In Legal Terms
- Volume 52, Number 2 - 2008
Important changes to the Alabama Bid Law.
As reported in the Final Legislative Report, there was very little legislation introduced during the 2008 Regular Session that actually became law. However, one bill that did become law will directly affect certain aspects of the county’s competitive bidding practices.
Act No. 2008-379, which takes effect on Aug. 1, 2008, amends several provisions of Alabama’s competitive bid law for local governments. These amendments will apply to county governing bodies in their bidding practices, so it is important that all county officials and employees involved in the bidding process understand the new provisions – and their ramifications.
The most significant change in the law is that, beginning Aug 1, 2008, the threshold amount requiring competitive bids will be doubled – from $7,500 to $15,000. While the
Association has opposed this increase in the past, virtually all other local governments supported this change, and it was popular with legislators who pointed to the rise in prices in recent years. In fact, there was a bill to also increase the threshold for state competitive bidding, but that bill, which contained several other proposed changes in the law applicable to state agencies, was not signed by the Governor, and did not become law.
It is important that counties keep in mind that this new provision establishes the threshold amount where bidding is required. However, the county can always, in its discretion, solicit competitive bids where the anticipated cost is less than the threshold amount.
Counties are encouraged to continue soliciting bids for such items where there appears a good likelihood that bidding will provide a better opportunity for the lowest possible price. However, this provision allows counties the flexibility to purchase items under $15,000 without complying with the bid law where it is believed that will best benefit the county.
The new law also makes provision for reverse auctions. There was an earlier legislative attempt to provide for reverse auctions in the law, but the bill as written did not really allow for such bidding. This law purports to correct those problems and allow for this process to be utilized beginning Jan. 1, 2009.
The law defines reverse auction as either a real-time bidding, usually lasting less than one hour, at a previously scheduled time and Internet location where multiple anonymous suppliers submit bids or a bidding process usually lasting less than two weeks at a previously scheduled period and Internet location where multiple anonymous suppliers submit bids.
Language requested by ACCA staff while this bill was working its way through the process requires the Examiners Office to establish procedures for use of reverse auctions by Nov. 30, 2008, and to distribute those procedures to all contracting agencies.
Counties should not make any plans to use the reverse auction process until these procedures are completed and distributed by the Examiners Office. These procedures will be used by that office for auditing purposes, and must be carefully followed whenever using this new option.
Another change contained in the amended bid law provides for local governments to consider “life cycle costs” in determining the lowest responsible bidder.
Under this provision, the awarding authority may consider the total cost of ownership over the expected life of an item if it can be “reasonably ascertained from industry recognized and accepted sources.”
Life cycle costs can only be considered in determining the lowest responsible bid if the awarding authority includes a notice in the invitation to bid that such consideration may be used and identifies in the bid the industry recognized and accepted sources that will be applicable.
As with reverse auctions, this provision requires the Examiners to establish procedures no later than Nov. 30, 2008, and distribute those procedures to all contracting agencies. Again, these procedures will be used by the Examiners for auditing purposes, and must be carefully followed.
Act No. 2008-379 does contain two changes that have been supported by Alabama counties in recent years, and were included in a bill sponsored by Rep. Pebblin Warren and Sen. Bobby Denton, on behalf of county government.
One such provision is the elimination of the requirement that counties and other local governments obtain a bid bond from all bidders for items exceeding $10,000.
This restriction has hampered counties from obtaining the best possible price in recent years due to local vendors’ reluctance to obtain bid bonds for relatively low priced items. Under the amended law, the county still has the authority to require bid bonds, but it can eliminate this requirement when it so chooses. It will be important that, where counties do require such bonding, the bid specifications detail that requirement.
The other change supported by counties attempts to address a problem with the lowest responsible bidder failing to complete his or her obligations under the bid award.
Under the new law, if the successful bidder defaults under the contract, the awarding authority may contract with the second lowest responsible bidder, but only if the lowest responsible bidder notifies the awarding authority in writing that he or she will no longer comply with the terms of the award or the awarding authority documents that the lowest bidder has defaulted.
An award made to the second lowest responsible bidder must be under the same terms and conditions found in the original bid specifications and must be for the same or a lower price than the second lowest bidder’s original bid.
The changes included in Act No. 2008-379 are broad, and can work to the benefit of counties if carefully and properly applied. However, counties are wise to consider each of these changes carefully before implementing any of them, and should weigh all options on a case-by-case basis to ensure that separate and thoughtful consideration is given in each case as to how to achieve the best price possible for the quality of product desired by the county, keeping in mind at all times the words of the Supreme Court of Alabama, that the most important requirement of the competitive bid law is the good faith of the officials charged in executing the law.
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