EAST LANSING: 517.484.8000 | NOVI: 248.533.0741 | WEST MICHIGAN: 616.588.7700
Bidding Farewell to Voluminous Vendor Responses?
Many school officials have reported a new challenge related to COVID-19: fewer vendors are submitting bids on requests for proposals (RFPs) for construction projects and materials, supplies, and equipment. Some vendors appear reluctant to take on school construction projects due to the limited availability and rising costs of building materials.
When Are Bids Required?
Michigan law requires schools to engage in competitive bidding in the following circumstances: (1) a construction project’s cost meets the current state threshold of $26,046 or more; (2) the purchase of materials, supplies, or equipment exceeds that threshold; (3) a school contracts with a qualified provider for energy conservation improvements; or (4) board policies or federal funding (e.g., ESSER) require bidding.
How Many Bidders Are Required?
Michigan law does not require a minimum number of bidders for a project or purchase. As a matter of law, one bidder can suffice. A board policy, however, may contain a minimum bidder requirement. If there are no bidders (or an insufficient number of bidders if a policy sets a minimum), a school would need to re-bid the project or purchase.
Does Michigan Have a Sole Source Exception?
Some states provide for a “sole source exception,” which exempts a public entity from competitive bidding requirements if (1) only one known source exists or (2) only one supplier can fulfill the requirements. Michigan law, however, does not have a sole source exception. Although Michigan law allows a school to award to a single bidder, the school still must follow competitive bidding requirements and bid out the work.
How Can Schools Increase Vendor Participation?
Given the current construction boom, coupled with market fluctuations and supply chain issues, vendors may be unable or unwilling to satisfy typical RFP requirements. If willing to give up certain benefits and protections in exchange for more bids, a school may consider the following strategies to increase participation in this difficult market:
- Modify board policies. Ensure that board policies are not more restrictive than what the law requires for purchasing materials, supplies, and equipment. School boards may consider modifying the policies to allow more flexibility (e.g., no minimum number of bidders) or making one-time exceptions to policies via resolution.
- Ease bid requirements. Responding to complex RFPs requires time and resources, which busy vendors may not have. Schools may consider eliminating unnecessary requirements to RFPs, such as a mandatory pre-bid meetings or substantial experience requirements.
- Lengthen the bidding process. Schools should begin the RFP process early and grant enough time for vendors to provide an adequate response.
- Broaden bid advertisements. In addition to the statutory requirements (e.g., posting on SIGMA and in a newspaper for construction projects), consider posting bid advertisements in alternative locations, such as the school website, Builders Exchange of Michigan, Bid4Michigan, or Buy4Michigan. Posting the advertisement in places vendors frequent may make it easier for them to find bidding opportunities.
- Use cooperative purchasing for non-construction. Cooperative purchasing, if authorized by board policy, allows a school to “piggy-back” off an intergovernmental pool, bid cooperative, purchasing consortium, or group purchasing organization. Cooperative purchasing may be an appropriate time- and cost-saving measure for procuring materials, supplies, and equipment. Cooperative purchasing, however, is not available for construction projects due to statutory bid procedures.
- Allow equivalents or alternates. Allow vendors to propose equivalents or alternates that the school may not have considered.
- Adjust contract terms. To attract more vendors, it may be helpful to offer more favorable contract terms to vendors. For example, the contract may include provisions eliminating or minimizing liquidated damages or damages for delay. Additionally, a school may ask for performance and payment bonds that are 25% of the contract price (the statutory minimum) rather than 100%.
Thrun Law Firm has developed board policies that comply with competitive bidding requirements and are available for purchase. Thrun Policy Service clients should review Policies 3301 (Purchasing and Procurement) and 3306 (Construction Bidding).