How to Know if Proprietary Bidding is Proper: A Public Construction Conundrum

Public construction projects are as necessary as they are numerous, which is to say very. Given that taxpayer money is at stake on these projects the state has an interest in regulating them from inception to completion to ensure that funds are spent efficiently. One specific statutory protection that Massachusetts provides at the inception of public construction projects is the competitive bidding requirement encompassed in MA G.L. c. 30, § 39M (b) (“Competitive Bidding Statute”).

The Competitive Bidding Statute serves to ensure that there is sufficient market competition for bids on public projects such that prices are kept low while the quality standards of the work remain high. The statute accomplishes this by requiring that public bids, “be written to provide for full competition for each item of material to be furnished under the contract; except, however, that said specifications may be otherwise written for sound reasons in the public interest.” It is important that contractors and subcontractors understand the implications of this statutory language so they are able to make fully informed and accurate bids.

The statute allows for two types of bids: competitive or proprietary. Competitive bidding is the norm and proprietary is the very narrow exception. The requirements of a competitive bid are that, “[f]or each item of material the specifications shall provide for either a minimum of three named brands of material or a description of material which can be met by a minimum of three manufacturers or producers.

Proprietary bids, or bids that do not meet the competitive bid standard, are allowed only if there are, “sound reasons in the public interest,” and only if those sound reasons are, “stated in writing in the public records of the awarding authority or promptly given in writing by the awarding authority to anyone making a written request therefor, in either instance such writing to be prepared after reasonable investigation.

In the case of both competitive and proprietary bidding, the awarding authority must allow contractors to submit alternative sources for materials that are the functional equivalents to materials described in the bidding document specifications. These are called equals. Specifically, “an item shall be considered equal to the item so named or described if, in the opinion of the awarding authority: (1) it is at least equal in quality, durability, appearance, strength and design, (2) it will perform at least equally the function imposed by the general design for the public work being contracted for or the material being purchased, and (3) it conforms substantially, even with deviations, to the detailed requirements for the item in the said specifications.”

The principal case on the matter of proper competitive bidding is E. Amanti & Sons, Inc. v R.C. Griffin, Inc. (2001). This case illustrates the importance of correct bidding practices by highlighting the financial consequences for violation of the Competitive Bidding Statute. In this case, the Massachusetts court made it clear that the distinction between proprietary and competitive bidding is meaningful and that subcontractors should not bear the burden of competitive bidding violations.

In this case, a subcontractor sought, and won reimbursement for, costs incurred when the subcontractor was forced to use a different and more expensive item than it included in its accepted bid. The specifications for the job required that the exhaust system be “as specified and manufactured by PlymoVent, or approved equal by the Fire Department.” The subcontractor’s accepted bid contained a different and less expensive exhaust system manufactured by a company other than PlymoVent.

While the “or approved equal” language gave the appearance of a competitive bid and led the subcontractor to believe that other exhaust systems could satisfy the specifications, in reality only the PlymoVent system could meet the architects requirements. The bidding authority did not make this fact clear to the subcontractor up front. Thus, the court held that form lost to substance, and the addition of the words “or equal” did not suffice for a competitive bid. The court determined that the awarding authority attempted to circumvent the statutory requirements for a proprietary bid by attaching the “or equal” language giving the false impression that competition was welcome. Ultimately, the court held that awarding authority had to bear the burden of the extra cost incurred by the subcontractor in reliance on the improperly proprietary bid.

Thus, it is imperative that contractors and subcontractors on public construction projects are aware of the Competitive Bidding Statute and its implications. Competitive bidding is the default unless the awarding authority explicitly indicates otherwise. Case law suggests the burden for improper proprietary bids should fall on the awarding authority. Nothing is certain, however, thus vigilance is key for contractors and subcontractors when it comes to bidding on public projects and that vigilance is bolstered by awareness of whether bidding documents are soliciting competitive or proprietary bids. If you have any questions about bidding on public construction contracts, you should contact a Massachusetts construction lawyer.

By Andrea Jacobs, Esq.

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