During the competitive bidding process, it is customary for the public project owner to determine if the low bidder is “responsible.” This entails an evaluation of the bidder’s resources and experience. The responsibility determination is controversial because it occurs after bids have been opened and prices exposed. It also involves some subjective or arbitrary evaluation criteria. No evaluation factor is more prone to abuse than bidder experience.

A very demanding experience requirement – completion of at least five projects of similar nature and scope within the past three years – can limit competition and tilt the contract toward a favored bidder. A vague experience requirement – the bidder’s satisfactory past performance for the project owner – can be used to eliminate a low bidder that previously had a dispute with the owner. There have been reported cases in which public project owners rejected low bidders as “litigious” or “claim hungry.” This was done despite the fact the bidder’s prior claim was legitimate and successful.

Some state and local governments have addressed this problem by amending their bid systems. If an owner wants to evaluate experience or past performance, it may elect to prequalify bidders. This enables bidders, well before bid submittal, to challenge their exclusion from the prequalified list. Once the prequalified bidders submit their bids, the owner must award the contract to the low bidder without further evaluation. This reduces owner discretion and the opportunity to manipulate the bidding system.

The Idaho Supreme Court recently applied that state’s revised bidding law. A public project owner violated the statute when it did not prequalify bidders, but then evaluated the performance history and experience of the low bidder. Having foregone the prequalification process, the owner could only require a responsive bid and a state contractor’s license.

Other cases this week involved a subcontractor’s right to recover its attorney fees against a prime contractor’s payment bond and a contractor’s recovery of lost profit on an unperformed future contract. The broad form payment bond guaranteed all obligations under the subcontract, so the sub recovered its attorney fees. And, the contractor recovered its anticipated profit because it was wrongfully removed from a list of contractors that performed small projects on a recurring, no-bid basis.