March 12, 2002
Re: Bidding Requirements
You have asked whether the Town must accept the lowest bid in a contract procurement that is subject to the competitive bidding requirements applicable to the Town. In my opinion, the Town is not required to accept the lowest bid, although, of course, it should be cautious in doing so and be prepared to give good reasons if questioned.
Your Town is incorporated under the general law Mayor-Aldermanic Charter ( Tennessee Code Annotated, § 6-1-101, et seq.). This charter does not have any provisions on competitive bidding requirements. Therefore, the Municipal Purchasing Law of 1983 (T.C.A. § 6-56-301, et seq.) applies to the Town. § 6-56-302 provides that this law applies to all purchases by all authorized municipal officials encumbering municipal funds with certain exceptions. One of these exceptions is purchases by city officials in municipalities having charter provisions on competitive bidding. Huntsville does not fall within this exception, so this law governs purchasing by the Town.
Whether a municipality must accept the lowest bid is determined by the particular statutory requirements applicable to the municipality. Some charters, for example, require the particular municipality to accept the lowest bid. If this were the case here, there would be no question what the Town should do. But that is not the case. There is no requirement in the Municipal Purchasing Law that the Town accept the lowest bid. There is also no requirement that the Town accept the “lowest and best bid” or the “lowest responsible bid.” Of course, one purpose of competitive bidding laws is to provide bidders a fair opportunity to compete for public contracts. State ex rel. Leech v. Wright, 622 S.W.2d 807,815 (Tenn. 1981). Therefore, there is an implied obligation to consider all bids honestly and fairly. Computer Shoppe, Inc. v. State, 780 S.W. 2d 729, 737 (Tenn. App. 1989). This is why the Town should be cautious in accepting a bid other than the lowest one.
T.C.A. § 6-56-306 gives the Town authority to “adopt regulations providing procedures for implementing the provisions of this part.” This would include the authority to reserve the right to reject any or all bids. The Town did this in its “Invitation to Bid” and could possibly have ordinances or other regulations providing for this. In a case that involved a requirement that the bid must be let to the “lowest bidder who is financially responsible,” the federal court noted that “Where...there has been a reservation of the right to reject all bids, the bidder on a public contract proposal is vested with no legal right to an acceptance of his bid even if it were the lowest bid.” Owen of Georgia, Inc. v. Shelby Co., 442 F. Supp. 314 at 318 ( W.D. Tenn. 1977).
A disappointed bidder has standing to challenge the award of the contract to another bidder, but the relief available is limited to “equitable or declaratory relief to ensure enforcement of required competitive bidding procedures.” Metropolitan Air Research Testing Authority v. Metropolitan Government of Nashville and Davidson County, 842 S.W.2d 611 at 617 (Tenn. App. 1992).
In a general statement of law, 64 Am. Jur. 2d § 71 notes that:
[W]here public officials have the right to reject any and all bids for a public contract, they are usually held to have the authority to consider, in letting the contract, the differences or variations in the character or quality of the offered materials, articles, or work, whether an applicable provision requires that the contract be awarded to the “lowest responsible bidder,” or the “lowest bidder,” or contains no such stipulation.
In awarding contracts, public officials must not be arbitrary, unreasonable, or capricious, but in the absence of fraud , corruption, or abuse of power, courts will not normally interfere with governmental procurement decisions. MARTA v.Metro Nashville,supra, at 619.
An annotation on the use of local bidding preferences, see 89 A.L.R. 4th 587. Some have been upheld and some not.
I hope this information is helpful. Your tight time frame left me with not enough time to do exhaustive research, but I believe the gist is here. If you have further questions, please call.