By: Caroline L. Trautman and Daniel J. Knight
For public construction projects, North Carolina law requires that the contract be awarded to lowest responsible bidder. N.C. Gen. Stat. § 143-129(b). This requires state public project owners entertaining bids to determine which bidders are responsible. Since 1995, North Carolina law has allowed state public owners to “pre-qualify” bidders for bidding on state construction projects – meaning that owners can perform their responsible bidder determination prior to receiving bids, rather than after. This means that some bidders can become qualified as responsible bidders before they bid on the work. However, until recently, no guidelines or standards governed the pre-qualification process. As of October 1, 2014, new statutory guidelines for pre-qualification took effect and now apply to all public contracts awarded after October 1st. Given some of the changes, it is important for potential bidders (i.e., “contractors”) and public project owners to have a basic understanding of these changes.
First, pre-qualification of responsible bidders will only be available if the governmental entity accepting bids complies with three statutory requirements: (1) the entity uses a construction method authorized by law (separate-prime bidding, single-prime bidding, or dual bidding), (2) the governmental entity uses an objective pre-qualification policy applicable to all construction or repair work prior to the advertisement of the contract for which the entity seeks to pre-qualify potential bidders, and (3) the governmental entity adopts an assessment tool and criteria for that specific project. The assessment tool and criteria must include pre-qualification scoring values and minimum required score for pre-qualification.
However, pre-qualification may not be used for the selection of architects, engineers, surveyors, design-builders, designers in design-build bridging projects, private developers in public-private partnership construction projects, or construction managers at risk.
Second, the governmental entity’s objective pre-qualification process must comply with certain statutory criteria. The new pre-qualification law establishes six criteria that must be satisfied. First, the policy must be uniform, consistent, and transparent in its application to all bidders. Second, the policy must allow all bidders who meet the pre-qualification criteria to be pre-qualified to bid on the project. Third, the policy must clearly state the pre-qualification criteria. Fourth, the policy must clearly state the assessment process of the criteria to be used. Fifth, the policy must establish a process for a denied bidder to protest its denial of pre-qualification. The protest process must be completed before the opening of bids and must allow bidders who become pre-qualified as a result of the protest sufficient time to submit a bid for the project. Finally, the policy must provide for written notification of denial to a bidder upon the bidder’s request.
Finally, if the governmental entity decides to utilize pre-qualification, then a potential bidder must pre-qualify in order for its bid to be deemed responsive. All bids by non-prequalified bidders will be deemed nonresponsive.
The intended transparency of the new pre-qualification requirements will benefit contractors by providing contractors who do not pre-qualify as responsible bidders with objective reasons for not pre-qualifying them. This in turn will allow contractors to try to remedy those aspects of their business that prevent them from being pre-qualified. The fact that a contractor’s bid may be rejected because the contractor is not pre-qualified is one more reason for contractors to have a basic understanding of these changes.
For more information on this topic, please contact Anderson Jones Attorneys Caroline Trautman or Daniel Knight at (919) 277-2541 or by email!
This summary is for informational purposes only and does not constitute legal advice or opinion.