Master Builders of Iowa

A recent news story reported that Cedar Rapids City Councilman Justin Shields is pushing his colleagues on the Cedar Rapids City Council to not accept the low apparent bid on rebuilding efforts for a Cedar Rapids Police Department project.  The current low apparent bidder is not from Cedar Rapids proper, but from a nearby city.  Councilman Shields is insisting that local projects should to go to local contractors.  At first blush, it sounds reasonable, especially if you are defined by Councilman Shields as a “local contractor”. However, Councilman Shield’s arguments are flawed.  First and foremost, such actions are illegal.  Secondly, history proves that building “preference” fences, only hurt those you are trying to help. 

Iowa’s laws do not contain any provisions permitting a public owner to restrict, qualify or otherwise limit or differentiate or discriminate against a bidder on a public construction project because of it location (i.e. city, county, state).  Such local preference specifications are generally considered to be discriminatory and illegal and should be strictly avoided under Iowa’ competitive bidding laws.

To MBI’s knowledge, there have been two district court opinions which have addressed the local preference issue.  In one, Hudson v. City of Mason City, the court voided a contract let to a “local” contractor even though the contractor was not the low bidder.  In another, the district court permitted a similar award to stand.  The losing contractor appealed to the Iowa Supreme Court, which affirmed the lower court but the ruling was based on the protesting contractor’s lack of standing, not the merits of the case. (See Garling Construction v. City of Shellsburg, 641 N.W. 2d 522 (Iowa 2002).

Another angle a public owner may attempt in trying to steer contract awards to local contractors would be to “pre-qualify” bidders.  The owner must avoid selecting contractors based on illegal criteria such as whether or not the contractor employees are union or non-union, local vs. non-local, number of years in business, or other subjective criteria where political favoritism might come into the selection process.  It is permissible for the owner to make post-bid opening objective judgments necessary to determine the contractor’s financial and performance qualifications to do the work outlined by the project plans and specifications. Any special qualifications needed to perform the work should be contained in the project specifications and bidders should be notified in advance that their inability to meet these special criteria may constitute a cause for their bid to be considered non-responsive in the final selection and award process.  However, contractors should not be disqualified from bidding on the basis of those criteria.  In order to provide the owner with the largest potential pool of bidders, owners should not “pre-qualify” bidders on the basis of immutable, arbitrary criteria.  As stated in one case, “such discrimination [amounts to] the denial of equality of right and opportunity to which every bidder is entitled.”