May Districts Impose Local Vendor Bid Preferences?

In an effort to help spur local economic growth and opportunity, especially during times of financial hardship, there have been many inquiries into whether school and community college districts may impose local vendor bid preferences on their bids.

Pursuant to Public Contract Code sections 20111 and 20651, school and community college districts are required to competitively bid any contract involving an expenditure of more than $81,000 (adjusted annually) for equipment, materials or supplies to be furnished, sold, or leased to a school district, and services, except construction services and repairs, including maintenance as defined in Section 20115. As required by law, a school district and community college district must award such competitively bid contracts to the lowest responsible bidder. The public policy behind the statutes on competitive bidding is to enhance competition and to prevent corruption and undue influence. Competitive bidding also guards against favoritism, extravagance, fraud, and serves the public by preventing waste and securing the best economic result. A contract made without compliance with competitive bidding, where such bidding is required by statute, is void and unenforceable as being in excess of the public agency’s power.

Local vendor bid preferences raise conflicts with the requirement that all contracts falling under Public Contract Code sections 20111 and 20651 go to the lowest responsible bidder. Therefore, school and community college districts seeking to spur local employment should take an approach other than direct local vendor preferences in their solicitation of contracts that are subject to Public Contract Code sections 20111 and 20651’s competitive bidding requirements. School and community college districts may, however, take some action to encourage local participation without mandating it, but such efforts must stay clear of suggesting any type of favoritism.

School and college community districts should consider alternatives to favoring local vendors with a preference discount on their bid just for being a local company. For example, districts may be able to utilize local vendor bid preferences for contracts that do not fall under the formal bidding requirements of the Public Contract Code. Thus, for any project under $81,000 or contracts that do not fall under the requirement of Public Contract Code sections 20111 or 20651, a school or community college district may be able to use a local vendor bid preference. In addition, school and community college districts can encourage local participation without directly mandating it.

For example, districts can draft language informing bidders to try to use local vendors or suppliers to the greatest extent possible, but such language cannot in any way suggest that the district favors or will credit local vendors. Districts can even require bidders to show evidence of good faith efforts to obtain local vendor participation or utilize carefully crafted prequalification documents. These alternative methods suggest bidders look to local vendors first. In conjunction with such language, school and community college district can offer lists of local vendors to contractors as suggestions or embark on outreach programs to make local vendors aware of bids being let by the district in an effort to increase participation.

No matter which approach is taken by districts, it is crucial to involve your counsel in crafting a legally valid approach to encouraging local economic activity to avoid a policy that can result in void contracts.

  • Partner

    Hugh Lee’s areas of practice include school and public works construction law and construction disputes and litigation, including construction contract administration, bidding and bid disputes, and architectural ...

  • Senior Associate

    Suparna Jain represents school districts, community college districts, and other public entities, as well as some private clients in litigation and transactional matters. She has successfully made solo court appearances ...

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