Is the Bidding Process the Same for Private and Government Contracts?
The bidding process for any construction project, in which contractors and suppliers propose bids to the client (such as a homeowner or developer), involves several legal considerations. For example, primary contractors need to be careful about which subcontractors they hire, since they can be held liable for their subs' illegal labor practices or illegal toxic waste disposal. Also, building contractors need to be sufficiently bonded and -- particularly if it's a government contract -- will need to adhere to strict regulations and requirements.
While each contract is unique in some way, the bidding process can be broken down into two main categories:
- Public contracts, where the party requesting bids is a government agency; and
- Private contracts, where none of the parties to the bidding process is a government agency.
This article provides a general overview of how these bidding processes differ.
Bidding on Construction Contracts: Public
The bidding process in connection with public contracts is generally very formal, with a raft of existing rules and regulations that must be strictly followed in order to emerge with the winning bid. If you are bidding on a state or local government contract, you will need to be familiar with the laws and regulations of that jurisdiction. If it's a federal contract, you will need to acquaint yourself with the rules established by the U.S. General Services Administration (GSA).
The public project bidding process generally follows these steps:
- An advertisement, or solicitation, for bids is published
- Qualified contractors receive and review the procurement documents (sometimes requiring payment of a deposit or non-refundable fee)
- If interested, prospective bidders attend a meeting and tour the construction site
- Contractors solicit bids from subcontractors and suppliers
- After estimating costs, contractors submit sealed bids
- Bids are announced and/or read privately at a specified time
- Winning bids are chosen, based on the lowest responsible bid
A responsible bid is one in which all of the factors involved in the project are adequately accounted for. In other words, the lowest bid will not win the contract if it is unrealistically low and either compromises the project or eventually will cost much more.
Bidding on Construction Contracts: Private
In connection with private contracts, the bidding process is less formal and not generally constrained by detailed government-imposed rules and regulations. In the private sector, the owner or prime contractor requesting bids has wide latitude in setting its own rules for soliciting bids, and in selecting among the various bids submitted. However, this latitude in the private sector is not completely unbounded. In connection with major projects, it is wise to have a construction lawyer review bid solicitation documents for compliance with state and local laws and customs.
Get Legal Help When Bidding on a Construction Contract
There are a number of factors to consider when bidding on a construction project, in addition to the differences between private and public contracts. There may be certain staffing requirements or other legal considerations for which an attorney can be particularly helpful. If your business needs professional legal advice, consider talking to a business and commercial law attorney near you.
See FindLaw's Contract Law section to learn more.