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Illinois School Board Journal
January/February 2006
Intent in bid letting as important as law
Second in a three-part series on district finances.
November-December, 2005 — Audits
March-April — Reimbursements/gifts/ethics
by Linda Dawson
Linda Dawson is IASB director of editorial services and Journal editor.
School districts in Illinois spend billions of dollars each year to keep their districts supplied with items from as small as a paper clip to as large as a bus. Many of those purchases … anything, with a few exceptions, where the amount will be more than $10,000 … must be made through a competitive bidding system that is established under Illinois statutes.
For Sonja Sanborn, purchasing agent for Naperville CUSD 203 in DuPage County, it's a full-time job trying to secure the best prices for her district. With 18,749 students enrolled for 2005-06, that means lots of copier paper, towels for gym classes, custodial supplies and fuel for buses, not to mention cartons of milk and loaves of bread.
"Each school in the district has a budget of what it can spend on office supplies, furniture, art supplies," said Sanborn, trailing off on a list of possible purchases. Even if what's being spent isn't over the $10,000 limit, her office often sends out "RFPs" (request for proposals) to possible suppliers to see who can provide the best price to the district for the year.
While not technically required by Illinois' bidding statutes, it just makes good sense for Naperville finances and saves taxpayers cents in the long run.
Relying on good advice
When it comes to making purchases for their districts, school board members usually rely on the expertise of a purchasing agent like Sanborn or their superintendent, delegating the authority to research options and write bid specifications. But even though the legwork and paperwork may be done for them, board members need to have a basic understanding of bidding procedures in order to keep the process within the intent of the law.
According to statute, school districts are required to bid — with some exceptions — for any purchase of "supplies, materials, or work or contracts with private carriers for transportation of pupils" in excess of $10,000. These purchases must be advertised and the sealed bids opened during a public meeting.
A big area of concern, according to Brian Braun, an attorney with Miller, Tracy, Braun, Funk & Guenther based in Champaign and the author of Illinois School Law Survey, is that districts fail to bid items that are required to be bid. But maybe, more importantly, he said, the concern should lie with boards that allow bids to be constructed in such a way that it becomes difficult to figure out who has submitted the lowest bid.
When bids are not well constructed, he said, "usually boards either have insufficient knowledge to comprehend what will cause a problem … or they have so many alternatives, they can't discern which bid is the lowest."
Because board members believe they need an 88-passenger bus, Braun said, they'll ask that bid specifications be written in terms of that "need" rather than in terms of what might be available in the marketplace. A quick check of school bus manufacturers may reveal that only one bus by a single manufacturer would meet that 88-passenger specification. Or the bid might specify a certain size of engine that can only be found in one make of vehicle.
Instead of limiting their options, Braun advises having the superintendent or business official bring together all possible bidders to construct the specifications so that the board has options once the sealed bids are opened.
Sometimes, when the item being bid is relatively low — say $30,000 for paper supplies — superintendents may think it takes too much time and effort to bring everyone together to construct a bid, "so they develop a habit of simply not doing this," Braun said. Then, when a larger product or service needs to be bid, "They are not thinking through that it's not like buying paper."
In addition, because it takes time and effort to put together a bid, a district that has a history of poorly constructed bids may attract fewer and fewer bidders. "Word will get out on the streets," Braun said, and districts may find that many eligible bidders just won't bother to submit a bid.
Buying locally
Boards often fall into this pattern of narrow bid specifications because they're trying to buy as much as they can locally, Braun said.
Purchasing agent Sanborn said Naperville 203 would like to buy as much as it can locally, especially to have local maintenance available for items where service can't wait. But, she added, that's only if their price is the lowest. The district will not write bid specs just so a local supplier will win.
The district does, however, look for competitive prices for any number of items that it does not need to bid: quantities that fall below the minimum required for bidding and other items, like milk, which as a perishable is not required to be bid. The district sends out requests for prices to local companies as well as anyone else who has asked to be on a bidder list, she said.
Three schools in the district have just started a hot lunch program, Sanborn said, so trying to get the best price for milk makes sense, because that can lower the cost for parents.
Communities may find it difficult to understand why a school district wouldn't want to do all of its business locally, attorney Braun said. But the district should be in the business of finding the lowest possible bidder, not necessarily the "hometown" bidder with a low price.
If bids are well-constructed and well-advertised and the two turn out to be the same, that's one thing. Writing specs to make it happen has another name: fraud.
Paying the consequences
So what might happen if a district writes a bid to favor a local company?
According to Braun, even if the district has followed all the legal procedures of bidding, if one bidder believes that the spirit of the law has been violated so that another bidder wins a contract, the offended bidder can file suit against the district, challenging the bid process. That suit can take the form of a temporary restraining order or a permanent injunction, which can tie the district's hands as far as that purchase is concerned.
"It can stop you in your tracks," Braun said, "and it's embarrassing in the community."
And the problems don't just end with the lawsuit being filed, he said. "The danger of a lawsuit is not just a loss of public support. The problem is, A: nobody anticipates the cost of the lawsuit, and, B: it takes time and effort, and you may not get out of it the way you think."
A district may not be able to just back up and take the plaintiff's bid or reopen the bidding process, he said.
That's one reason bids are presented sealed, Braun said, so that bidders are giving what they believe is the lowest price they can afford to offer. While the board does have the option to reject all bids, once the bids are opened and everyone can see what everyone else bid, then to rebid a project doesn't necessarily mean that the bids will come in lower. And it certainly can't assure that the original low bidder will be low bid the second time around.
In addition, he said, frequently a low bidder may choose not to rebid at all, whether because of the time and effort it took to bid only to be rejected or because the bidder is upset that the first low bid … what that company considered its lowest offer … was rejected. Their attitude: Why bid again when I already gave you my best price?
Complicating the process
Sometimes bids are so complicated that even the best financial wizards would have difficulty deciding which bid is the lowest. Part of that can stem from poorly constructed specifications, Braun said. But an additional problem is that vendors will always argue that they are the lowest bid.
Put in context of a current "we offer the lowest possible prices" commercial on television, it's because the "lowest" price may not contain something that's in the higher priced item, such as a warranty. When put in the context of bidding, Braun said, it means they're trying to juggle the terms of the bid.
"You're the ones making the motion to accept or reject a bid," he said. "If you don't understand the choices, you can't make a good decision."
Boards cannot possibly be expected to have the expertise in all the areas of items that need to be bid. In that case, according to Michael Johnson, IASB executive director and a former school superintendent, the board may choose to hire a consultant to help with bidding. However, he cautioned, the board should ask some very specific questions before entering into such a consulting relationship.
Is the consultant being paid by anyone other than the board?
Will the consultant be paid by any of the bidders?
Has the consultant been paid by one of the possible bidders in the past?
Another area to be watchful, he said, is the amount being bid as wages under construction contracts. If the amount for wages is substantially lower on one bid, it might throw up a red flag that the contractor may be trying to skirt provisions of the Wage and Labor Act.
Whether a board hires help or depends on existing staff to make decisions about bidding, knowing the fundamentals of the bid process should be required of all board members, according to Braun. That includes: when to bid; what's exempt; specifications can't favor local bidders; and the board has the right to reject all bids.
With even that minimum knowledge base, boards should be able to keep themselves out of bidding trouble while finding the lowest prices for what their districts need.
Resource
Illinois School Law Survey (Eighth Edition), Brian A. Braun, 2004, Illinois Association of School Boards
FAQs on bidding
The following questions and answers are taken directly from the Illinois School Law Survey, Eighth Edition, written by Brian Braun and published in March 2004. A cautionary note at the beginning states: "Illinois School Law Survey provides answers to general questions regarding statutes and case law in force as of January 1, 2004, and administrative rules in effect as of March 30, 2003. It is not intended to provide advice in the handling of specific situations." Readers should treat the law survey "as a source of instruction in the basic principles of school law and as a guide to matters meriting further study or the assistance of legal counsel." The publication also excludes laws unique to Chicago Public Schools District 299.
When do bidding requirements apply?
A school board is required to let all contracts for supplies, materials, or work or contracts with private carriers for transportation of pupils involving an expenditure in excess of $10,000 to the lowest responsible bidder considering conformity with specifications, terms of delivery, quality and serviceability after due advertisement. However, certain contracts are exempted from competitive bidding requirements, including:
1) contracts for the services of individuals possessing a high degree of professional skill where the ability or fitness of the individual plays an important part;
2) contracts for the printing of finance committee reports and departmental reports;
3) contracts for the printing or engraving of bonds, tax warrants, and other evidences of indebtedness;
4) contracts for the purchase of perishable food and perishable beverages;
5) contracts for materials and work which have been awarded to the lowest responsible bidder after due advertisement, but due to unforeseen revisions not the fault of the contractor for materials and work must be revised, causing expenditures not in excess of 10 percent of the contract price;
6) contracts for the maintenance or servicing of, or provision of repair parts for, equipment which are made with the manufacturer or authorized service agent of that equipment where the provision of parts, maintenance, or servicing can best be performed by the manufacturer or authorized service agent;
7) purchases and contracts for the use, purchase, delivery, movement, or installation of data processing equipment, software, or services and telecommunications and interconnect equipment, software, and services;
8) contracts for duplicating machines and supplies;
9) contracts for the purchase of natural gas when the cost is less than that offered by a public utility;
10) purchases of equipment previously owned by some entity other than the district itself;
11) contracts for repair, maintenance, remodeling, renovation, or construction, or a single project involving an expenditure not to exceed $20,000 and not involving a change or increase in the size, type or extent of an existing facility;
12) contracts for goods or services procured from another governmental agency;
13) contracts for goods or services which are economically procurable from only one source, such as for the purchase of magazines, books, periodicals, pamphlets and reports, and for utility services such as water, light, heat, telephone or telegraph;
14) where funds are expended in an emergency and such emergency expenditure is approved by three-fourths of the members of the board.
All competitive bids for contracts involving an expenditure in excess of $10,000 must be sealed by the bidder and must be opened by a member or employee of the school board at a public bid opening at which the contents of the bids must be announced.
105 ILCS 5/10-20.21
May a school district accept a faxed or e-mailed bid?
No. The relevant statute provides that if bidding is required, the bids must be sealed.
105 ILCS 5/10-20.21
What recourse is available to an unsuccessful low bidder?
A low bidder who is not awarded the contract may bring suit challenging the award of the contract. In appropriate circumstances, the low bidder may be awarded the contract or may recover money damages or both.
L.E. Zannini & Co. v. Board of Education, Hawthorn School District 73, 138 Ill. App. 3d 467, 486 N.E. 2d 426, 93, Ill. Dec. 323 (2nd Dist. 1985)
Cardinal Glass v. Board of Education of Mendota Community Consolidated School District 289, 113 Ill. App. 3d 442, 447 N.E. 2d 546, 69 Ill. Dec. 329 (3rd Dist. 1983)
May a school board reject all bids?
Yes.
Premier Electric Construction Co. v. Board of Education of City of Chicago, 70 Ill. App. 3d 866, 388 N.E. 2d 1088, 27 Ill. Dec. 125 (1st Dist. 1979)
May a school district give preference to local bidders when letting contracts?
If the contract requires competitive bidding, the school board may not give preference to a local bidder.
Doyle Plumbing and Heating Co. v. Board of Education, Quincy Public School District No. 172, 291 Ill. App. 3d 221, 683 N.E. 2d 530, 225 Ill. Dec. 362 (4th Dist. 1997)
Cardinal Glass v. Board of Education of Mendota Community Consolidated School District 289, 113 Ill. App. 3d 442, 447 N.E. 2d 546, 69 Ill. Dec. 329 (3rd Dist. 1983)
New Illinois program offers districts savings
by Linda Dawson
How would your district like to save $6,000 a month on items you need to purchase? Sounds too good to be true, right? But a new purchasing program through the Illinois State Board of Education offers districts of any size the opportunity to save money as well as let someone else take care of the bidding process.
"Boards nationwide, not just in Illinois, are asking the question ‘How do we make ends meet?'" said Karen Helland, ISBE's shared services policy and planning liaison, who was hired to coordinate the new Illinois School Purchasing Network.
The Network, up and running since August 2005, operates in partnership with U.S. Commodities, a nationwide, not-for-profit governmental purchasing cooperative. The cooperative offers access to a wide variety of basic products that schools use daily — like office and janitorial supplies — as well as big ticket items like playground equipment, office furniture, carpeting and technology products.
All of the items have already gone through a competitive bidding process, according to a memo from ISBE General Counsel Jonathan Furr, thus exempting the individual district from rebidding the contracts.
Once districts register with ISBE for the program, Helland said, they will have access to an online catalog and can look for items with no cost to register, no minimum requirement and no obligation to buy.
Helland estimates that districts should be able to save 10 to 20 percent across the board, depending on the items they choose because the prices are "very competitive."
"And it doesn't matter where you live in the state," she added. "Everyone will get the same price."
"At the Illinois State Board of Education, we need to do our part to help local school districts save money in their day-to-day operations," said Randy Dunn, state superintendent of schools, in announcing the program. "By launching the Illinois School Purchasing Network, we will help local districts leverage group buying power. This initiative gives school districts one more option in their purchasing decisions."
Existing co-op already helping
Since the early 1990s, a buying cooperative in north central Illinois has helped school districts save money on food products and food service equipment under the premise that the larger the buying power, the better the price.
From 13 districts who signed up the first day, the La Salle County Area Purchasing Cooperative has grown into a 41-district strong organization with just minor recruiting efforts, according to John Scholfield, former superintendent at Leland CUSD 1 and a former regional superintendent.
Having been superintendent of a small district, he knew their purchasing power didn't carry as much clout when it came to bidding as a larger district would have. When he mentioned the predicament to other administrators in his county, he said he found they were all "in the same boat."
For a small entry fee, the original 13 districts banded together and sent out bid materials. Since then, bids have been let every five years, with just two firms — one based in Montgomery, Illinois, and the other in East Peoria — filling orders during that time.
Kelly Pandolfi, who currently administrates the program through the La Salle County Regional Office of Education, said all deliveries are made directly to the districts on a weekly basis and that the service is open to more districts than just those in their ROE.