TEN GUIDELINES TO MUNICIPAL CONTRACTS

By MICHAEL S. REICH, Assistant Corporation Counsel, City of Chicago

Even the smallest of Illinois municipalities enters into scores of contracts each year and many municipalities with a population in excess of several thousand enter into a hundred or more contracts a year. This article sets out ten guidelines which Illinois municipal officials and attorneys should recognize when entering into contracts.:

1. RIGHT TO CONTRACT

Chapter 24, Section 2-1-12 of the Illinois Revised Statutes permits non-home rule municipalities to enter into contracts. However, this general provision permitting governmental entities to contract does not cloak these entities with authority to contract regarding specific matters. City of Marquette Heights v. Vrell, 22 Ill. App. 2d 254, (1959). If a purported contract with a local governmental body is either prohibited by law or beyond the scope of the municipality's authority that contract is void although a court may permit a party partial recovery based upon the benefits received by the municipality. Stahelen v. Board of Education, 87 Ill. App. 2d 28 (1967).

Home rule units of government have a broader array of contractual powers than non-home rule units. However, even these contractual powers of home rule units are circumscribed by the limits of Article VII, Section 6 of the Illinois Constitution of 1970 and cases interpreting those provisions.

2. ILLINOIS MUNICIPALITIES ARE ONLY REQUIRED TO ENGAGE IN COMPETITIVE BIDDING WHERE THAT REQUIREMENT IS CONTAINED WITHIN THE STATE STATUTES OR WITHIN ITS OWN REGULATIONS

The purposes behind requiring governmental units to engage in competitive bidding are to invite competition, to guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable. Smith v. FWD Corporation, 106 Ill. App. 3d 429 (1983). Municipalities are not required in every instance to implement a system of competitive bidding. Where there is no statutory or ordinance requirement, competitive bidding need not be employed. People ex. rel Adamowski v. Daley, 22 Ill. App. 2d 87 (1959).

3. A MUNICIPALITY HAS BROAD DISCRETION IN CHOOSING THE LOWEST RESPONSIBLE BIDDER

Municipal officials may use discretion in choosing the "lowest responsible bidder. Essentially, the term "lowest responsible bidder" contemplates that the bidder will satisfactorily complete the contract. Hallett v. City of Elgin, 254 III. 343 (1912). A contract may be awarded to one who is not the lowest bidder where there is a sound or reasonable basis for the award. Cardinal Glass Company v. Board of Education, 113 Ill. App. 3d 442 (1983).

4. A MUNICIPALITY SHOULD NOT SEEK BIDS WHICH INVITE QUOTATIONS ON ONLY A SINGLE NAMED ITEM

Case law in Illinois prohibits a municipality from specifying a particular article in the bidding form. Village of Rossville v. Smith, 256 Ill. 302 (1912). Bid specifications are not invalid merely because they tend to favor one manufacturer over another, but may become improper when drawn so as to confine bids to one particular firm or item. However, it may be proper to specify a particular brand "or equal". McQuillan, Municipal Corporation, 3rd Ed., Vol. 10, Section 29.42 n.12.

5. A MUNICIPALITY MAY ENGAGE IN AN AFFIRMATIVE ACTION PROGRAM WHICH WILL AWARD A CONTRACT TO ONE WHO IS NOT THE LOWEST BIDDER

Affirmative action legislation creating minority set asides in contracts permissible. J. A. Cronson Co. v. City of Richmond, 779 F.2d 181 (1985). Section 132.601 of Chapter 127 of the Illinois Revised Statutes, creates affirmative action programs for both minorities and women. Various municipalities provide for affirmative action programs through local ordinance or executive order.

As a result, municipal officers may take a bidder's affirmative action program into account in determining the lowest responsible bidder. S. N. Nielson Company v. Public Building Commission, 81 Ill. 2d 290 (1980).

September 1986 / Illinois Municipal Review / Page 7

6. A MUNICIPALITY MAY AWARD A CONTRACT WHERE ONLY ONE BID HAS BEEN RECEIVED

It is also proper to award a contract based upon the bid of only one bidder if the law governing the bidding circumstances has been followed. McQuillan, Municipal Corporations, 3rd Ed., Vol. 10, Section 29.74.

7. A MUNICIPALITY MAY REJECT ALL BIDS

A municipality may reject all bids and re-bid the contract. Sanitary Dist. of Chicago v. McMahon, 110 Ill. App. 510 (1903). In instances where the lowest bidder has not conformed to bid requirements, the governmental entity may award the contract to the next lowest bidder without readvertising for bids. Johnson v. Sanitary Dist., 163 Ill. 285 (1896).

8. A BID NOT GUARANTEED FOR A DEFINITE TERM MAY BE WITHDRAWN PRIOR TO ACCEPTANCE

A bid is no more than an offer which, until accepted, does not create a contractual relationship. Hassett Storage Warehouse, Inc. v. Board of Election Commissioners, 69 Ill. App. 3d 972 (1979). Therefore, absent an ordinance or provision in the bid package, a bid may be withdrawn prior to acceptance and any bid deposits returned to the bidder. Oscar George Electric Company v. Metropolitan Fair & Exposition Authority, 104 Ill. App. 3d 957 (1982). However, the express terms of the bid requirements may validly provide that a bidder has no right to withdraw his bid even before the bids are opened. McQuillan, Municipal Corporations, 3rd Ed., Vol. 10, Section 19.67.

9. A CONTRACTOR MAY BE ABLE TO CORRECT MINOR ERRORS IN A BID AFTER SUBMISSION OR ACCEPTANCE

It is permissible, though not advisable, to allow a bidder to alter a bid after it has been submitted and/or approved. The Courts will look to whether such an alteration constitutes a "material variance" between the original and modified proposal. A "material variance" is one which gives a bidder a substantial advantage or benefit not enjoyed by any other bidder. Leo Michuda & Sons Company v. Metropolitan Sanitary District of Greater Chicago, 97 Ill. App. 3d 340 (1981). The key to any necessity for rebidding is not whether a bid is modified or altered, but whether such amendment creates a special advantage not enjoyed by other bidders.

10. RIGHTS OF UNSUCCESSFUL BIDDERS

An unsuccessful bidder usually challenges an award of a contract through an action for injunction or declaratory relief. Stanely Magic-Door, Inc. v. City of Chicago, 74 Ill. App. 3d 595 (1979) although in the recent Illinois Appellate Court case of State Mechanical Contractors, Inc. v. Village of Pleasant Hill, 132 Ill. App. 3d 1027 (1985), an unsuccessful bidder sought compensation for lost profits it would have received had it been awarded the contract. The Illinois Appellate Court refused to extend the remedy of lost profits to unsuccessful bidders, but held that the challenging bidder might recover from the municipality its expenses incurred in preparing and presenting the bid.

The acceptance of a competitor's bid does not, in and of itself, give rise to a federal civil rights action on the part of an unsuccessful bidder. Coyne-Delany Company v. Capital Development Board, 616 F.2d 341 (1980); Northwest Disposal Company v. Village of Fox Lake, 119 Ill. App. 3d 546 (1983). (1985).

CONCLUSION

Municipal officials and attorneys should recognize that a municipality's ability to contract is subject only to limited restrictions. Many contract decisions need not be made on the basis of competitive bidding. Furthermore, Illinois Courts have been relatively restrained in their review of municipal contract decisions whenever disputes arise. With these ten guidelines to municipal contracts clearly in mind, governmental officials and attorneys should have no difficulty in achieving a municipality's contractural expectations. •

News items and photographs of interest indicating new developments and progress in your municipality are always of interest to our readers. You are urged to send such information to the ILLINOIS MUNICIPAL REVIEW for publication. Be sure your information is complete. All photographs should be black and white glossy prints.—Editor

Page 8 / Illinois Municipal Review / September 1986