DISTRICTS ‑- SCHOOL ‑- CONTRACTS ‑- USE OF TRADE NAME, BRAND NAME, ETC. IN CONTRACTS UNDER CHAPTER 224, LAWS OF 1961
A school district calling for bids prior to letting a contract can specify an item by brand name or name of manufacturer without an additional clause inviting bids on similar items of equal quality and serviceability if the public officials have not drafted the specifications arbitrarily and capriciously and are acting in good faith.
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April 25, 1961
Honorable William Chatalas
2802 33rd South
Seattle, WashingtoAGO 61-62 No. 24 Cite as:
Overruling AGO 55-57 No. 279
By letter previously acknowledged you requested an opinion of this office, paraphrased as follows:
When a school district publicly calls for bids prior to letting a contract, can it specify an item by brand name or name of manufacturer without an "or equal" clause allowing bids on a similar item of equal quality and serviceability?
We answer this question in the affirmative as explained in the following analysis.
The school districts of this state are municipal corporations. Seattle High School Ch. No. 200 v. Sharples, 159 Wash. 424, 293 Pac. 994 (1930);Juntila v. Everett School Dist. No. 24, 178 Wash. 637, 35 P. (2d) 78 (1934). As an arm of state government created by the legislature, they are subject to statutorily imposed competitive bidding requirements.
[[Orig. Op. Page 2]]
Prior to the passage of a law in the 1961 legislative session, RCW 28.62.170, applying only to first class school districts, was the sole statute pertaining to competitive bidding on district projects. There was no corresponding law applicable to second and third class districts nor were there any applicable constitutional provisions, although Chapter 39.04 RCW required certain procedures to be followed when competitive bids were not solicited. By Chapter 224, Laws of 1961, RCW 28.62.170 was repealed and competitive bidding requirements were imposed on all classes of school districts. This law and its repealer will be effective June 8, 1961. Neither this law or RCW 28.62.170 spelled out the legal requirements as to the content in the plans and specifications.
However, the nature and legal requirements of competitive bidding have been clearly decided in Washington, in regard to the use of seemingly restrictive specifications in the call for bids. The leading case isSmith v. Seattle, 192 Wash. 64, 72 P. (2d) 588 (1937). In that case the specifications required that bids should be submitted for "true Mazda lamps only" which were obtainable from only one source. The court upheld this specification after recognizing that the issue had been similarly presented to the highest courts in many states and two divergent lines of authority had been established, saying:
"We think, also, that, apart from mere weight of authority, the liberal rule is supported by the more persuasive reasons. The restricted rule would, in many cases, make it impossible for the city authorities to protect the best interests of the municipality by specifying patented materials or other articles which could only be obtained from one source, when it is clearly to the public interest to do so.
"The purpose of competitive bidding statutes is to promote honesty and economy in public contracts. It is not the purpose of such statutes to deprive the city of the right to procure the best article available simply because it is held in a monopoly or is procurable only from a limited number of sources. In this age of scientific invention, courts should be adverse to denying to municipalities the privilege of using modern methods and improvements.
"It would seem that a previous satisfactory experience by the city, in the actual use of a particular article, [[Orig. Op. Page 3]] is a reasonable basis for the exercise of discretion by the city authorities in favor of that article as against other similar articles of less proven quality. If the authorities, in the exercise of sound discretion, believe that a particular article, procurable from only one or a limited number of sources, is required in preference to other articles procurable from a large number of sources, the fact that there can be only a limited competition, or even no competition at all, is not a bar to calling for bids for the particular article desired, and the discretion of public authorities will not be overruled by the courts, in the absence of a showing that that discretion was abused or fraud existed." (page 68)
It should be noted that the court's decision does not rest solely on the specification of patented materials. At page 66 it was observed:
"There is some dispute in the evidence as to whether or not the patents, or some of the patents, on Mazda lamps have expired. Whether or not that is true, is of no special importance. The important fact is that, either on account of patents or some other reason, their manufacture, distribution, and sale are controlled by a single company."
Consequently, the holding seems quite broad enough to support the specification of items by trade names, brand names, or name of manufacturer and the availability of the article in the open market would only present a situation more clearly falling within the court's requirements for competitive bidding.
In a previous case,Great Northern R. Co. v. Leavenworth, 81 Wash. 511, 142 Pac. 1155 (1914), the court had reached a similar decision but the facts in that case did not present the issue quite as squarely as in the Smith case since the owner of the patent executed a license agreement prior to the bidding in which it promised to supply the specified article to the successful bidder, whoever that might be.
The cases prior to 1932, illustrating the weight of authority in accordance with the Washington view, are collected in 77 A.L.R. 702, Annot., "Validity of contract for material patented or held in monopoly where letting to lowest bidder is required." See also, 43 Am.Jur., Public Works and Contracts, § 16. The authorities [[Orig. Op. Page 4]] on the subject appear to support the Washington position, expanding the rationale of the majority view by stating:
"The true reason, it is submitted, for the rule upholding municipal authorities in specifying patented material or articles is that to hold otherwise would defeat the very purpose of the legislative provisions requiring contracts to be let to the lowest responsible bidder after advertisement. The purpose of these provisions is to protect the public interests. They do this by requiring bids to be advertised for and the contract to be let to the lowest and best, or lowest responsible, bidder. But this specific requirement is only incidental to the main purpose of protecting the public interests by securing the best advantages in the way of material and supplies at the lowest practical price. The authorities may, however, protect the interests of the municipality by refusing to contract for the thing patented if the price asked therefor is unreasonable or prohibitive, and if there is any fraud practiced it will vitiate the contract the same as it will a contract for an unpatented article. Consequently, in promoting and protecting the best interests of the municipality, it is necessary that the corporate authorities be permitted to specify patented materials or articles when it is clearly to the public interest to do so, after carefully considering the serviceability and cost of the material or article for which the contract is made. . . ." 10 McQuillin, Municipal Corporations (3rd ed.), § 29.42.
"The majority and seemingly the better view permits specifying articles covered by patents at least where the patented article is available to many bidders, although there is a strong majority position." 1 Antieau, Municipal Corporations Law, § 10.11.
The requirement of "or equal" clauses is confined to those jurisdictions who have subscribed to the minority view.
"So, where the power to specify a patented article when competitive bidding is required is denied, it is generally held that a patented article may be provided for if the use of any other article equally as good is also provided for." 10 McQuillin, Municipal Corporations, (3rd ed.), § 29.42.
[[Orig. Op. Page 5]]
Note also a related statutory provision, inapplicable to school districts, RCW 43.19.1906, which indicates the policy of the state under certain circumstances to dispense with the requirement of competitive bidding. It provides
". . .Provided, That sealed competitive bidding shall not be necessary for:
". . .
"(3) Purchases which are clearly and legitimately limited to a single source of supply and purchases involving special facilities, services or market conditions, in which instances the purchase price may be best established by direct negotiations."
This provision indicates a legislative awareness that situations may arise, as in theSmith case, where restrictive specifications would be desirable.
In conclusion, it is our opinion that contracts may be let by school districts under Chapter 224, Laws of 1961, in accordance with specifications listing items by trade name, brand name, or name of manufacturer without an additional clause inviting bids on similar items of equal quality and serviceability, providing that the public officials have not drafted the specifications arbitrarily and capriciously, and are acting in good faith. In practice, however, it is much easier to prove good faith where equals are invited, since, if there are similar items ofequal quality and serviceability, the limitation to a particular item is usually hard to justify.
We specifically overrule AGO 55-57 No. 279.
We trust that the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
DAVID C. CUMMINS
Assistant Attorney General