Bob Ferguson
Other LanguagesAGLO 1971 No. 128 -
Attorney General Slade Gorton
- - - - - - - - - - - - -
November 15, 1971
Honorable Hal Wolf
State Representative
22nd District
Clark Road
Yelm, Washington 98597
Cite as: AGLO 1971 No. 128 (not official)
Dear Sir:
By letter previously acknowledged you requested an opinion of this office relating to the powers of the department of general administration with regard to the purchase of equipment and material for the state. As set forth in your letter, your question reads as follows:
"Can the Department of General Administration legally employ a purchase‑by-contract method whereby individual, open-end, non-renewable and non-negotiable contacts (which could be purchased against for one year by any state agency without further authorization by the Department of General Administration) are bid competitively once a year and awarded to the individual qualified franchisee, manufacturer or vendor who submits the lowest qualified bid for each specified brand name?" (Emphasis supplied.)
ANALYSIS
The governing statute with respect to state purchases of equipment and materials is RCW 43.19.1906, which reads as follows:
"Insofar as practicable, all purchases and sales shall be based on competitive bids and a formal sealed bid procedure shall be used as standard procedure for all purchases and contracts for purchases and sales executed by the director of general administration through the division of purchasing and under the powers granted by RCW 43.19.190 through 43.19.1939: Provided, That sealed competitive bidding shall not be necessary for:
[[Orig. Op. Page 2]]
"(1) Emergency purchases if such sealed bidding procedure would prevent or hinder the emergency from being met appropriately; and
"(2) Purchases not exceeding five hundred dollars but in all such purchases quotations shall be secured from enough vendors to assure establishment of a competitive price; and
"(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 negotiation."
From the contents of your letter, we take it that your question concerns a situation in which competitive bidding is called for by this statute ‑ as distinguished from one which falls within one or more of the three exceptions set forth in the proviso. For purposes of illustration let us posit, specifically, a hypothetical case involving the purchase of automobiles.
Past practice of the department of general administration, as we understand it, has been to publish a call for bids for all new automobiles to be purchased for state agencies during the ensuing year without any specification as to brands. Instead, the bid specifications have, typically, merely described and identified a general class of automobiles, such as "standard size, with eight-cylinder engines, etc." All interested suppliers, without regard to the brand or brands which they sell, may then respond and the contract will be awarded to the lowest responsible bidder with a result that all automobiles purchased by state agencies pursuant to this contract for the period for which it covers will be of that brand or make in which the successful bidder deals.
The alternative procedure which your questions places in issue, as we understand it, would be for the department of general administration to submit multiple calls for bids. For example, in the case of automobiles it would submit one call for Chevrolets, another for Plymouths, a third call for Fords and a fourth call for American Motors Ramblers. Chevrolet dealers would then compete with other Chevrolet dealers; Ford dealers with other Ford dealers, and the like. Separate contracts would then be let with the successful bidder in each brand category and the various state agencies then desiring to obtain automobiles pursuant to one of these contracts would be able to choose between brands and designate the particular brand or make which they desired.
[[Orig. Op. Page 3]]
Your question is whether this alternative procedure may be said to be authorized under our existing bid law governing state purchases ‑ RCW 43.19.1906, supra.
The purpose of competitive bidding statutes such as this, as recently described by our court in Savage v. State, 75 Wn.2d 618, 621, 453 P.2d 613 (1969), is to
"'. . . guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable, and . . . [such statutes] are enacted for the benefit of . . . taxpayers, and not for the benefit or enrichment of bidders . . .'"1/
When an item is put out to competitive bid, it must be accompanied by specifications. See, 43 Am.Jur., Public Works and Contracts, § 35. These specifications, according to § 36 of this same text,
". . . must be sufficiently detailed, definite, and precise upon all the essential elements that enter into the contract, so as to afford a basis for full and fair competitive bidding upon a common standard, and they should be free from any restrictions the effect of which would be to stifle competition; unless they are definite, so that all bids shall be upon the same proposition, there will be no real competition and no basis on which to determine which bid is the lowest, and thus the door to favoritism and improvidence will be opened. . . ."
The issue raised by your question involves, at the outset, the legality of including a specific brand name as one of the specifications to be met by all bidders responding to the call.
The leading case in this state on the question of specifying a brand name in a call for bids for a public contract is Smith v. Seattle, 192 Wash. 64, 72 P.2d 588 (1937). In that case, the specifications published 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 of 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, [[Orig. Op. Page 4]] 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 averse 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, 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."
This case, in turn, represented the primary authority cited by this office in AGO 61-62 No. 24 [[to William Chatalas, State Representative on April 25, 1961]], copy enclosed, wherein we concluded that 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 only if the officials submitting the call for bids have not drafted these specifications arbitrarily and capriciously, and are acting in good faith.
Another Washington case, Great Northern R. Co. v. Leavenworth, 81 Wash. 511, 142 Pac. 1155 (1914), was cited in 43 Am.Jur., Public Works and Contracts, § 16, for the proposition that:
[[Orig. Op. Page 5]]
". . . advertisements for bids may lawfully specify an article covered by a patent or a tradename, provided the article is different from other products and may fairly be considered superior in quality, . . ."
Unfortunately, none of the foregoing authorities appears to reach and dispose of the precise issue which the bidding proposal described in your question poses. Your question does not contemplate a situation where, because of the special needs or requirements of the purchasing agency, the only source of the desired item is a particular manufacturer and/or supplier. If this were the area of your concern, then under RCW 43.19.1906, supra, there would be no need for competitive bidding at all because of the exception therefrom which is set forth in subsection (3), dealing with
"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 negotiation."
However here, as with the hypothetical subject of state automobiles, your approach contemplates competitive bidding on a brand name basis but without any prior determination that only a certain brand of automobiles would suffice. Under your proposed approach, the suppliers of all competitive brands or makes of the particular class of automobiles to be purchased would be given an opportunity to submit bids ‑ but each supplier would only bid competitively with other suppliers of his particular brand or make of automobile. Thus, we do not regard either Smith v. Seattle, supra, or RCW 43.19.1906 (3), supra, as being dispositive of your question.
The basic premise upon which your proposed bidding procedure rests is that (in the case of our hypothetical) all brands or makes of the particular class or category of automobile specified are satisfactory (thus negating the use of brand name bidding if only a single contract were to be let); but that each of the state agencies for which these automobiles are purchased by the department of general administration should have an opportunity to select or designate the particular brand which it desires. In order to achieve this result, you would have the department execute multiple contracts so as to establish, on a competitive bidding basis, a source of supply of each of the brands of automobiles within the specified category or class.
The difficulty in approving this procedure is that it does not afford the full opportunity for competition which is contemplated by a competitive bidding statute such as [[Orig. Op. Page 6]] RCW 43.19.1906, supra. Rather, this procedure would eliminate any price competition between manufacturers of supposedly equal products; and it would do so without any demonstration of economic or other legally recognizable advantage to the state as purchaser. Therefore, in our opinion, there is no legal justification for this procedure on the basis of the facts above assumed.
In elaboration of this conclusion, we quote again from the court's opinion in Savage v. State, supra, page 621, as follows:
". . . competitive bid statutes are 'for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best . . . supplies at the lowest price practicable, and they are enacted for the benefit of . . . taxpayers, and not for the benefit or enrichment of bidders. . . .'"
In furtherance of this purpose, one of the requirements of bidding is:
". . . that all responsible bidders shall have the opportunity to compete, and accordingly devices or unreasonable actions by authorities which are designed or tend to limit the list of qualified bidders are presumed to be injurious to the taxpayer and are illegal. . . ." 10 McQuillin, Municipal Corporations, 1966 Rev. Vol., § 29.442/
Thus, one has to conclude, statutory bidding requirements are in the interests of the public and are both strictly construed and strictly enforced. When such bidding requirements exist, they constitute the rule, and any exceptions permitting deviation from that norm are narrowly interpreted.
The "brand name" exception, as we have above observed, constitutes one allowable deviation. In those cases where the public purchaser has been permitted to specify a certain product by brand name it has been because certain features found on that brand (usually patented) make that particular brand unique ‑ and not because of a desire to favor a particular manufacturer. In those situations, because of the absence of any competing brands, competition may be limited to that which may exist between dealers of the same brand. In fact, if there is only one source of supply, competitive bidding ‑ which presupposes the existence of competing vendors of the same product ‑ may be dispensed with entirely. See, 10 McQuillin, Municipal Corporations, supra, § 29.34. Accord, RCW 43.19.1906 (3), supra.
[[Orig. Op. Page 7]]
In applying these principles to the facts at hand, we first assume that the purchases in question are contemplated for the purpose of fulfilling the state's needs for a certain specific product or item; e.g., automobiles. In making such purchases for the various state agencies, the purchasing division of the department of general administration is first to ascertain the state's need, both as to quantity and quality. Then, it is to prepare and publish appropriate specifications together with an invitation to bid. The specifications will be expressed in terms of functional design, safety, quality, performance, etc.
However, in our hypothetical case there will be no need to call for the product (automobiles) by any particular brand name bacause each of the several manufacturers produces an automobile which possesses all of those standard characteristics called for in the specifications. Therefore, there will be reason to compete for the lowest responsible bid on an automobile having those features, regardless of its brand name. If the purchasing division does mention a brand name, the reason will be standardization only; i.e., a purchaser may invite bids from several manufacturers to supply a model with the standard features found only on (let us say) a 1930 Model A Ford.
On the other hand, if the specifications actually should call for a class of automobile by brand name, the only justification found among the authorities cited earlier in this opinion would be that this brand ‑ and only this brand ‑ possesses the features which the state requires its automobiles to have. In other words, the state may call for bids on Fords, Chevrolets, or Plymouths, or some other brand, but only if there is a real justification for seeking that brand to the exclusion of all others.
Conceivably, under that same principle, the state might call for a certain quantity of each brand as in your proposal for multiple contracts. However, to do so the state would have to show a justification in terms of a demonstrable need for the predetermined unique characteristics of each brand for certain purposes. For example, a state university might need a certain number of driver training cars and specify a certain brand as being produced by the only manufacturer of a patented safety device. The Department of Natural Resources might, similarly, specify a need for a different brand bacause of another manufacturer's proven monopoly on some different feature necessary for that agency's use on rugged terrain. Those expressed needs would certainly justify separate calls for bids, for those two items of separate and unique products, by brand name.
[[Orig. Op. Page 8]]
By way of contrast, there is no similar justification shown for the proposal outlined in your request for an opinion. For all that appears, factually, the state would be calling for several brand names for no justifying purpose other than a desire to eliminate competition between the brands. That purpose would be in direct violation of the principles of competitive bidding. See, 10 McQuillin, Municipal Corporations, supra, § 29.44. A general bid call for certain quantities of each of several brands of the same identical product either denies that any one of them is unique or it assumes (without the required proof) that every one is unique. In either case, the procedure would violate the purposes of our competitive bidding statute and would be, in our opinion, unlawful.
We trust the foregoing will be of assistance to you.
Very truly yours,
FOR THE ATTORNEY GENERAL
Robert F. Hauth
Assistant Attorney General
Richard A. Heath
Assistant Attorney General
*** FOOTNOTES ***
1/See, also, Miller v. State, 73 Wn.2d 790, 793, 440 P.2d 840 (1968).
2/See, also the similar language in Savage v. State, supra, p. 622.