Constraints on Bidder Experience Requirements

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By Bernard S. Kamine

(A version of this article appeared in the ECA Magazine, February 2017)

More and more, local public agencies impose experience requirements as pre-requisites to bidding on their projects.  For example, for installation of 3000 linear feet of 21″, 15″ and 8″ vitrified clay pipe in city streets, one southern California agency recently required bidders to provide a record “showing successful completion, as a General Contractor and/or Pipeline Contractor, of at least three similar projects within the last 10 years . . . [and involving] installation of 12-inch and larger VCP sewer pipelines, 1500 linear feet or greater.”  In addition to the bidder’s experience record, the agency required bidders to submit “resumes of key personnel proposed to work on this project . . . [which] information will be critical in meeting requirements as a responsible bidder.”  Finally, the agency declared, “Failure to submit any of the above-mentioned information with your bid ‘may’ deem your bid non-responsive.”

At the outset, there are two separate legal concepts involved here:  First is bid responsiveness; second is bidder responsibility.

Bid responsiveness is a determination whether the bid did, and promises to do, what the bidding instructions demand (D.H. Williams Construction, Inc. v. Clovis Unified School District (2007) 146 CA4th 757, 763-64).  In other words:  Was the bid timely; was the bid complete, including bid bond, subcontractor listing, non-collusion declaration and other submittals required by the bid instructions; and does the bid promise to perform the work as required by the plans and specifications?

Bidder responsibility is a determination of the bidder’s trustworthiness, quality, fitness, capacity and experience necessary to satisfactorily perform the contract (Public Contract Code § 1103).

“Submitting” an experience record and resumes of key personnel, with the bid, as required in the invitation for bids, is a matter of bid responsiveness.  However, “evaluating” a bidder’s experience, including the experience record and resumes, is always a matter of bidder responsibility, not bid responsiveness.  The statement, in the bid instructions quoted above, that a bid which fails to include the requested experience information may be deemed non-responsive, does not recast the evaluation of a bidder’s experience into a matter of bid responsiveness.  Public Contract Code § 1103 clearly makes an evaluation of bidder experience a responsibility issue; it defines a “responsible bidder” as one “who has demonstrated . . .  experience to satisfactorily perform the public works contract.”

The distinction between responsiveness and responsibility is important.  City of Inglewood-Los Angeles County Civic Center Authority v. Superior Court (1972) 7 C3d 861, 871, requires the awarding authority to conduct a “quasi-judicial proceeding prior to rejection of the low-monetary bidder as a nonresponsible bidder.”  At that hearing the awarding authority must point out the evidence on which it is relying, “and permit [the bidder] to present evidence that he is qualified to perform the contract.”  Inevitably, that hearing will include exploration of the qualifications of key personnel proposed to work on the project.  See Great West Contractors, Inc. v. Irvine Unified School District (2010) 187 CA4th 1425, 1455-57, for a recent application of these principles.

An experience requirement, by its nature, prevents some bidders from competing for the contract.  The requirement is valid only if the required experience is reasonably necessary to satisfactorily complete the specific project.  Otherwise, the restriction in the pool of bidders unreasonably defeats the essential purposes of competitive bidding.  Those purposes are spelled out in Public Contract Code § 100:

[I]t is the intent of the Legislature in enacting this code to achieve the following objectives . . .

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(c)  To provide all qualified bidders with a fair opportunity to enter the bidding process, thereby stimulating competition in a manner conducive to sound fiscal practices

(d)  To eliminate favoritism, fraud, and corruption in the awarding of public contracts.

It is elementary economics that more competition results in lower prices.  Studies of the construction of San Francisco’s Bay Area Rapid Transit system proved this rule.  By increasing competition, BART was able to achieve dramatic decreases in prices.  When BART got only two bids on a large segment of the system, with the lowest being $60 million, it rejected all bids and broke the segment into smaller contracts for rebidding.  The result was 10 times the number of bidders and a 20% reduction in the overall cost; 20 bids were received and the sum of the lowest bidders was only $48 million for all of the work.  (Gaver and Zimmerman, An Analysis of Competitive Bidding on BART Contracts (July 1977) 50 Journal of Business 280, 292).

It has long been recognized that assuring the greatest possible competition is a key purpose of competitive bidding laws.  United States v. Brookridge Farm, Inc. (10th Cir. 1940) 111 F2d 461, 463, addressed clauses in contracts that limited competition, explaining that one purpose of competitive bidding

is to give all persons equal right to compete for Government contracts; to prevent unjust favoritism, or collusion or fraud in the letting of contracts for the purchase of supplies; and thus to secure for the Government the benefits which arise from competition.  In furtherance of such purpose, invitations and specifications must be such as to permit competitors to compete on a common basis.  Conditions or limitations which have no reasonable relation to the actual needs of the service and which are designed to limit bidding to one of several sources of supply are interdicted, and render the award of a contract made in such circumstances voidable.

For a small sole proprietorship, a determination of bidder experience can usually focus on the owner; the owner either has that experience, or not.  However, the bigger the contractor entity, and especially for corporate bidders, satisfying an experience requirement becomes more complex.  Those firms can only meet the requirement through the experience of their employees who will be performing and managing the job.  Therefore, the focus must be on the experience of those who will actually be running the project, whether or not they are officers at a particular level or the registered managing officer/ employee of the company for purposes of its contractor license.

No California case has discussed the permitted scope of experience requirements, and what personnel must have the experience, but other jurisdictions have faced this issue.  For example, in Construction Contractors Association of the Hudson Valley, Inc. v. Board of Trustees, Orange County Community College  (N.Y.A.D. 1993) 600 NYS2d 953, the project was extensive renovation of an historically significant building listed on the National Register of Historic Places.  The prequalification requirement was the successful renovation of at least two buildings listed on the National Register within the previous five years.  The contractors association challenged the experience requirement as violating the lowest responsible bidder statute.  Held:  Experience requirements cannot exclude responsible bidders without violating the competitive bidding statute.  The requirement was too narrow and too arbitrary.  It excluded both firms that had worked on National Register buildings, but not two in the last five years, and firms that had never worked on such buildings, but had recently hired key personnel with just that experience.  Also, experience could be limited to renovation of National Register buildings only upon a showing that work on those buildings presented different problems than renovation of other historical buildings

Another example, in Matter of J. D. Miles & Sons, Inc. (Apr. 7, 1993) Comp. Gen. No. B-251533, five years experience in performing the type of roofing work involved was required.  Held:  A new company that had acquired the assets and employees of another company which had the experience satisfied the requirement.

[I]n determining compliance with a bidder experience requirement, an agency may consider the experience of the bidder’s employees, even if the experience was gained while these employees worked for other employers.  In addition, in evaluating the experience of a corporation, the agency may consider the experience of a predecessor firm.

Therefore, before an experience requirement can be mandated, the agency must be able to demonstrate that the specific requirement is reasonably required to assure that the contract will be successfully performed.  (How much experience – beyond possession of a C-34 Pipeline Contractor license – is really needed to install 3000 linear feet of VCP for a routine sewer line?)  Moreover, in determining a bidder’s experience, the agency must look at the bidder’s personnel who will actually manage and perform the work, whether or not they are recent employees or have been with the firm for years.  Otherwise, agencies will find their experience requirements challenged in the required quasi-judicial proceedings, which will delay or disrupt performance of agency contracts.

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