April 22, 1991

Mr. John R. Steele
Aurora County State's Attorney
P.O. Box 577
Plankinton, South Dakota 57368-0577

OFFICIAL OPINION NO. 91-10

Competitive bidding/used equipment

Dear Mr. Steele:

You have requested an official opinion from this office regarding the following factual situation.

FACTS:

The Aurora County Board of County Commissioners is contemplating the purchase of a pay loader to be used by its highway department. Having investigated the price range of new pay loaders, and having reviewed the expected amount of use of the pay loader, the county commissioners are of the opinion that it may be in the county's best interests to consider the purchase of a used pay loader rather than a new piece of equipment.

Because the purchase of a used pay loader would involve the expenditure of more than $7,500, you advised the county commissioners that such purchase would be subject to the competitive bidding requirements of SDCL 5-18. The county commissioners are of the opinion that, no matter how carefully the specifications are drawn, there may be, because of the nature of used heavy equipment, significant differences between two pieces of equipment offered for sale to the county. These differences may make one piece of equipment a much better buy than another, even though it is not the lowest price and even though the bidders offering the equipment are both responsible bidders.

Based upon the above factual situation, you have asked the following questions:

QUESTION NO. 1:

May a county commission, when purchasing used equipment through competitive bidding, take into consideration differences in quality and condition between two or more offered items when both items offered meet the technical specifications of the bid and both bidders are responsible?

QUESTION NO. 2:

If your answer to that question is in the affirmative, what differences may a commission take into account that would justify not accepting the bid of the lowest responsible bidder?

IN RE QUESTION NO. 1:

The competitive bidding statutes of SDCL ch. 5-18 are relevant to this inquiry. In reviewing these statutes, the court in Fonder v. City of South Sioux Falls, 76 S.D. 31, 71 N.W.2d 618 (1955), stated that the object the legislature sought to accomplish through competitive bidding is to guard against favoritism, improvidence, extravagance, fraud and corruption. The Court in Fonder also held that the requirement for competitive bids contained in SDCL ch. 5-18 constitutes a jurisdictional prerequisite to exercise the power of a public corporation to contract.

Therefore, I must review the relevant statutes to determine what discretion is given to a public body to review bids. SDCL 5-18-9 provides:

Unless all bids presented are rejected, the lowest responsible bid, in all cases, must be accepted. In case the low bidder is not responsible, or the bid is not made in accordance with the requirements of this chapter, or the low bid is withdrawn, the bid of the next lowest responsible bidder may be accepted.

In construing the lowest responsible bidder provision, one of my predecessors stated that a public body may consider, in addition to the question of pecuniary amount, the bidder's ability to respond to the requirements of the contract, his ability to execute the contract and his integrity, judgment and skill. AGR 55-56, p.78. See also Menke v. Board of Education, Independent School Dist., West Burlington, 211 N.W.2d 601 (Iowa 1973).

It is my opinion that under SDCL 5-18-9 a public body cannot reject the low bidder and accept another if the low bid is in conformance with the specifications, is in compliance with SDCL ch. 5-18 and the low bidder is responsible. The concerns of your commissioners must be addressed in drafting specifications. In drafting specifications, the commissioners should be guided by SDCL ch. 5-18 and Supreme Court interpretations.

Public contract bid specifications must be sufficiently definite and precise so as to afford a basis for bids and they must be free of restrictions, the effect of which would stifle competition. Such specifications must be sufficiently detailed upon all essential elements as to afford a basis for full and fair competitive bidding upon a common standard.

Gridley v. Engelhart, 322 N.W.2d 3 (S.D. 1982).

Thus, in your situation, the county commissioners may not reject the lowest responsible bid that meets specifications on the basis of subjective quality review. Once the commissioners have examined the bid for compliance, the remainder of a public body's discretion is limited to determining whether the lowest bid is responsible, not whether a higher bidder is more responsible or its product better satisfies the specifications. To determine otherwise would be contrary to the purpose of the competitive bid requirements as determined by the South Dakota Supreme Court.

Therefore, my answer to your first question is no. It is, therefore, unnecessary to address your remaining question.

Respectfully submitted,

MARK BARNETT
ATTORNEY GENERAL

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