Bids or Quotes

Procurement for some goods can be a maze when you look at how cities operate. Some purchases are just out right purchases. These generally involve day to day needs. Other purchases are quotes and some are bids. Sometimes we request proposals from businesses to offer services to us. These are generally for professional services of consultants when used. Knowing what is what can be confusing but knowing what to do is a matter of law.

So what’s a quote and what’s a bid. Sometimes these words get used interchangeably but really there is a difference under law. A quote is a formal amount quoted by a business to provide a certain product. Minnesota law was recently amended to provide for quotes in government purchases for amounts up to $100,000. However any quoted amount over $25,000 needs to have at least 2 quotes so we’re assured we have a competitive quote for the work to be accomplished. Typically we try to get at least two quotes on any purchase of significance.

Under current law quotes can be received for items up to $100,000 but there is one other requirement for quotes over $75,000. This requires the city to receive a performance and payment bond for the purchase. These are separate bonds which provide for security. The performance bond guarantees the “project” gets built or provided in accordance with the specifications or needs of the purchaser. The payment bond provides and assurance to subcontractors that they will be paid. Without that assurance a subcontractor could seek payment from the city even though the city paid the contractor.

A bid is a much more formalized process. Bids are required on all procurements in excess of $100,000. This process involves a public notice to be published in the official newspaper of the city and often in other trade publications. The notice requires bids to be received at a specified time and date. At that time bids are opened publicly and read aloud. Typically the low bidder receives the award. With this process the bidder has to have a bid bond. This bond addresses the issue of signing a contract to do the work at the price bid. If the contractor makes an error and doesn’t want to sign a contract after being awarded the bid he relinquishes the bid bond. These are typically for 5% of the amount of the bid. The thought here is that the city may need to rebid the project and the bid bond addresses the expense of doing this. It also however places the onus on the bidder to do his homework so the process can move smoothly.

There are exceptions to the bidding/quote requirements. Professional services are one of those exceptions. We however periodically do a “Request for Proposals” for some professional service work. We have done this primarily for public works projects in using the services of an engineer. This allows us to evaluate the services being offered and also look at the expense of the engineer for the project. This process takes a bit more time but the ability to select the most qualified or least expensive or other criteria can be accomplished when additional information is received.

It may seem like there are hoops to jump through when dealing with a city but when you look at the reasons for them they becomes easier to understand. There is a method to our madness.