Questions and Answers Regarding Electronic Contracting
- How has the use of Electronic Bidding affected the bid opening process?
The use of electronic documents and processes in the bidding and letting of projects has increased markedly since July 1999, when the Georgia DOT first used Internet bidding. As of May 24, 2006, there are at least 33 State Transportation Agencies (STAs) that allow contractors to submit electronic bids; with at least 27 of these that receive bids over the Internet, and at least 9 of these that accept only Internet bids. See "Summary of STA Bidding Information Available on the Internet" for more details.
From the industry's perspective, the main advantage to electronic bidding is that bids can be developed and revised more quickly and more accurately than traditional paper bids; electronic bidding software generally performs the computations and also checks for the completeness of the bid, including required certifications.
From the STA perspective, electronic bid submittals have greatly increased the efficiency of the contract letting process and have allowed the STAs to process much larger lettings with fewer staff.
For more information, see the FHWA document titled Internet Bidding for Highway Construction Projects.
- Does FHWA's policy restrict the use of electronic contracting for advertising, receiving bids or awarding contracts?
No. While FHWA's regulations in 23 CFR Part 635 were written prior to the advent of Internet bidding, there is nothing in these regulations that prohibits Internet bidding. The FHWA supports the use of electronic procedures to advertise, open bids, and award projects as long as the process assures opportunity for free, open, and competitive bidding, including adequate publicity of the advertisements or calls for bids, as required by 23 CFR 635.104(a).
- When may Internet-based advertising be used in lieu-of traditional means?
Under 23 CFR 635.104(a), the STA "...shall assure opportunity for free, open and competitive bidding, including adequate publicity of the advertisements or calls for bids." A number of STAs are advertising their projects on the Internet. Where allowed by State policy, Internet-based advertising may be used in lieu of traditional means if the STA can successfully demonstrate to the FHWA Division Administrator that using such means would generate "adequate publicity". In demonstrating whether this means would generate "adequate publicity," the STA should show that it has worked with appropriate representatives from the contracting industry.
- Does FHWA's policy allow bids to be announced by means other than reading them aloud?
Yes. Presently, the relevant text of 23 CFR 635.113 states: "All bids received in accordance with the terms of the advertisement shall be publicly opened and announced either item by item or by total amount. If any bid received is not read aloud, the name of the bidder and the reason for not reading the bid aloud shall be publicly announced at the letting." The intent of this regulation is to maintain a transparent bidding process.
With the advent of electronic bidding via the Internet, many contractors are opting not to attend bid openings, especially in states where bids are received exclusively over the Internet. There have been instances where the STA has read the bids aloud to an empty room. If the STA expects these circumstances to be present, it could instead post the bids in a timely manner at a location accessible to the general public while noting the reason for not reading them aloud. If allowed by State policy, the results may be posted on an Internet site, such as on the STA web page.
In our review of this issue, we have noted the following methods that some STAs have used to announce bid results:
- Live video Webcast of the bid opening (ND).
- Live audio Webcast of the bid opening (AR, KS, MS, NC, OK, WV)
- "Real Time" posting of bid opening results via Bid Express web site (MI, MN, VA)
- Are electronic submittals and electronic signatures acceptable for the contractor's weekly payroll and "statement of compliance" required by the US Department of Labor's policies in 29 CFR 5.5?
Yes. The US Department of Labor, Wage and Hour Division has supported the initiation of several pilot programs to evaluate Internet-based compliance systems. As a number of STAs are interested in automation of the contractor's payroll information, attached is a November 12, 2004 letter from the U.S. Department of Labor regarding Electronic Signatures and the Copeland Act, which permits the use of electronic signatures on the payroll certifications.
The Wisconsin DOT is currently implementing a pilot program for an Internet-based wage compliance system on the Marquette Interchange project. We will provide further information on this program when details become available.
- Does the FHWA recommend that STAs post potential bidders lists or planholders lists on its websites?
No. FHWA cautions STAs from making information available that could aid collusion. FHWA discourages the publication of plan-holder lists. These lists identify potential bidders, and where competition is limited, they may support fraudulent bidding practices. During court testimony, defendants have stated the bidders list was used to identify other potential prime contractors to be contacted to rig the project bids. Although potential subcontractors and material suppliers have other means of identifying potential bidders, at least the contracting agency is not providing this information when it keeps the bidders list confidential. STAs are encouraged to review their State "Freedom of Information" or "Public Records" acts to determine whether they have the authority to withhold documents that would compromise government interests. For more information see Paragraph 3.d of the FHWA document "Guidelines on Preparing Engineer's Estimate, Bid Reviews and Evaluation"
- May contracting agencies reference wage rate determinations in bid proposals and construction contracts?
FHWA policy requires contracting agencies to "set out" wage determinations in construction solicitations / bid proposals and further, that the wage determination will be "made part of the contract." These policies were developed before the advent of the internet and electronic contracting.
FHWA Statute - Title 23 USC 113 (b)
" (b) In carrying out the duties of subsection (a) of this section, the Secretary of Labor shall consult with the highway department of the State in which a project on any of the Federal-aid systems is to be performed. After giving due regard to the information thus obtained, he shall make a predetermination of the minimum wages to be paid laborers and mechanics in accordance with the provisions of subsection (a) of this section which shall be set out in each project advertisement for bids and in each bid proposal form and shall be made a part of the contract covering the project."
FHWA Regulation - 23 CFR 635.117(f):
"(f) The advertisement or call for bids on any contract for the construction of a project located on the Federal-aid system either shall include the minimum wage rates determined by the Secretary of Labor to be prevailing on the same type of work on similar construction in the immediate locality or shall provide that such rates are set out in the bidding documents and shall further specify that such rates are a part of the contract covering the project."
It is recognized that many contracting agencies are currently using electronic means to advertise projects, post procurement documents and receive bids and proposals via the internet. Furthermore, some agencies are posting bid proposals and design-build request for proposals on their web sites for the industry's use.
As it relates to the requirement to "set out" the appropriate wage determination in the bid proposal, the following steps may be used in an electronic proposal document:
- The contracting agency may incorporate a copy of the appropriate wage determination in the proposal document. In this case, the contracting agency is responsible for notifying bidders and providing a copy of any modifications when a notice of the modification is published on the US Department of Labor's Wage Determination On Line web site, or published in the Federal Register, less than ten days before the opening of bids (29 CFR 1.6(c)). For modifications received less than ten days before the opening of bids, such modifications are effective unless the contracting agency finds that there is not a reasonable time available before bid opening to notify bidders of the modification (23 CFR 1.6(c)).
- The contracting agency may provide a web link in the bid proposal document or the request for proposal document that references the appropriate wage determination on the Wage Determination On Line web site or the appropriate wage determination that is posted on the State DOT's web site. The general decision number, state, construction type and county must be listed in the proposal to ensure that the appropriate determination is referenced. The contracting agency remains responsible for notifying all potential bidders of any modifications to the wage determination in accordance with the US Department of Labor's requirements in 29 CFR 1.6.
The actual construction contract between the contracting agency and the construction contractor (or between the contracting agency and the design-builder) must incorporate all applicable wage determinations for that contract. It is not acceptable to reference wage determinations in the actual contract.
May contracting agencies reference form FHWA-1273- Required Contract Provisions Federal-Aid Construction Contracts, in bid proposals and construction contracts?
Yes, contracting agencies may reference Form FHWA-1273 in bid proposal documents or request for proposal documents. The reference must include a link to the appropriate electronic version on FHWA's web site. In cases where a contracting agency references Form FHWA-1273 in lieu of including the actual form, the contracting agency is responsible for ensuring that bidders have reasonable access to a copy of Form FHWA-1273, which may include a link to the electronic version on FHWA's web site.
However, pursuant to 23 CFR 633.102, Form FHWA-1273 must be physically incorporated (not referenced) in all contracts, subcontracts and lower tier subcontracts.