New state law does not go far enough to help local businesses in school bidding projects

A new state law (P.A. 540) promoted by State Representative Dudley Spade (Tipton) has led to criticism of the Tecumseh Public Schools recently after bids were awarded for the construction of the athletic complex and demolition of the bleachers and concession stand at the Tecumseh Middle School.

The law allows schools to adopt a policy that gives local businesses preference in bids for school projects, even if a non-local bid is lower. The law took effect only in January, which gave little time for the Tecumseh Public Schools to review and adopt such a policy. The law is merely an option, not a mandate for state school districts to adopt, and thus far, no school in Lenawee County has adopted a policy based on the new law.
In a major oversight, the new law fails to define “local.” Any Michigan business that submits a bid to a state school district could fall under the definition of “local.” Therefore, workers in Lenawee County could easily lose their jobs to any union or business from elsewhere in the State of Michigan.

Despite flaws in the law promoted by Representative Spade, we encourage the Tecumseh Public Schools to pursue a policy that would give preference to local businesses in the Tecumseh area.

The Herald invited the Tecumseh schools to address the issue  to our readers, which is printed below.

Tecumseh Public Schools’ analysis of P.A. 540, school bid law preferences

Background Information
Recent legislation sponsored, in part, by Representative Dudley Spade, D-57th District, may alter the ways in which school districts, intermediate school districts and public school academies go about the business of procuring materials and supplies; and repair or build new school buildings. Some confusion has developed surrounding the newly enacted P.A. 540 that amends the Revised School Code of 1976, (School Code) specifically sections 623, 1267, and 1274 that pertain to procurement of supplies and materials; and repair, renovation and construction of school buildings and the respective bidding processes.  Public Act 540 was passed with immediate effect on January 13, 2009, and the most recent rendering of the bill was February 17, 2009.
What was the intent of this legislation?

It is believed, and it appears, that Rep. Spade was attempting to give a preference to ‘local’ bidders during the bidding process for school supplies and materials; and repair and construction of new school buildings. In his Letter to the Editor in both the Tecumseh Herald (April 23rd) and the Daily Telegram (April 24th), Rep. Spade wrote “Let me be very clear. State law no longer requires the selection of the lowest bidder provided schools respond to the new law by making the necessary policy changes”.  Respectfully, this Act does NOT provide local boards with an option to award a bid based on a preference to ‘local’ bidders’ and/or ‘local’ suppliers’. The Act does not allow local boards to differentiate among ‘local bidders’ within the state of Michigan.  It does, however, afford local boards of education the option of providing a bid selection preference to a Michigan-based business or contractor over an out-of state business or contractor provided the local board has adopted a policy that provides a preference.  At this time, we are not aware of any local school districts in Lenawee County that have adopted such a policy.

In general, how do the school bidding laws in Michigan operate?
The School Code annually establishes a statutory threshold for a mandatory bid amount for both the procurement of supplies and materials; and repair and/or construction of school buildings for which the bidding process must be implemented. For the current school year that amount is $20,959.  This amount is increased annually by a measure of inflation or a consumer price index (CPI) calculation as outlined in the School Code. In determining which bidder qualifies as the “lowest responsible bidder,” the Michigan Attorney General ‘examined the lowest responsible bidder pursuant to competitive bidding in OAG, 1959-60, No. 3303, 9. 171, that the Board must “appraise itself of the integrity and technical qualifications of the prospective contractors.”  Further, the Attorney General stated that the “aim of the board should be to secure the most able and efficient performance, from the most responsible contractor, on terms beneficial to the public” and that the “lowest bid does not always respond to this test.”  Finally the Attorney General concludes that the board is required to award any bid it awards only to the “lowest responsible bidder.”   Tecumseh Public Schools’ legal counsel states further, ‘In sum, a school district is obligated to select the “lowest responsible bidder,” not the “lowest responsible local bidder.”   The local board has the responsibility to determine the ‘responsibility’ of the participating bidders.  Usually, the board’s architect, engineers or project designers actively assist the board in determining a bidder’s degree of responsibility.  If the School Code is found to have been violated by a school employee or board member, those in violation are subject to fines and/or incarceration.
What does the bill say about local bidders and local preference?

There is no language specific to ‘local bidders’ and/or ‘local suppliers.’  The bill provides the local board an option for developing a local policy that may give preference to a Michigan-based business or Michigan based contractor.  The actual language in 380.1267 of the revised School Code of 1976 (7) states ‘The board of a school district or intermediate school district or board of directors of a public school academy may adopt and implement a local policy that gives a preference to a Michigan-based business in awarding a contract under this section.  The policy may provide for a preference based on the status of the primary contractor as a Michigan-based business or based on the status of one or more subcontractors of the primary contractor as a Michigan-based business, or both’.   In short, local boards are not bound to develop such a policy; and it is at the complete discretion of the board to adopt such a policy or not.  Note:  The Tecumseh Public Schools’ finance attorney has advised the Tecumseh Public School Board NOT to adopt such a policy.  It is counsel’s position that the Board should be able to accept the ‘lowest responsible bidder’, regardless of the location of the bidder.  The bidding process for the procurement of supplies and materials; and the repair and construction of buildings should remain an issue of local control.

What is the measure of preference, or percentage of preference that a local board may give to a Michigan-based business or Michigan-based contractor over out-of-state competitors?

There is no percentage or amount of preference stated in the Act. Any measure of preference is at the sole discretion of the local Board of Education.  

What was the timing of the Tecumseh Public Schools recent bidding process for the athletic field complex and bleacher demolition project; did the Board have sufficient time to develop a policy to provide a preference to a Michigan-based company or contractor?
Bids for the athletic field complex were opened and read publicly on Friday, February 20, 2009.  The School Code requires that bids be posted on the department of management and budget website or the district website for at least 2 weeks prior to the bid opening.  Foresite Design, Inc. completed the bid package following the design process on January 28, 2009, and advertised for bids. Given the timelines of the Act’s development and final rendering on February 17, 2009, there was no opportunity for the Board of Education to respond with a policy providing for a preference for Michigan-based businesses or contractors over out-of-state companies.

With respect to the bleacher demolition project at Tecumseh Middle school, the bids were distributed on February 2, 2009, and publicly read on February 16, 2009.  Once again, there was no time for the Tecumseh Public Schools Board of Education to respond to P.A. 540 within this timeline.  Please note that both the lowest and second lowest bidders are Michigan businesses and the difference between the bidders is 20.8% or a savings of $6,582.00

For a policy to be written and taken to the Board Policy Committee and the regular Board for the 2 required readings, the general timeline is approximately 5 to 6 weeks in duration.

There has been insufficient time for the Board of Education to develop a policy, if it had chosen to do so, that would affect either of the projects that we have discussed.
Additional notes:  

Public Act 540 of 2009 will be placed on the TPS website.  
The Letter to the Editor from Rep. Spade will be placed on the TPS website.
An opinion letter from the TPS legal counsel will be placed on the TPS website.
The bid summary for the athletic field complex will be placed on the TPS website.
The bid summary for the bleacher demolition project will be placed on the TPS website.