Municipal Contract Law �Maddie Cash �MAT Spring Short Courses 2024

Scope of MCL

• CONTRACTING AUTHORITY
• Minn. Stat. § 365.02
• Minn. Stat. § 365.025
• MCL AUTHORITY
• Minn. Stat. § 471.345
• THERE ARE EXPRESSED EXEMPTIONS OF MCL
• ESTIMATING CONTRACT COST IS THE FIRST STEP!

$0-25,000

$25,000-175,000

Over $175,000

Contracting levels

Lowest Responsible Bidder Requirement

“a contract let on bid must be let to the lowest responsible bidder.” Minn. Stat. § 365.37, subd. 2

Separate from the requirements of MCL, but whenever the board initiated the sealed bidding process, the lowest responsible bidder requirement MUST be followed regardless of the value of the contract.

Simply giving a contract to the low bidder without considering whether the contractor can adequately perform the contract will not necessarily serve the public’s interests, so the municipality has some discretion.

If a low bid is rejected because it is made by an irresponsible bidder, the board must show some fact as to why the bidder is irresponsible (e.g. cannot complete the job, lacks the skill).

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Lowest Responsible Bidder: Factors to consider

- FINANCIAL RESPONSIBILITY

- INTEGRITY

- SKILL

- ABILITY

- LIKELIHOOD OF PROVIDING FAITHFUL AND SATISFYING WORK

- PAST EXPERIENCE/RELIABILITY (NOT RUMORS)

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Lowest Responsible Bidder: Equipment

CONSIDER:

Bid price

Quality

Suitability

Adaptability

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DECIDING FACTORS MUST BE REASONABLE AND BASED ON SUBSTANTIAL DIFFERENCE IN QUALITY OR ADAPTABILITY.

OTTER TAIL POWER CO. V. VILLAGE OF ELBOW LAKE, 49 N.W. 2D 197, 201 (MINN. 1951).

Lowest Responsible Bidder: �Support Your Decision

• Courts consider many factors to determine if the contract was properly awarded including:
• The amount of time investigating the bids
• Reasonableness of factors used to evaluate the quality and sustainability of an item
• Develop supportable facts
• Do not rely on rumors of incompetence
• Detail any factual findings in minutes
• The decision to move to the next lowest bidder is a significant one! Be deliberate and objective.

Lowest Responsible Bidder: �Violations

• The legislature has made it a crime for town officers to fail to comply with the lowest responsible bidder requirements. Minn. Stat. § 365.37, subd. 5.
• A contract made in violation of the lowest responsible bidder requirement is void. Minn. Stat. § 365.37, subd. 5.
• The town will be responsible for paying the contractor who acted in good faith for any benefit conferred to the town under the voided contract.
• Remember: defense of criminal charges are not covered by the town’s insurance policies and may not be paid by the town unless the officer is ultimately found not guilty. Minn. Stat. § 465.76.

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Splitting contracts

1. Examples:
1. If the town uses a general contractor for a project, the whole project may be over $175,000, but if the town is acting as the general contractor, then each part of the project may be a less expensive separate contract that would not require sealed bids.
2. Splitting a road project between seasons (complete one half this year and complete the next half another year)

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1. MCL is not applicable to all contracts
2. The statute defines a contract to be “...an agreement entered into by a municipality for the sale or purchase of supplies, materials, equipment or the rental thereof, or the construction, alteration, repair or maintenance of real or personal property.” Minn. Stat. § 471.345, subd. 2.
3. Contracting statutes interpreted narrowly and not extended to contracts not clearly within their respective purviews or the intent of the legislature.
4. A complete list of examples is in Minn. Stat. § 471.345.

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MCL Exemptions

Best Value Procurement Alternative

• A process based on competitive proposals as an alternative to bidding that awards the contracts to, “the vendor or contractor offering the best value, considering the specifications of the request for proposals, the price and performance criteria as set forth in [Minn. Stat. § 16C.02, subd. 4a] and described in the solicitation document.”
• The Department of Administration is supposed to run training courses on the best value contracting method, and the township isn’t supposed to use it until the board, or their agent is trained in its use.
• Need to be doing a really big project to make it worthwhile. (Most things you can break into pieces to avoid sealed bidding).
• Even with best value contracting, the board must give reasons for why their selected contractor is better than others.

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Violating MCL

• Any contract formed in violation of MCL requirements is void and unenforceable. Minn. Stat. § 365.37, subd. 5 and Minn. Stat. § 471.89, subd. 1.
• It is a misdemeanor for any township official to violate the MCL and makes such an offense ground for removal from office. Minn. Stat. § 365.37, subd. 3

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Conflict of Interest

• Township officials are prohibited from being a party to, being directly or indirectly interested in, or otherwise benefit financially from any sale, lease, or other contract in which the official is authorized to participate in any manner.
• The authority to vote on a contract that benefits the officer is what violates the conflict of interest, not the actual vote itself so obtaining from a vote alone is not enough.
• It is not always easy to determine when there is a conflict but as a rule of thumb, anytime a supervisor is getting paid to do work outside the supervisor role as an elected official, there is a conflict of interest.

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Conflict of Interest: Exemptions

• If a supervisor has a direct or indirect financial interest in a contract with the town, it may only form the contract if it falls under one of the specific exceptions provided in the statutes. Minn. Stat. § 471.88, subd. 1
• There is an extensive list of contracts in which public officials are allowed to have an interest. Minn. Stat.§ 365.37 and Minn. Stat. § 471.87. Two that pertain to townships include:
• Any contract for which competitive bids are not required
• A contract to provide construction material or services if sealed bids are used and the officer does not vote on the contract (only for towns with a population of less than 1,000) Minn. Stat. § 471.88, subd. 12.

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Questions?

Thank you!

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