Contractor Selection

• Pages: 189-217

Contr acto r Se lect ion 189

8.0 int roDu cti on

Perhaps the most signi cant differences between construction in the private

and public sectors lie in the area of procurement. Unlike private projects, pub-

lic procurement is extensively regulated and generally requires that contrac-

tors be selected through a publicly announced, competitive, sealed bidding

process.1 In addition to securing for the general public the lowest price for a

project, the competitive bidding process is perceived to be the best means for

“giv[ing] all quali ed contractors the opportunity to compete for government

contracts while, at the same time, avoiding favoritism, collusion, or fraud.”2 As

discussed in the section that follows, private owners enjoy considerably more

freedom when procuring design and construction services.

1. 1 PHILLIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNOR ON CONSTRUCTION LAW

§ 2:21, at 84 (West Group 2002) [hereinafter BRUNER & O’CONNOR].

2. Id. § 2:22, at 86 n.4 (quoting W. NOEL KEYES, GOVERNMENT CONTRACTS UNDER THE FEDERAL ACQUISI-

TION REGULATION 14.1, 153 (1986)); 48 C.F.R. § 14.1 (2003).

8

Contractor Selection

R. HARPER HECKMAN

C H A P T E R

189

190 CO N S T RU C T I O N L A W

8.02 Pri vate Pro cureme nt Gen era lly

Procurement of construction services on private projects typically is character-

ized by “offer and acceptance” negotiations, which leave owners free to con-

tract for their projects in the manner and with the contractor of their choice.

Many private owners elect to contract rst for the project’s design and then for

its construction, which is referred to as the Design-Bid-Build method of project

delivery. However, there are many other means by which a private owner may

contract for the construction of a project. These include:

❒ Design-Build

❒ Agency Construction Management

❒ At-Risk Construction Management

A detailed discussion of the various project delivery systems available to the

private owner can be found in Chapter 4. A private owner also may elect to

construct its project using some or all of the following pricing mechanisms:

❒ lump sum (also known as “xed price”)

❒ cost-plus-fee (with or without a “guaranteed maximum price”)

❒ unit pricing

For more information regarding these pricing mechanisms, please refer to

Chapter 9.

Private owners select their contractors in a variety of ways. Indeed, owners

hire their contractors based upon similar criteria used to select their lawyers,

including marketing efforts, reputation, and references. It is not uncommon for

a private owner to send a request for proposal to two or more contractors,

review their written submissions, and then meet with the nalists before

deciding which contractor to engage. While price is an important factor in the

owner’s decision making, it is not the only factor.

Even when it elects to solicit competitive bids, an owner is allowed consid-

erable freedom to negotiate privately with each bidder before deciding which

bid to accept. For this reason, most competitively bid projects in the private

sector are considered “closed bidding” projects, as distinguished from the

“open bidding” protocol found in the public sector. In open bidding, no private

negotiations take place. Instead, all bids are opened simultaneously in public

and read aloud, with the contract awarded to the lowest bidder.

Nevertheless, much of the discussion concerning public bidding that fol-

lows, particularly those sections having to do with the bid advertisement and

package, is applicable to the private sector as well. In reviewing these concepts,

however, the reader should remember that private procurement is signicantly