b'Competitive Bidding Requirements Under\nthe Federal-Aid Highway Program\nThe competitive bidding requirement of 23 U.S.C. \xc2\xa7 112 imposes, in addition to procedural rules dictating the process by which bids are awarded, a substantive limitation on\nstate or local bidding requirements that are unrelated to the bidder\xe2\x80\x99s performance of\nthe necessary work.\nSection 112\xe2\x80\x99s competitive bidding requirement does not preclude any and all state or local\nbidding or contractual restrictions that have the effect of reducing the pool of potential\nbidders for reasons unrelated to the performance of the necessary work. Rather, section\n112 affords the Federal Highway Administration discretion to assess whether a particular state or local requirement unduly limits competition.\nGenerally, state or local government requirements that eliminate or disadvantage a class\nof potential responsible bidders to advance objectives unrelated to the efficient use of\nfederal funds or the integrity of the bidding process are likely to unduly impede competition in contravention of the substantive component of section 112\xe2\x80\x99s competitive\nbidding requirement.\nAugust 23, 2013\n\nMEMORANDUM OPINION FOR THE ACTING GENERAL COUNSEL\nDEPARTMENT OF TRANSPORTATION\nThis memorandum responds to your office\xe2\x80\x99s request for an opinion regarding the requirement in 23 U.S.C. \xc2\xa7 112 that state and local governments receiving federal-aid highway grant funds use competitive bidding\nin awarding highway construction contracts. 1\nSection 112 requires a state transportation department to award contracts using federal highway funds by \xe2\x80\x9ccompetitive bidding, unless the\nState transportation department demonstrates . . . that some other method is more cost effective.\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(b)(1) (2006); see also id.\n\xc2\xa7 112(a) (\xe2\x80\x9cThe Secretary shall require such plans and specifications and\nsuch methods of bidding as shall be effective in securing competition.\xe2\x80\x9d).\nFor a bidding process to be \xe2\x80\x9ccompetitive,\xe2\x80\x9d the state transportation department must award contracts for projects \xe2\x80\x9conly on the basis of the\nlowest responsive bid submitted by a bidder meeting established criteria\n1 See Letter for Virginia Seitz, Assistant Attorney General, Office of Legal Counsel,\nfrom Robert S. Rivkin, General Counsel, Department of Transportation (Oct. 3, 2012)\n(\xe2\x80\x9cDOT Letter\xe2\x80\x9d).\n\n33\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nof responsibility.\xe2\x80\x9d Id. \xc2\xa7 112(b)(1). A 1986 opinion of this Office concluded that section 112 obligated the Secretary of Transportation to\nwithhold federal funding for highway construction contracts that were\nsubject to a New York City law imposing disadvantages on a class of\nresponsible bidders, where the city failed to demonstrate that its departure from competitive bidding requirements was justified by considerations of cost-effectiveness. See Compatibility of New York City Local\nLaw 19 with Federal Highway Act Competitive Bidding Requirements,\n10 Op. O.L.C. 101 (1986) (\xe2\x80\x9cCompetitive Bidding Requirements\xe2\x80\x9d). Since\nthe issuance of our 1986 opinion, the Federal Highway Administration\n(\xe2\x80\x9cFHWA\xe2\x80\x9d), the Department of Transportation (\xe2\x80\x9cDOT\xe2\x80\x9d) agency that has\nbeen delegated authority to administer the Federal-Aid Highway Program, see 49 U.S.C. \xc2\xa7 104 (2006); 49 C.F.R. \xc2\xa7 1.85(a)(1) (2012), has\ntaken the position that state or local bidding specifications or contract\nrequirements that limit the pool of potential bidders violate section\n112\xe2\x80\x99s competition requirement unless they directly relate to the bidder\xe2\x80\x99s\nperformance of the necessary work in a competent and responsible\nmanner. DOT Letter at 1, 3.\nIn connection with a reevaluation by DOT of FHWA\xe2\x80\x99s position, your\noffice has asked whether section 112\xe2\x80\x99s competitive bidding requirement\ncompels FHWA to adhere to this approach, or whether section 112 leaves\nroom in some circumstances for state or local bidding requirements that\nmay limit the pool of potential bidders for specific federal-aid highway\nconstruction contracts for reasons other than the bidder\xe2\x80\x99s ability to\nperform the work in a competent and responsible manner. Id. at 1, 7. 2\nAnswering your office\xe2\x80\x99s question involves resolving two related issues:\n(1) whether section 112(b)(1)\xe2\x80\x99s requirement that contracts be awarded by\n\xe2\x80\x9ccompetitive bidding\xe2\x80\x9d imposes, in addition to procedural rules dictating\nthe process by which bids are awarded, 3 any substantive limitation on\nstate or local bidding requirements that are unrelated to the bidder\xe2\x80\x99s\nAlthough FHWA has promulgated regulations governing the policies, requirements,\nand procedures relating to federal-aid highway projects, see 23 C.F.R. pt. 635 (2012),\nyour office has asked about, and we address, only the scope of the statutory requirements,\nsee 23 U.S.C. \xc2\xa7 112.\n3 Examples of such \xe2\x80\x9cprocedural\xe2\x80\x9d rules are the process requirements that bids be solicited from a pool of potential responsible contractors based on specifications advertised in\nadvance and that the contract be awarded to the lowest responsive bidder.\n2\n\n34\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nperformance of the necessary work; and (2) if section 112(b)(1) imposes a\nsubstantive limitation, what the nature of that limitation is. As we explain\nin Part II below, in our view section 112\xe2\x80\x99s competitive bidding requirement has a \xe2\x80\x9csubstantive\xe2\x80\x9d component. That is, even where a bidding process meets the procedural requirements of competitive bidding, it may\nnonetheless violate section 112\xe2\x80\x99s competitive bidding requirement in\nsubstance if responsive bidders are required to comply with state or local\nrequirements that unduly limit the pool of potential bidders. However, we\ndo not believe that the statute\xe2\x80\x99s competitive bidding requirement precludes any and all state or local bidding or contractual restrictions that\nhave the effect of reducing the pool of potential bidders for reasons unrelated to the performance of the necessary work. Rather, we believe that\nsection 112 affords the FHWA Administrator (as the Secretary\xe2\x80\x99s delegee)\ndiscretion to assess whether a particular state or local requirement unduly\nlimits competition.\nWe address what unduly limiting competition entails in this context in\nPart III. A state or local requirement that has only an incidental effect on\nthe pool of potential bidders or that imposes reasonable requirements\nrelated to the performance of the necessary work would not unduly limit\ncompetition. But a requirement that has more than an incidental effect on\nthe pool of potential bidders and does not relate to the work\xe2\x80\x99s performance would unduly limit competition unless it promotes the efficient and\neffective use of federal funds. In assessing whether a requirement does so,\nFHWA may take into account both whether the requirement promotes\nsuch efficiency in connection with the letting of a particular contract and\nalso whether it more generally furthers the efficient and effective use of\nfederal funds in the long run or protects the integrity of the competitive\nbidding process itself. Where a state or local requirement serves these\npurposes, we believe the Administrator may reasonably determine, consistent with section 112, that the requirement does not unduly limit competition, even if it may have the effect of reducing the number of eligible\nbidders for a particular contract. Generally speaking, however, state or\nlocal government requirements that eliminate or disadvantage a class of\npotential responsible bidders (and thus have a non-trivial effect on the\npool of such bidders) to advance objectives unrelated to the efficient use\nof federal funds or the integrity of the bidding process (or to the performance of the necessary work in a competent and responsible manner) are\n35\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nlikely to unduly impede competition in contravention of the substantive\ncomponent of section 112\xe2\x80\x99s competitive bidding requirement.\nI.\nSome background is necessary to place our reasoning in context. Pursuant to 23 U.S.C. \xc2\xa7\xc2\xa7 104 and 302 (2006 & Supp. V 2011), FHWA disburses federal-aid highway funds to states, which administer those funds\nthrough their transportation departments. Section 112, on the letting of\ncontracts, requires both (1) that federally funded highway construction\nprojects performed or supervised by state transportation departments be\nawarded by contract through a competitive bidding process, unless an\nexception applies; and (2) that the Secretary of Transportation require\nwhatever plans and specifications and methods of bidding as are necessary to be effective in securing competition. The section provides in\nrelevant part:\n(a) In all cases where the construction is to be performed by the\nState transportation department or under its supervision, a request\nfor submission of bids shall be made by advertisement unless some\nother method is approved by the Secretary. The Secretary shall require such plans and specifications and such methods of bidding as\nshall be effective in securing competition.\n(b) Bidding requirements.\xe2\x80\x94\n(1) In general.\xe2\x80\x94Subject to paragraphs (2) and (3), construction\nof each project, subject to the provisions of subsection (a) of this\nsection, shall be performed by contract awarded by competitive\nbidding, unless the State transportation department demonstrates,\nto the satisfaction of the Secretary, that some other method is\nmore cost effective or that an emergency exists. Contracts for the\nconstruction of each project shall be awarded only on the basis of\nthe lowest responsive bid submitted by a bidder meeting established criteria of responsibility. No requirement or obligation shall\nbe imposed as a condition precedent to the award of a contract to\nsuch bidder for a project, or to the Secretary\xe2\x80\x99s concurrence in the\naward of a contract to such bidder, unless such requirement or obligation is otherwise lawful and is specifically set forth in the advertised specifications.\n36\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\n23 U.S.C. \xc2\xa7 112(a), (b)(1). Section 112(d) bars state transportation departments and local subdivisions from entering into a contract awarded\nby competitive bidding pursuant to subsection (b) and subject to the\nprovisions of section 112, \xe2\x80\x9cwithout compliance with the provisions of\nthis section\xe2\x80\x9d and without \xe2\x80\x9cthe prior concurrence\xe2\x80\x9d of the Secretary in the\ncontract award. Id. \xc2\xa7 112(d). In addition, Congress has delegated to the\nSecretary authority \xe2\x80\x9cto prescribe and promulgate all needful rules and\nregulations for the carrying out of the provisions\xe2\x80\x9d of the title. Id. \xc2\xa7 315\n(2006).\nIn 1986, we considered the application of section 112 to a New York\nCity law, Local Law 19, that authorized the city to impose disadvantages\non bidders for city contracts who failed to sign an anti-apartheid certificate stating (1) that in the previous twelve months they had not conducted,\nand for the term of the impending contract they would not conduct, business with South Africa or Namibia; and (2) that in contracts to supply\ngoods to the city, none of the goods originated in South Africa or Namibia. Competitive Bidding Requirements, 10 Op. O.L.C. at 101\xe2\x80\x9302. Local\nLaw 19 provided that if a bidder complying with the anti-apartheid certification requirement made a bid no more than five percent higher than a\nlow bid submitted by a non-complying contractor, both bids were to be\npassed on to a city board. That board was authorized to determine that it\nwas in the \xe2\x80\x9cpublic interest\xe2\x80\x9d to award the contract to a bidder other than\nthe lowest responsible bidder. Id. at 102. New York City declared its\nintention to apply the law to federally funded projects. Id.\nOur opinion concluded that section 112 required the Department of\nTransportation to withhold funding for highway construction projects\nsubject to Local Law 19. We explained that section 112 \xe2\x80\x9creflect[ed] a\ncongressional judgment that the efficient use of federal funds afforded by\ncompetitive bidding is to be the overriding objective of all procurement\nrules for federally funded highway projects, superseding any local interest\nin using federal funds to advance a local objective.\xe2\x80\x9d Id. at 103. We found\nthat \xe2\x80\x9c[b]y imposing disadvantages on a class of responsible bidders,\xe2\x80\x9d\nLocal Law 19 \xe2\x80\x9cdistort[ed] the process of competitive bidding\xe2\x80\x9d in order to\nadvance a local objective \xe2\x80\x9cunrelated to the cost-effective use of federal\nfunds.\xe2\x80\x9d Id. In addition, the opinion emphasized, the 1983 amendment to\nsection 112(b)(1)\xe2\x80\x94which imposed the current requirement that departures\nfrom competitive bidding be justified by a demonstration that they are\n37\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nmore cost-effective than the alternative\xe2\x80\x94made clear that \xe2\x80\x9cthe efficient\nuse of federal funds is the touchstone by which the legality of state procurement rules for federally funded highway projects is to be tested.\xe2\x80\x9d Id.\nat 105. By imposing disadvantages on a certain class of contractors (those\nwho had not signed an anti-apartheid certificate), we concluded, the city\nmay have discouraged responsible contractors from bidding and undermined the competitive bidding process without demonstrating that the\nrequirement was cost-effective. Id. The opinion did not consider other\ntypes of bidding restrictions and did not address the legality of restrictions\ndesigned to protect the integrity of the competitive bidding process or to\npromote the efficient use of federal funds over the long term.\nYour office has explained that, since the issuance of our 1986 opinion,\nFHWA has taken the position that, in the absence of federal statutory\nauthorization, state or local requirements that restrict the pool of applicants available to bid on a federal-aid highway contract, or that otherwise\nfavor certain potential bidders over others in ways unrelated to the capability of the bidder to perform the work, conflict with the competition\nrequirements in section 112 and the agency\xe2\x80\x99s regulations implementing\nthat section, 4 and therefore are not permitted. DOT Letter at 1\xe2\x80\x936. Consequently, FHWA has prohibited state and local grant recipients from adopting policy preferences restricting bidders\xe2\x80\x99 political contributions (socalled \xe2\x80\x9cpay-to-play\xe2\x80\x9d provisions), requiring equal benefits for domestic\npartners, or mandating the inclusion of local hiring preferences or project\nIn this regard, FHWA\xe2\x80\x99s implementing regulations require, in part, that \xe2\x80\x9c[a]ctual\nconstruction work . . . be performed by contract awarded by competitive bidding,\xe2\x80\x9d unless\nthe state transportation department \xe2\x80\x9cdemonstrates to the satisfaction of the Division\nAdministrator that some other method is more cost effective or that an emergency\nexists,\xe2\x80\x9d 23 C.F.R. \xc2\xa7 635.104(a), and obligate the state transportation department to\n\xe2\x80\x9cassure opportunity for free, open, and competitive bidding.\xe2\x80\x9d Id. To that end, the regulations prohibit approval of any \xe2\x80\x9cprocedure or requirement for bonding, insurance,\nprequalification, qualification, or licensing of contractors\xe2\x80\x9d that, \xe2\x80\x9cin the judgment of the\nDivision Administrator, may operate to restrict competition, to prevent submission of a\nbid by, or to prohibit the consideration of a bid submitted by, any responsible contractor,\nwhether resident or non-resident of the State wherein the work is to be performed.\xe2\x80\x9d Id.\n\xc2\xa7 635.110(b). The regulations further provide that \xe2\x80\x9c[i]f any provisions of State laws,\nspecifications, regulations, or policies may operate in any manner contrary to Federal\nrequirements . . . to prevent submission of a bid, or prohibit consideration of a bid submitted by any responsible bidder appropriately qualified in accordance with \xc2\xa7 635.110, such\nprovisions shall not be applicable to Federal-aid projects.\xe2\x80\x9d Id. \xc2\xa7 635.112(d).\n4\n\n38\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nlabor agreements, on the ground that these policy preferences violate\nsection 112. Id. at 1, 4\xe2\x80\x936.\nII.\nWe first address the threshold question of whether section 112(b)(1)\xe2\x80\x99s\nrequirement that federally aided construction projects be \xe2\x80\x9cperformed by\ncontract awarded by competitive bidding,\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(b)(1), contains a substantive component authorizing FHWA to examine bid specifications and conditions to determine whether they impede competition, or\nwhether it requires only, as a matter of process, that the contract be\nawarded to the lowest responsive bidder, but otherwise leaves state and\nlocal governments free to impose on bidders whatever conditions they\nchoose, including conditions that reduce the pool of potential bidders for\nreasons unrelated to the cost-effective use of federal funds.\nIn our 1986 opinion, we concluded that New York City\xe2\x80\x99s anti-apartheid certification requirement violated the procedural requirement of\ncompetitive bidding that contracts be awarded to the lowest responsible\nbidder and was therefore incompatible with the statute. See Competitive\nBidding Requirements, 10 Op. O.L.C. at 104\xe2\x80\x9307. However, our opinion\nalso implicitly recognized that section 112\xe2\x80\x99s competitive bidding requirement has a substantive dimension that calls into question any state\nand local requirements that diminish the pool of eligible contractors,\nabsent a showing of greater cost-effectiveness. See, e.g., id. at 105 (\xe2\x80\x9cBy\nimposing disadvantages on a certain class of contractors, New York City\ndiscourages responsible contractors from bidding and undermines the\ncompetitive bidding process.\xe2\x80\x9d); id. (\xe2\x80\x9cThe 1982 amendments . . . make\nclear that the efficient use of federal funds is the touchstone by which the\nlegality of state procurement rules for federally funded highway projects\nis to be tested.\xe2\x80\x9d).\nWe have reassessed our opinion in light of contrary dicta in a 2007 decision of the U.S. Court of Appeals for the Sixth Circuit, cited in the DOT\nLetter at page 5. In City of Cleveland v. Ohio, 508 F.3d 827 (6th Cir.\n2007), the court sustained FHWA\xe2\x80\x99s withdrawal of federal funds from a\nCleveland public works project on the ground that the city had incorporated a local hiring preference into the contract without advertising the\npreference in the bid specifications\xe2\x80\x94a violation of section 112(b)(1),\nwhich prohibits the imposition of a requirement or obligation as a condition precedent to the award of a contract \xe2\x80\x9cunless such requirement or\n39\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nobligation . . . is specifically set forth in the advertised specifications.\xe2\x80\x9d Id.\nat 843 (quoting 23 U.S.C. \xc2\xa7 112(b)(1)). In dicta, the court added that the\nstatute\xe2\x80\x99s reference to \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d was intended to deal \xe2\x80\x9conly\nwith the process of how bids are awarded\xe2\x80\x94competitive bidding or \xe2\x80\x98some\nother method\xe2\x80\x99\xe2\x80\x94not the substance of the underlying contracts themselves.\xe2\x80\x9d Id. at 841. The court rejected FHWA\xe2\x80\x99s argument that the public\nbody awarding the contract was required to justify its \xe2\x80\x9crequirements or\nobligations\xe2\x80\x9d as \xe2\x80\x9cmore cost effective\xe2\x80\x9d than competitive bidding, or necessitated by emergency. Instead, in the court\xe2\x80\x99s view, such conditions apply\nonly when the body awarding the contract \xe2\x80\x9cseeks to depart from competitive bidding as the method for awarding a contract.\xe2\x80\x9d Id. Thus, the court\nconcluded that section 112(b) \xe2\x80\x9cby itself confers no authority upon the\nFHWA to evaluate substantive contract requirements to determine whether they might inhibit competition or disqualify otherwise qualified bidders.\xe2\x80\x9d Id. 5\nContrary to the Sixth Circuit\xe2\x80\x99s dicta, we continue to believe that section\n112(b)(1) is best read to impose more than a procedural requirement that a\nstate or local highway department accept the lowest responsive bid after\nsoliciting bids from a pool of potential responsible bidders. Instead,\nsection 112(b)(1) requires FHWA to evaluate state or local bidding specifications or contract requirements to determine whether they unduly\ninhibit competition. To explain how we reach this conclusion, we begin\nwith the text of section 112, first examining the historical evolution of the\nstatute and then describing the prevailing understanding of the concept of\n\xe2\x80\x9ccompetitive bidding\xe2\x80\x9d in 1954, when Congress enacted the express statu5 Although City of Cleveland acknowledged that the Administrator would have discretion to disapprove of bidding specifications based on a judgment that they are not \xe2\x80\x9cconsistent with the overall goals of the [Federal-Aid Highway Program],\xe2\x80\x9d 508 F.3d at 842,\nthe court\xe2\x80\x99s dicta suggested that, consistent with section 112(b)(1), the Administrator could\napprove contract specifications that limit the pool of potential bidders for reasons unrelated to the performance of the contract, so long as the procedure of competitive bidding was\nfollowed. Id. at 841; see also Bldg. & Constr. Trades Dep\xe2\x80\x99t v. Allbaugh, 172 F. Supp. 2d\n138, 161\xe2\x80\x9362 (D.D.C. 2001) (in obligating the Secretary of Transportation to \xe2\x80\x9crequire such\nplans and specifications and such methods of bidding as shall be effective in securing\ncompetition\xe2\x80\x9d in section 112(a), Congress was \xe2\x80\x9cclearly discussing the procedures for bid\nsubmission, and not the substantive requirements that a State may impose upon prospective bidders\xe2\x80\x9d; substantive requirements that bidders must fulfill are addressed in section\n112(b)(1), and there \xe2\x80\x9cCongress explicitly permitted such requirements as long as they are\nlawful and bidders are given sufficient notice\xe2\x80\x9d), rev\xe2\x80\x99d on other grounds, 295 F.3d 28\n(D.C. Cir. 2002).\n\n40\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\ntory requirement that federally funded highway contracts be \xe2\x80\x9cawarded by\ncompetitive bidding.\xe2\x80\x9d Finally, we address why language added to section\n112(b) in 1968 to address the imposition of additional contract requirements after the end of the bidding process does not affect the meaning of\n\xe2\x80\x9ccompetitive bidding.\xe2\x80\x9d\nA.\nIn our view, the phrase \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d in section 112(b)(1) is\nbest read to impose both procedural and substantive requirements. Section 112(b)(1)\xe2\x80\x99s requirement that contracts be \xe2\x80\x9cawarded by competitive\nbidding\xe2\x80\x9d must be read in the context of section 112 as a whole. The\nstatute\xe2\x80\x99s text is focused on \xe2\x80\x9csecuring competition,\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(a),\non \xe2\x80\x9ccost effective[ness],\xe2\x80\x9d id. \xc2\xa7 112(b), and on preventing \xe2\x80\x9cany action in\nrestraint of free competitive bidding,\xe2\x80\x9d id. \xc2\xa7 112(c). It is difficult to reconcile section 112\xe2\x80\x99s evident and overriding focus on the efficient use of\nfederal funds with a reading of its \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d requirement that\nis purely procedural and thus indifferent to state or local restrictions that\nwould shrink the pool of bidders for reasons unrelated to cost or efficiency.\nThe substantive dimension of the statute\xe2\x80\x99s competitive bidding requirement is particularly apparent when its text is considered in the\ncontext of its drafting history. Congress\xe2\x80\x99s commitment to competitive\nbidding for federally assisted highway construction projects\xe2\x80\x94and Congress\xe2\x80\x99s understanding of what \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d requires\xe2\x80\x94can be\ndiscerned in the historical evolution of the statutory regime that culminated in 23 U.S.C. \xc2\xa7 112, in substantially its current form, in the 1950s.\nIn 1938, Congress amended the Federal-Aid Road Act of 1916, ch. 241,\n39 Stat. 355, to adopt the precursor to what is now section 112(a). That\nstatute required that the Secretary of Agriculture (then the agency head\nwith authority to approve federally funded highway projects) approve, in\nconnection with federally aided highway construction projects, \xe2\x80\x9conly\nsuch methods of bidding and such plans and specifications of highway\nconstruction for the type or types proposed as will be effective in securing competition and conducive to safety, durability, and economy of\nmaintenance.\xe2\x80\x9d Pub. L. No. 75-584, \xc2\xa7 12, 52 Stat. 633, 636 (1938). As\nevidenced in the legislative history, Congress contemplated that this\naddition would promote \xe2\x80\x9copen competition in bidding.\xe2\x80\x9d H.R. Rep. No.\n75-2094, at 7 (1938) (using the heading \xe2\x80\x9copen competition in bidding\xe2\x80\x9d to\n41\n\n\x0c37 Op. O.L.C. 33 (2013)\n\ndescribe the amendment); 83 Cong. Rec. 6385 (1938) (statement of Rep.\nWhittington) (the provision \xe2\x80\x9csays that there shall be competitive bidding\xe2\x80\x9d\nand that \xe2\x80\x9call bids will be on an equal footing and that all bidders will be\ngiven equal treatment\xe2\x80\x9d). That history also suggests that Congress contemplated that the agency head with authority to approve federally funded highway projects would exercise a gate-keeping function in determining whether projects adequately provided for competitive bidding, with\nthe result that \xe2\x80\x9conly plans, specifications, and methods that provide for\ncompetition will be approved.\xe2\x80\x9d 83 Cong. Rec. 6385 (statement of Rep.\nWhittington).\nCongress made those purposes even clearer in 1954, when it amended\nthe statute to add the precursor to what is now section 112(b)(1). The new\nsubsection provided:\nHighway construction work performed in pursuance of agreements between the Secretary of Commerce and any State highway\ndepartment which requires approval by the Secretary of Commerce\nand which is financed in whole or in part by funds authorized under\nthis or succeeding Acts, shall be performed by contract awarded by\ncompetitive bidding under such procedures as may by regulations be\nprescribed by the Secretary of Commerce, unless the Secretary of\nCommerce shall affirmatively find that, under the circumstances relating to a given project, some other method is in the public interest.\nAll such findings shall be reported promptly in writing to the Committees on Public Works of the Senate and the House of Representatives.\nFederal-Aid Highway Act of 1954, Pub. L. No. 83-350, \xc2\xa7 17(a), 68 Stat.\n70, 75 (1954). At the same time, Congress instructed that in any case in\nwhich the Secretary of Commerce approved highway construction work,\nthe Secretary had to require as a condition precedent \xe2\x80\x9ca sworn statement,\xe2\x80\x9d executed by or on behalf of the person or entity to which such\ncontract is to be awarded, \xe2\x80\x9ccertifying\xe2\x80\x9d that such person or entity \xe2\x80\x9chas not,\neither directly or indirectly, entered into any agreement, participated in\nany collusion, or otherwise taken any action in restraint of free competitive bidding in connection with such contract.\xe2\x80\x9d Id. \xc2\xa7 17(b), 68 Stat. at 75\n(codified at 23 U.S.C. \xc2\xa7 112(c)).\nThe legislative history of the 1954 Act underlines that Congress adopted the more specific language requiring competitive bidding and the\n42\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\n\xe2\x80\x9csworn statement\xe2\x80\x9d requirement to eliminate collusion and obstacles to\nfree competitive bidding. The Senate committee report accompanying the\nlegislation, for example, explained that the committee adopted section 17\n\xe2\x80\x9cto prohibit collusion or any other action in restraint of free competitive\nbidding in connection with any contract for highway construction work\nperformed by cooperative agreements between the Secretary and any State\nhighway department requiring approval by him and financed wholly or in\npart by funds authorized in this or succeeding acts.\xe2\x80\x9d S. Rep. No. 83-1093,\nat 14 (1954); see also 100 Cong. Rec. 5124 (1954) (statement of Sen.\nGore) (praising the provision as doing \xe2\x80\x9ca great deal to restrain what . . .\namounts to a widespread practice of kickbacks of certain portions of the\nfunds under highway contracts, collusion in restraint of free competitive\nbidding, and other malpractices\xe2\x80\x9d). Significantly, Congress also adopted\nsection 17 to promote the most efficient use of federal funds. As the\nChairman of the Senate Subcommittee on Public Roads emphasized in the\nfloor debate: \xe2\x80\x9cThe committee felt it was only proper that competitive\nbidding should be required in order to obtain the maximum number of\nroads in quality and quantity for the dollars spent.\xe2\x80\x9d 100 Cong. Rec. 4671\n(1954) (statement of Sen. Case).\nIn 1958, Congress amended and codified in 23 U.S.C. \xc2\xa7 112(a) and (b)\nthe above provisions from the 1938 and 1954 Acts. The revised subsections provided:\n(a) In all cases where the construction is to be performed by the\nState highway department or under its supervision, a request for\nsubmission of bids shall be made by advertisement unless some other method is approved by the Secretary. The Secretary shall require\nsuch plans and specifications and such methods of bidding as shall\nbe effective in securing competition.\n(b) Construction of each project, subject to the provisions of subsection (a) of this section, shall be performed by contract awarded by\ncompetitive bidding, unless the Secretary shall affirmatively find\nthat, under the circumstances relating to such project, some other\nmethod is in the public interest. All such findings shall be reported\npromptly in writing to the Committees on Public Works of the Senate and the House of Representatives.\nPub. L. No. 85-767, \xc2\xa7 112(a)\xe2\x80\x93(b), 72 Stat. 885, 895 (1958). In addition,\nsection 112(d) barred states and localities from entering into a contract\n43\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nawarded by competitive bidding pursuant to section 112(b) \xe2\x80\x9cwithout\ncompliance with the provisions of this section, and without the prior\nconcurrence of the Secretary in the award thereof.\xe2\x80\x9d Id. \xc2\xa7 112(d), 72 Stat.\nat 895. Both the accompanying House and Senate committee reports\nclarified that the bill would place in one enactment \xe2\x80\x9ca clear, concise, upto-date version of all the existing Federal highway laws in an orderly and\nlogical arrangement,\xe2\x80\x9d and that the bill was \xe2\x80\x9cnot intended to change any of\nthe fundamental and underlying concepts of existing Federal highway\nlegislation or to make any changes of real substance.\xe2\x80\x9d H.R. Rep. No. 851938, at 2 (1958); S. Rep. No. 85-1928, at 2 (1958); see also H.R. Rep.\nNo. 85-1938, at 40 (confirming that the new section 112 derives from\nsection 12 of the 1938 Act and section 17(a) of the 1954 Act); S. Rep. No.\n85-1928, at 42 (same).\nIt is difficult to reconcile this history with a characterization of section\n112\xe2\x80\x99s \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d requirement as imposing a purely procedural\nconstraint. Instead, Congress envisioned from the start that the head of\nthe responsible federal agency (a designation that has changed over time)\nwould ensure that state and local conditions on bidding would not impede\ncompetition and would decline to approve federally aided highway construction contract awards when federal competitive bidding requirements\nwere not met. The current text of the statute supports this view. Section\n112 mandates that the agency head, now the Secretary of Transportation,\n\xe2\x80\x9crequire\xe2\x80\x9d \xe2\x80\x9csuch plans and specifications and such methods of bidding as\nshall be effective in securing competition.\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(a). The\nstatute further instructs that construction of each project \xe2\x80\x9cbe performed\nby contract awarded by competitive bidding,\xe2\x80\x9d unless the Secretary makes\nan exception. Id. \xc2\xa7 112(b)(1); see infra note 14 (discussing the grounds\nfor an exception). Finally, under the statute, the Secretary must concur in\nthe decision to award any federally funded highway contract, 23 U.S.C.\n\xc2\xa7 112(d), and must receive, as a condition precedent to that approval, a\nsworn statement certifying that the person or entity to whom a contract is\nto be awarded \xe2\x80\x9chas not . . . entered into any agreement, participated in\nany collusion, or otherwise taken any action in restraint of free competitive bidding in connection with such contract,\xe2\x80\x9d id. \xc2\xa7 112(c). See also\nGlasgow, Inc. v. FHWA, 843 F.2d 130, 135 (3d Cir. 1988) (emphasizing\nthe four instances in section 112 \xe2\x80\x9cin which Congress references the\nSecretary\xe2\x80\x99s obligation to ensure competitive bidding\xe2\x80\x9d).\n\n44\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nB.\nSection 112(b)(1)\xe2\x80\x99s requirement that federally funded highway contracts be \xe2\x80\x9cawarded by competitive bidding\xe2\x80\x9d must also be interpreted in\nlight of the prevailing understanding of the concept of \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d when Congress added that language to federal-aid highway requirements in 1954. \xe2\x80\x9cCompetitive bidding\xe2\x80\x9d was not a novel concept when\nCongress enacted the Federal-Aid Highway Act of 1954. Instead, it was\nthe subject of judicial rulings in federal and state courts, bid-protest\ndecisions rendered by the Comptroller General, and widely cited treatises.\nThese sources together confirm that the requirement of competitive bidding was understood then, as it is now, to have a substantive component,\nrendering invalid those bidding specifications that unduly restrict competition among potential responsible bidders. 6 Nothing in the legislative\nrecord suggests that in requiring competitive bidding in awards of federally aided highway construction contracts, Congress intended to depart from\nthis general understanding.\nA 1954 opinion of the U.S. Court of Appeals for the Ninth Circuit exemplifies this prevailing understanding. As the Ninth Circuit explained,\n\xe2\x80\x9c[t]he object of competitive bidding is to invite competition, by allowing\nall persons having the ability to furnish the supplies or materials or to\nperform the work to compete freely without any unreasonable restrictions.\xe2\x80\x9d Gamewell Co. v. City of Phoenix, 216 F.2d 928, 933 (9th Cir.\n1954), amended on other grounds, 219 F.2d 180 (9th Cir. 1955). Significantly, contract specifications \xe2\x80\x9cmust be free of provisions, the effect of\nwhich would stifle competition.\xe2\x80\x9d Id. at 934. Applying this rule, the court\nfound a city contract invalid because the specifications called for certain\nA responsible bidder is one who has \xe2\x80\x9cthe ability to respond by the discharge of the\ncontractor\xe2\x80\x99s obligation in accordance with what may be expected or demanded under\nterms of a contract. The lowest responsible bidder . . . must be held to imply skill, judgment and integrity necessary to the faithful performance of the contract, as well as\nsufficient financial resources and ability.\xe2\x80\x9d 10 Eugene McQuillin, The Law of Municipal\nCorporations \xc2\xa7 29.73, at 353 (3d ed. 1950) (internal quotation marks omitted); see also\nHenry A. Cohen, Public Construction Contracts and the Law 80 (1961) (\xe2\x80\x9cThe expression\n\xe2\x80\x98lowest responsible bidder\xe2\x80\x99 . . . means the lowest bidder whose offer best responds in\nquality, fitness, and capacity to the particular requirements of the proposed work.\xe2\x80\x9d);\nPicone v. City of New York, 29 N.Y.S.2d 539, 541 (N.Y. Sup. Ct. 1941) (the term \xe2\x80\x9clowest\nresponsible bidder\xe2\x80\x9d \xe2\x80\x9cimplies skill, judgment and integrity as well as sufficient financial\nresources\xe2\x80\x9d).\n6\n\n45\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nequipment manufactured by only one bidder, such that \xe2\x80\x9creal competitive\nbidding was impossible.\xe2\x80\x9d Id. at 937.\nLike Gamewell, state courts and the authors of widely cited treatises\nat that time also understood unduly restrictive requirements to be at\nodds with competitive bidding. Gamewell cited a leading treatise for\nthe proposition that the object of competitive bidding was to invite\ncompetition without unreasonable restriction. See Gamewell, 216 F.2d\nat 933 (citing 10 Eugene McQuillin, The Law of Municipal Corporations \xc2\xa7 29.44 (3d ed. 1950) (\xe2\x80\x9cMcQuillin\xe2\x80\x9d)). That treatise pronounced\nthen, as it does now: \xe2\x80\x9cThe request for bids must not unduly restrict\ncompetition.\xe2\x80\x9d 10 McQuillin \xc2\xa7 29.44, at 297; accord 10 McQuillin\n\xc2\xa7 29:48, at 536 (3d rev. ed. 2009) (same); 43 Am. Jur. Public Works\nand Contracts \xc2\xa7 51, at 794 (1942) (\xe2\x80\x9cThe terms and conditions upon\nwhich bids may be asked are subject to the limitations that they must\nnot be such as to prevent or restrict full and free competition[.]\xe2\x80\x9d); see\nalso id. \xc2\xa7 35, at 777 (\xe2\x80\x9cterms and conditions\xe2\x80\x9d \xe2\x80\x9cshould contain nothing\nthat would otherwise prevent or restrict full and free competition\xe2\x80\x9d). As\nMcQuillin elaborated: \xe2\x80\x9cA law demanding competition in the letting of\npublic work is intended to secure unrestricted competition among\nbidders, and hence, where the effect of an ordinance is to prevent or\nrestrict competition and thus increase the cost of the work, it manifestly violates such law and is void[.]\xe2\x80\x9d). 10 McQuillin \xc2\xa7 29.48, at 303\xe2\x80\x9304\n(3d ed. 1950). It was also well established in state courts by the 1950s\nthat contracting authorities following competitive bidding principles\nmust not impose restrictions that stifle competition. See id. at 297\xe2\x80\x9398\n(citing cases); see also, e.g., Prescott Courier, Inc. v. Moore, 274 P.\n163, 166 (Ariz. 1929); Wilmington Parking Auth. v. Ranken, 105 A.2d\n614, 631\xe2\x80\x9335 (Del. 1954); Weiss v. Town of Woodbine, 289 N.W. 469,\n474\xe2\x80\x9375 (Iowa 1940); Miller v. City of Des Moines, 122 N.W. 226, 230\n(Iowa 1909); Jackson v. Sullivan, 124 S.W.2d 1019, 1021\xe2\x80\x9322 (Ky.\n1939); Ledwith v. City of Lincoln, 193 N.W. 763, 764\xe2\x80\x9365 (Neb. 1923). 7\n\n7 To be sure, McQuillin in 1950 recognized that the authorities \xe2\x80\x9cmay, without violating\nthe rule requiring freedom of competition, insert proper conditions in their proposals for\nbids, and the bidders are bound to observe them,\xe2\x80\x9d 10 McQuillin \xc2\xa7 29.44, at 298 (3d ed.\n1950), but the examples provided related to the nature of the work to be performed and\nthe bidder\xe2\x80\x99s capability of performing it, such as restrictions as to the kind and quality of\nthe material to be used or requirements that a successful bidder have the requisite plants\n\n46\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nNecessarily, of course, \xe2\x80\x9c[a]ll specifications restrict competition since\nthey narrow the range of acceptable bids.\xe2\x80\x9d 1B John Cosgrove McBride et\nal., Government Contracts: Cyclopedic Guide to Law, Administration,\nProcedure \xc2\xa7 10.50[1], at 10-164 (2012). The question is whether a particular bidding specification \xe2\x80\x9cunduly\xe2\x80\x9d restricts competition. Id. at 10-166;\nsee also To the Elgin Sweeper Co., 43 Comp. Gen. 680, 682 (1964) (legal\nquestion is whether the specification was \xe2\x80\x9cunduly restrictive, i.e., restrictive to the point of preventing the pecuniary benefits which we believe to\nflow from free and open competition\xe2\x80\x9d). The notion that specifications that\n\xe2\x80\x9cunduly restrict\xe2\x80\x9d competition are inconsistent with competitive bidding\nrequirements has long been a background principle informing government\ncontracts law, as reflected in bid-protest decisions by the Comptroller\nGeneral. In the 1950s (as is the case now), for example, the Comptroller\nGeneral, in deciding bid protests under direct federal procurement laws,\ndeemed it within his purview \xe2\x80\x9cto determine whether specifications as\nwritten are unduly restrictive of competition,\xe2\x80\x9d while emphasizing that the\ninability or unwillingness of a particular bidder to meet the minimum\nrequirements will not be a sufficient reason to conclude that specifications\nunduly limit competition. To York Corp., 36 Comp. Gen. 251, 252 (1956);\nsee also To the Postmaster General, 32 Comp. Gen. 384, 386 (1953)\n(questioning the restrictiveness of specifications that appeared to have\nbeen drawn with reference to a particular company\xe2\x80\x99s sweeper and \xe2\x80\x9cin such\na manner as to preclude all other companies from submitting responsive\nand facilities for doing the job, rather than conditions unrelated to the project or the\ncontractor\xe2\x80\x99s capability of performing it. See id.\nWe note that the consistency with state competitive bidding laws of specifications and\nconditions that promote social policy goals not directly related to the needs of the project\nhas been the subject of considerable disagreement among state courts and federal courts\napplying state law. Compare, e.g., Domar Elec., Inc. v. City of Los Angeles, 885 P.2d 934\n(Cal. 1994) (city could require bidders to comply with subcontractor outreach program),\nand Court St. Steak House, Inc. v. Cty. of Tazewell, 643 N.E.2d 781 (Ill. 1994) (county\njail food supply contract could be awarded to higher bidder who would provide food\nservice training for mentally handicapped), with Council of City of New York v. Bloomberg, 846 N.E.2d 433 (N.Y. 2006) (city law requiring contractors to provide domestic\npartner benefits to employees violated competitive bidding requirements), and Tex. Hwy.\nComm\xe2\x80\x99n v. Tex. Ass\xe2\x80\x99n of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963) (Texas\nHighway Commission order requiring construction contracts to require that materials be\nmanufactured in the United States violated competitive bidding law); see also infra pp.\n57\xe2\x80\x9360 (citing additional cases).\n\n47\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nbids thereunder\xe2\x80\x9d). 8 To be sure, the Comptroller General bid protests\ntended to focus on whether bidding specifications were too rigid in technical respects\xe2\x80\x94e.g., whether specifications requiring a desk with \xe2\x80\x9csandwich construction\xe2\x80\x9d were too restrictive, see To the Secretary of the Navy,\n48 Comp. Gen. 345, 346\xe2\x80\x9349 (1968) (yes)\xe2\x80\x94rather than on whether bidders\nwere being excluded categorically on the basis of other legal requirements. That focus was attributable partly to the era, and partly to the fact\nthat most bid protests addressed by the Comptroller General involve direct\nfederal procurement, which is subject to detailed regulation. Moreover,\nCongress, unlike local governments subject to federal or state competitive\nbidding requirements, may enact legal restrictions on competitive bidding,\nand such restrictions will not be subject to challenge in bid protests before\nthe Comptroller General. The key point, for present purposes, is that the\nComptroller General, like federal and state courts, undertook a substantive\nreview of whether bidding specifications were unduly restrictive. 9\n\n8 Accord To Control Corp., 33 Comp. Gen. 586, 588 (1954) (observing that \xe2\x80\x9cthe law\nrequiring advertising for bids and award of contracts to the lowest responsible, responsive\nbidder . . . contemplates fair and unrestricted competition\xe2\x80\x9d but that the fact that a particular bidder may be unable or unwilling to meet the minimum requirements for supplying\nthe needs \xe2\x80\x9cwill not be sufficient to warrant the conclusion that the specifications are\nunduly restricted\xe2\x80\x9d (emphasis added)); To the Secretary of the Interior, 33 Comp. Gen.\n567, 570 (1954) (because qualifying language of stated minimum requirements left\nbidders in doubt as to whether it would be permissible not to meet those minimums, the\nspecifications were \xe2\x80\x9clegally defective\xe2\x80\x9d as being \xe2\x80\x9cunduly restrictive of competition\xe2\x80\x9d;\nproper course was to advertise \xe2\x80\x9con the basis of specifications which will permit the\nbroadest field of competition within the actual minimums required\xe2\x80\x9d); To the Chairman,\nAtomic Energy Commission, 30 Comp. Gen. 368, 370 (1951) (determining that the\nchallenged specifications, while potentially eliminating particular bidders who might be\nunable to meet the minimum requirements for supplying an agency\xe2\x80\x99s needs, were not\n\xe2\x80\x9cunduly restrictive\xe2\x80\x9d to \xe2\x80\x9cthe point of precluding free and open competition\xe2\x80\x9d).\n9 We also note that regulations implementing the Federal-Aid Highway Program have\nlong authorized the responsible agency head or delegee to disallow state or local procedures or requirements that restrict competition. See, e.g., 23 C.F.R. \xc2\xa7 635.110(b) (2012)\n(\xe2\x80\x9cNo procedure or requirement for bonding, insurance, prequalification, qualification, or\nlicensing of contractors shall be approved which, in the judgment of the Division Administrator, may operate to restrict competition, to prevent submission of a bid by, or to\nprohibit the consideration of a bid submitted by, any responsible contractor[.]\xe2\x80\x9d (emphasis\nadded)); see also supra note 4. Nearly identical variations of this provision date back to at\nleast 1951. See 25 Fed. Reg. 4162, 4163 (1960) (23 C.F.R. \xc2\xa7 1.16); 22 Fed. Reg. 1063,\n1065 (1957) (23 C.F.R. \xc2\xa7 1.10(d)); 16 Fed. Reg. 387, 389 (1951) (23 C.F.R. \xc2\xa7 1.10(d)).\n\n48\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nC.\nFinally, we explain our view that the language added to section 112(b)\nin 1968, and cited by the Sixth Circuit in City of Cleveland, does not\nshow that section 112(b)\xe2\x80\x99s competitive bidding requirement is merely\nprocedural. The Sixth Circuit\xe2\x80\x99s conclusion in dicta to the contrary rested,\nin part, on the last sentence of section 112(b)(1): \xe2\x80\x9cNo requirement or\nobligation shall be imposed as a condition precedent to the award of a\ncontract to such bidder for a project, or to the Secretary\xe2\x80\x99s concurrence in\nthe award of a contract to such bidder, unless such requirement or obligation is otherwise lawful and is specifically set forth in the advertised\nspecifications.\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(b)(1), quoted in City of Cleveland, 508\nF.3d at 841. The court compared subsection (b)(1)\xe2\x80\x99s reference to a \xe2\x80\x9crequirement or obligation\xe2\x80\x9d imposed upon contractors with the reference to\ncompetitive bidding as a \xe2\x80\x9cmethod\xe2\x80\x9d in its first sentence. Based on this\ncontrast, the court concluded that the public body awarding a contract\nneed not justify the \xe2\x80\x9crequirements or obligations\xe2\x80\x9d imposed on contractors\nas \xe2\x80\x9cmore cost effective\xe2\x80\x9d than competitive bidding or as necessitated by an\nemergency, because the need for such showings is triggered only when\nthe public body seeks to depart from competitive bidding as the \xe2\x80\x9cmethod\xe2\x80\x9d\nfor awarding a contract. Id. Thus, the court reasoned, section 112(b)\n\xe2\x80\x9cconfers no authority upon the FHWA to evaluate substantive contract\nrequirements to determine whether they might inhibit competition or\ndisqualify otherwise qualified bidders.\xe2\x80\x9d Id.\nThis reading of the text of section 112(b)(1), however, overlooks that\nthe last sentence of this provision was added in 1968\xe2\x80\x94years after Congress enacted the requirements in 1938, 1954, and 1958 that the Secretary\n\xe2\x80\x9crequire such plans and specifications and such methods of bidding as\nshall be effective in securing competition,\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(a), and that\nfederally aided highway construction contracts be \xe2\x80\x9cperformed by contract\nawarded by competitive bidding,\xe2\x80\x9d id. \xc2\xa7 112(b)(1). See supra Part II.A\n(quoting earlier versions of the Act). 10 Neither the text of the 1968\n10 The 1968 amendment added the following two sentences to what was then subsection (b):\n\nContracts for the construction of each project shall be awarded only on the basis of\nthe lowest responsive bid submitted by a bidder meeting established criteria of responsibility. No requirement or obligation shall be imposed as a condition prece-\n\n49\n\n\x0c37 Op. O.L.C. 33 (2013)\n\namendment nor its legislative history supports the conclusion that by\nadding this language, Congress intended to inject into the statute a new\ndistinction between the \xe2\x80\x9cmethod\xe2\x80\x9d or \xe2\x80\x9cprocess\xe2\x80\x9d of competitive bidding, on\nthe one hand, and substantive \xe2\x80\x9crequirements or obligations\xe2\x80\x9d imposed on\ncontractors, on the other. Nor did Congress add the last sentence to suggest that \xe2\x80\x9cany requirement or obligation\xe2\x80\x9d must be accepted by FHWA so\nlong as it is \xe2\x80\x9cotherwise lawful\xe2\x80\x9d and \xe2\x80\x9cspecifically set forth in the advertised specifications.\xe2\x80\x9d\nApart from adding the last two sentences of what is now section\n112(b)(1), the 1968 amendment did not amend the text of either section\n112(a) or (b), leaving unchanged the pre-existing requirements that the\nSecretary \xe2\x80\x9crequire such plans and specifications and such methods of\nbidding as shall be effective in securing competition\xe2\x80\x9d in subsection (a),\nand that federally assisted contracts be \xe2\x80\x9cawarded by competitive bidding\xe2\x80\x9d\nin subsection (b)(1). For the reasons discussed above in Part II.A\xe2\x80\x93B, we\nthink that Congress, in enacting these earlier provisions, intended the\nstatute\xe2\x80\x99s competitive bidding requirement to have a substantive dimension\nempowering the responsible agency head (or delegee) to ensure that state\nand local bidding specifications and conditions adhere to competitive\nbidding principles and do not unduly restrict competition.\nThe 1968 amendments were not intended to alter this authority. Rather, the 1968 amendments are better understood to address only one\nparticular axiom of competitive bidding\xe2\x80\x94that a requirement or obligation not be imposed as a condition precedent to the award of a contract,\nor to the Secretary\xe2\x80\x99s concurrence in the award, \xe2\x80\x9cunless such requirement\nor obligation is otherwise lawful and is specifically set forth in the\nadvertised specifications.\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(b)(1). The legislative history\nreflects that this language, paraphrased from a Comptroller General\ndent to the award of a contract to such bidder for a project, or to the Secretary\xe2\x80\x99s\nconcurrence in the award of a contract to such bidder, unless such requirement or\nobligation is otherwise lawful and is specifically set forth in the advertised specifications.\nFederal-Aid Highway Act of 1968, Pub. L. No. 90-495, \xc2\xa7 22(c), 82 Stat. 815, 827. The\namendment also added a new section 140 (Equal employment opportunity), which\nobligated the Secretary to require that each state \xe2\x80\x9cinclude in the advertised specifications, notification of the specific equal employment opportunity responsibilities of the\nsuccessful bidder.\xe2\x80\x9d Id. \xc2\xa7 22(a), 82 Stat. at 826 (codified at 23 U.S.C. \xc2\xa7 140(a) (2006)).\n\n50\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nopinion requested by a member of Congress, was added to the statute to\naddress a specific problem. As the congressional committee reports\nexplain, the two sentences were added in response to the Department of\nLabor\xe2\x80\x99s effort to compel contractor compliance with equal employment\nopportunity requirements imposed by Executive Order 11246 of September 24, 1965, 3 C.F.R. 167 (1965 Supp.), by negotiating such requirements with contractors after they had been determined to be the\nlowest responsive bidders but before the contracts were awarded. 11\nCongress found the Department of Labor\xe2\x80\x99s approach problematic because it added \xe2\x80\x9cgrave uncertainty about the exact nature of the legal\nobligation and requirements which may be imposed upon the low bidder\non Federal-aid highway projects.\xe2\x80\x9d S. Rep. No. 90-1340, at 16 (1968);\nsee also H.R. Rep. No. 90-1584, at 13 (1968) (\xe2\x80\x9cNo State can expect to\nconduct competitive bidding unless it is able to say, when it advertises\nfor bids, what the requirements of the contract will be. No contractor can\nbe expected to bid responsively unless he knows, when he prepares his\nbid, what the contract will require of him.\xe2\x80\x9d). To address this concern,\nthe 1968 amendments prohibited any requirements except those \xe2\x80\x9cspecifically set forth in the advertised specifications,\xe2\x80\x9d drawing on language\nfrom a Comptroller General letter describing the obligation to set forth\nthe \xe2\x80\x9cspecific and definite minimum requirements\xe2\x80\x9d of a contract in the\ninvitation to bid. 12\nAccording to congressional committee reports, the Department of Labor was evaluating individual contractors\xe2\x80\x99 compliance with these requirements on a contract-bycontract basis for each highway project, after the low bidder on a federal-aid construction\ncontract was determined but before the award to the low bidder was made. S. Rep. No.\n90-1340, at 16 (1968); see also H.R. Rep. No. 90-1584, at 13 (1968); id. at 51 (minority\nviews). The Labor Department required the low bidder to submit an \xe2\x80\x9cacceptable affirmative action program\xe2\x80\x9d for the employment of members of minority groups, but the advertised specifications contained no detailed description of what would be considered an\nacceptable program. Instead, the acceptability of the program was left to negotiation after\nthe bids were opened but before the contract was awarded. H.R. Rep. No. 90-1584, at 51.\n12 Representative William Cramer asked the Comptroller General if the Department of\nLabor\xe2\x80\x99s approach violated the competitive bidding requirements of the federal-aid highway laws. In a letter opinion, the Comptroller General responded that\n11\n\nthe basic principles of competitive bidding require that bidders be assured that\naward will be made only on the basis of the low responsive bid submitted by a bidder meeting established criteria of responsibility, including any additional specific\nand definite requirements set forth in the invitation, and that award will not thereaf-\n\n51\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nAs both the statute\xe2\x80\x99s text and history show, Congress adopted the\n1968 amendments to require that the Secretary comply with what Congress and the Comptroller General understood to be a basic principle of\ncompetitive bidding\xe2\x80\x94that a contract award be made only on the basis of\nthe lowest responsive bid submitted by a bidder meeting established\ncriteria of responsibility, including any specific and definite requirements set forth in advance in the advertised specifications. With this\namendment, Congress declared out of bounds the conditioning of a\nfederally funded contract award on a requirement or obligation that has\nnot been specifically set forth in the advertised specifications or is not\notherwise lawful. But Congress did not amend and did not intend to\nsignificantly alter the meaning of the preexisting portions of section\n112(b) to permit unduly restrictive state and local specifications so long\nas they are otherwise lawful and advertised in advance. Apart from\ncodifying that one specific principle of competitive bidding, the 1968\namendment does not change FHWA\xe2\x80\x99s required determinations that the\nplans and specifications of the state or local contracting authority are\n\xe2\x80\x9ceffective in securing competition\xe2\x80\x9d and comply with the requirements of\n\xe2\x80\x9ccompetitive bidding,\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(a), (b)(1).\n\nter be dependent upon the low bidder\xe2\x80\x99s ability to successfully negotiate matters\nmentioned only vaguely before the bidding.\nTo Rep. William C. Cramer, 47 Comp. Gen. 666, 670 (1968), quoted in H.R. Rep.\nNo. 90-1584, at 51, and 114 Cong. Rec. 19,398\xe2\x80\x9399 (1968) (statement of Rep. Cramer);\nsee also H.R. Rep. No. 90-1584, at 13 (citing Comptroller General opinion); S. Rep.\nNo. 90-1340, at 17 (same). Consequently, the Comptroller General concluded that the\nDepartment of Labor could require bidders to submit affirmative action programs\nbefore contract awards were made only if the agency issued regulations that included a\nstatement of definite minimum requirements to be met by the bidder\xe2\x80\x99s program and any\nother standards or criteria by which the acceptability of the program would be judged.\n47 Comp. Gen. at 670. Concerned that the Department of Labor was not complying\nwith the Comptroller General opinion, H.R. Rep. No. 90-1584, at 51, and believing that\nequal opportunity requirements should be \xe2\x80\x9cwork[ed] out in advance,\xe2\x80\x9d id. at 13, the\nHouse committee adopted an amendment to section 112 \xe2\x80\x9cto incorporate the effect of\nthis ruling of the Comptroller General into the Federal-aid highway laws, to require\nresolution of the problem of equal employment programs before the bidding.\xe2\x80\x9d Id. at 51\n(minority views); see also id. at 13; H.R. Rep. No. 90-1799, at 34 (1968) (Conf. Rep.)\n(adopting House version of amendment).\n\n52\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\n*****\nFor these reasons, and consistent with our 1986 opinion, we believe\nthat section 112(b)(1)\xe2\x80\x99s requirement of \xe2\x80\x9ccompetitive bidding\xe2\x80\x9d for federally assisted highway construction contracts not only describes a procedural\nmethod for awarding contracts, but also contains a substantive component\nthat would render some conditions imposed by state or local governments\nimpermissible (even if the conditions are announced in advance and are\notherwise lawful).\nIII.\nThere remains the question of the scope and nature of the substantive\nlimitation that section 112(b)(1) imposes on state or local bidding restrictions unrelated to performance of the necessary work. As explained\nbelow, we do not think that the requirement that contracts be \xe2\x80\x9cawarded by\ncompetitive bidding\xe2\x80\x9d precludes any and all state and local bidding requirements that might reduce the pool of eligible, responsible bidders. In\nour view, FHWA retains some discretion under the statute to evaluate\nwhether a particular state or local law or policy that has more than an\nincidental effect on the pool of potential bidders is nonetheless compatible\nwith section 112(b)(1)\xe2\x80\x99s competitive bidding requirement.13 See generally\nRothrock v. United States, 62 F.3d 196, 198\xe2\x80\x9399 (7th Cir. 1995) (noting\nthe Secretary\xe2\x80\x99s broad discretion in approving federal highway projects);\nGlasgow, 843 F.2d at 136 (\xe2\x80\x9cThe Act, in general, indicates that the FHWA\nis to have discretion in its administration.\xe2\x80\x9d). FHWA\xe2\x80\x99s exercise of that\ndiscretion, however, is constrained by the objectives of the statute: state\nor local bidding requirements that disadvantage or exclude a class of\npotential bidders from the pool of applicants for reasons not directly\nrelated to the contractors\xe2\x80\x99 capability of performing the work are compatible with section 112 only if such requirements advance the purposes of\ncompetitive bidding. Accordingly, FHWA may reasonably conclude that a\nstate or local bidding requirement that constricts the pool of potential\nThus, as discussed further below, the assessment of whether any particular state or\nlocal law or policy restricting the pool of potential bidders is compatible with section 112\nproperly belongs to FHWA and DOT. Consequently, we do not address here whether any\nparticular state or local bidding restriction or requirement, including those discussed in\nthe DOT Letter, would be consistent with section 112\xe2\x80\x99s competitive bidding mandate.\n13\n\n53\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nbidders is nonetheless consistent with section 112 because the requirement advances the purposes of competitive bidding and thus does not\nunduly limit competition. In making that judgment, FHWA may permissibly weigh whether the bidding requirement promotes the efficient and\neffective use of federal funds in the short or long run, or otherwise safeguards the integrity of the competitive bidding process. It is for FHWA\nand DOT to determine the regulatory approach the agency should take in\nexercising this discretion and in evaluating whether certain state and local\nrequirements are consistent with the statutory mandates that \xe2\x80\x9cplans and\nspecifications and [the] methods of bidding . . . be effective in securing\ncompetition\xe2\x80\x9d and that bidding be \xe2\x80\x9ccompetitive\xe2\x80\x9d unless some other method\nis \xe2\x80\x9cmore cost effective\xe2\x80\x9d or \xe2\x80\x9can emergency exists.\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(a),\n(b)(1). 14\nIt is a truism that promoting the efficient use of federal funds is a central purpose of the competitive bidding requirement in section 112. Consequently, state or local bidding requirements that foster the efficient and\nSection 112 authorizes the Secretary to approve federally assisted highway contracts that have been let through a method other than competitive bidding if \xe2\x80\x9cthe State\ntransportation department demonstrates, to the satisfaction of the Secretary, that some\nother method is more cost effective or that an emergency exists.\xe2\x80\x9d 23 U.S.C. \xc2\xa7 112(b)(1).\nThus, a process for letting a contract that includes state or local restrictions that are\ninconsistent with competitive bidding principles may nonetheless be approved as an\nalternative method if one of these conditions is met\xe2\x80\x94at least in theory. See, e.g., 23\nC.F.R. \xc2\xa7\xc2\xa7 635.201\xe2\x80\x93635.205 (prescribing procedures for the performance of federally\nfunded highway construction contracts by a method other than competitive bidding); see\nalso Competitive Bidding Requirements, 10 Op. O.L.C. at 105\xe2\x80\x9306 (New York City was\nrequired to justify its departure from competitive bidding principles by considerations of\ncost effectiveness). We find it difficult to envision a situation, however, where FHWA\ncould determine that a process for letting a contract by competitive bidding is not\nconsistent with the substantive requirements of competitive bidding because it includes a\nstate or local restriction that imposes an \xe2\x80\x9cundue\xe2\x80\x9d limit on competition (reflecting a\nregulatory determination that the restriction does not promote the efficient use of federal\nfunds or protect the integrity of the process), but where FHWA nonetheless could find\nthat the process is \xe2\x80\x9cmore cost effective\xe2\x80\x9d for purposes of determining that it qualifies for\nthe exception. Instead, as FHWA\xe2\x80\x99s regulations recognize, the \xe2\x80\x9ccost effectiveness\xe2\x80\x9d\nexception is more meaningful in authorizing complete departures from the method of\ncompetitive bidding, such as negotiated contracts or the \xe2\x80\x9cforce account\xe2\x80\x9d method of\nconstruction, in which a state transportation department, a county, a railroad, or a public\nutility company directly performs the highway construction work. See 23 C.F.R.\n\xc2\xa7 635.203(b), (c) (defining the meaning of \xe2\x80\x9csome other method of construction\xe2\x80\x9d as used\nin 23 U.S.C. \xc2\xa7 112(b), and of \xe2\x80\x9cforce account\xe2\x80\x9d).\n14\n\n54\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\neffective use of federal funds, either in the short or long term, do not\nconflict with the competitive bidding requirement of section 112. Thus,\nwe concluded in our 1986 opinion that \xe2\x80\x9c[s]ection 112 clearly reflects a\ncongressional judgment that the efficient use of federal funds afforded by\ncompetitive bidding is to be the overriding objective of all procurement\nrules for federally funded highway projects, superseding any local interest\nin using federal funds to advance a local objective, however laudable, at\nthe expense of efficiency.\xe2\x80\x9d Competitive Bidding Requirements, 10 Op.\nO.L.C. at 103. 15 Although not addressed in our 1986 opinion, state or\nlocal bidding requirements that protect the integrity of the competitive\nbidding process, and therefore its ability to safeguard the public fisc in the\nlong run, similarly would not conflict with the competitive bidding requirement in section 112.\nAs described above, over time Congress has adopted amendments to\nthe Act to foster the efficient use of federal funds, as well as to eliminate\ncollusion and other threats to the integrity of the competitive bidding\nprocess. See supra Part II.A; see also Mahler v. United States, 306 F.2d\n713, 721 (3d Cir. 1962) (recounting the legislative history of federal-aid\nhighway legislation, with the observation that \xe2\x80\x9c[t]he concern of Congress\nwas to make sure that federal funds were effectively employed and not\nwasted\xe2\x80\x9d). One classic description recognizes that the requirements of\n15 Our 1986 opinion relied in part on the 1983 amendment to section 112(b), which\nreplaced the public interest exception (\xe2\x80\x9cunless the Secretary shall affirmatively find that,\nunder the circumstances relating to such project, some other method is in the public\ninterest\xe2\x80\x9d) with the current requirement that departures from competitive bidding be\njustified by a demonstration that the alternative is more cost-effective (\xe2\x80\x9cunless the State\nhighway department demonstrates, to the satisfaction of the Secretary, that some other\nmethod is more cost effective\xe2\x80\x9d). See Surface Transportation Assistance Act of 1982, Pub.\nL. No. 97-424, \xc2\xa7 112, 96 Stat. 2097, 2106 (1983). Based in part on this amendment, our\n1986 opinion reasoned that Congress had intended that \xe2\x80\x9ccost-effectiveness be the only\ncriterion\xe2\x80\x9d for awarding contracts for highway projects funded by the federal government,\nand that Congress had made clear that \xe2\x80\x9cthe efficient use of federal funds is the touchstone\nby which the legality of state procurement rules for federally funded highway projects is\nto be tested.\xe2\x80\x9d Competitive Bidding Requirements, 10 Op. O.L.C. at 105 (citing Surface\nTransportation Assistance Act of 1982, Pub. L. No. 97-424, 96 Stat. at 2106). Although\nwe continue to believe that the efficient use of federal funds is central not only to the\ncost-effectiveness exception but also to the core requirements of competitive bidding\nitself, we now believe that the new language introduced in 1983 changed only the nature\nof the exceptions justifying a departure from competitive bidding, and not the nature of\nthe competitive bidding requirement itself.\n\n55\n\n\x0c37 Op. O.L.C. 33 (2013)\n\ncompetitive bidding are \xe2\x80\x9cfor the purpose of inviting competition, to guard\nagainst favoritism, improvidence, extravagance, fraud and corruption in\nthe awarding of municipal contracts, and to secure the best work or supplies at the lowest price practicable.\xe2\x80\x9d 10 McQuillin \xc2\xa7 29.29, at 266 (3d ed.\n1950); see also 64 Am. Jur. 2d Public Works and Contracts \xc2\xa7 28, at 648\xe2\x80\x93\n49 (2011) (\xe2\x80\x9cThe purpose of requiring governmental entities to conduct\ncompetitive bidding is to eliminate favoritism, fraud, and corruption; to\navoid misuse of public funds; and to stimulate advantageous marketplace\ncompetition. Such competitive bidding statutes are intended not only to\nensure that the awarding authority obtains the lowest price among responsible contractors but also to establish an open and honest procedure for\ncompetition for public contracts.\xe2\x80\x9d). 16\nCase law construing competitive bidding requirements under state and\nlocal law is, of course, not binding on FHWA in implementing the competitive bidding mandate of 23 U.S.C. \xc2\xa7 112 (and, indeed, courts in different jurisdictions often have reached different conclusions regarding the\nvalidity of similar bidding restrictions, see supra note 7). But this case\nlaw illustrates the kinds of analyses that courts use to determine whether\nstate and local restrictions or contract conditions comply with competitive\nbidding requirements, as well as the background understanding of \xe2\x80\x9ccompetitive bidding.\xe2\x80\x9d As discussed above, see supra Part II.B, courts have\nlong set aside state and local specifications and contract conditions that\nthey consider unduly restrictive under competitive bidding principles.\nWhat is particularly instructive are the reasons courts cite in rejecting or\n\n16 Before Congress added the explicit competitive bidding requirements to the statute\nin 1954, one treatise explained that honest and effective competition is the means by\nwhich the end of securing public contracts at a low cost may be achieved:\n\nThe purposes of [competitive bidding] are to secure economy in the construction of\npublic works and the expenditures of public funds for materials and supplies needed by public bodies, to protect the public from collusive contracts, to prevent favoritism, fraud, extravagance, and improvidence in the procurement of these things for\nthe use of the state and its local self-governing subdivisions, and to promote actual,\nhonest, and effective competition to the end that each proposal or bid received and\nconsidered for the construction of a public improvement, the supplying of material\nfor public use, etc., may be in competition with all other bids upon the same basis,\nso that all such public contracts may be secured at the lowest cost to taxpayers.\n43 Am. Jur. Public Works and Contracts \xc2\xa7 26, at 767 (1942).\n\n56\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nsustaining restrictions on eligible bidders unrelated to the capability of the\nbidder to perform the work in a competent and responsible manner.\nFor example, many courts have identified protection of the public fisc,\nby obtaining the best work at the lowest possible price, as one of chief\nobjectives of their states\xe2\x80\x99 competitive bidding laws. These courts tend to\ninvalidate state or local bidding restrictions that are not intended to safeguard public funds, even though the restrictions may serve other desirable\npublic policy goals. See, e.g., Associated Gen. Contractors of Cal., Inc. v.\nCity & Cty. of San Francisco, 813 F.2d 922, 926 (9th Cir. 1987) (competitive bidding statutes are designed to protect against \xe2\x80\x9ca variety of ills,\xe2\x80\x9d\nincluding \xe2\x80\x9cinsufficient competition to assure that the government gets the\nmost work for the least money\xe2\x80\x9d; invalidating San Francisco ordinance\ngiving preferences to minority-owned, women-owned, and locally-owned\nbusiness enterprises as inconsistent with city charter requiring contracts to\nbe let \xe2\x80\x9cto the lowest reliable and responsible bidder\xe2\x80\x9d); Council of City of\nNew York v. Bloomberg, 846 N.E.2d 433, 438\xe2\x80\x9339 (N.Y. 2006) (ruling that\nexclusion of responsible bidders that do not provide domestic partner\nbenefits violates competitive bidding requirements because the purpose\nand likely effect of the law was not \xe2\x80\x9cto make the City\xe2\x80\x99s contracts cheaper\nor their performance more efficient,\xe2\x80\x9d and the law may open the door to\n\xe2\x80\x9cfavoritism\xe2\x80\x9d by allowing the city to design its requirements to match the\nbenefit structure of its preferred bidder); Associated Builders & Contractors, Inc. v. City of Rochester, 492 N.E.2d 781, 782\xe2\x80\x9383 (N.Y. 1986)\n(holding city ordinance granting preference to contractors with apprenticeship training programs invalid given competitive bidding statute\xe2\x80\x99s\n\xe2\x80\x9cpredominate purpose\xe2\x80\x9d of \xe2\x80\x9cprotection of the public fisc\xe2\x80\x9d); Am. Inst. for\nImported Steel, Inc. v. Office of Gen. Servs., 365 N.Y.S.2d 56, 58 (N.Y.\nApp. Div. 1975) (invalidating \xe2\x80\x9cBuy-American\xe2\x80\x9d policy as contrary to\ncompetitive bidding statute, the purpose of which is \xe2\x80\x9cto invite competition\xe2\x80\x9d and thereby furnish the state with \xe2\x80\x9cthe best product at the lowest\nprice practicable,\xe2\x80\x9d and thus \xe2\x80\x9cconserve the taxpayers\xe2\x80\x99 money\xe2\x80\x9d; this purpose \xe2\x80\x9ccould easily be neutralized if any group of responsible bidders is\nwrongfully eliminated\xe2\x80\x9d); Clarkie\xe2\x80\x99s, Inc. v. City of Philadelphia, 67 Pa.\nD. & C. 2d 68, 75, 77\xe2\x80\x9391 (1973) (\xe2\x80\x9cWhere competitive bidding is required,\nany ordinance which unduly limits the number of bidders, thus tending to\nincrease the cost of the work, is void\xe2\x80\x9d; invalidating proof-of-competency\nspecification requiring prior experience in a stadium, race track, or arena\n57\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nwith seating capacity of at least 10,000, for Veterans\xe2\x80\x99 Stadium janitorial\nand maintenance services contract, as an \xe2\x80\x9carbitrary\xe2\x80\x9d and \xe2\x80\x9cundue restriction on competitive bidding\xe2\x80\x9d).\nOn the other hand, where state or local bidding restrictions or contract\nconditions are intended to promote the efficient use of government funds,\ncourts are more likely to find them consistent with competitive bidding\nrequirements. In New York State Chapter, Inc. v. New York State Thruway\nAuthority, 666 N.E.2d 185 (N.Y. 1996), for example, the New York Court\nof Appeals considered whether public authorities governed by state competitive bidding laws may lawfully adopt prebid specifications known as\nproject labor agreements (\xe2\x80\x9cPLAs\xe2\x80\x9d) for construction projects, despite their\n\xe2\x80\x9canticompetitive impact on the bidding process.\xe2\x80\x9d Id. at 188. 17 Reading its\npast cases as identifying two central purposes of New York\xe2\x80\x99s competitive\nbidding statutes\xe2\x80\x94protection of the public fisc by obtaining the best work\nat the lowest possible price, and prevention of favoritism, improvidence,\nfraud, and corruption in the awarding of public contracts\xe2\x80\x94the court held\nthat the public authority bears the burden of showing that a decision to\nenter into a PLA has \xe2\x80\x9cas its purpose and likely effect\xe2\x80\x9d the advancement of\nthese interests. Id. at 190. Applying this test, the court sustained one PLA\nrequirement in connection with a major bridge construction project, on the\nground that the public authority\xe2\x80\x99s focus on \xe2\x80\x9cthe public fisc\xe2\x80\x94both cost\nsavings and uninterrupted revenues\xe2\x80\x9d demonstrated that the PLA was\nadopted in conformity with competitive bidding statutes. Id. at 191. The\ncourt invalidated a second PLA, however, because of the absence of\nrecord evidence regarding projected \xe2\x80\x9ccost savings\xe2\x80\x9d or \xe2\x80\x9clabor unrest\xe2\x80\x9d\nthreatening the project, even though the authority\xe2\x80\x99s goals of promoting\nwomen and minority hiring through the PLA were \xe2\x80\x9csurely laudable.\xe2\x80\x9d Id.\nat 192\xe2\x80\x9394; accord John T. Callahan & Sons, Inc. v. City of Malden, 713\nN.E.2d 955, 964 (Mass. 1999) (upholding PLA where record reflected\nA PLA is a prebid contract between a construction project owner and a labor union\nestablishing the union as the collective bargaining representative for all persons who will\nperform work on the project. The PLA provides that only contractors and subcontractors\nwho sign the prenegotiated agreement with the union can perform project work. A PLA\ngenerally requires all bidders on the project to hire workers through the union hiring halls;\nfollow specified dispute resolution procedures; and comply with union wage, benefits,\nand other rules. In return for a project owner\xe2\x80\x99s commitment to insist in its specifications\nthat all successful bidders agree to be covered by the PLA, the union promises labor peace\nthroughout the life of the contract. Thruway, 666 N.E.2d at 188.\n17\n\n58\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nthat city sought to obtain \xe2\x80\x9cthe lowest price for its work that the competition among responsible contractors can secure\xe2\x80\x9d and where the PLA served\nto \xe2\x80\x9cplace[] all general contractors and subbidders on an equal footing in\nthe competition to gain the contract\xe2\x80\x9d (internal quotation marks omitted));\nsee also State ex rel. Associated Builders & Contractors v. Jefferson Cty.\nBd. of Comm\xe2\x80\x99rs, 665 N.E.2d 723, 727 (Ohio Ct. App. 1995) (sustaining\nPLA as consistent with competitive bidding laws, the purpose of which is\n\xe2\x80\x9cto enable a public contracting authority to obtain the best work at the\nlowest possible price while guarding against favoritism and fraud\xe2\x80\x9d). But\nsee George Harms Constr. Co. v. N.J. Turnpike Auth., 644 A.2d 76, 79,\n95 (N.J. 1994) (holding that PLAs may not be used by state agencies,\ngiven \xe2\x80\x9cparamount policy\xe2\x80\x9d of state\xe2\x80\x99s public-bidding laws to foster \xe2\x80\x9cunfettered competition\xe2\x80\x9d in public contracts).\nFurthermore, courts have sustained bidding restrictions and contract\nconditions that are designed to protect the integrity of competitive\nbidding procedures itself\xe2\x80\x94a process goal that helps ensure fairness to\nbidders, enhance participation of potential bidders, and ultimately\nachieve cost savings. To give an obvious example, contracting authorities may reject fraudulent bids. 10 McQuillin \xc2\xa7 29.69, at 408 (3d rev. ed.\n1966) (citing People v. Stephens, 71 N.Y. 527 (1878)). A city requirement that bidders list their subcontractors in their bid proposals has been\nupheld on the ground that it prevents \xe2\x80\x9cbid shopping,\xe2\x80\x9d thus yielding \xe2\x80\x9cthe\nlowest possible cost for the taxpayer, and fairness to bidders and subcontractors.\xe2\x80\x9d See C.R. Kirby Contractors, Inc. v. City of Lake Charles,\n606 So.2d 952, 955 (La. Ct. App. 1992). Under section 112 itself, a\nfederally funded highway construction contract may not be approved in\nthe absence of a sworn statement that the grantee has not participated in\ncollusion. 23 U.S.C. \xc2\xa7 112(c); see also Glasgow, 843 F.2d at 138 (upholding FHWA decision to withhold concurrence in highway contract\naward because the agency could have found that the state transportation\ndepartment\xe2\x80\x99s renegotiation of the disadvantaged business enterprise\nparticipation goal \xe2\x80\x9cdamaged the integrity of the bidding process\xe2\x80\x9d and\n\xe2\x80\x9cwas not consistent with \xe2\x80\x98free, open and competitive bidding\xe2\x80\x99\xe2\x80\x9d (quoting\n23 C.F.R. \xc2\xa7 635.104(a) (1987))). Courts have upheld restrictions designed to open up the competitive bidding process, maximizing the\nnumber of potential responsible bidders and thereby securing the best\nwork at the lowest possible price. See, e.g., Domar Elec., Inc. v. City of\n59\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nLos Angeles, 885 P.2d 934, 940\xe2\x80\x9341 (Cal. 1994) (upholding good-faith\nsubcontractor outreach program as consistent with competitive bidding\nrequirements, which \xe2\x80\x9cnecessarily imply equal opportunities to all whose\ninterests or inclinations may impel them to compete at the bidding\xe2\x80\x9d and\nbecause the city board \xe2\x80\x9ccould reasonably have concluded that the program will assist the City in securing the best work at the lowest price\npracticable\xe2\x80\x9d (internal quotation marks omitted)). And, relevant to the\nvalidity of state or local restrictions on political contributions by potential bidders, a New York court, in a widely cited decision, upheld a city\nboard decision to reject the lowest bid, in reliance on a mayoral executive order directing city agencies not to do business with a list of contractors (including the low bidder) who had given gifts to city officials.\nKayfield Constr. Corp. v. Morris, 225 N.Y.S.2d 507 (N.Y. App. Div.\n1962); see also 10 McQuillin \xc2\xa7 29.69, at 408 (3d rev. ed. 1966) (citing\nKayfield ); 10 McQuillin \xc2\xa7 29:76, at 620 (3d rev. ed. 2009) (same). 18\nAgainst the backdrop of these conventions in construing competitive\nbidding requirements, and consistent with the congressional purposes in\nrequiring competitive bidding here, we conclude that section 112 authorizes FHWA to exercise discretion to approve federally funded highway\nconstruction contracts\xe2\x80\x94notwithstanding state or local requirements that\nhave more than an incidental impact on the pool of eligible bidders and\nare unrelated to the necessary work\xe2\x80\x94so long as such requirements, in\nFHWA\xe2\x80\x99s judgment, advance the purposes of this statute and thus do not\nunduly limit competition. Restrictions that FHWA determines promote the\nshort- or long-term efficient use of federal funds, or protect the integrity\nof the competitive bidding process itself, do not unduly inhibit competition and need not satisfy one of the exceptions under section 112(b)(1)\n(although the contract awards remain subject to FHWA\xe2\x80\x99s prior concurrence under section 112(d)). In light of the limits on the agency\xe2\x80\x99s discretion, however, we believe that FHWA will rarely, if ever, be in a position\n18 Federal law also prohibits any person who enters into a contract with the United\nStates or a federal department or agency, at any time between the commencement of\nnegotiations for, and the later of the completion of performance under or the termination\nof negotiations for, such contract, \xe2\x80\x9cdirectly or indirectly to make any contribution of\nmoney or other things of value, or to promise expressly or impliedly to make any such\ncontribution to any political party, committee, or candidate for public office or to any\nperson for any political purpose or use.\xe2\x80\x9d 2 U.S.C. \xc2\xa7 441c(a)(1) (2012).\n\n60\n\n\x0cCompetitive Bidding Requirements Under the Federal-Aid Highway Program\n\nto conclude that state or local requirements that eliminate or disadvantage\na class of responsible bidders (for reasons unrelated to the necessary\nwork) to advance objectives that neither enhance the efficient use of\nfederal funds nor protect the fundamental integrity of the bidding process\nare compatible with the competitive bidding requirement of section 112.\nDOT (and accordingly its delegee FHWA) must establish the process\nby which the agency will exercise its discretion under section 112. As\nexplained above, in our view, section 112 does not compel FHWA\xe2\x80\x99s\ncurrent position and permits FHWA to authorize state and local requirements that might diminish the pool of potential bidders for a particular\ncontract, provided that the agency concludes that such requirements do\nnot unduly limit competition. FHWA also has discretion to structure an\nappropriate regulatory process to reach such determinations. For example,\nthe agency could initiate a rulemaking that would enable FHWA to make\ncategorical determinations about the types of state and local bidding\nconditions that are permissible under the statute or, alternatively, it could\ninitiate a rulemaking that would establish an administrative process\nthrough which the agency would make case-by-case assessments about\nthe validity of particular restrictions, outlining the factors the agency\nwould take into account in making such assessments.\nIV.\nIn sum, we reaffirm the view expressed in our 1986 opinion that \xe2\x80\x9cthe\nefficient use of federal funds is the touchstone by which the legality of\nstate procurement rules for federally funded highway projects is to be\ntested,\xe2\x80\x9d Competitive Bidding Requirements, 10 Op. O.L.C. at 105, but\nwe do not understand section 112\xe2\x80\x99s competitive bidding requirement to\ncompel FHWA to reject every state or local bidding specification or\ncontract requirement that may have the effect of reducing the number of\npotential bidders for a particular contract. Rather, in our view, FHWA\nmay reasonably conclude, consistent with 23 U.S.C. \xc2\xa7 112, that certain\nstate or local requirements promote the efficient and effective use of\nfederal funds or protect the integrity of the competitive bidding process\neither in connection with the particular contract or when considered\nover the long term\xe2\x80\x94even if the requirements may have the effect of\nconstricting the pool of potential responsible bidders in particular\ninstances. FHWA may establish a regulatory process to determine\n61\n\n\x0c37 Op. O.L.C. 33 (2013)\n\nwhether particular state or local bidding restrictions, whether considered as a class or case by case, satisfy the competitive bidding requirements of section 112.\nVIRGINIA A. SEITZ\nAssistant Attorney General\nOffice of Legal Counsel\n\n62\n\n\x0c'