Opinion ID: 1191923
Heading Depth: 1
Heading Rank: 4

Heading: Competitive Bidding Statutes

Text: The issue of whether a PLA violates Nevada's competitive bidding statutes is one of first impression before this court. However, three state high courtsNew Jersey, New York, and Alaskahave addressed the issue of whether PLAs are valid under their states' competitive bidding laws. See Laborers Local No. 942 v. Lampkin, 956 P.2d 422 (Alaska 1998); Tormee Const. v. Mercer County Imp., 143 N.J. 143, 669 A.2d 1369 (1995); George Harms Const. v. Turnpike Auth., 137 N.J. 8, 644 A.2d 76 (1994); N.Y. State Chapter v. Thruway Authority, 88 N.Y.2d 56, 643 N.Y.S.2d 480, 666 N.E.2d 185 (1996). The first court to review PLAs in light of competitive bidding laws was the Supreme Court of New Jersey. The court noted that the policy behind the competitive bidding statutes is to guard against favoritism, improvidence, extravagance and corruption; their aim is to secure for the public the benefits of unfettered competition.  George Harms, 644 A.2d at 91 (emphasis added)(quoting Terminal Construction Corp. v. Atlantic County Sewerage Authority, 67 N.J. 403, 341 A.2d 327 (1975)). The court determined that the PLA at issue violated New Jersey's competitive bidding statutes because the statutes provide that a public entity cannot specify a sole source of construction services or denote a specific union affiliation. Id. at 94. In response to the argument that the bids are open to all bidders, the court noted that a PLA does not represent real competition. Id. Although noting that PLAs serve important purposes on major long-term construction projects, the court concluded that the policy of New Jersey's statutes is to foster unfettered competition and the effect of PLAs is to lessen competition. Id. at 95. The Supreme Court of New Jersey revisited the issue in Tormee Construction, after the New York Court of Appeals had addressed the issue. The New Jersey court stated it is obligated to adjudicate such bid specifications case-by-case and in this case, again, found the PLA at issue violative of New Jersey's competitive bidding laws. Id. at 1373. The court noted that the library project for which the PLA was adopted lacked the size and complexity of a project for which a PLA was upheld by the New York Court of Appeals. Id. at 1372. The New York Court of Appeals had held that: PLAs are neither absolutely prohibited nor absolutely permitted in public construction contracts. A PLA will be sustained for a particular project where the record supporting the determination to enter into such an agreement establishes that the PLA was justified by the interests underlying the competitive bidding laws. Thruway Authority, 643 N.Y.S.2d 480, 666 N.E.2d at 187-88. The New York court determined that its competitive bidding statutes did not compel unfettered competition, as the New Jersey statutes did, but instead had two central purposes: (1) to protect the public fisc by obtaining the best work at the lowest possible price; and (2) the prevention of favoritism, improvidence, fraud, and corruption. Id., 643 N.Y.S.2d 480, 666 N.E.2d at 190. The Thruway Authority court analyzed two separate instances in which a PLA was used. First, the New York court determined that the PLA used in a project to refurbish the Tappen Zee Bridge was adopted in conformity with competitive bidding laws because: (1) the PLA did not promote favoritism in that it applied whether the successful bidder was union or non-union and discrimination on the basis of union membership was prohibited; and (2) the Thruway Authority focused on the public fisc given the size and complexity of the project and an earlier labor dispute. Id., 643 N.Y.S.2d 480, 666 N.E.2d at 191-92. Second, the New York court held that a PLA used on a project to modernize the Roswell Park Cancer Institute was not adopted in conformity with New York's competitive bidding statutes because there was no indication of a discussion of cost savings prior to approval of the PLA and no indication of a concern about labor unrest. Id., 643 N.Y.S.2d 480, 666 N.E.2d at 193. The third state high court to address PLAs, the Supreme Court of Alaska, addressed the issue of whether a PLA adopted on a high school construction project violated a borough's procurement code, which states that bid specifications should be drafted to promote overall economy and encourage maximum free and open competition. Lampkin, 956 P.2d at 432 n. 13. The Alaska court noted that the purpose of the procurement code is to prevent fraud, collusion, favoritism, and is for the benefit of taxpayers, not the bidders. The court examined the PLA under a reasonable basis standard and held that the borough had a reasonable basis for adopting the PLA. The project was the largest construction project undertaken by the borough and required flexible scheduling so the school schedule would not be affected. Id. at 435. We hold, following the reasoning of the other state high courts which have reviewed this issue, that PLAs are not absolutely prohibited under Nevada law. A PLA will be upheld if it was adopted in conformity with the objectives of our competitive bidding laws. Therefore, we examine whether the PLA at issue complied with these objectives. NRS 338.140 provides, in part, that: 1. An agency of this state, a political subdivision, municipal corporation or district, a public officer or a person charged with the letting of contracts for the construction, alteration or repair of public works shall not draft or cause to be drafted specifications for bids, in connection with the construction, alteration or repair of public works: (a) In such a manner as to limit the bidding, directly or indirectly, to any one specific concern. In addition, NRS 338.147(1) provides that: [a] public body shall award a contract for a public work to the contractor who submits the best bid. Further, with respect to bidding procedures, this court has held that: The purpose of bidding is to secure competition, save public funds, and to guard against favoritism, improvidence and corruption. Such statutes are deemed to be for the benefit of the taxpayers and not the bidders, and are to be construed for the public good. Gulf Oil Corp. v. Clark County, 94 Nev. 116, 118-19, 575 P.2d 1332, 1333 (1978). Therefore, we address whether the PLA at issue was adopted in conformity with the interests underlying competitive bidding practices as enunciated in Gulf Oil, i.e., to secure competition, save public funds, and guard against favoritism, improvidence, and corruption. According to the record, providing equal access to projects to both union and non-union contractors, at no disadvantage to non-union contractors, was an issue of concern to the Water Authority when it was developing the PLA. The PLA allows both union and non-union contractors to bid on projects and allows a non-union contractor to hire up to seven core employees. In addition, employees are not required to join the representative union under the PLA. Therefore, we conclude that the PLA maintains competition among bidders and guards against favoritism. Further, the record indicates that, in this case, a PLA was considered due to concerns about potential labor disputes and a halt to the project, after the Water Authority learned of two strikes that had occurred on the project. Although the record does not indicate specific discussion about saving public funds, [1] labor strikes are an issue which could affect public funds. Furthermore, testimony indicated that the Water Authority was concerned that projects be completed on time in order to ensure an adequate water supply to southern Nevadans. The PLA, under Article I: Purpose, states: The Project covered by the Scope of this Agreement ... is critical to meeting the needs of the increasing population of Las Vegas and the surrounding metropolitan area and to avoiding economic disruption and personal suffering caused by limited water supplies.... Requirements for timely completion of the work without interruption or delay and for at-budget completion are vital to the needs of this community. An obvious concern in adopting the PLA was the cost of a delay if water supplies became limited. Therefore, we conclude that the PLA was focused on saving public funds, albeit indirectly. Based on these facts, we hold that the PLA at issue was adopted in conformity with Nevada's competitive bidding laws.