On January 27, 2012, the New York State Legislature amended Section 103, subdivision 1, of the General Municipal Law. Pursuant to the amendment, municipalities (including school districts and political subdivisions) are no longer required to adhere to the long-standing “lowest responsible bidder” standard in advertising for purchase contracts and may adopt a “best value” standard instead. The new standard allows a municipality to forego the less expensive conforming option in favor of a more expensive one which the municipality adjudges as a better long-term investment. The stated theory behind the “best value” standard is that while the lowest responsible bidder’s option may be less expensive at present, the “best value” option will be more cost efficient in the long run due to factors such as lower cost of maintenance, durability, higher quality and longer product life.
Section 103(1) is not entirely changed however, in that competitive bidding for public works contracts (i.e. construction projects) is still subject to the “lowest responsible bidder” standard. Furthermore, the monetary thresholds for public contracts subject to competitive bidding, i.e. $30,000 for public works contracts and $20,000 for service contracts, also remain unchanged.
Section 103(1) cross-references Section 163(1)(j) of the State Finance Law, which defines “best value” as “the basis for awarding contracts for services to the offerer which optimizes quality, cost and efficiency, among responsive and responsible offerers.” The definition continues that “[s]uch basis shall reflect, wherever possible, objective and quantifiable analysis.” [Id. (emphasis added)]. According to Mitchell Morris, Associate Counsel at the New York State Comptroller’s Office, the last clause of the definition is particularly important because it imposes an obligation on the municipality to conduct a thorough cost-benefit analysis, in quantifiable monetary terms, showing how a costlier option will actually save the municipality money over time as compared to less expensive conforming options. Furthermore, Municipalities should be wary of basing “best value” determinations on intangible or subjective criteria, such as brand preference or aesthetics, which add nothing to the performance/value of the product or service in question.
Ultimately, the greatest concern for a municipality using the “best value” standard is that it will subject itself to legal challenge from a lower bidder whose bid is rejected in favor of a costlier option. It is therefore in a municipality’s best interest to conduct “best value” analyses as thoroughly and with as much detail as possible in order to insulate its decision from attack.
To implement the “best value” standard, Section 103(1) requires a municipality to enact a local law incorporating the standard into the municipality’s competitive bidding practice. However, a municipality need not eliminate the “lowest responsible bidder” altogether, but may adopt an open-ended local law allowing the municipality to consider either standard.
