PREQUALIFICATION OF CONTRACTORS ON PUBLIC WORKS PROJECTS

Public Contract Code section 20101 authorizes local public agencies except school districts to prequalify contractors before allowing them to bid for public works projects.  The key points of statute are:

• Contractors must meet "trustworthiness, quality, fitness, capacity, and experience" standards in order to prequalify to bid.

• Local public agencies may require contractors and subcontractors to submit completed, standardized questionnaires which seek information necessary to determine whether the contractors have met these standards.

• Uniform, subjective rating systems must be used to determine "both the minimum requirements permitted for qualification to bid, and the type and size of the contracts upon which each bidder shall be deemed qualified to bid."

• Agencies must have procedures in place which allow contractors to appeal decisions that they are not qualified to bid, which will result in review and conclusion prior to the submission of bids.

• If a contractor is prequalified and awarded a contract, a public agency may still determine that one (or more) of its subcontractors are not "responsible" and remove the individual subcontractor from the Project.

• The questionnaires and attachments will not become public records, although information about which contractors have applied for prequalification will be.

The Department of Industrial Relations has prepared "model guidelines" for prequalifying bidders.  For a description of the forms and their use, click here.  To go straight to the forms, click here for Microsoft WORD format, or click here for PDF format.

School districts are allowed to prequalify potential contractors pursuant to Public Contract Code § 20111.5, which is substantially similar to section 20101.  The Department of Industrial Relations has also issued the minimum required prequalification documents which must be used when school districts utilize the design-build method under Assembly Bill 1402 (Education Code sections 17250.10 et seq.).  You can download them by clicking here.

The two biggest advantages of prequalifying contractors are that:

• agencies can determine if any special expertise is required to be a responsible bidder on a particular size or type of project and screen for that expertise, and

• agencies can take adequate time to determine whether a (potential) bidder is indeed a responsible bidder.

The disadvantages of prequalification are that:

• in a good economy, some contractors will decide not to expend the extra effort to bid the project, and

• agencies may yield to the temptation to require prequalified bidders to meet "ideal" qualification requirements, which will invalidate their prequalification processes.

Agencies should consult carefully with counsel as they develop their prequalification packages and determine how the potential bidders’ packages will be reviewed and scored. It is important to apply an objective standard to all potential bidders and to adhere closely to the adopted procedures during the review and analysis process.

Some agencies are concerned that a prequalification process will increase the number of contractor challenges. While this may be true, the procedure the procedure for addressing a challenge to the prequalification decision is no more difficult than when bidders are not prequalified.

[P]rior to awarding a public works contract to other than the lowest bidder, a public body must notify the low monetary bidder of any evidence reflecting upon his responsibility received from others of adduced as a result of independent investigation, afford him an opportunity to rebut such adverse evidence, and permit him to present evidence that he is qualified to perform the contract. We do not believe, however, that due process compels a quasi-judicial proceedings prior to rejection of the low monetary bidder as a nonresponsible bidder.

(City of Inglewood-Los Angeles County Civic Center Authority v. Superior Court of Los Angeles County (1972) 7 Cal.3d 861, 871, emphasis added.)

In sum, agencies should carefully consider the benefits of prequalifying bidders when:

• the economy is tight and many contractors are likely to bid on a project,

• the techniques to be used in constructing the project are unusually difficult or unique, and

• when the construction schedule will require the contractor to apply significantly more expertise in scheduling and the change order process.

Please contact our office if you are interested in consulting about the prequalification process.

Another option is to adapt the forms prepared by the Department of Industrial Relations for use by a school district. 

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Post Office Box 3084
Monterey, California  93942-3084
Telephone:  831/656-1220
Facsimile:  831/656-1221

This web site and its contents are provided solely for informational purposes and should not be construed as legal advice.  In order to give legal advice, PubliConstructionLaw must be made aware of all facts which relate to the question being asked, and to establish an attorney-client relationship with the entity asking the question.

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