A Responsible Bidder Ordinance (RBO) is a policy that sets minimal requirements for all contractors bidding on publicly-funded projects in a given political jurisdiction. Typically, these requirements include proof of participation in an apprenticeship training program, proof of certificates of insurance, prequalification surveys, and compliance with all local, state, and federal laws. RBOs are a qualifications-based approach to construction contracting for public entities. The policies are a kind of “insurance policy” for taxpayers. The local ordinances establish clear, objective standards that contractors must meet in order to win bids and construct projects funded using taxpayer dollars.
In a true free-market setting, project owners could choose from any bidding procedure, from absolute low bids with fixed specifications to design-build, negotiated price, and time-and-materials procedures. However, nearly all governments accept the lowest bidder based on “hard” low bids. This type of public procurement puts downward pressure on contractors to reduce quality, cut wages, and avoid contributing to employee health insurance plans, among other items. Reputation, past performance, workforce quality, and even final costs are not emphasized in the low-bid model. As a result, this race-to-the-bottom process tends to result in imperfect design plans, cost overruns, change orders, added safety risks, and low-quality infrastructure.
A Responsible Bidder Ordinance is an acknowledgement that governments should consider benefits in addition to costs. RBOs protect taxpayers by setting minimum standards, ensuring that cheating contractors do not win bids, and awarding projects to the lowest responsible and responsive bidder. It is a qualifications-based approach that works within the low-bid system to provide the highest possible quality at the lowest possible cost. Thus, the purpose of the over-200 Responsible Bidder Ordinances that have passed and become law across the United States is to ensure that local governments hire only professional, competent contractors that provide the highest-quality work to complete taxpayer-funded projects safely, on time, and on budget.
The most authoritative research on RBOs comes from school districts in Ohio. A peer-reviewed, academic study investigated the bid costs of over 300 elementary schools from 1997 to 2008 and found that responsible contracting policies “exert no discernible statistical impact on construction bid costs” after controlling for geographic location. Thus, there is no evidence that RBO provisions raise construction costs. The study provides evidence that adopting RBOs “may be an effective way to improve employment conditions and living standards of construction workers without significantly raising costs for taxpayers.”
RBOs ensure that reputable contractors with proven track records complete jobs efficiently and within budget– without the need for additional re-construction later on. Contractors with workplace law violations are more than five times as likely to have a low performance rating as contractors with a clean record of workplace law compliance. A low performance rating indicates that a contractor is costly to a city. By weeding out cut-rate contractors, RBOs encourage successful project delivery and ensure that taxpayers get the quality they pay for. In fact, case studies from across the country have found that RBOs promote higher quality and more reliable services, increased competition among responsible contractors, and reduced back-end reconstruction and litigation costs. In addition, evidence suggests that 98% of construction owners using qualifications-based procurement models– like those in RBOs– report to being satisfied with project quality.
Responsible Bidder Ordinances ultimately drive economic development. RBOs increase the likelihood that local contractors will win bids, keeping tax dollars in the community and supporting the local economy through increased consumer demand. RBOs also ensure that infrastructure projects are completed right, on-time, the first time at high levels of quality. High-quality infrastructure ensures that schools are safe, bridges are durable, and transportation systems are able to efficiently transport goods and people to the global marketplace. Responsible Bidder Ordinances are the best value for taxpayers.
View this article as a Policy Memo: ILEPI Policy Memo – RBOs Are Taxpayer Protection Plans