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1968 Minnesota Attorney General Reports and Opinions 1 (1968)

handle is hein.sag/sagmn0083 and id is 1 raw text is: MINNESOTA LEGAL REGISTER VOL. 1, NO. 1 Opinions of the Attorney General Hon. DOUGLAS M. HEAD MUNICIPALITIES: COMPETITIVE BIDDING: PUR- CHASE OF HEAVY EQUIPMENT: Cost of equipment plus cost of maximum repairs during guarantee per- iod minus guaranteed repurchase price as formula to ascertain low bidder, approved subject to certain qualifications; Op. Atty. Gen. 707a-7, June 12, 1967. Part A is limited to its facts, and part B is overruled by part 2 hereof. Honorable John C. Arko January 9, 1968 St. Louis County Attorney 707a-7 Duluth, Minnesota 55802 In your letter to Attorney General Douglas M. Head, you state the following: FACTS The (St. Louis) County Purchasing Agent in a typical situation puts out a call for bids as follows: Furnish and deliver one Grader less dozer meet- ing the specifications of this bid. Award will be made on the cost of a new unit less trade, plus guaranteed five year maintenance costs and a guaranteed re-purchase price after five years; or on net cost of unit without guarantee or buy back. In the specifications it is provided among other things, that the bidder shall state and include a guaranteed price for re-purchase by him five years hence. Paragraph 11 of the specifications provides: The County retains the right to sell or trade or otherwise dispose of the equipment at its discre- tion at any time. Such action will make the con- tract (repurchase agreement) null and void for that particular machine. Should the County exer- cise its option to return a unit to the vendor- contractor at the expiration of the five year agree- ment, the re-purchase price (Item 5 of the proposal) will be paid to the County by the vendor-contractor on delivery of the unit. Some equipment suppliers and vendors refuse to bid on such proposals claiming, first, that their fi- nancial situation is in such condition that they can- not set aside a reserve for the re-purchase of such equipment; and, secondly, that in any event such a proposal and call for bids by the County is illegal in that it stifles, even eliminates competitive bidding. The critics of this buy-back arrangement call at- tention to the case of Neil B. McGinnis Equipment Co., et al v. L. Alton Riggs, et al, 4 Ariz. App. 556, 422 P. 2d 187 (1967). You ask the following: QUESTIONS 1. Under Minnesota law, in particular L. 1967, c. 563 pertaining to St. Louis County, can specifica- tions for bidding include a specification for guaran- teed maximum repair costs for a specified period of time or hours of operation, or 2. Under Minnesota law, in particular L. 1967, C. 563 pertaining to St. Louis County, can specifica- tions for bidding include a guaranteed minimum re- JAN. 17, 1968 IN THIS ISSUE Subject Op. No. Dated MUNICIPALITIES: COMPETITIVE BIDDING: PUR- CHASE OF HEAVY EQUIPMENT. 707a-7 1/9/68 COUNTIES: IMPLIED POWERS: APPROPRIATIONS. 107b 1/10/68 DEED TAXES: EXEMPTION FROM PAYMENT: MORTGAGE RELEASE. 373b-10 1/11/68 purchase price payable after a specified calendar period or after specified hours of operation? 3. If question two is answered in the affirma- tive, must the re-purchase provision be in the form of a guaranteed minimum bid to be submitted by the seller, if the county decides to exercise its option? OPINION 1. GUARANTEED MAXIMUM REPAIR COST. Competitive bidding statutes in Minnesota require that governmental purchasing units advertise for bids and let the contract to the lowest responsible bidder. M. S. 1965, §§ 375.21 and 412.311. L. 1967, c. 563 imposes a similar requirement on St. Louis Coun- ty. The test for competitive bidding is, (a) whether the specifications are reasonable designed -to give all contractors an equal opportunity to bid; and (b) whether they reasonably assure to the taxpayers the best bargain for the least money. See e. g. Nielsen v. St. Paul, 252 Minn. 12, 88 N. W. 2d 853 (1958); Coller v. City of St. Paul, 223 Minn. 376, 26 N. W. 2d 835 (1947). The law does not require that the bid go to the bidder whose bid ultimately and in every case results in the lowest dollar cost to the taxpayer, since that calculation is impossible to determine until hind- sight shows repair costs, down time, resale value, salvage value, and other factors. Moreover, the law does not even go so far as to require that the contract be awarded to the bidder whose bid is lowest in dol- lars. In Otter Tail Power Co. v. Elbow Lake, 234 Minn. 419, 49 N. W. 2d 197 (1951), the court said: * * * where bids are received on items of equip- ment which are not capable of precise or exact specifications, a municipality may exercise a rea- sonable discretion in determining who is the lowest responsible bidder and, in so doing, may consider, in addition to the bid price, the quality, suitability, and adaptability of the article to be purchased for the use for which it is intended. In so doing, the discretion exercised must be reasonable and must be based upon some substantial difference in qual- ity or adaptability. To hold otherwise would compel a municipality to purchase an article of less value for its use simply because the price was lower. Value is not always determined by price alone. 49 N. W. 2d at p. 201. As recognized in Op. Atty. Gen. 707a-7, dated June 12, 1967, a provision for a guaranteed maximum re- pair cost does have a relationship to the quality of equipment to be purchased, and could be included in specifications for equipment, within the rule of Otter

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