Although prequalification of a potential bidder is but the first step in the surety underwriting process, it is an extremely important one and must be performed by a politically disinterested body. Politically appointed or politically oriented individuals or organizations could often find themselves under strong pressures in favor of certain contractors. For this reason the screening of potential bidders in the United States is almost always done by surety companies rather then by government bureaus or municipal agencies.
The Honorable Herbert J. Stern testified to the dangers inherent in public officials, or appointed individuals or organizations of theirs, involvement in contractor qualification from his experience as United States Attorney for the District of New Jersey. He stated, in part:
“We have found in our investigation that one of the ways in which competitive bidding is defeated is by the requirement of a prequalification statement. We have found that this has given public officials, who do not have the public interest at heart, the ability to disqualify certain businessmen before they even can get their bids in. I’m just talking about a public official in a city or county government saying this or that firm doesn’t have enough machinery, doesn’t have enough men, doesn’t have enough experience. These are subjective factors. We have found them to be capable of misused and we would suggest to you that it may be well to consider that, provided a firm can give an adequate surety bond, the legitimate interest of the municipality or the county or the State are guaranteed without the necessity for that kind of subjective judgment.”
Testimony before the New Jersey Local Government Conflict of Interest and Code of Ethics Study Commission. (February 21, 1973).
I have seen public officials in the Inland Empire, acting through CM firms, disqualify tradesmen on a large math and science building on the Riverside Community College campus a few short years ago due to subjective prior work experience requirements. In particular my HVAC contractor account was disqualified for not having three (or five) similar size projects completed in the last three years. (And this was during the recession.) It did not matter that my client had a few years prior completed the HVAC for the entire campus of the new King High School in Riverside. This was not the only new High School my client had completed in the past. The King High School project had a contract value in excess of the RCC campus project. Complaints of this situation were made to everyone on the school board, the president of the school, local newspapers, to state assemblymen and to U.S. Representatives. All to no avail. There were numerous tradesman that were disqualified, in addition to my client. My client alone would have saved the school district $500,000. Overall, the school board spent millions more on this project then they needed.
To add insult to injury, the final written recommendations which is what the public sees, stated that the award to the selected contractors was saving tax payers millions of dollars, as the selected contractors’ bid amounts were under the architect’s estimate. The architect’s estimate (most likely many years old) is not what dictates the cost of a project, rather it is the market price that is available at bid time from contractors. This project cost tax payers millions more, however, officials had the nerve to present to the public that it saved tax payers millions.