Should cities buy domestic or spend less?

Few people will argue that it is preferable to buy an American product or service and save an American job. And, when the purchaser is a public entity, such as a municipality or public works authority, that preference can become a practical mandate.

Fewer people still would argue that the government should pay as little as possible for goods and services. It is, after all, taxpayer money that a town or agency is spending.

For that reason, the laws of many states require that a public contract be given to the lowest bidder who can do the work or provide the product responsibly and to the contractor who proposes to use only American products when available. When these two requirements come into conflict, however, lawsuits often result.

Public entities are continually faced with the dilemma of choosing between the lowest bidder and a higher bidder who proposes using American products. It is difficult to award the contract without either violating the law or facing a legal challenge from one bidder or another.

A wise bidder increases the chances of obtaining public contracts by understanding how the courts have attempted to resolve this conflict and by moving quickly to enforce the right to award a contract.

In the federal sector, the problem was, for the most part, resolved years ago by creating a formula that specifies that a higher “American-made” bid is preferred unless it exceeds a lower “foreign-made” bid by a specific percentage of the lower bid. The formula has inherent complications and leaves certain discretion to the public entity, but it resolves much of the conflict.

In New Jersey no such formula exists, and the courts are faced with the difficult task of trying to resolve the dispute between two bidders, both of whom have a legitimate claim to a public contract.

The courts have generally avoided confronting the problem and instead dismiss contractors’ claims based on procedural land mines on which contractors can easily step. These include mistakes such as failing to bring an action and seek an injunction before the winning contractor has commenced performance in reliance on the award or attempting to recover lost profits against a public entity, an approach barred as a matter of public policy in New Jersey.

The courts have literally begged the legislature to develop guidelines similar to the federal statute. In a recent New Jersey case, the appeals court said, “Perhaps the executive or legislative branch can adopt similar (to the federal) guidelines for state and local purchasing agencies. Without guidelines, administration of the “Buy-American” statute will no doubt continue to be frustrating and inconsistent and could invite a torrent of litigation.”

To date, no action has been taken to resolve the problem, and there will continue to be uncertainty in, and ongoing challenges to, the award of public contracts based on these conflicting statutory goals.