7460.8 REV 2
CHAPTER 6. SEALED BIDS
6.1 General
For all PHA contracting requirements above the small purchase threshold, competitive
procurements are conducted by inviting sealed bids or by requesting competitive
proposals. Both methods are effective ways of satisfying the PHA’s contractual
requirements. The requirements for sealed bidding are discussed in this chapter and
requirements for competitive proposals are discussed in Chapter 7. This chapter only
applies to contracts in excess of the Federal small purchase threshold.
6.2 Description
Under sealed bids, the PHA publicly solicits bids and a firm fixed-price contract
(lump sum or unit price) is awarded to the responsible bidder whose bid, conforming
with all the material terms and conditions of the invitation for bids, is the lowest
in price. Sealed bidding is the preferred method for procuring construction, supply,
and non-complex service contracts in excess of the Federal small purchase threshold.
However, PHAs may use competitive proposals for construction contracts.
6.3 When to Use Sealed Bids
Sealed bidding should be used whenever the requirements in 24 CFR 85.36(d)(2)(i)
can be met.
6.4 Alternate Bids
PHAs should not request alternate bids, i.e., two different systems or types of
projects. Instead, when necessary because of limited available funding, a PHA may
specify the most expensive system as the base bid and list deductive alternates in
inverse priority order. Thus, in the case of limited funding, deductive alternates
may be taken in numerical order as listed until the award can be made within available
funds
Example: If the full-scope base bid included complete repainting and cleaning of 75
apartments, Deduct Alternate #1 might delete cleaning of 25 apartments and Deduct
Alternate #2 might delete all cleaning. In this way, PHAs can maximize the amount of
work to be completed within a limited budget. Without alternates the project may have
to be re-bid if the full-scope price exceeds the available budget.
6.5 Invitation for Bids (IFB) (24 CFR 85.36(d)(2))
The IFB is the entire package of information necessary for potential bidders to submit
a bid. The IFB includes a description of the supplies or services being purchased, any
unique technical information, time and place of bid opening, time and place of site
inspections or pre-bid conferences, a form for stating the bid price, and any required
forms, as outlined below.
A. IFB Package. The IFB packages for supplies, services, or
construction are quite similar. The major difference is the
length and complexity of the specifications or scope of work
and the variety of attachments. All IFBs must be in writing.
The basic documents to be included in an IFB package are:
6-1
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
1. Cover Page with Table of Contents. States the name,
address and phone number of the PHA, a person to
contact for information regarding the solicitation, the
project name and solicitation number, and a table of
contents for the complete solicitation package. A sample
IFB cover page is shown at Appendix 4.
2. Bid Form. This is the form on which bidders enter their
bid or price(s). The form must be clear, accurate, and
unambiguous.
3. Specification and Statement of Work. Description of the
work or items required. See Chapter 9.
4. Form HUD-5369, Instructions to Bidders for Contracts,
Public and Indian Housing Programs (construction) or form
HUD-5369-B, Instructions to Offerors Non-Construction.
5. Form HUD-5369-A, Representations, Certifications, and Other
Statements of Bidders, Public and Indian Housing Programs
(construction) or form HUD-5369-C, Certifications and
Representations of Offerors Non-Construction Contract.
6. Form HUD-5370, General Conditions of the Contract for
Construction or form HUD-5370-C, General Conditions for
Non-Construction Contracts, along with any appropriate
Davis-Bacon or HUD wage decision for construction and
maintenance work.
B. Method of Solicitation. While any of the following methods can be
employed, the Contracting Officer should choose the method, which,
considering matters of economy, provides for full and open
competition.
1. Advertising in newspapers or other print mediums of local
or general circulations. A sample advertisement is provided
in Appendix 3.
2. Advertising in various trade journals or publications.
3. E-Procurement. PHAs may conduct their public procurements
through the internet using e-procurement systems. However,
all e-procurements must otherwise be in compliance with 24
CFR 85.36, State and local requirements, and the PHA’s own
procurement policy. Steps must be taken to meet the
requirements for full and open competition to avoid
potential protests.
C. Time Period for Solicitation. The solicitation must be run for a
period sufficient to achieve effective competition, which, in the
case of paid advertisements, should generally be run not less than
once each week for two consecutive weeks. State or local law may
impose additional advertising requirements.
6.6 Amendments
If a change to the IFB, e.g., specifications, plans, date or time for bid opening,
etc., becomes necessary after it has been issued, the change must be accomplished by
issuing a written amendment, sometimes called an addendum. The amendment must
indicate the IFB
6-2
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
number, project title, issue date of the original IFB, and formally detail each
change. Each amendment must be noted on the PHA’s solicitation log. A copy of the
amendment should be mailed to each prospective bidder who was provided the initial
IFB package with acknowledgement required. If an amendment needs to be issued just
before the scheduled bid opening date, the bid opening should be postponed for an
adequate period of time to permit the potential bidders to fully analyze the change
and to submit timely bids. A sample solicitation amendment is included at Appendix 5.
6.7 Pre-Bid Conference
After the IFB is issued and before bids are due, the Contracting Officer may hold a
pre-bid conference with prospective contractors to discuss the project requirements
and details of the IFB. The conference should be attended by the Contracting Officer
and supporting technical staff. A pre-bid conference is normally conducted for large
or complex procurements. Notice of any scheduled conference should be included in the
IFB. The timing of the conference should allow bidders enough time to review the IFB
before the conference and adequate time to prepare or revise their bids before the bid
opening. At the conference, the Contracting Officer should state that nothing said at
the conference will change any of the terms of the IFB unless a subsequent written
amendment to the solicitation is issued. A written summary of the conference should be
made available to anyone requesting it. The summary should also be provided to all
those who submitted IFBs or solicitations, not just those who attended the pre-bid
conference. Attendance by offerors at the pre-bid conference, while desirable, should
not be mandatory, and non-attendees should not be deemed non-responsive. The PHA
should consider the need for all potential bidders to attend. Attendance may not be
necessary for firms familiar with the work and others may be unable to schedule a
representative to attend, although they may be well qualified to do the work at a
reasonable price. To impose a requirement to attend a pre-bid conference could
unnecessarily limit competition.
6.8 Canceling an IFB
A. The PHA may cancel IFBs when necessary or when otherwise considered
to be in the best interest of the PHA. A common reason for canceling
an IFB is that the low bid significantly exceeds the PHA’s budget
(note, this is a good reason to consider the use of deductive
alternate bids) or when the scope of work or specifications are
found to be ambiguous or flawed, e.g., by the submission of wildly
different bids or offer prices. Cancellations must be done in
accordance with the PHA’s written procurement policy and procedures.
While it is not prohibited, the repeated cancellation of a single
IFB or cancellation of multiple IFBs only serves to create a lack of
confidence in the PHA’s bidding process. Such actions may create the
appearance that either the PHA does not really know what it wants,
or that the PHA may be seeking a particular bidder or bidders.
B. The Contracting Officer or designated procurement official shall
document the procurement file with the reasons and supporting facts
for canceling the IFB (24 CFR 85.36(b)(9)).
6.9 Bid Opening (24 CFR 85.36(d)(2))
The bid opening process shall be carried out as follows:
A. Time and Place Certainty. Each bid must be dated and time-stamped
immediately upon receipt by the PHA. Sealed bids should be stored
in a locked bid box, cabinet, or safe to ensure that they are not
opened or mishandled prior to the bid opening. A PHA staff person
should standby just before the deadline to see that bids received
at the proper location are date- and time-stamped expeditiously.
Sealed bids received after the time specified in the IFB should be
recorded as a late bid and kept unopened in the contract file. A
late bid received before the award is made may only be considered
in accordance with the procedures listed in the form HUD-5369,
Item 5, or form HUD-5369-B, Item 6.
6-3
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
B. Public Bid Opening Process. To ensure fairness in the award process,
anyone is permitted to attend the bid opening. Bids shall be
publicly opened on the scheduled date and time shown in the
solicitation. The bid opening official (usually the Contracting
Officer) reads aloud the bidders’ names and the bid prices. This
information is recorded and may be made available for public
inspection. No commitment or statement regarding contract award
should be made to any bidder at the bid opening.
C. Recording the Bids. As bids are publicly opened and read aloud, an
abstract (sometimes referred to as a tabulation) of all bids is
prepared showing the name of each bidder and their bid prices
including alternates, if any. This abstract becomes part of the
official contract file. The abstract is public information and a
copy may be sent to interested parties when requested.
6.10 Mistakes in Bids
A. General. Correction or withdrawal of bids requires careful
consideration. The integrity of the competitive bidding system must
be maintained, fairness ensured, and delays avoided. While bidders
must be bound by their bids (the “firm bid rule”), circumstances may
arise where correction or withdrawal of bids is proper and may be
permitted.
B. Mistakes Before Bid Opening. Unless otherwise prohibited by State or
local law, bidders shall be permitted to withdraw or modify their
bids by written or facsimile notice prior to bid opening (see form
HUD-5369, Item 5, and form HUD-5369-B, Item 6).
C. Review of Bids for Mistakes. After the bid opening, the Contracting
Officer should carefully review all bids to ensure that the bidders
have not made any obvious mistakes in their bids, e.g., the sum of
individual bid line items does not equal the total bid price. An
item-by-item recalculation of the bid costs will often reveal the
miscalculation or error. If a bidder appears to have made a mistake,
the Contracting Officer should immediately notify a bidder of any
apparent mistake in his/her bid and request verification of the bid
as submitted. If the bidder is not present at bid opening, or if the
Contracting Officer performs the bid review after opening takes
place, the Contracting Officer should notify the bidder by phone.
PHAs are strongly advised to confirm phone notifications with a
follow-up letter containing the information communicated by phone.
The Contracting Officer should place a copy of the letter or
otherwise document the procurement file.
6-4
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
D. Mistakes after Bid Opening. In general, bidders should not be
permitted to change a bid after bid opening. In rare cases, the
Contracting Officer may permit the revision of a bid if the bidder
is able to present clear and convincing evidence, acceptable to
the Contracting Officer, of a mistake and the intended bid price.
Allowing changes to bids without appropriate evidence may
compromise the integrity of the public bid process and serve to
undermine public confidence in the PHA’s bidding process.
Therefore, the Contracting Officer should request as much evidence
as he or she deems necessary. Examples of evidence may include:
original work papers, bids from suppliers and subcontractors used
to develop the bid, bonding or insurance evidence supporting a
different bid price, etc. Failure or refusal by a bidder to provide
adequate evidence shall result in the original bid remaining
unchanged. PHA personnel should consult with their legal counsel
before allowing a change in bid. If justified, a low bidder can be
replaced with the next lowest bidder.
E. Withdrawal of Bids. Withdrawal of a bid is permissible if there is
an obvious error in the bid such as a math error, but the mistake
must be readily apparent from the bid itself. A bidder may be
permitted to withdraw a low bid if a mistake is clearly evident on
the face of the bid document, but the intended correct bid is not
similarly evident. A bidder may also be permitted to withdraw a low
bid if the bidder submits written evidence that clearly and
convincingly demonstrates that a mistake was made. The PHA should
require written supporting evidence before allowing withdrawal by
the bidder. If the PHA allows withdrawal, the bid bond should be
returned to the bidder upon verification of the error. In cases of
alleged mistakes or requests for withdrawal, the decision to allow
a correction or withdrawal should only be made after consultation
with the PHA’s legal counsel.
6.11 Bonds/Guarantees (24 CFR 85.36(b); 24 CFR Part 1000)
This section describes the specific bonding requirements for construction contracts of
more than the Federal small purchase threshold. While PHAs may use sealed bidding for
other types of materials and service contracts, the same bonding requirements do not
apply. PHAs may adopt bonding requirements for these other sealed bidding contracts as
they deem appropriate.
A. General. In sealed bid construction contracts, three types of bonds
or guarantees are required: a bid bond or guarantee, a performance
bond, and a payment bond. The purpose of these bonds is to ensure
bidders will honor their bids, complete work as contracted, and
pay their subcontractors and suppliers.
B. Definitions
1. Bid Bonds/Guarantees. A bid bond or guarantee is included
in the bid package submitted by each bidder. The bonds or
guarantees ensure that if awarded the contract, the bidder
will accept and perform the work under the contract. It
also ensures that the bidder will not attempt to withdraw
or otherwise not fulfill the contract. Finally, the bid
bond ensures that the bidder will execute the contractual
documents that are required within the time specified in
the solicitation, or forfeit all or part of the guarantee.
A certified check, bank draft, U.S. Government Bonds at par
value, bid bond secured by an acceptable surety company, or
other negotiable instrument may be accepted as a bid
guarantee. If the successful bidder refuses to sign the
contract after award, the bid bond is forfeited and award
will go to the next lowest responsive, responsible bidder.
If there is not a responsive and responsible next lowest
bidder, the procurement should be re-bid. If a bid bond or
guarantee is not submitted with the bid, the PHA should
reject the bid as non-responsive. The PHA should not
return any bid bonds until the contract has been awarded
and the required performance and payments bonds have been
furnished, until all bids have been rejected, or the time
specified for acceptance of bids has expired.
6-5
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
2. Performance Bonds. Performance bonds are means to ensure
that the contract is successfully completed. The
performance bond guarantees that if the contractor is
unable to complete the contract, the surety company will
step in to finish the work. In the case of a letter of
credit or cash escrow, the PHA may use these funds to
complete the contract work.
3. Payment Bonds. The payment bond is a method of ensuring
that the contractor pays the subcontractors and suppliers.
By requiring payment bonds, the PHA avoids becoming
entangled in disputes concerning payment of subcontractors
and suppliers by the general contractor. The surety
underwriting the payment bond ensures the contractors and
suppliers will be paid. Often, performance and payment
bonds are combined into a single document. Failure to pay
subcontractors for work performed in commercial contracts
may often lead to the subcontractor filing a mechanic’s
lien against property owners to obtain payment for services
rendered. PHA contracts require payment bonds to prevent
this problem and ensure that no liens will be filed against
any PHA building or lot of ground. Clause 24 of form
HUD-5370, General Conditions of the Contract for
Construction, clearly forbids the placement of liens and is
binding on any contractor, subcontractor, and material
supplier.
C. Bonding Companies
An acceptable surety (bonding) company is one that is authorized to
do business in the State where the project is located and acceptable
to HUD and the PHA. The surety must be listed on the most recently
published U.S. Treasury Circular 570 (often referred to as the
T-List). Individual sureties are not permitted. Circular 570 is
available from the U.S. Department of the Treasury, Financial
Management Service, Surety Bond Branch, Room 262C, 401 14th Street,
S.W., Washington, D.C. 20227. The T-List may also be accessed on
the Internet at: http://www.fms.treas.gov/ c570/index.html.
D. HUD Bonding Requirements for PHAs
1. In order to encourage participation by a broad range of
competitors, including small and minority firms, HUD has
provided for alternate bid and contract guaranties. These
apply to all construction projects greater than $100,000,
whether development or modernization, funded pursuant to
the U.S. Housing Act of 1937, as amended. As a result, the
contractors for all construction projects shall be
required to submit the following bid and contract
guarantees. Please note that only the bid bond is required
at time of bid; however, one of the purposes of the bid
bond is to provide the PHA with assurance that the
successful bidder will indeed obtain the necessary
performance and payment bonds. (There are no bonding
requirements for non-construction projects; PHAs should
only require bonds for non-construction where consistent
with good business practice.) State or local laws or
regulations may require a higher level of guarantees.
Required bonds include a bid guarantee from each bidder,
equivalent to 5% of the bid price, and one of the
following:
6-6
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
• A performance and payment bond for 100% of the
contract price;
• Separate payment and performance bonds each for
50% or more of the contract price;
• A 20% cash escrow; or
• A 25% irrevocable letter of credit.
2. The Contracting Officer, via form HUD-5369, has the option
to select any one of the above contract guarantees. Careful
consideration should be given to the selection, as the
options vary greatly in degree of security provided to the
PHA versus cost and degree of difficulty in obtaining by
the contractor.
E. Inadequate Surety. If the low bidder fails to provide an acceptable
assurance of completion (payment and performance bonds) after award
of the contract, the PHA should consider the bid guarantee forfeited
and notify the surety company. The contract is then terminated for
default. The amount to be recovered from the bid bond or guarantee
should equal at least the difference between the defaulted bid and
the next higher acceptable bid or the amount by which the bid
accepted by re-soliciting exceeds the defaulted contract.
6.12 Contract Award (24 CFR 85.36(d)(2)(ii)(D))
The following steps should be used in awarding a contract based on the sealed bids
method of procurement:
A. Evaluate Bids & Any Alternates
1. The apparent low bid should be evaluated according to the
procedures outlined in the paragraphs below. If the
apparent low bid exceeds the project budget, any deduct
alternates should be applied to the bid prices, one at a
time, to identify the bidder whose resulting price falls
within the budget. If the first deduct alternate does not
produce an acceptable bid, then the second alternate
should be applied, and so on, until an acceptable price
and bidder is identified.
2. If alternates are employed, and the apparent low bid falls
below the available budget, a similar process of applying
the alternates one at a time may be employed to identify
the low bidder who includes the greatest number of
alternates within the available funding.
3. The PHA should not use alternate prices as a way to select
a preferred bidder.
B. Determining Responsiveness & Contractor Responsibility. The next
step in the contract award process is to review the low bid for
responsiveness.
6-7
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
1. Responsiveness (24 CFR 85.36(b)(8)). To be considered
responsive, a bid must conform to the material requirements
of the IFB. The Contracting Officer must examine the low
bid to be sure that the bidder did not alter the
specifications or other terms and conditions (e.g.,
delivery schedules, payment terms, etc.) or attempt to
impose different terms and conditions. If the bid does not
conform to the solicitation, it must be rejected and the
next lowest bid examined for responsiveness. Allowing a
bidder to alter the material requirements of a solicitation
gives the bidder an unfair advantage over the other bidders
and destroys the integrity of the sealed bidding process.
It also limits the PHA’s rights in the contract. The
Contracting Officer shall document his/her findings
regarding the low bidder’s responsiveness in the
procurement file. Minor informalities (see paragraph D)
are not grounds for determining a bid to be
non-responsive.
2. Responsibility. After determining the responsiveness of
the low bid, the Contracting Officer shall determine if
the bidder is responsible. See Chapter 10, paragraph
10.2.A, for detailed guidance on assessing responsibility.
C. Equal Bids. In the rare case when two or more low bids are equal in
all respects, the award should be decided by drawing lots or other
random means of selection. Authority to use this method should be
included in the PHA’s Procurement Policy and stated in the IFB.
D. Minor Informalities. The Contracting Officer may waive minor
informalities or allow the bidder to correct them. Minor
informalities are matters of form rather than substance. They
are insignificant mistakes that can be waived or corrected
without prejudice to the other bidders and have little or no
effect on price, quantity, quality, delivery, or contractual
conditions. Examples include failure to: return the number
of signed bids required by the bid package; sign the bid,
provided that the unsigned bid is accompanied by other
documents indicating the bidder’s intent to be bound (e.g.,
a signed cover letter or a bid guarantee); complete one or
more certifications; or acknowledge receipt of an amendment
or addendum, provided that it is clear from the bid that the
bidder received the amendment/addendum and intended to be
bound by its terms, or the amendment/addendum had a negligible
effect on price, quantity, quality, or delivery.
E. Rejection of Bids (24 CFR 85.36(b)(9)). Rejection of any bid during
the evaluation process shall be fully documented, including all
reasons for the rejection. Minor informalities in the bid may be
waived, as described above. Any bid may be rejected if the
Contracting Officer determines that the price is unreasonable.
Determining a bid price to be unreasonable includes not only the
total price of the bid, but the prices for individual items as well.
Any bid may be rejected if the prices for any of the items are
materially unbalanced (such as bidding a high price for the first
items to be provided and then low prices for subsequent items). A
bid is materially unbalanced if and when there is a reasonable doubt
that the bid would result in the lowest overall cost to the PHA,
even if it is the lowest bid, or if the bid is so grossly unbalanced
that accepting it would amount to an advance payment.
F. Award to the Lowest Responsive and Responsible Bidder
(24 CFR 85.36(d)(2)(ii)(D)). After the Contracting Officer evaluates
each bid, the responsive and responsible bidder that submits the
bid whose dollar value is lowest overall and meets all specified
requirements shall be awarded the contract. A sample contract award
letter is included in Appendix 6. Unsuccessful bidders also should
be notified in writing of the contract award. A sample notice is
shown as Appendix 7.
6-8
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
6.13 Bid Protests (24 CFR 85.36(b)(12))
Protests against the award of contracts shall be handled as described in
Chapter 10, section 10.4
6.14 Multi-Step Bids
PHAs may use two-step or multi-step sealed bidding procedures where appropriate and
if permitted by their procurement policy. The two-step procedure is designed to
obtain the benefits of sealed bidding by awarding a contract to the lowest responsive,
responsible bidder. Simultaneously, this procedure is designed to obtain the benefits
of the competitive proposals method through soliciting technical offers and conducting
discussions that evaluate and determine the acceptability of technical offers. Under
the two-step sealed bidding process, technical proposals alone are requested first.
Then the proposals are evaluated for acceptability and negotiations or discussions
held, if necessary.
In the second step, the normal sealed bid process is followed except that only bidders
with acceptable technical proposals may bid, and each bidder’s price is based on its
own technical proposal. An example of this method would be equipment contracts with
performance specifications rather than detailed design specifications, where the PHA
needs a certain level of performance but is not specifying how this performance is
achieved.
These procedures offer certain advantages. First, two-step sealed bidding encourages
competition for contracts since contractors who might not have competed on the basis
of strict specifications under sealed bidding may participate in the first step of two
step sealed bidding because alternative approaches to the project or the design
specifications are encouraged. Second, because of the price competition of step two,
the general aims and benefits of price competition are achieved. Third, step one
allows the PHA to take full advantage of the industry’s experience and creativity.
Note: Two-step sealed bidding also has significant disadvantages. The process is
generally time consuming and costly for both the PHA and bidders who must draw up
detailed technical proposals to meet the specifications or statement of work. In
addition, the two-step procedure may result in the procurement of a product or service
that is not necessarily the best or most cost effective overall. In step two, bidders
will generally bid on their least costly design in order to maximize their chances of
success. Since the PHA is to accept the least costly proposal in step two, it may be
compelled to turn down proposals which, though a bit higher priced, are superior
technically to the lowest cost proposal. In addition, the flexibility and general
unfamiliarity of the process lead to a greater likelihood of bid protests and contract
disputes.
It is also noted here that the Federal government has issued procedures in
construction contracting for using a concept known as two-phase design-build selection
procedures, similar to the two-step process outlined above. The process is described
in detail in the Federal Acquisition Regulation (FAR) 48 CFR Chapter 1, Part 36,
Subpart 36.3. PHA procurement is not regulated by the FAR. This reference to the
direction provided in it is purely for informational purposes.
6-9
2/2007
_____________________________________________________________________________________
|
