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Ethics/Laws regarding privately funded construction projects.

CaliforniaConstruction Contract

Dear LEVELSET Staff, I am a volunteer designer/draftsman/construction manager for a Veterans Memorial my coalition plans to construct in Lincoln, CA. I am also a retired city, civil construction inspector, and accustomed to addressing public agency bids. I have a couple questions: 1. In the private sector in California, is there a maximum contract amount allowed for a quotation, and for any amount over that, is a contract is required, as in the public sector? Years back at the City where I worked, $10,000 was the maximum amount for a quotation. 2. If a contract is required, are we obligated to have a public bid opening at a specified and advertised time? If not, are there any guidelines? 3. If quotations are allowed for any amount, are we allowed to invite and gather them at our convenience over time, or are we obligated to distribute the request for quotations at the same time to the contractors we choose? I'm contacting you folks because I couldn't find the info I needed on the internet. Thank you for your attention. Regards, Rick McCarter

1 reply

Jul 8, 2019
These are great questions. Much of the regulations that bind public projects are not present when the construction project is privately owned. With private projects, there's no specific threshold where bidding requirements kick in because there aren't really any bid or quotation requirements for private works. Rather, the parties are really just bound by general contract law - and the freedom to contract allows a lot of leeway there. Further, there's no official public bid requirements or guidelines. Of course, if there are any public funds being used on the project, it'd probably be wise to consult with that public entity or agency to make sure there are no unknown requirements.

While there are a lot of bidding regulations placed on public projects, when the agreement is between two private entities, they're generally entitled to do business as they see fit. At the same time, formalizing the bidding process can help bring some order to the job, and it can make sure that the bidders are qualified to perform the work under the agreed-upon pretenses. Certainly, a good way to make sure that the most qualified bidders have the opportunity to bid a project is to advertise the project and to provide a fair amount of time to submit bids. But, typically, a private contract could be entered into without even opening up the bidding process in the first place.

Finally, it's good practice to gather a number of bids for a project from different sources for a number of reasons, including to make sure the price has been fairly bid and to make sure that the best bidder is chosen for the job. For private works, it's completely up to the project owner who they'll request and accept bids from. And, as touched-on in your question, collecting bids over a period of time can help to increase the number of bids given and to verify that bidders are serious about the project. Plus, for project owners, this also allows time to do due diligence on any bidders and their subcontractors to be sure there aren't any hidden issues with a bid or the bidder.

As a last note, regardless of whether there are bid requirements or regulations, it's important to do all dealings in good faith, and it's important to make sure that all expectations are clear and on the table when collecting bids. When requesting bids, it should be clear that any proposals aren't binding, processes should be relatively transparent, and it's a good idea to give bidders a timetable for when a selection will be made. Further, if there are certain licensing requirements for the work that will be done, it's important to verify that everyone is properly licensed and that the proper procedures will be followed throughout the project. Bringing in a project manager or a construction manager - even if only for the bidding process - might be helpful to make sure a solid process is utilized. Or, consulting an attorney who's familiar with real estate development practices in your area might help to make sure things are done by the book.

I hope this was helpful information! If you have any other questions, please feel free to post them here at the Ask an Expert Center!
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