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Senator Fessie pilots 'average-bid' contracting method; industry warns of transparency risks
Summary
The Senate Transportation committee advanced SB 513 to pilot selecting the bid just below the average on state-funded projects; DOT said the pilot would apply to state-only dollars and could later seek FHWA approval. The AGC urged more study, and the sponsor agreed to reporting and a sunset.
Senator Fessie introduced Senate Bill 513 as a narrowly tailored pilot that would let the state award selected projects to the bidder whose price is immediately below the average of all bids, instead of automatically picking the lowest responsive bidder.
"By going with average bid ... the bid that's right below average bid ... what you do is you take all the bids, you add them up, divide it by that number, and whatever bid is right under average bid would get the job," Senator Fessie said, arguing the change would discourage low-ball bids that later lead to change orders.
A DOT official identified in committee as Secretary Glenn said the method would apply primarily to projects built with state-only dollars and would not apply to federal-aid projects unless the department sought and received FHWA approval through its special experimental program for alternative contracting.
"FHWA typically requires us to use the lowest responsive and responsible bidder," the secretary said, but added the department could pursue an experimental approval if the pilot proved successful.
Committee members probed the bill's selection mechanics and safeguards. "Perhaps if we look at it from a different standpoint and say, don't exclude everyone below the average, that we may have a great contractor that has proven themselves time and time again," Senator Wheat said, urging flexibility so proven contractors are not unfairly excluded.
Senator Price pressed the author to build in a reporting requirement and sunset so the legislature could evaluate outcomes. The author said he would add language to require a report back and suggested a two-year sunset to allow enough projects to be completed for assessment.
Darryl Cahoon of Capital Partners, representing the Associated General Contractors, testified in opposition. He defended the traditional design–bid–build approach as the best system for transparency and argued the proposed method risks reducing open competition and could be manipulated.
"All we want to do is have the same transparency, the same lack of the prospect of collusion, and that it be open for free competition," Cahoon said, urging more study and industry involvement before statutory change.
After discussion and agreement from the author to add reporting/sunset language and to work on clarifying amendments, the committee voted to report SB 513 favorably as amended.
Next steps: SB 513 will move to the Senate floor with the sponsor's promise to refine selection mechanics and reporting requirements prior to floor debate.
