If a Mississippi city's only bidder on a road project comes in over budget by more than 10%, can the city negotiate the price down?

Plain-English summary

Natchez sought bids for a roadway construction project under § 31-7-13(c) (estimated costs in excess of $75,000). The first round of bids all came in more than ten percent above the city's allocated funds. The Board rejected those bids, advertised again, and got just one bidder, also over budget by more than ten percent. The city wanted to negotiate that bid down. The question for the AG: can it?

The AG said no. § 31-7-13(d)(iv) provides:

If the lowest and best bid is not more than ten percent (10%) above the amount of funds allocated for a public construction or renovation project, then the agency or governing authority shall be permitted to negotiate with the lowest bidder in order to enter into a contract for an amount not to exceed the funds allocated.

The Mississippi Supreme Court in Hemphill Constr. Co., Inc. v. City of Clarksdale, 250 So. 3d 1258 (Miss. 2018), held this language is unambiguous. A bid more than ten percent over allocated funds takes the city outside the negotiation authority entirely. In Hemphill, both bids exceeded the allocated funds by more than ten percent, and the Supreme Court ruled the city had no authority to negotiate with either bidder.

Two clarifications:

• The number of bidders is irrelevant. Sole bidder, three bidders, ten bidders: the only thing that matters is whether the lowest bid is within ten percent of allocated funds.
• You can't bring it under ten percent through negotiation. The city had asked whether negotiation could bring the bid below the ten-percent threshold and then proceed. The opinion says "that is not what the statute provides": § 31-7-13(d)(iv) only applies if the lowest and best bid is "not more than ten percent above the funds allocated for the project."

What this means for you

City attorneys and public agency counsel

The opinion holds that under § 31-7-13(d)(iv), a governing authority may negotiate with the lowest bidder only if the bid is "not more than ten percent (10%) above the amount of funds allocated" for the project. A bid more than ten percent above allocated funds removes the negotiation authority entirely, and the opinion relies on Hemphill Constr. Co. v. City of Clarksdale for the rule that this language is unambiguous. It also rejects the idea that the parties could negotiate a too-high bid down below the threshold, because the statute keys off the bid as submitted.

Boards of aldermen and supervisors

The opinion confirms there is no negotiation authority for a bid more than ten percent over allocated funds, citing Hemphill, where the Mississippi Supreme Court held a city had "no authority to 'negotiate . . . to enter into a contract'" with bidders whose bids exceeded the allocation by more than ten percent, even where the city offered to obtain additional funds.

Contractors bidding on Mississippi public construction work

Under the opinion, if the lowest and best bid is more than ten percent above the agency's allocated funds, the agency has no statutory authority to negotiate, regardless of whether the bidder is the only bidder. The opinion does not address what the agency must do next; it answers only that negotiation is not available.

Common questions

Q: What is § 31-7-13?
A: Mississippi's public-purchasing statute for commodities, equipment, and construction over the threshold dollar amount. Subsection (c) sets formal bidding requirements; subsection (d) addresses bid evaluation and negotiation.

Q: What does "allocated funds" mean?
A: The amount the public agency has appropriated for the project. It's set before bidding and is the reference for the ten-percent calculation.

Q: Can the city negotiate a too-high bid down and then sign?
A: No. The opinion addressed this directly: the statute "only applies if the lowest and best bid is not more than ten percent above the funds allocated," so it cannot be used to negotiate a bid that starts above the threshold down into compliance.

Q: Did adding more money help in Hemphill?
A: No. The opinion notes Clarksdale conditionally awarded the contract "dependent upon the city's obtaining additional funds to match the bid," and the Mississippi Supreme Court still held the city had no authority to negotiate because both bids exceeded the allocation by more than ten percent.

Q: What about a sole bidder?
A: The opinion states "the number of bidders is irrelevant to the applicability of the provision." The ten-percent rule applies the same whether there is one bidder or many.

Q: What did Hemphill hold?
A: The Mississippi Supreme Court held that § 31-7-13(d)(iv) is unambiguous. The City of Clarksdale could not negotiate with bidders whose bids exceeded ten percent of allocated funds, even when the city was offering to obtain additional funds to match the bid. Negotiation authority simply doesn't exist outside the ten-percent window.

Q: Are there alternatives to bidding for some projects?
A: § 31-7-13 has carve-outs for specific situations (sole-source procurement, emergency procurement, certain professional services). Construction projects of this size generally must go through formal bidding. Consult counsel for specific exceptions.

Background and statutory framework

§ 31-7-13 is the bedrock of Mississippi public purchasing for goods and construction. Subsection (c) sets formal bidding requirements for purchases over a defined threshold; subsection (d) governs bid evaluation, including the negotiation authority in subsection (d)(iv).

Subsection (d)(iv) contains a permission and a constraint:

• Permission: if the lowest bid is within ten percent of allocated funds, the agency can negotiate with the lowest bidder to enter a contract not exceeding the allocated amount.
• Constraint: if the lowest bid exceeds ten percent over allocated funds, no negotiation authority.

The opinion relies on Hemphill, where the Mississippi Supreme Court held § 31-7-13(d)(iv) is unambiguous. In that case Clarksdale received two bids that both exceeded the allocated funds by more than ten percent and conditionally awarded the contract dependent on obtaining additional funds; the Court held the city "had no authority to 'negotiate . . . to enter into a contract' with either bidder."

This opinion applies that holding to a new fact pattern, a sole bidder, and concludes the number of bidders is irrelevant to whether § 31-7-13(d)(iv) permits negotiation.

Citations and references

Statutes:

• Miss. Code Ann. § 31-7-13(c) (formal bidding requirements for purchases over threshold dollar amount)
• Miss. Code Ann. § 31-7-13(d)(iv) (negotiation authority limited to bids within ten percent of allocated funds)

Case:

• Hemphill Constr. Co., Inc. v. City of Clarksdale, 250 So. 3d 1258 (Miss. 2018) (Mississippi Supreme Court holding that § 31-7-13(d)(iv) is unambiguous; no negotiation authority for bids exceeding ten percent of allocated funds)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/11/B.Callaway-November-28-2023-Negotiations-with-Sole-Bidder.pdf

Original opinion text

November 28, 2023

Bryan H. Callaway, Esq.
Attorney, City of Natchez
Post Office Box 21
Natchez, Mississippi 39121

Re: Negotiations with Sole Bidder

Dear Mr. Callaway:

The Office of the Attorney General has received your request for an official opinion.

Background

According to your request, the city of Natchez ("City") is seeking to obtain a contractor to construct a roadway. The estimated costs and funds allocation is in excess of $75,000, and the City requested bids pursuant to Mississippi Code Annotated Section 31-7-13(c). All of the initial bids for construction were in excess of the funds allocated for the project by more than ten percent. The Board of Aldermen rejected the bids and agreed to advertise and request bids a second time. Only one contractor bid on the project following the second request for bids, but that bid also exceeded the funds allocated by more than ten percent.

Question Presented

May the City negotiate with a contractor that is the sole bidder even though the bid is in excess of ten percent of the funds allocated?

Brief Response

The City may only negotiate with the lowest and best bidder if the bid is not more than ten percent above the amount of funds allocated for the project.

Applicable Law and Discussion

Section 31-7-13(d)(iv) provides:

If the lowest and best bid is not more than ten percent (10%) above the amount of funds allocated for a public construction or renovation project, then the agency or governing authority shall be permitted to negotiate with the lowest bidder in order to enter into a contract for an amount not to exceed the funds allocated.

(emphasis added.) The state supreme court has held that this subsection "is unambiguous. In its plainest terms, the statute provides that an agency or governing authority (here, the City) shall be permitted to 'negotiate . . . to enter into a contract' if the 'bid is not more than ten percent (10%) above the amount of funds allocated' for the project." Hemphill Constr. Co., Inc. v. City of Clarksdale, 250 So. 3d 1258, 1263 (Miss. 2018). In Hemphill, the city of Clarksdale received two bids, both of which exceeded the project's allocated funds by more than ten percent. Id. at 1260. Clarksdale conditionally awarded the contract to the lower bidder dependent upon the city's obtaining additional funds to match the bid. Id. The Court held that "[b]ecause both bids exceeded ten percent of the funds allocated, the City had no authority to 'negotiate . . . to enter into a contract' with either bidder." Id. at 1264.

Your request suggests that the City could potentially use Section 31-7-13(d)(iv) to negotiate with a bidder if the bid is more than ten percent above the amount of funds allocated, but the parties are able to negotiate to less than ten percent of the funds allocated. However, that is not what the statute provides. Section 31-7-13(d)(iv) only applies if the lowest and best bid is not more than ten percent above the funds allocated for the project. Further, the number of bidders is irrelevant to the applicability of the provision. Based on the plain language of Section 31-7-13(d)(iv) and in accordance with the holding in Hemphill, the Board may only negotiate with the lowest bidder if the bid is "not more than ten percent above the amount of funds allocated."

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General