Jordan Ramis pc. Attorneys at law
Navigating Contractor Prequalification in Oregon
<< Back To Listings
This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

By John Hickey
Spring 2011


Although competitive low bidding is the most common method for public contracting authorities to procure construction services, many contracting authorities rightly believe that selecting the lowest bid for a project will not always result in the least cost. Often the contractor with the lowest bid is the contractor who made the biggest mistake or is the most desperate for work and hence the most likely to cause additional cost by cutting corners and looking for claims.

Contracting authorities have therefore looked to alternative procurement methods under which contractors are selected based on factors other than price (e.g., experience and reputation). Critics of the alternative methods say they are unfair because many contracting authorities do not objectively evaluate the nonprice factors and simply select the contractor they want.

Although Oregon law prohibits contracting authorities from using an alternative method unless the contracting authority determines that the method will not encourage favoritism and will result in a substantial cost savings (or in some cases qualifies as a pilot program), there is a growing perception that those requirements are regularly being treated as empty formalities. That perception has led to a bill pending before the state legislature that would restrict the ability of contracting authorities to use alternative procurement methods for construction services. Because of the perceived unfairness and growing focus on abuses of the alternative procurement methods, many contracting authorities have opted to use competitive low bidding and attempt to mitigate that method's problems through contractor prequalification.

Prequalification
Prequalification allows contracting authorities to accept bids only from contractors who satisfy certain minimum criteria.

Although prequalification appears to provide the benefits of both competitive bidding and alternative procurement methods, the evaluation of prequalification criteria is subject to abuses similar to those of the alternative procurement methods. For example, a contracting authority could evaluate the prequalification criteria in a way that results in a favored contractor being the only contractor that qualifies. To protect against being unfairly disqualified, it is vital for contractors to understand the prequalification rules and the appeal process.

Prequalification Criteria
Under Oregon law, contracting authorities may consider only whether the contractor has appropriate resources (e.g., working capital and equipment), sufficient expertise, experience, and integrity and necessary licenses and insurance. In addition, the contractor must have satisfied any necessary legal requirements to perform the work and supplied all information requested by the contracting authority so that it may evaluate the other prequalification criteria.

The evaluation of experience is limited only to whether — to the extent that costs and time remained within the contractor's control on a previous contract — the contractor stayed within the budget and time allotted for the project and otherwise performed the contract in a satisfactory manner. The evaluation of integrity is typically limited to whether the contractor has previous criminal convictions in connection with a prior contract. If a contracting authority disqualifies a contractor on the basis of experience or integrity, the contracting authority must document the basis for its decision.

Notice and Timing
If a contracting authority disqualifies a contractor, it must notify the contractor in writing of the reasons for its decision and inform the contractor of the right to appeal under applicable law (ORS 279C.445 and 279C.450). Within three business days after receipt of the written notice, the contractor must notify the contracting authority that it appeals the disqualification.

If a contractor fails to appeal within three business days, the disqualification becomes final and is not subject to challenge. If an appeal is timely made, the contracting authority must conduct a hearing within 30 days unless the contractor agrees to a different period. At the hearing, the contractor will be given an opportunity to be heard and should be ready to explain why it believes the initial disqualification was made in error.

If at the conclusion of the hearing the contracting authority upholds the initial disqualification decision, the contractor has 15 days to file a petition for review in the circuit court for the county. The circuit court will reverse the disqualification only if the contractor can clearly prove that the disqualification was a result of corruption or fraud, that there was favoritism, or that the authority made a miscalculation or mistake.

The point here is this: disqualified contractors must act quickly to confirm whether the contracting authority has followed the rules or made a mistake and appeal to preserve any chance of competing for the contract. Getting a lawyer involved immediately will increase the chances of a successful prequalification appeal.