Local officials talk changes to bidding laws

Staff Writer

Two new laws that take effect Jan. 1 will change the way cities and counties buy some products and some local officials aren't so sure taxpayers will see the savings touted by state lawmakers.

The new laws require local governments to provide companies the opportunity to place bids online as well as by the traditional sealed paper bids method. A separate change requires the use of online reverse auctions for large equipment purchases over $50,000. Infrastructure projects such as bridges and street paving aren't included, West Point City Administrator Randy Jones said.

While the laws take effect in less than three weeks, local governments still are awaiting some guidance from the state. The state Department of Finance and Accounting is drafting rules and regulations governing the auctions, web portal requirements, and safeguards to protect the integrity of bidding.

In addition, cities like West Point are working with Mississippi State University on centralized systems that would be more efficient and cost-effective for communities.

"The idea is to attract more bidders with the goal of generating more competition," Jones said. "We still can take sealed bids and I suspect we will, but we have to have an opportunity for people to submit an electronic bid."

The bigger change is the reverse auction process. In a reverse auction, each bidder is notified whether their bid is the lowest. The amount of the bid isn't identified, just the low bidder. As long as the auction still is open, companies can continue to bid, theoretically driving down the price.

"I think the intent of the Legislature was by requiring bids to be received in a reverse auction format electronically more vendors would participate which would benefit the county. There would be savings," explained Clay County Chancery Clerk Amy Berry, who serves as the clerk for the Board of Supervisors.

In some cases, the county may have to have a computer available for small "mom and pop" operations to submit bids or take part in reverse auctions, Berry added.

"Small companies won't be overlooked," Berry said, addressing one of the concerns raised statewide about the new process.

West Point has used reverse auctions for issuing general obligation bonds, buying equipment and infrastructure projects. Jones says if he had his way, he'd do it again for large equipment but not for other things. One of the reasons is most cities and counties will have to use an outside company to handle the bidding process, especially reverse auctions.

In fact, the state auditor's office has recommended local governments contract out much of the work because of the liability issues.

Those third parties can charge a 3 percent fee that will be tacked on to the bid.

They also can charge a fee for companies to participate. Jones noted that when the city did one project by reverse auction, the company handling the bidding charged $3,000 to participate plus the 3 percent.

"I just can't see how it can be worthwhile. You can't convince me we are getting a better deal with a third party," Jones said.

The veteran city administrator noted the process might benefit rural areas and larger cities by attracting more bidders, especially in rural areas where bigger companies might win work and then sub-contract it out to local companies.

He also noted getting MSU involved to be the third party and to set up bid portals would help.

"You'll cut out a lot of that extra expense and you have some expertise on hand to help review bids in certain situations," Jones explained. "Frankly, I'm not real excited. In the end, we'll just have to see what the rules are and what happens once it all gets started. That'll be the reality," he concluded.