Madison School Contracting Policy Favors Unions, Likely Violates Law

Editors note January 25, 2016: According a revised expert legal opinion, Wisconsin school districts are not bound by state statute to use a competitive bidding process or a transparent bidding process. They are free, under current law, to rig the outcome.

Union and local contractors have a leg up on the competition when it comes to bidding – and winning – contracts solicited by the Madison Metropolitan School District thanks to a unique – and possibly illegal – feature in the bid solicitation and award process. Instead of awarding bids to the “lowest responsible bidder” in every situation, the district’s contracting policy favors union bidders, local bidders, and in some circumstances allows competitors to view the supposedly “sealed” bid of another contractor.

Madison is one of the largest school districts in Wisconsin, and according to its website, the school board will, “whenever possible . . . select contractors that are signatory with one or more local labor organizations and/or local contractors” when picking a winning bid for construction or building renovation projects.

However, the board policy also states the board “shall award the bid to the lowest and most responsible bidder except in cases in which the lowest and most responsible bidder is a non-union and non-local contractor.” If the lowest bidder is non-union or not local, then the school board takes the lowest bid and, stunningly, shows it to union or local contractors and asks them to match the bid so they can get the contract.

“In such cases, union and/or local contractors who have submitted a bid within 5% of the low bid shall be given the opportunity to match the low bid of the non-union and non-local contractor,” the policy states.

Such blatant favoritism for union or local contractors, including the opening of sealed bids and showing them to preferred contractors, could violate state law. The League of Wisconsin Municipalities tells local governments they generally can’t give local bidders preference according to state law. The law in question, Wis. Stat. 66.0901(1m) explains that, “bidding shall be on the basis of sealed competitive bids” and “contract[s] shall be awarded to the lowest responsible bidder.” The statute goes on to clarify that “Except when necessary to secure federal aid, a political subdivision may not use a bidding method that gives preference based on the geographic location of the bidder or that uses criteria other than the lowest responsible bidder in awarding a contract.”

Madison Metropolitan School District’s policy contradicts state law by revealing to competitors the contents of some sealed bids – which means the bids are no longer sealed if a competitor views them – and by giving preference to local and union bidders, both of which are “criteria other than the lowest responsible bidder.”

Tom Kamenick, an attorney with the Wisconsin Institute for Law and Liberty, reviewed both the MMSD contracting policy and the state law and concluded that, “Based on the language, I think the policy violates state law.” Kamenick pointed out that it is possible, “MMSD might argue that they actually are giving the contract to the lowest bidder, because in the end, one of the contractors with the lowest bid is getting the contract.” But such an argument, he says, misses the point of sealed bids – which are required by law. “Once you’re telling one bidder what somebody else has bid, that’s no longer sealed bids. The whole point of requiring sealed bids is to prevent this kind of cronyism – letting your buddy know what the lowest bid was so they can match or beat it.”

According to information maintained by the state Department of Workforce Development, in fiscal year 2015 MMSD started or paid for at least $38.4 million worth of construction, maintenance and renovation projects. Each project over $200,000 was part of the bidding process that MMSD outlines on its website and that offers favors to preferred contractor groups.