State DOT Procedures for the Evaluation of Materially Unbalanced Bids

On April 30, 2004 the AASHTO Subcommittee on Construction, Contract

Administration Section initiated a survey concerning the evaluation of unbalanced bids.
The survey asked the following questions:
Evaluating Materially Unbalanced Bids*
1) Does your state have written procedures for determining when a bid is materially
unbalanced? (If yes, please forward a copy to me at the above address.)
2) In the past three years, how many times has a bid been declared to be materially
unbalanced?
3) What was the disposition of these circumstances? (reject all bids and readvertise;
award to second low, etc.)

Summary of Responses

27 State DOT responses were received by the FHWA Office of Program

Administration.
Several states cited their standard specification language for unbalanced bids,
irregular proposals, or consideration of proposals.
Five State DOTs provided their procedures for evaluating unbalanced bids. See
the summary below.
In the past three years, twelve states did not declare a bid to be materially
unbalanced, eleven states had between 1- 4 materially unbalanced bids, two states
had 5 10 materially unbalanced bids and two states provided a not applicable
response. Considering the approximate 20,000 construction contracts let
annually by the states, the issue of materially unbalanced bids is an issue that
occurs relatively infrequently.
The disposition of an apparent irregular bid varies with each state and in some
cases, may depend on the unique circumstances for each contract. Several State
DOT specifications provide options for: a) award to the apparent low bidder, b)
award to the apparent second low bidder (or next responsive bid that is not
materially unbalanced), or c) reject all bids and re-advertise.
In the past three years, states responded to irregular bids in the following manner:
eleven states rejected all bids and readvertised, four states indicated that they
declared the irregular bid non-responsive and awarded to the lowest responsive
bidder, and ten states responded with not applicable reply.

Overview of State Procedures for Evaluating Unbalanced Bids

Seven State DOTs (CA, FL, NC, NV, TN, TX and WI) provided their formal
procedures for evaluating unbalancing.
o Most of these procedures provide for a comparison of the mathematically
unbalanced bid items with the engineers estimate, a review of potential
overrun / underrun items, and a determination of whether the unbalancing
is of such magnitude that it would affect the order bids.
o Floridas procedure includes the use of an Unbalanced Bid Item
program that utilizes a bell curve distribution to develop a statistical
average unit price for comparison purposes. FDOTs procedure also
describes an option for desk and field reviews to assist in identifying other
factors that may have led to an unbalance bid. Finally, FDOT includes an
option for a post-bid review with the contractor to allow the contractor to
substantiate or explain their bid.
o Florida, Nevada and Tennessees procedures use the term materially
unbalanced in describing a bid for which there is reasonable doubt that
awarding to the apparent low bidder would result in the lowest ultimate
cost to the State.
o Texass procedure analyzes unbalanced prices that vary from the estimate
outside a specific range. The range is 100% above or 50% below the
estimate for major items and 200% above or 75% below the estimate for
minor items. Major items are defined as 5% of the contract or $100,000
whichever is less.
TXDOTs procedure is also unique in that it utilizes a comparison of the
balanced vs. unbalanced monthly payout rates to determine whether a bid
is mathematically or materially unbalanced. TxDOT calculates monthly
payout during the life of the contract based on an assumed schedule. This
payout is compared to the estimated payout of the second bidder. If earlier
payout to the low bidder results in loss of interest to the State in an amount
greater than the difference in low and second bid, the bid is determined to
be potentially materially unbalanced, as it may not result in the overall
lowest cost to the state.
o North Carolinas procedure is unique in that it utilizes a contractual
provision to retain any funds that are in excess of a reasonable price until
the last partial payment estimate. Article 109-4 defines a reasonable unit
or lump sum price to be the average of the Engineers Estimate and the
individual balanced bid prices received from the other bidders for the item
in question. NCDOT believe that this provision provides a significant
disincentive unbalancing by front loading.

Cumulative responses:
1) Does your state have written procedures for determining when a bid is materially
unbalanced?
AK - The Alaska DOT/PF does not have a written procedure for determining when a bid
is materially unbalanced.
AR - We don't have written procedures to determine when a bid is materially unbalanced.
We do accept zero bids, which some might consider materially and mathematically
unbalanced. We do require Asphalt Binder to be bid at $120/ton minimum and
Mobilization is limited to 5% of the subtotal.
CA - Yes. Our Ready to List and Construction Contract Award Guide discusses
unbalanced bids and provides direction to the districts. Also, in June of 2002, Caltrans
provided direction specifically on the subject of unbalanced bids.
CT - We use the FHWA Guidance.
FL - Yes. See section 3.3(d) in the attached document: (See attached file:
600010001.pdf)
GA - We do not have written procedures for determining if a bid is unbalanced.
IA - The Iowa DOT does not have written procedures to determine when a bid is
materially unbalanced.
ID - The Idaho Transportation Department does not have a specification or procedure for
determining when a bid is materially unbalanced.
IL - No
IN - No
KS - No written procedures.
KY No.
MA Cited Massachusetts Standard Specification: 3.01 Consideration of Proposals
ME cited Maine DOT standard specification - 103.1.2 Unbalanced Bids
MN -FHWA Guidelines
MS No
NC - We have a procedure for determining unbalanced bids but do not distinguish
between materially and mathematically unbalanced.
ND We have no written procedures.
NE We do not have a written procedure for defining a materially unbalanced bid.
NH - No
NV - Yes we have written procedures to evaluate bids, however nothing specifically
describes "materially unbalanced" other than the definition itself. Typically, there must
be very strong information supporting this conclusion. The procedures are attached.
OK - OkDOT does not have a written procedure, however, materially and mathematically
unbalanced bids are defined in our Standard Specifications in Subsections 101.76 and
101.77 and reference is made to the issue in the form of a "Notice" placed on each bid
proposal, which states: The Department reserves the right to reject any bid as irregular
that is found by the Department to be either materially or mathematically unbalanced. A
bid is materially unbalanced when that bid generates a reasonable doubt that award to a
bidder submitting a mathematically unbalanced bid will result in the lowest ultimate cost

to the Department. A bid will be found to be mathematically unbalanced when the bid
contains lump sum or unit bid items that do not reflect reasonable estimated costs
plus a reasonable proportionate share of the bidder's anticipated profit, overhead costs
and other direct costs.
PA - We do not have written procedures.
TN - Yes, a MS word document with the body of the memo is attached.
TX TxDOT response is attached.
VT - Vermont does not have a written procedure for determining when a bid is
materially unbalanced.
WY - We have used the information provided by FHWA but not with formal written
procedures of our own.
2)
In the past three years, how many times has a bid been declared to be
materially unbalanced?
AK - No bids have been declared to be materially unbalanced.
AR - In the past 3 years, only one bid was considered mathematically unbalanced (not
materially unbalanced and not the lowest bid
on the project).
CA - There have been no instances of bids being declared materially unbalanced;
however, between January and June of 2001, there were three instances of bids being
rejected due to material unbalancing by the low bidder.
CT - Approx. 3-4 times
FL - None
GA - We had one project we declared unbalanced in the last three years.
IA - I didn't dig up the records, but I'd guess we have been able to determine a bid is
materially unbalanced only a couple of times in the last 3 years.
ID - None
IL 5 to 10.
IN None
KS Appx 5
KY - KY - No bids have been declared to be materially unbalanced.
MA - We have only had to reject a couple of bids for being unbalanced.
ME - 0 times (Although we have this specification, we have not utilized it.)
MN 3 projects
MS N/A
NC None
ND - None in the last 3 years
NE - We have declared one bid as materially unbalanced in the last 3 years.
NH - None to my knowledge
NV - 3 contracts.
OK - None, in the last three years.
PA- No bids have been declared to be materially unbalanced.
TN - approximately 3 times
TX no response

VT - To the best of my knowledge, there was one bid in the past three years that was
declared to be materially unbalanced.
WY - None
3)

What was the disposition of these circumstances?

AK - Although ADOT/PF has not rejected an unbalanced bid, we came close to taking
that action 5-6 years ago. If that had happened, the Department of Law advised us that
we would go to the second low bidder (if not materially unbalanced itself).
AR - We awarded the contract to the low bidder (the unbalanced bid was considered
irregular and rejected).
CA - In each of the cases mentioned above, the low bidder's bid was rejected and the
contract was awarded to the next low bidder.
CT Readvertise. For more information regarding this issue, please contact Pall
Oushana at 860-594-3126
FL N/A
GA - All bids were rejected.
IA We reject all bids and readvertise the project if there is enough time to do so without
putting the timely completion of the project in jeopardy. However, most of the time there
isn't enough time, so we award the materially unbalanced bid.
IL - Reject and readvertise.
IN N/A
KS - Rejected and readvertised after we corrected the reason the contractor unbalanced.
KY - No bids have been declared to be materially unbalanced.
MA - We rejected all bids and readvertised the projects.
ME N/A
MN - 2 projs. rejected and readvertised, 1 proj. awarded (Determined not to be
materially unbalanced by the Office of Construction after further review)
MS N/A
NC N/A
ND N/A
NE - We rejected the low bidder and awarded to the second low.
NH - Award to second low
NV - All bids were rejected and the contracts readvertised in these instances.
OK - N/A; however, it would depend on the individual circumstances. Could reject or
award to second low.
PA - Not applicable based on response to 2) above.
TN - Reject all bids and readvertise.
TX no response
VT - The decision in this case was to re-advertise the project.
WY NA - As stated in the letter sent out, mathematically unbalanced bids have been
received and all bids rejected. But have not rejected any on basis of materially
unbalancing.