Competitive Bidding

I. Introduction

Competitive bidding is considered a fundamental best practice in public administration. Most citizens assume their government at all levels is using competitive bidding to maximize the benefit of tax dollars.

Public corruption involves extracting revenue from a public entity. Procurement accounts for a significant volume of financial transactions and is one of the functions most vulnerable to corruption. The indictment of the State Auditor provides an example.

At the State level, Delaware has consistent purchasing policies which apply to state agencies as well as a broader range of State controlled agencies. The state policy encompasses the broadest possible universe. Up to date threshold amounts are available online to officials, vendors and citizens, and they are uniform for this broad group of agencies. Citizens have confidence in this system even if they are unaware of all aspects of the process.

However, under Delaware’s Home Rule statute, local governments have no requirement to do competitive bidding.  They have complete latitude to adopt their own laws or policies or to ignore competitive bidding entirely. If they do pass laws requiring competitive bidding, there is no outside oversight of compliance.

This analysis presents a survey of the laws and policies of Delaware’s 32 Charter Municipalities.  Only 10 of these jurisdictions have Charters or Codes requiring competitive bidding which are combined with a reasonable threshold amount to trigger the bidding requirement.  The remaining 22 municipalities either have only written policies vs. laws, high thresholds ranging up to $100,000, or have no policy whatsoever.

Here’s an example from New Castle which has no requirement for competitive bidding. FightDECorruption.com recently filed the following “complaint” with both the Public Integrity Commission and the DOJ Division of Civil Rights and Public Trust. Brenda Antonio is a local official in New Castle. Below is the summary of our complaint:

“Brenda Antonio has a conflict of interest serving as Assistant Treasurer of the Trustees of the New Castle Common while the Trustees award all contracts for landscape maintenance to her husband’s company, Antonio Lawn and Landscaping. These contracts are awarded without competitive bidding.”

We filed this complaint based on an obvious conflict of interest.  However, New Castle officials could not be charged with lack of compliance with competitive bidding statutes which led to the indictment of the State Auditor.  The state statutes don’t apply to these local officials, and there are no local statutes.

The loose haphazard nature of local procurement laws greatly limits the vulnerability of local officials to ethics enforcement.  Without a stronger legal foundation, Delaware citizens have no assurance that expenditures will be subject to a fair and reasonable process.

II. Models for Local Authority

Below is a quote from the National League of Cities regarding the role of local government in the United States.

“The Constitution of the United States does not mention local governments. Instead, the Tenth Amendment reserves authority-giving powers to the states. It is not surprising, then, that there is a great diversity in state-local relations between, as well as within, states. This means that to speak of local government in the United States is to speak of more than fifty different legal and political situations.”

There are two basic models. Two 1868 court decisions by Judge John Dillon of Iowa established “Dillon’s Rule” providing that a town or city can exercise only the powers explicitly granted to them by the state. Party bosses were controlling corrupt cities and Judge Dillon was distrustful of local government.

However, this framework proved too rigid and most states, including Delaware, adopted some version of “Home Rule” which creates local autonomy and limits the degree of state interference in local affairs. 

Below is the key provision of Delaware’s Home Rule Statute:

    § 802. Applicability of chapter; grant of power.

Every municipal corporation in this State containing a population of at least 1,000 persons as shown by the last official federal decennial census may proceed as set forth in this chapter to amend its municipal charter and may, subject to the conditions and limitations imposed by this chapter, amend its charter so as to have and assume all powers which, under the Constitution of this State, it would be competent for the General Assembly to grant by specific enumeration and which are not denied by statute. This grant of power does not include the power to enact private or civil law governing civil relationships except as an incident to an exercise of an independent municipal power, nor does it include power to define and provide for the punishment of a felony.

This statute provides sweeping powers to Delaware’s 32 Charter Cities ranging from Wilmington with a population of 70,635 to Newport with 1,029. The last sentence of the above paragraph represents the only restrictions imposed by the state.

Our statutes include no language outlining responsibilities, guidelines, or reporting by Delaware towns or cities. These 32 cities and towns make and enforce their own laws with no state oversite regarding competitive bidding, audits, flood management, development, employee compensation and many other issues. 

The closest thing these towns have to a “higher authority” are their Charters which are passed by the General Assembly. We also have Home Rule in the General Assembly with a strong tradition of the Charters being sponsored by the town’s two state legislators with little input from the other 59 legislators.

III. Charter Municipalities and Competitive Bidding

This analysis focused on a single function of local government which is procurement. At the state level, Delaware has established “My Marketplace—Delaware’s Procurement Portal” to manage the state purchasing process. There are three categories of purchases including Material and Non-Professional Services, Public Works and Professional Services.

This analysis focuses on Material and Non-Professional Services because most purchases fall into this category. For this category the threshold for competitive bidding starts at $10,000.  For Public Works and Professional Services, it starts at $50,000.

The Charters, Codes and Policies of the 32 municipalities were reviewed and, in many cases, local officials were contacted or FOIA’d to clarify requirements for competitive bidding. This is an analysis of the legal structure which governs local procurement. No audit or review of purchasing practices was undertaken.

Having a law on the books won’t guarantee compliance, but it’s in important step.  The procurement laws and thresholds are part of the foundation for ethical government. Without a sound legal foundation local officials are less likely to consistently comply with competitive bidding procedures.

The findings are presented in the attached spreadsheets. The first tab lists ten towns without a law or written policy requiring competitive bidding. Smyrna and New Castle are the largest towns in this category.

The second tab lists fifteen municipalities which have either laws or written policies with a threshold no higher than 50% above the state standard of $10,000. Wilmington has a threshold of $15,000 and is the only city in this group above the state standard.

These15 cities are divided into two groups. At the top of the spreadsheet are listed nine towns with competitive bidding requirements written into their Charters and one where the requirement is in Code. Having the threshold in the Charter is the gold standard because it’s more cumbersome to change requiring action by the General Assembly.  Revising the Code also requires a formal process.

At the bottom of the page are five municipalities with written policies vs. laws. The Dover policy is 45 pages long which would indicate gravitas.  The Townsend and Delmar policies are undated and don’t specify who issued them.

There are two problems with written policies vs. Charter or Code. First, there’s no stated process for amending them.  Local authorities can revise them at will.

Second, these policies are unenforceable. Both DOJ and the Public Integrity Commission police ethical violations by enforcing laws. Complaints filed with those agencies must specify a violation of law.

The third spreadsheet lists seven municipalities which exceed the $10,000 state threshold by more than 100%. Three of them have a $50,000 threshold and Shelbyville is at $100,000. At some level, the amount of the threshold obviates the policy.

IV.  Conclusion

Only ten, or less than one-third, of these 32 municipalities have a competitive bidding requirement in their Charter or Code with a reasonable threshold.  The remarkable thing about these findings is the extensive range of variation in terms of both the form (law or policy, formal and less formal) and threshold amounts from $2,000 in Blades to $100,000 for Shelbyville.

There is no reasonable pattern driving these variations. These communities vary dramatically in size, but that has little impact on their procurement policies.  The data simply reflect random variation.

The General Assembly should insert the State purchasing thresholds and procedures into all municipal Charters. The State developed the procurement system to reduce corruption. With the millions spent by the 32 Charter municipalities, the potential for abuse is enormous.