3.3 Public Bidding & South Carolina Procurement Code

3.3 Public Bidding & South Carolina Procurement Code

Exam Focus: Public construction in South Carolina is governed by statutory rules designed to protect public funds and ensure fair competition. Know the South Carolina Consolidated Procurement Code (Title 11, Chapter 35), the difference between a responsive bid and a responsible bidder, the 5% bid security rule, subcontractor listing and substitution rules, and the protest deadlines.

Public construction projects funded by South Carolina state taxpayers operate under fundamentally different legal standards than private commercial contracting. In private work, an owner may award a contract to any contractor based on personal relationships, reputation, or negotiated price. In public contracting, statutory procurement codes govern every phase of the bidding process to guarantee transparency, fairness, ethical conduct, and open competition.

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The South Carolina Consolidated Procurement Code

The primary statute governing public construction in South Carolina is the South Carolina Consolidated Procurement Code, codified in South Carolina Code of Laws Title 11, Chapter 35.

Purpose and Legislative Intent

The General Assembly enacted the Procurement Code to achieve five statutory objectives:

1. Consolidate, clarify, and modernize the laws governing public procurement in South Carolina;
2. Ensure fair and equitable treatment of all persons dealing with the state procurement system;
3. Foster effective, broad-based competition across the construction industry;
4. Maintain public confidence in the integrity of state purchasing and public expenditures; and
5. Secure high-quality construction at the most economical overall cost to the State.

Entities Subject to the Code

The Procurement Code applies to all South Carolina state agencies, departments, commissions, boards, public universities, state colleges, and technical education institutions. While local political subdivisions (counties, municipalities) and school districts are separate legal entities, South Carolina law mandates that local public bodies and school districts adopt local procurement ordinances that embody the core principles and competitive safeguards of the state code.

Administrative Oversight

State construction procurement is overseen by the State Fiscal Accountability Authority (SFAA) and administered through the Division of Procurement Services. Technical construction oversight and engineering reviews are conducted by the Office of the State Engineer (OSE), led by the Chief Procurement Officer (CPO) for Construction.

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Public Construction Procurement Methods

The South Carolina Procurement Code establishes distinct procurement pathways for construction:

1. Competitive Sealed Bidding (Invitation for Bids - IFB)

Under SC Code § 11-35-3015(2)(b), competitive sealed bidding under § 11-35-1520 must be used to procure construction in a design-bid-build procurement. Key characteristics include:

• Public Notice: Formal advertisement in South Carolina Business Opportunities (SCBO), the state's official procurement publication, for a statutory notice period prior to bid opening.
• Definitive Specifications: Detailed drawings, specifications, and contractual terms are provided equally to all bidders.
• Public Bid Opening: Sealed bids are opened publicly at the exact time and location specified in the IFB. The names of bidders and their total submitted prices are read aloud and recorded.
• Objective Award Standard: Award must be made to the lowest responsive and responsible bidder.
• Prohibition on Post-Opening Negotiations: Unlike private contracting, the procurement officer cannot negotiate price or scope with the low bidder after bid opening. For construction, SC Code § 11-35-3020(d) allows one exception. If bids exceed available funds, the agency determines in writing that there is no time to rebid, and the base bid less deductive alternates is within 10% of the construction budget, the agency may negotiate with the lowest responsive and responsible bidder and reduce the scope to fit the budget.

2. Competitive Sealed Proposals (Request for Proposals - RFP)

Under SC Code § 11-35-1530, agencies use Competitive Sealed Proposals where the Code allows it. Section 11-35-3015 assigns methods by delivery system. Design-build is procured by competitive sealed proposals or competitive negotiation, and construction management at-risk by competitive sealed bidding or competitive sealed proposals. Typical uses:

• Design-Build (D-B): Where a single entity provides both architectural design and construction services.
• Construction Management At-Risk (CMAR): Where a construction manager provides preconstruction consulting and commits to a Guaranteed Maximum Price (GMP).
• Award Basis: Evaluation factors include contractor qualifications, management approach, past performance, technical design solutions, schedule, and cost. Proposals are scored by an evaluation committee.

3. Small Purchases (SC Code § 11-35-1550)

For smaller construction scopes, simplified procedures apply:

• Up to $10,000: no competitive quotations are required if the price is considered fair and reasonable.
• Construction up to $100,000: at least three written quotes from qualified sources, unless the purchase is publicly noticed in South Carolina Business Opportunities, with award to the lowest responsive and responsible source. The separate "advertised small purchase" method does not apply to construction.
• Above the small-purchase limits: formal source selection, such as competitive sealed bidding for design-bid-build construction.
• Requirements may not be artificially divided to fit under a small-purchase limit.

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Responsive Bid vs. Responsible Bidder: The Dual Gate

One of the most critical legal distinctions on the South Carolina contractor licensing examination is the difference between a Responsive Bid and a Responsible Bidder. A contractor cannot win a public contract without satisfying both independent standards.

Exam Trap: Suppose a contractor submits the lowest price but leaves the required subcontractor list incomplete. Section 11-35-3020(2)(b)(ii) says failing to complete the list renders the bid unresponsive, however strong the contractor's finances are. Responsiveness is judged from the bid documents, and responsibility from the bidder's capability.

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Statutory Bid Security Requirements (SC Code § 11-35-3030)

Bid security is required for all competitive sealed bidding for design-bid-build construction contracts over $100,000, and for other contracts the State Engineer's Office prescribes (§ 11-35-3030(1)(a)).

Key Statutory Provisions

• Mandatory Minimum Amount: at least 5% of the amount of the bid.
• Form: a bond from a surety meeting the criteria in the State Fiscal Accountability Authority's regulations, or another form of security the regulations allow. The agency may not require a particular surety company, agent, or broker (§ 11-35-3030(5)).
• One-working-day cure: A bidder whose bid security is in the wrong amount, or whose bid bond lacks the required rating, must be given one working day after bid opening to cure the deficiency. If it is not cured, the bid is rejected (§ 11-35-3030(1)(c)).
• Contract bonds: Construction contracts require a 100% performance bond and a 100% payment bond. The agency may waive them for contracts of $50,000 or less if the State is otherwise protected (§ 11-35-3030(2)).
• Retainage on state projects: no more than 3.5% of each progress payment. Retainage for a completed division is released to the prime contractor, who must pass the subcontractor's share on within 10 days (§ 11-35-3030(4)).
• Purpose of Bid Security: Protects the public owner against the risk that the winning low bidder will refuse to execute the formal contract or fail to deliver the required 100% Performance Bond and 100% Payment Bond within the specified timeframe (typically 10 to 14 days after notice).
• Mechanism of Forfeiture: If the low bidder defaults and refuses to sign the contract, the bidder and surety forfeit the bid bond penalty (up to 5%) to the State as liquidated damages to compensate for the difference in cost between the low bid and the next lowest responsive bid.

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Subcontractor Listing Requirements (SC Code § 11-35-3020(2)(b))

One of the most consequential provisions of South Carolina public procurement law is the mandatory listing of subcontractors on the official bid form.

The Problem of Bid Shopping and Bid Peddling

• Bid Shopping: Occurs after the prime contract is awarded when a general contractor approaches subcontractors and coerces them into lowering their prices by shopping competing numbers, pocketing the savings as unearned profit.
• Bid Peddling: Occurs when an unlisted subcontractor approaches the winning general contractor and offers to undercut the price of the subcontractor whose number was used in the prime bid.

Both practices undermine the integrity of competitive bidding, compromise craftsmanship, and lead to jobsite disputes.

The South Carolina Statutory Solution

Under SC Code § 11-35-3020(2)(b), the agency, working with the project architect or engineer, identifies in the invitation for bids, by license classification or subclassification, the subcontractors the bidder must name:

• Who must be listed: every subcontractor expected to perform work under a subcontract exceeding 3% of the prime contractor's total base bid. The agency may also designate work that is vital to the project. Which subcontractors must be listed cannot itself be protested.
• Self-Performance Rule: A bidder that will use its own employees for a listed portion, and is qualified to do that work, lists itself in that place. It may not subcontract that work later without the agency's approval for good cause.
• Incomplete list: Failure to complete the list renders the bid unresponsive.

Strict Prohibition on Post-Bid Subcontractor Substitution

After the notice of award or intended award, the prospective contractor may not substitute a listed subcontractor except for the reasons in SC Code § 11-35-3021, requested in writing to the governmental body:

1. A showing satisfactory to the agency that the listed subcontractor:
   • is not financially responsible
   • omitted part of the required work from its bid without clearly stating the exclusion
   • was listed by an inadvertent clerical error, if the request is made within four working days of bid opening
   • failed or refused to furnish performance and payment bonds after saying it could
   • lacked a required license when the law required it
2. The listed subcontractor fails or refuses to perform its subcontract.
3. The agency finds the listed subcontractor's work substantially unsatisfactory.
4. The contractor and subcontractor mutually agree.
5. The agency consents for good cause shown.

If substitution is allowed, the contractor must first try in good faith to negotiate with at least one subcontractor whose bid it received before bidding.

Exam Warning: A general contractor cannot substitute a listed subcontractor simply because another subcontractor later offers a lower price. A lower post-bid price is not a ground under § 11-35-3021, and swapping subcontractors to capture it is the bid shopping the listing rule exists to stop.

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Notice of Intent to Award and Bid Protest Procedures

To ensure transparency and provide legal recourse against improper procurement decisions, South Carolina law provides a formal administrative protest mechanism.

Notice of Intent to Award

For construction, the agency posts a notice of intended award to the lowest responsive and responsible bidder at the place named in the invitation for bids. It announces the posting date at bid opening and sends responsive bidders the notice and the bid tabulation. The agency may sign the contract after five business days' notice (§ 11-35-3020(2)(c)).

Protest Deadlines (SC Code § 11-35-4210)

• Protest of the solicitation: A prospective bidder must protest within 15 days of the date the invitation for bids, or a contested amendment, is issued.
• Protest of the award: An actual bidder must give the appropriate Chief Procurement Officer (CPO) written notice of intent to protest within seven business days after the award or intent-to-award notice is posted and sent. It must then file the protest within 15 days of that posting. For construction, that officer is the CPO for construction in the Office of the State Engineer.
• Contents: The written protest states the grounds and the relief requested with enough detail to show the issues.
• Small contracts: Protest rights do not apply to contracts with an actual or potential value of $50,000 or less.

The Automatic Administrative Stay

A timely protest triggers an automatic stay under § 11-35-4210(7):

• The State may not proceed with the solicitation or award until 10 days after the CPO's decision is posted. If the decision is appealed to the Procurement Review Panel, the stay lasts until the Panel decides.
• Lifting the Stay: The stay does not apply if the CPO, after consulting the head of the using agency, determines in writing that proceeding without delay is necessary to protect the interest of the State.

Administrative Review and Appeals Hierarchy

Intent to Protest (7 business days) + Protest (15 days after posting)
                    │
                    ▼
Chief Procurement Officer (CPO) Issues Written Determination
                    │
    ┌───────────────┴───────────────┐
    ▼                               ▼
Decision Final                Adversely Affected Party Requests Review (10 days after posting)
                                    │
                                    ▼
               South Carolina Procurement Review Panel
                                    │
                                    ▼
                  South Carolina Court of Appeals

1. CPO Determination: The CPO may first try to settle the protest. If it cannot be settled, the CPO begins an administrative review within 15 business days after the protest deadline and issues a written decision within 10 days of completing the review.
2. Procurement Review Panel: A person adversely affected may request review by the Procurement Review Panel within 10 days of the posting of the CPO's decision. Otherwise the decision is final.
3. Judicial Review: A Panel decision may be appealed only to the South Carolina Court of Appeals under § 1-23-380, and the appeal does not stay the Panel's decision (§ 11-35-4410(6)).