N.C. Local Government Finance Policy Manual

11.0 Introduction

Purchasing the goods and services necessary for the operation of local governments is a major administrative responsibility. Likewise, contracting is an essential function of local governments. This policy outlines the North Carolina laws that govern public procurement and contracting and the Uniform Guidance requirements, which govern the administration of federal award funds (e.g., federal grants). Local governments must adopt written procurement policies that comply with local, state, and federal rules, and adhere to the “most restrictive” rule requirements in the event of a conflict of law. For more information about following the most restrictive rule, visit the Most Restrictive Rule Summary here.

11.1 General Public Contract Requirements

Key Point: All contracts, including public contracts, must be enforceable under common law and state statutes, and require adequate consideration and mutual agreement.

All contracts, even those between private parties, must be enforceable under general common law and state statutory requirements. Most importantly, contracts must be supported by adequate consideration (that is, by something of value on each side of the contract), and clear evidence of mutual agreement. Of course, additional requirements apply to public contracts, as explained below.

11.1.1 Contracting for Authorized Purposes

Key Point: Local governments must have statutory authority to contract for and expend public funds on the activity.

North Carolina statutes grant counties (G.S. 153A-11) and cities (G.S. 160A-11) broad corporate powers necessary to govern and to conduct basic activities, including a delegation of authority to contract. Other statutes provide for specific contracting powers, such as contracting for the operation of public enterprises. These specific authorizations do not limit the general authority to contract. Indeed, parallel statutes for counties (G.S. 153A-449) and cities (G.S. 160A-20.1) authorize each form of local government to contract with a private entity to perform any activity in which the county or city has the authority to engage. This means that local governments must ensure they have sufficient statutory authority before contracting.

11.1.2 Authority to Contract within the Organization

Key Point: The correct person(s) within a local government must award the contract.

Local government contracts must be entered into by someone with legal authority to bind the entity. In North Carolina, this authority rests with the governing board (G.S. 153A-11 for counties, G.S. 160A-11 for cities), although the board may delegate this authority, unless a statute specifically requires board action. For example, state law requires board approval for formal construction and repair contracts and to enter into contracts pursuant to certain exceptions to the bidding requirements. Generally, the Uniform Guidance does not mandate board approval for specific procurement or property disposal actions.

11.1.3 Expenditures Supported by Appropriations and Preaudit Certifications

Key Point: Failure to perform applicable preaudit requirements makes a contract void and a finance officer could be personally responsible for money paid under the void contract.

State laws governing local government finance require counties and cities to establish internal procedures to ensure that sufficient appropriated funds are available to pay contractual obligations. Specifically, contracts involving the expenditure of public funds appropriated in a unit’s annual budget ordinance or in a project ordinance must  be “preaudited.”[G.S. 159-28]. During the preaudit process, the finance officer, or a duly appointed deputy finance officer, must ensure the funds are being spent in accordance with a budget appropriation and that sufficient funds remain in the appropriation  to pay the amount obligated. All written contracts must contain a certification on the face of the instrument that is signed by the finance officer (or deputy finance officer), attesting that the instrument has been “preaudited in the manner required by the Local Government Budget and Fiscal Control Act.” Failure to perform the preaudit process renders the contract void and unenforceable.  See Chapter 12 of this Policy Manual for more information about preaudit requirements.

11.1.4 Signing the Contract

Key Point: Local governments should specify in writing who within the local government is authorized to sign contracts.

Execution of a contract is a formality that is used to prove assent. Contracts are sometimes executed at the same time that they are approved. In other cases, the contract is executed after approval, such as when a unit’s governing board approves a contract that is later executed by the unit’s manager. Aside from the required preaudit certification by the finance officer, state law doesn’t specify who must sign contracts, leaving it to local discretion. Execution authority is best delegated through a written policy or resolution approved by the governing board.

11.1.5 Contracts in Writing and Electronic Contracts

Key Point: Contracts should be in writing, and in some cases must be in writing, and electronic contracts are permissible.

Whether a contract must be in writing depends on the type of contract and the government entity involved. G.S. 160A-16 requires that all contracts made by or on behalf of municipalities must be in writing, or they are void unless ratified by the governing board. While no similar statute applies to counties, the formal bidding statute, G.S. 143-119, requires written contracts for contracts within its scope. Under North Carolina case law, board minutes alone do not satisfy statutory requirements for a written contract. Wade v. City of New Bern, 77 N.C. 460 (1877). Under the Uniform Commercial Code (UCC), all contracts for the sale of goods exceeding $500 must be in writing. [G.S. 25-2-201(1)]. Additionally, Chapter 22 of the General Statutes requires a written contract or instrument for land sales, easements, mining rights, and leases longer than three years. Even when not legally required, written contracts help clearly define the parties’ agreement, incorporate necessary fiscal and departmental approvals, and provide documentation for audits.

State and federal laws provide broad authority for the use of electronic contracts. These laws generally provide that a contract cannot be denied legal effect solely because it has been created as an electronic document or has been affixed with an electronic signature. However, it is up to each county or city to determine whether to use electronic contracts and to develop systems to ensure their authenticity and enforceability.

11.1.6 Multi-year Contracts

Key Point: Multi-year contracts are generally allowed, and local governments may consider adding a non-appropriation clause to such contracts.

Counties (G.S. 153A-13) and cities (G.S. 160A-17) can enter into contracts that extend beyond the current fiscal year, provided that the governing board appropriates the amount due in each subsequent fiscal year. Most county and city contracts involve basic commercial transactions and remain enforceable against the unit for the duration of the contract, even with changes in board membership or philosophy. However, contracts that limit essential governmental discretion, such as a contract that promises not to annex property or a contract in which the unit promises not to raise taxes, are not allowed.

Because a multi-year contract imposes an ongoing fiscal obligation on a local government unit, it may choose to include a non-appropriation clause in the contract, which makes subsequent years of the contract contingent on the governing board’s appropriation of funds for that contract.  [G.S. 159-13(b)(15)]. A non-appropriation clause is required for installment financing. It also may be required on any other contract, agreement, or lease that could be construed as a borrowing by the unit.

11.2 An Overview of Competitive Bidding Requirements

11.2.1 Contracts Covered by State Bidding Laws

Key Point: State bidding laws apply to the procurement of goods and construction or repair.

State law requires local governments to obtain competitive bids before awarding certain types of contracts. Under two North Carolina statutes, G.S. 143-129 (formal bidding) and G.S. 143-131 (informal bidding), bidding is required for contracts involving the purchase or lease-purchase of “apparatus, supplies, materials, or equipment” and  for construction or repair work. Bidding requirements are triggered when public fund expenditures exceed the dollar thresholds specified in the statutes, based on the contract’s total cost, not individual item costs or budgeted amounts. Current thresholds are listed here.

11.2.2 Contracts Covered by the Uniform Guidance

Key Point: The Uniform Guidance applies to all types of procurements financed in whole, or in part, with federal award funds.

The Uniform Guidance classifies procurements differently than state law and divides procurements into the following three methods: informal procurement, formal procurement, and noncompetitive procurement. (See 2 C.F.R. § 200.320). Within these three categories, competitive procurement processes are required for what the Uniform Guidance calls simplified acquisitions, sealed bids, and competitive proposals, explained further below.

• Simplified acquisition procedures are used when the total procurement cost is higher than the micro-purchase threshold but lower than the simplified acquisition threshold. The micro-purchase threshold is $10,000, but governmental units can increase the micro-purchase threshold up to $50,000 through an annual self-certification process. 

• Under the Uniform Guidance, sealed bids are preferred for fixed-price contracts and construction services, while competitive proposals are used when sealed bids are not suitable. Sealed bids and competitive proposals are required when procurement exceeds the simplified acquisition threshold of $250,000. If state law imposes a lower threshold, such as North Carolina’s $90,000 requirement for formal bidding on goods, the recipient or subrecipient must follow the most restrictive rule. This means that when using federal funds for purchases of goods valued at $90,000 or more, sealed bids must be obtained according to state law.

11.2.3 Private Entities and Procurement

Key Point: Private entities that receive public funds may not need to comply with public procurement regulations.

Private entities, whether non-profit or for-profit, that contract with counties or cities are generally not required to comply with North Carolina bidding statutes, even when spending funds obtained from counties or cities. Once funds are received by a private entity under a contract or grant, they are no longer considered public. However, local governments may choose to require private entities to follow bidding requirements. Federal and state agencies administering grant programs often require private subrecipients to follow federal competitive bidding procedures when expending grant funds. In most cases, subrecipients of federal awards must follow the procurement standards of the Uniform Guidance in awarding contracts. However, contractors are not subject to the Uniform Guidance, although the UG procurement methods will have been used by the recipient or subrecipient to select the contractor.

11.2.4 Contracts Not Covered by North Carolina Bidding Requirements

Key Point: Under North Carolina law, many service contracts, real property purchases, and contracts below certain thresholds are exempt from competitive bidding.

Under North Carolina law, contracts for many services, such as janitorial, grounds maintenance, and solid waste collection, fall outside the scope of the competitive bidding statutes. Special rules under the Mini-Brooks Act, apply to contracts for architectural, engineering, and land surveying services (sometimes referred to as “professional services”) and alternative construction delivery services. Contracts for the purchase or lease of real property are also exempt from bidding requirements. However, lease-purchase, installment-purchase, or lease-with-option-to-purchase contracts for personal property are subject to competitive bidding under North Carolina law. Finally, under North Carolina law, purchase contracts and contracts for construction or repair work that fall below the informal bidding threshold are not subject to competitive bidding, though many local policies require bidding even at these lower levels.

11.2.5 Voluntary Competitive Procurement

Key Point: Local governments may use competitive procurement processes even when not required by state law.

Counties and cities often choose to seek competitive proposals for contracts even when competition is not legally required—for example,  by issuing a request for proposals (RFP) for solid waste services. This is considered a good practice whenever there is a competitive market for a particular service or product. Counties and cities often use statutory procedures when seeking competition voluntarily, but this is not required. When a unit opts to solicit bids or proposals outside of statutory requirements, it is important to clearly identify in the solicitation the procedures that will govern the award process, especially when they differ from those in the statutes. Once a unit establishes its own procedures, it is legally obligated to follow them unless it formally terminates the procedures and underlying contract using a different process after determining this to be in its  best interest of the unit. The decision to competitively bid a contract when it is not statutorily required does not obligate the unit to use bidding in the future for that contract or for that type of contract.

11.2.6 Exceptions to Bidding Requirements

Key Point: State and federal bidding laws contain numerous exceptions to competitive procurement, but local governments must strictly adhere to the scope of the exception and any statutory requirements when using these exceptions.

North Carolina competitive bidding exceptions can be found in this chart. Unless otherwise noted in the chart, there are no specific procedures when exercising these exceptions. County and city officials should be cautious when contracting without bidding to verify that the contract clearly falls within an exception.

Unlike state law, which allows for exceptions to competitive bidding procedures based largely on the subject matter of the contract or the place from which an item is purchased, the Uniform Guidance, 2 C.F.R. § 200.320(c), permits noncompetitive procurement in only five instances: (1) the procurement is under the micro-purchase threshold, (2) the item is only available from a single source, (3) a public emergency will not permit a delay, (4) it has been expressly permitted by the federal awarding agency or pass-through entity, or (5) the competition is deemed inadequate after solicitation of several sources. The Uniform Guidance does not elaborate on the definitions or processes for noncompetitive procurements, and recipients should look to the federal awarding agency for further guidance.

11.2.7 Fair and Open Competition

Key Point: The purpose of bidding laws is to ensure fair and open competition, and state and federal laws specify conduct that is restrictive of competition.

The Uniform Guidance, 2 C.F.R. § 200.319(b), prohibits practices that restrict competition, such as requiring unnecessary experience, excessive bonding, awarding noncompetitive contracts to consultants on retainers, or using overly restrictive specifications that unjustifiably limit competition.

State and federal regulations generally discourage brand-name specifications. Under G.S. 133-3, a single brand can be specified only if no alternatives are suitable, and construction materials must be described by performance unless that’s not feasible. In such cases, at least three brands should be listed, or as many as possible if three are not available. Preferred products that are to be listed as alternates in specifications must be approved before bid opening. Similarly, the Uniform Guidance, 2 C.F.R. § 319(b), views brand-name specifications as restrictive of competition and prompts recipients and subrecipients to allow for an equal product to be offered.

Finally, to promote competition, some individuals are prohibited from participating in the procurement process. Under G.S. 133-1, architects and engineers providing design services on public projects are prohibited from specifying any materials, equipment, or other items in which the designer has a financial interest. Similarly, manufacturers cannot be involved in drawing plans or specifications for public construction projects. The Uniform Guidance, 2 C.F.R. § 319(b), prohibits contractors that develop or draft specifications or other procurement documents from competing for those contracts.

11.3 Summary of Bidding Procedures

11.3.1 The Standard of Award for Informal and Formal Bidding

Key Point: The standard of award for informal and formal bids is the lowest responsive, responsible bidder.

Under state law, both the formal and informal bid statutes require that contracts be awarded to the “lowest responsible, responsive bidder, taking into consideration quality, performance, and the time specified in the bids for the performance of the contract.” [G.S. 143-131 (informal bidding); see also G.S. 143-129 (formal bidding)]. Similarly, under 2 C.F.R. § 200.318(h), the Uniform Guidance requires awarding contracts only to “responsible contractors that possess the ability to perform successfully under the terms and conditions of a proposed contract” and that recipients consider matters such as contractor integrity, public policy, past performance, and financial and technical resources.

Although the “lowest responsible, responsive bidder” standard seemingly creates a presumption in favor of the bidder who submits the lowest dollar bid, it does not require an award to the lowest bidder in all cases. The formal bid statute authorizes a local government to evaluate the bidder’s experience, training and quality of personnel, financial strength, and any other factors that impact the bidder’s ability to perform the work. (G.S. 143-129).

Local governments also have broad authority under state law to reject any or all bids for any reason that is not inconsistent with the purposes of the bidding laws. [See G.S. 143-129(b)]. Likewise, the Uniform Guidance, 2 C.F.R. §  200.320(b)(1)(ii)(E), allows bids to be rejected but requires documentation and justification.

11.3.2 Requirements for Informal Bidding

Key Point: Informal bidding procedures require obtaining and documenting quotes.

For North Carolina local governments, informal bidding is required by state law for contracts for construction or repair work and to purchase goods between the minimum informal bid threshold and the formal bidding limit (see this chart for current threshold amounts). No advertisement or minimum number of bids is required. Informal bids may be submitted by phone, fax, electronically, or in writing, but must be documented. For building construction or repair contracts in the informal range, local governments must solicit bids from minority firms. Contracts in the informal range are awarded to the lowest responsive, responsible bidder. (G.S. 143-131).

Under the Uniform Guidance, informal bidding applies to “simplified acquisitions,” which are procurements where the contract amount is above the micro-purchase threshold but below the simplified acquisition threshold. Local governments recipients or subrecipients of federal award funds must obtain and document price or rate quotes from an adequate number of qualified sources. This language gives a recipient discretion to determine the “adequate” number of qualified sources but implies that the number must be greater than one. [2 C.F.R. § 200.320(a)(2)]. The Uniform Guidance also encourages federal fund recipients and subrecipients to consider contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor-surplus-area firms. (2 C.F.R. § 200.321).

11.3.3 Requirements for Formal Bidding

Key Point: Formal bidding procedures require more processes than informal bidding, and local governments should be mindful of the most restrictive rule when using federal funds.

The procedural requirements for formal bidding are more rigorous than informal bidding procedures. Under state law, formal bidding is synonymous with sealed bidding. (See G.S. 143-129). However, the Uniform Guidance classifies two types of procurement methods as formal procurement methods: sealed bids and competitive proposals. [2 C.F.R. § 200.320(b)]. Due to the interplay with state law, sealed bids are required for purchases of goods starting at $90,000 and for construction or repair starting at $250,000 when federal funds are being used. Competitive proposals are used when conditions are not appropriate for sealed bids for contracts costing above $250,000, although a lower threshold could also be adopted. For example, a federal grant recipient may choose to use the competitive proposals method to solicit a service contract costing $250,000 or more.

Advertisement

Key Point: State law specifies the time and place of formal procurements advertisements, but the Uniform Guidance does not specify time or place. Local governments should be mindful of the most restrictive rule when using federal funds.

Under G.S. 143-129, North Carolina local governments must publicly advertise formal bids for construction or repair or the purchase of goods. The public advertisement must run for at least seven full days before the bid opening, and include the date, time, and location of the bid opening, where specifications may be obtained, and a statement that the unit’s governing board reserves the right to reject any or all bids.

Formal bidding advertisements must appear in a newspaper of “general circulation” unless the governing board approves electronic advertisement, either for specific contracts or for contracts in general. An example resolution authorizing electronic advertisement is available here. Under the Uniform Guidance, a sealed bid procurement only requires the invitation to be “publicly advertised” which allows a “sufficient response time,” but no specific publication method or location is mandated. [2 C.F.R. § 200.320(b)(1)(ii)].

Sealed Bids

Key Point: Bids must remain sealed until the advertised bid opening and must be opened publicly.

Bids must be sealed and submitted to the local government prior to the time of the bid opening. State and federal rules require public bid openings, which are typically conducted by local government staff.  Construction or repair contracts in the formal range must always be awarded by the governing board, though the governing board may delegate its awarding authority for formal purchase contracts. Once formal bids are opened, they become public records under North Carolina law, except that trade secrets are exempt from disclosure under G.S. 132-1.2 if they were identified as such when the bid was submitted to the local government.

Competitive Proposals under the Uniform Guidance

Key Point: The Uniform Guidance requires competition for services, typically handled through a Request for Proposals (RFP).

The Uniform Guidance allows for competitive proposals as a formal procurement method when sealed bids are not suitable, often when price is not the primary factor for selecting a bidder. Competitive proposals can be used in two ways. First, a competitive proposal can be a Request for Proposals (RFP), whereby proposers are evaluated on numerous factors including price, and an award is made to the most advantageous proposal. Second, competitive proposals can be used for procuring architectural and engineering services, where the price is excluded and the “most qualified offeror” is chosen, mirroring North Carolina’s Mini-Brooks Act. When a recipient is using an RFP, the Uniform Guidance imposes a few additional requirements. The RFP must list all evaluation factors and their relative importance, and a recipient must follow a written evaluation method. Finally, proposals must be solicited from an adequate number of qualified offerors. [2 C.F.R. §  200.320(b)(2)].

Electronic Bids

Key Point: State law allows for electronic receipt of formal bids for purchases.

For formal purchase contracts, local governments may accept electronic bids under G.S. 143-129.9, provided that the process ensures security, authenticity, and confidentiality of the bids equivalent to sealed paper bids. Local governments may use “reverse auctions” for purchasing goods, where bidders compete in real time to offer the lowest price. These alternatives cannot be used for formal construction or repair contracts, and reverse auctions cannot be used to purchase construction aggregates, including crushed stone, sand, and gravel.

Number of Bids

Key Point: State law requires the receipt of three bids for formal construction or repair contracts.

Under G.S. 143-132, three  bids must be received before a unit may award a construction or repair contract in the formal bidding range. If three bids are not received after the first advertisement, the project must be readvertised for at least seven full days before the next bid opening. Following the second advertisement, a contract can be awarded even if fewer than three bids are received. The Uniform Guidance allows a recipient or subrecipient to determine the adequate number of bids. [2 C.F.R. § 200.320(b)].  

Bid, Performance, and Payment Bonds

Key Point: State and federal law require bid bonds and performance and payment bonds for construction or repair contracts above certain thresholds.

State and federal laws require bid security of at least 5 percent of the bid amount for construction or repair contracts in the formal bid range. North Carolina law allows for a bid bonds, cash, cashier’s checks, or certified checks. [G.S. 143-129(b)]. Other forms of security, such as a letter of credit, are not authorized under state law. The Uniform Guidance permits bid bonds, cashier’s checks, and other negotiable instruments. (2 CFR § 200.326).

Under G.S. 44A-26, local governments must obtain performance and payment bonds from the successful bidder for construction or repair projects over $300,000. The Uniform Guidance requires the same for construction or facility improvements contracts above the simplified acquisition threshold. (2 C.F.R. § 200.326). A performance bond guarantees the completion of the project if the contractor defaults, while a payment bond protects subcontractors by guaranteeing payment for labor and materials.

 Bid Withdrawal

Key Point: Bidders may withdraw their bids only under certain statutorily specified circumstances.

G.S. 143-129.1 outlines the procedures for bid withdrawal. A bidder may withdraw its bid without forfeiture of the bid bond if the bidder can demonstrate that it made an unintentional and substantial error, as opposed to an error in judgment. The law does not allow a bidder to correct a mistake, and the request for withdrawal must be made within seventy-two hours of the bid opening.

Awarding of Formal Contracts

Key Point: Formal construction or repair contracts must be awarded by the governing board, awarding authority for formal purchase contracts can be delegated by the governing board to administrative staff, and local governments have discretion to determine awarding authority for informal contracts.

Construction or repair contracts subject to the formal bidding requirements must be awarded by a unit’s governing body. For purchase contracts in the formal range, G.S. 143-129(a) authorizes the board to delegate to the unit’s manager or chief purchasing official the authority to award contracts or to reject bids and readvertise the contract and opportunity to bid. The informal bidding statute does not dictate who must award contracts. This responsibility is usually delegated to the purchasing agent or to other employees responsible for handling informal contracts.

11.3.4 Waiving Bid Defects

Key Point: Local governments cannot waive statutory bidding requirements and should not waive bid defects that give a bidder an unfair advantage.

Once received, bids must be evaluated to determine whether they are responsive—meaning whether they conform to the law and the local government’s specifications. Local governments do not have unlimited discretion in waiving deviations from specifications. Rather, a local government must reject a bid that contains a “material variance” from specifications, which is a variance that gives the bidder “an advantage or benefit which is not enjoyed by other bidders.” If the low bid is rejected because it is not responsive, a local government can choose to accept the next-lowest responsible, responsive bid or reject all the bids and rebid the contract. Bids that fail to meet statutory requirements, such as including a required bid bond, must also be rejected.

11.3.5 Cost or Price Analysis

Key Point: For any procurement using federal funds above the simplified acquisition threshold, a cost or price analysis is required and must be completed before solicitation.

When expending federal award funds, recipients and subrecipients must perform a cost or price analysis before awarding contracts above the simplified acquisition threshold. (2 C.F.R. § 200.324).  A price analysis compares total prices without examining individual cost elements, while cost analysis evaluates those elements (e.g., materials) to determine reasonableness. Cost analysis is used when there is no price competition, such as in sole-source contracts or when only one bid is received. The required methods and level of analysis will vary by situation, and federal agencies often provide specific guidance. More information on performing a cost or price analysis is available here.

11.4 Special Rules for Building Contracts

11.4.1 Bidding and Construction Methods

Key Point: Construction or repair projects involving buildings with a total project cost exceeding  $300,000 have additional requirements under G.S. 143-128.

In addition to the bidding requirements for contracts involving construction or repair work described above, there are several special requirements for construction and repair contracts involving buildings. State law limits building construction projects over $300,000 to the following delivery contracting methods: separate prime, single prime, construction management at risk, design-build, design-build bridging, or public–private partnership. In traditional construction delivery methods, the prime contract is between the owner (i.e., the unit of government) and the contractor. This is typically done through single-prime contracting, where a general contractor holds the prime contract and manages all subcontractors, or separate-prime contracting, where contractors for each trade separately bid and contract directly with the owner. In some cases, bids may be solicited under a dual-bidding approach, allowing both single- and separate-prime bids.

Procurement for alternative construction delivery methods—construction management at risk (G.S. 143-128.1), design-build (G.S. 143-128.1A), design-build bridging (G.S. 143-128.1B), and public–private partnership (G.S. 143-128.1C)—differs significantly from traditional methods. Generally, these contracts are awarded through a qualification-based process under the Mini-Brooks Act and may be used only if the local government determines they are in the project’s best interest. Specific procedures for each alternative construction delivery method can be found in the relevant statutes.

Using alternative construction delivery methods with federal funds is challenging due to a conflict between North Carolina law and federal procurement standards. State law requires qualifications-based selection under the Mini-Brooks Act for hiring a construction manager at risk or design-builder. However, the Uniform Guidance limits the qualifications-based selection to architectural/engineering (A/E) professional services and prohibits using it for other services, even if provided by A/E firms. [See 2 C.F.R. § 200.320(b)(2)(iv)]. As a result, this is likely to prevent local governments from using the state-mandated qualifications-based selection process when federal funds are involved.

11.4.2 Historically Underutilized Business (HUB) and Minority and Women-Owned Business Enterprise (MWBE) Participation

Key Point: North Carolina law requires public agencies and prime contractors to make good-faith efforts to include HUB contractors in major construction projects and the Uniform Guidance encourages outreach to minority and disadvantaged businesses.

G.S. 143-128.2 requires public agencies to establish a percentage goal for participation by HUB contractors in major building construction or repair projects, to make efforts to include these contractors in these projects, and to require prime contractors to make good-faith efforts to attain the established HUB participation goal. The law does not allow contract set-asides or preferences based on HUB status. Contracts must be awarded to the lowest responsible, responsive bidder, without regard to race, sex, religion, national origin, or disability. However, a bidder’s failure to make and document statutory good-faith efforts is grounds for rejection of a bid.

The Uniform Guidance suggests that recipients and subrecipients consider minority businesses, women’s business enterprises, veteran-owned businesses, and labor-surplus-area firms contracting opportunities.  Methods for considering these businesses can be found in 2 C.F.R. § 200.321 and are similar to the good-faith efforts required of local governments under North Carolina state law. Generally speaking, recipients and subrecipients are not required to meet any federal MWBE goals when using federal funds.

11.4.3 Required Use and Procurement of Design Professionals

Key Point: Both state and federal law require that design professionals be hired based on qualifications without regard to price.

Under G.S. 143-64.31, public agencies must select architects, engineers, and surveyors based on qualifications—not price. Pricing, aside from hourly rates, cannot be requested until the most qualified firm is identified. Fees are then negotiated to develop a final contract. For projects under $50,000, G.S. 143-64.32 allows local governments to exempt themselves from this process by documenting the exemption in writing. Once exempt, they may negotiate fees or use competitive bidding to select a provider. Under G.S. 133-1.1(a)(3), public building plans must be prepared by a licensed architect or engineer, depending on whether the project involves new construction or renovation that calls for foundation or structural work or that affects life safety systems.

Under the Uniform Guidance, a recipient may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services. Using this method, an offeror’s qualifications are evaluated, and the most qualified offeror is selected without regard to price. [2 C.F.R. § 200.320(b)(2)(iv)].

11.5 Protests and Legal Challenges

Key Point: North Carolina local governments are not legally required to provide bid protest procedures and a bidder’s remedy is to pursue a lawsuit. Federally funded contracts must provide for written dispute procedures, although specific processes are not mandated.

North Carolina contracting laws do not provide for bid protest procedures. Dissatisfied bidders may raise concerns with the responsible official or governing board, but there is no legal requirement for a hearing. If unresolved, the only legal remedy is to sue—typically seeking an injunction to stop an unlawful contract. While bid protests are common, lawsuits are rare. For contracts using federal funds, the Uniform Guidance requires recipients and subrecipients to handle disputes and maintain written procedures for issues like protests and source evaluation. However, it does not mandate specific processes, and federal agencies generally defer to local handling unless a primarily federal issue is involved. (See 2 C.F.R. § 200.318).