The Legal Theory of Competitive Bidding for Government Contracts

Abstract:     
Each year, the federal, state and local governments conduct transactions worth hundreds of billions of dollars, through contracts that are awarded as a result of a competitive bidding process. While competitive bidding procurement mechanisms have given rise to ample literature and research in the fields of economics and game theory, no attempt has yet been made to formulate a legal theory of competitive bidding for government contracts. This article represents a first attempt to deal with this complex issue from a legal perspective.

The article defines the three objectives of the government procurement competitive bidding mechanism and their characteristics, and proposes an appropriate hierarchy to be applied among them when they are in conflict. The article also addresses the courts’ approach to the issue and analyzes the unexpressed rationales for that approach, which are not reflected in the judgments themselves. Based on these rationales, the author proposes an alternative decision-making model (a “disqualification presumption”), to be used by procuring entities when a flaw is discovered in the best offer submitted in a particular competitive bidding situation.

Keywords: government, contracts, competitive bidding, procurement

JEL Classifications: C70, D73, H11, H50, K23

Accepted Paper Series