June 5, 2023
Part 1

School Contracts with Vendors, Construction Companies & Architects

WASDA Conference School Contracts Education Law

This two-part series recaps Kirk’s presentation, School Contracts with Vendors, Construction Companies & Architects, which was presented at the March 2023 WASDA NSA conference.

In this series, Kirk takes a fresh look at Wisconsin school contracts, with a focus on the following …

Part 1

  • Legal capacity to contract
  • Negotiations
  • Contracting requirements in Wisconsin

Part 2

  • Contract clauses
  • Issues, traps, & pitfalls
  • Contracting methods, issues, & practices

Let’s get started with Part 1 by diving into contracts …

Legal Capacity to Contract

Why do we care about this somewhat arcane legal principle?

  1. Because people believe that they have a contract with the school district if they get someone at the district to sign off on the agreement.
  2. Because a school district can be leveraged by claims of “apparent authority” or agency, whereby a contractor claims to have entered into an agreement and then took action to meet their obligations under that agreement (always at some cost).
  3. Because contractors may know about the legal limitations of contracting with school districts, but still may pursue a course of action designed to get a signature.

KEY: A school district should require that all agreements or obligations above a certain amount be approved by the school board and make clear (or provide clear information) that anything else is not a binding contract with the school district.

When is there a contract?

  • Generally, a school board must enter into a contract for it to be binding on the school district.
  • Sometimes a contract entered into by a school official is binding because of enabling policy or delegated authority.
  • “Contracts” at least functionally exist where there is offer, acceptance, and performance.
  • A contract can be secured by previous agreement, where a vendor gets the work because they performed a service. This can be, but is not always, legal or appropriate.

Who can enter into a contract?

Recommendation:

  1. Board policy should state that only the school board has the authority to enter into contracts unless the board or board policy specifically provides otherwise. It is normal to permit a measure of administrative discretion, e.g., below a certain dollar amount, but this should be spelled out.
  2. Every would-be contractor should be made aware of this policy, in fact or at least constructively (e.g., a bid spec provision requiring that contractors review and abide by all school board policies).

Negotiations

Factors to keep in mind during negotiations:

  • Installation and other capacities that can/cannot be duplicated;
  • Capacity to decline to enter into a contract;
  • Value of the contract to the would-be vendor;
  • The market share that the vendor controls; and
  • Multinationals that are the only game in town, versus a variety of relatively local and competitive vendors.

Contracting Requirements in Wisconsin

Legal Requirements

  1. School districts are not generally required to choose contractors through bidding processes, unless a specific statute or board policy requires.
  2. School districts do have a general obligation to act with due diligence in contracting.
  3. School officials have to avoid conflicts of interest or violation of the code of ethics for public officials.
  4. School officials may need annual or special meeting approval.
  5. Schools may require specific board majorities to approve certain contracts by law or policy.

Bidding Essentials

As a general rule, a school district is not required to use competitive bidding, except where a specific statute or rule says otherwise (e.g., energy savings contracting), or when the school board has adopted competitive bidding requirements. However, school officials have a duty of due diligence in contracting for goods and services.

  1. Reserve the right to reject any and all bids and advise that there shall be no obligation to accept a particular bid.
    • Wisconsin statutes generally provide that public construction projects must be competitively bid and awarded to the “lowest responsible bidder.”
    • A school district should not hesitate to reject bids from an irresponsible bidder, e.g., the bidder has a history of poor-quality work and costly delays.
    • The Wisconsin Court of Appeals has held that: 
      • A “public bidding authority cannot be compelled to award the contract to the lowest bidder.”   
        — Five Star Airport Alliance, Inc. v. Milwaukee Cnty., 939 F. Supp. 2d 936, 941 (E.D. Wis. 2013) (citing N. Twin Builders, LLC v. Town of Phelps, 334 Wis. 2d 148, 154, (Ct. App. 2011)).
      • “A reviewing court will only interfere with a bidding authority's discretionary act if it is arbitrary or unreasonable.”   
        — PRN Assocs. LLC v. State Dep’t of Admin., 313 Wis. 2d 263, 268 (Ct. App. 2008).
  • Mandate that bidders provide specific pricing.
  • Advise of consequences of bid rejection policy under public records law.

We hope Part 1 of this series gives you a better understanding of how to handle the ins and outs of legal capacity to contract, negotiations, and contracting requirements in Wisconsin, as they pertain to school contracts with vendors, construction companies & architects.

In Part 2, we’ll be covering contract clauses; issues, traps, & pitfalls; and contracting methods, issues, & practices.

Finally, if you’re a superintendent in Wisconsin, you may also like the following article, Everything Superintendents Need to Know About Public Records Laws.

© 2022, Strang Law LLC