October 20, 1980
Subject:
Municipalities; Public Building Contracts; Minority Business Enterprises; G.S. 143-129; G.S. 63-54; Operation of an Airport.
Requested By:
Henry W. Underhill, Jr. City Attorney Charlotte, North Carolina
Question:
Do the federal regulations found in 49 C.F.R. Part 23 regarding participation by minority business enterprises in airport construction projects funded by the United States Department of Transportation conflict with the provisions of G.S. 143-129, which require that public construction contracts be awarded to the lowest responsible bidder, and thereby prevent the City of Charlotte from receiving federal funds for the operation and expansion of Douglas Municipal Airport?
Conclusion:
No. Although Part 23 of C.F.R. 49 is in direct conflict with G.S. 143-129, in exception to North Carolina’s public bidding laws is provided by G.S. 63-54 where a municipality engaged in the operation of airport applies for federal funds for the acquisition, construction, enlargement, improvement, maintenance, equipment or operation of such airport.
The City of Charlotte, which owns and operates Douglas Municipal Airport, receives federal financial assistance from the Federal Aviation Administration for construction projects at the airport. On March 31, 1980, the United States Department of Transportation (DOT) published regulations which require applicants for federal funds to implement a Minority Business Enterprise (MBE) program as a prerequisite to the award of such funds.
Pursuant to the requirements of those regulations the City of Charlotte must establish overall MBE goals for specific federally funded projects and must also require all prime contractors bidding on these projects to meet established MBE subcontractor participation goals, or at least demonstrate that the goals could not be met in spite of a good faith effort. The City is then required to award the contract to the lowest bidder meeting the MBE goal. If the City determines that no bidder meeting the MBE goal has submitted a reasonable price, the contract award must be made to the bidder with highest percentage of MBE participation, so long as that bidder’s price is deemed to be reasonable. If the price is not reasonable, the City must consider the other bidders in the order of their MBE percentage participation until a bidder is reached offering a reasonable price. "Reasonable price" is defined as the price the City would be willing to pay if it received only one bid. Furthermore, the regulations state that if any bidder offering a reasonable price has met the MBE goal, it is to be conclusively presumed that other bidders failing to meet the goal have failed due to insufficient effort and are therefore ineligible to be awarded the contract.
G.S. 142-129 requires that construction or repair work which exceeds $30,000 in cost be awarded ". . . to the lowest responsible bidder or bidders, taking into consideration quality, performance and the time specified in the proposals for the performance of the contract". As construed by the North Carolina Supreme Court, the requirements of this statute are mandatory and non-observance will render any contract awarded other than pursuant to these requirements void and unenforceable. Raynor v. Commissioners of Louisburg, 220 N.C 348 (1941).
The regulations promulgated by DOT could potentially result in the award of a construction contract to a bidder who has actually submitted the high bid on a project. Absent some exception to G.S. 143-129, such an award would clearly be in violation of State law and would result in a void contract.
Such an exception exists, however, in G.S. 63-54. This section provides that a municipality engaged in the operation of an airport may accept federal funds for airport purposes and furthermore that such a municipality is authorized to comply with federal laws and regulations in regard to the utilization of such funds ". . . notwithstanding any other State law to the contrary."
In view of this provision, it is the opinion of this Office that although the federal requirements in 49 C.F.R. Part 23 conflict with G.S. 143-129, a statutory exemption exists where a municipality engaged in the operation of an airport applies for and utilizes federal funds for airport purposes.
Rufus L. Edmisten Attorney General
Grayson G. Kelley Assistant Attorney General