Purchased Services Contracts
Purchased services are those provided by vendors for routine, necessary, and continuing functions of a local government agency, mostly relating to physical activities. These services are usually repetitive, routine, or mechanical in nature, support the agency’s day-to-day operations, involve the completion of specific tasks or projects, and involve minimal decision-making.
Examples of purchased services include, but are not limited to:
- Delivery/courier service
- Herbicide application
- Recycling/disposal/litter pickup service
- Vehicle inspection, lubricating, and repair services
However, the state Department of Labor and Industries considers some services, such as HVAC maintenance or road striping, to be public works (see below).
Purchased services should not be confused with personal services, which are mostly intellectual in nature.
Local governments in Washington have no statutory requirements for purchased service contracts, unless the contract requires prevailing wages as discussed below. This means that the state has not established bid limits or advertising requirements, and that bonds and retainage are not required.
Local governments are encouraged to follow the guidelines on this page. However, agencies must also consider their own resolutions, policies, and procedures to determine their own local contracting requirements.
Local governments generally have significant flexibility in determining how to solicit competition. However, if the project includes grant funding, the grant conditions may require a specific solicitation process. Generally, the more complex or expensive the project is anticipated to be, the more rigorous the solicitation process should be.
Suggested Bid Limits and Processes
MRSC suggests that small and medium-sized agencies use the following dollar limits and processes for purchased services. However, the exact limits and processes should be tailored to each particular agency. Agencies should always document these processes for the public record, including the selection criteria, the names of firms considered, all responses received, the basis for the award decision, and a copy of the final contract.
- Suggested dollar limit of $5,000. Some level of competition is recommended, but not required.
- Place calls to 1-3 qualified firms or individuals describing the desired services. Request prices, schedules, and qualifications.
- Make the purchase based on the agency’s inquiries, experience, and knowledge of the market to obtain the highest-quality product at the lowest price.
- Suggested dollar limit of $20,000.
- Prepare a written solicitation document including, at a minimum: a description of the required services, the project schedule, a request for the consultant’s qualifications and costs/fees, and due date for the responses.
- Send the solicitation to 3-5 firms selected from the appropriate consultant roster or other list and ask for proposals.
- Evaluate the proposals and negotiate a contract with the lowest responsible bidder.
Formal Competitive Bidding
- Suggested for all contracts over $20,000.
- Prepare a formal solicitation document, typically an Invitation to Bid. Describe all the project requirements in order for proposers to understand what the agency needs and how the responses will be evaluated.
- Publish legal notice in major daily newspapers to notify firms of the upcoming solicitation. Develop a bidder’s list of all firms responding to the solicitation.
- Post the solicitation document on the agency website (optional).
- Develop score sheets to be used by evaluators.
- Send the solicitation document to at least six firms, or notify at least six firms that the document is available at the agency website. If less than six firms are contacted, document the reasons.
- Conduct a pre-proposal conference, if required, and provide answers to bidders’ questions via addenda.
- Require sealed bids and a public bid opening. Date- and time-stamp all proposals received.
- Evaluate proposals according to the score sheets, using at least three evaluators. Interview the top finalists, if desired.
- Negotiate a contract with the lowest responsible bidder.
The state Department of Labor and Industries (L&I) considers some service contracts, such as HVAC maintenance or road striping, to be public works subject to prevailing wages no matter which procurement process was actually used to procure that work.
Some other services fall into a gray area between purchased services and public works. Purchased service contracts generally require much less paperwork than public works contracts, but if a particular contract is in that gray area, the conservative approach is to consider it a public works contract.
If you are uncertain whether a particular task should be considered a public work for the purposes of prevailing wages under chapter 39.12 RCW, see L&I’s Prevailing Wage Policies and Determinations or contact the department directly (pw1@Lni.wa.gov or 1-855-545-8163).
If a purchased service requires prevailing wages to be paid, it may also be a good idea to require retainage and performance and payment bonds to protect against potential claims from workers not paid prevailing wages. However, state law is unclear on this issue. As noted by Mike Purdy in When Should Retainage and a Bond Be Obtained?:
- RCW 39.08.010 actually requires a bond for all “work.” Work is fairly broad and could reasonably be interpreted to refer to work subject to prevailing wages that is not a public work.
- RCW 60.28.011 states that retainage is required for all “public improvement contracts.” A “public improvement contract” is not defined. One could make the argument that a public improvement contract […] is the same as a “public work” in Chapter 39.04 RCW, although there is no explicit connection between the two.
Without further clarification from the state, it is up to local agencies to decide whether to withhold retainage and require bonds for these types of projects, depending on the size of the project and the agency’s potential financial liability.
If you are uncertain whether a particular task is subject to prevailing wages, you may browse L&I’s Prevailing Wage Policies and Determinations or contact the department directly. There are also examples in MRSC's Contracting for Services publication.
Practice Tip: If the purchased service requires prevailing wages, the Invitation to Bid or Request for Proposals should include the following information:
- Specifications for the performance and frequency of the service
- Minimum qualifications that the contractor must meet, such as financial capability, experience, language skills, licenses, or equipment
- A statement that prevailing wages are required
- The applicable prevailing wage rates, or the URL address for L&I’s Prevailing Wage Rates for Public Works Contracts with the exact wage publication date and county to use
- Whether or not retainage will be withheld
- Whether or not performance and payment bonds are required
Below are some exmaples of purchased service requests for proposals and invitations to bid:
Purchased Service Contracts Without Prevailing Wages
- Bonney Lake RFP for Utility Bill Printing (2009)
- Bellingham RFP for Fleet Vehicle Towing (2012)
- Port of Tacoma RFP for Beverage/Coffee Service (2014)
- Tacoma RFP for Trailer Repair and Service (2013)
- Longview RFP for Bus Painting (2012)
Purchased Service Contracts With Prevailing Wages
- Shoreline Street Sweeping Contract ITB (2003)
- Bellevue Janitorial Services RFP (2012)
- Sno-Isle Libraries Custodial Services ITB (2012)
For more sample documents regarding purchasing and contracting, see MRSC's Sample Document Library.