In the Drew County case, a public hospital authority in Arkansas incurred more than $100,000 in design fees from the design-builder before realizing its design-build contract was prohibited by Arkansas competitive bidding statutes.  Id. at 5-6.  The hospital refused to pay the design-builder, arguing that it was neither a licensed contractor nor a licensed design professional.  Id. 

The court concluded the design-builder did not need a contractor’s license because it had yet to bid on construction work and its preliminary design work was not within the scope of the licensing statute.  Id. at 7-10.  The Court did note, however, that the design-builder was practicing architecture and engineering without a license.  The design-builder was nevertheless allowed to recover its fees because the licensing laws did not prohibit recovery of fees for services performed without a license. 

The lesson from this case is that public agencies should not act without knowing the scope of their statutory authority.  Most states and local governments have been relying on competitive bidding for decades.  This requires separating design and construction services and awarding construction contracts to the lowest bidder.  Design-build competitions, which allow agencies to consider factors other than price, are not allowed under traditional competitive bidding laws.

Case Cite:  Drew County v. Joh Pas Murray Company, 2011 WL 1533434 (E.D. Ark. 2011).