If a Mississippi city's only bidder on a road project comes in over budget by more than 10%, can the city negotiate the price down?
Plain-English summary
Natchez sought bids for a roadway construction project under § 31-7-13(c) (estimated costs in excess of $75,000). The first round of bids all came in more than ten percent above the city's allocated funds. The Board rejected those bids, advertised again, and got just one bidder, also over budget by more than ten percent. The city wanted to negotiate that bid down. The question for the AG: can it?
The AG said no. § 31-7-13(d)(iv) provides:
If the lowest and best bid is not more than ten percent (10%) above the amount of funds allocated for a public construction or renovation project, then the agency or governing authority shall be permitted to negotiate with the lowest bidder in order to enter into a contract for an amount not to exceed the funds allocated.
The Mississippi Supreme Court in Hemphill Constr. Co., Inc. v. City of Clarksdale, 250 So. 3d 1258 (Miss. 2018), held this language is unambiguous. A bid more than ten percent over allocated funds takes the city outside the negotiation authority entirely. In Hemphill, both bids exceeded the allocated funds by more than ten percent, and the Supreme Court ruled the city had no authority to negotiate with either bidder.
Two clarifications:
- The number of bidders is irrelevant. Sole bidder, three bidders, ten bidders: the only thing that matters is whether the lowest bid is within ten percent of allocated funds.
- You can't bring it under ten percent through negotiation. The city had asked whether negotiation could bring the bid below the ten-percent threshold and then proceed. That's not what the statute says. The threshold is checked against the bid as submitted, not as it might be after negotiation.
If the city wants the project, it has only a few options: increase the allocated funds, redesign the project to be cheaper, rebid with revised specifications, or shelve it.
What this means for you
If you are a Mississippi city attorney, county attorney, or public agency counsel
Pay close attention to the ten-percent threshold. Every public construction or renovation bidding cycle should include:
- A clear statement of allocated funds. Document the appropriation; this is the denominator for the ten-percent calculation.
- A bid analysis at submission. Calculate (lowest bid) ÷ (allocated funds). If under 110%, you can negotiate within the allocated cap. If over 110%, you cannot negotiate. Period.
- A decision tree if over 110%: Increase allocation (if funds available), redesign and rebid, or cancel the project.
- No "negotiating into compliance." You can't ask the bidder to reduce their bid below the threshold and then sign. The Hemphill ruling is clear.
If you are on a board of supervisors or city council
Resist pressure to find a creative path around the ten-percent rule. The statute is mandatory. Hemphill is on point. Try to fix the underlying problem (funding, scope, market timing).
If you are a contractor bidding on Mississippi public construction work
Calibrate carefully. If your competitive bid lands more than ten percent above the project's allocated funds, the public agency has no negotiation authority and must reject your bid. You can't expect to negotiate down. Submit a tight bid or accept that the project may be rebid with revised scope.
If you are a public engineer or project manager developing scope
The allocated-funds estimate matters. If your estimate is too low and the market lands above 110% of the estimate, the project stalls. Build in realistic contingency, validate with current market data, and align with the allocation timeline.
If you live in a Mississippi city watching a public project stall after bidding
The ten-percent rule explains a lot. When bids come in too high, there is no negotiation around it. The city must either find more money, change the project, or wait. This is a feature of Mississippi's public-purchasing law, not a bureaucratic glitch.
Common questions
Q: What is § 31-7-13?
A: Mississippi's public-purchasing statute for commodities, equipment, and construction over the threshold dollar amount. Subsection (c) sets formal bidding requirements; subsection (d) addresses bid evaluation and negotiation.
Q: What does "allocated funds" mean?
A: The amount the public agency has appropriated for the project. It's set before bidding and is the reference for the ten-percent calculation.
Q: Why is ten percent the threshold?
A: The Legislature set this margin as the limit within which negotiation is permitted. Beyond ten percent, the Legislature determined that the better path is to start over with revised specifications or revised funding, not to keep the existing bidder and try to talk them down.
Q: Could the agency just allocate more money and then negotiate?
A: If the agency increases the allocation so that the bid is now within ten percent of the new allocation, then yes. But that requires actually finding and appropriating the additional funds, not just paper-shuffling.
Q: What about a sole bidder?
A: § 31-7-13(d)(iv) doesn't distinguish based on the number of bidders. The ten-percent rule applies the same whether there's one bidder or many.
Q: What did Hemphill hold?
A: The Mississippi Supreme Court held that § 31-7-13(d)(iv) is unambiguous. The City of Clarksdale could not negotiate with bidders whose bids exceeded ten percent of allocated funds, even when the city was offering to obtain additional funds to match the bid. Negotiation authority simply doesn't exist outside the ten-percent window.
Q: Are there alternatives to bidding for some projects?
A: § 31-7-13 has carve-outs for specific situations (sole-source procurement, emergency procurement, certain professional services). Construction projects of this size generally must go through formal bidding. Consult counsel for specific exceptions.
Background and statutory framework
§ 31-7-13 is the bedrock of Mississippi public purchasing for goods and construction. Subsection (c) sets formal bidding requirements for purchases over a defined threshold; subsection (d) governs bid evaluation, including the negotiation authority in subsection (d)(iv).
Subsection (d)(iv) contains a permission and a constraint:
- Permission: if the lowest bid is within ten percent of allocated funds, the agency can negotiate with the lowest bidder to enter a contract not exceeding the allocated amount.
- Constraint: if the lowest bid exceeds ten percent over allocated funds, no negotiation authority.
The Mississippi Supreme Court in Hemphill decisively settled the interpretation. The ten-percent threshold is a hard cutoff, not a negotiable target. The Court rejected an argument that conditional contracts (depending on additional appropriations) could work around the rule.
This is part of a broader Mississippi commitment to procurement integrity. Public agencies are bound by statutory procurement procedures, and creative workarounds are disfavored.
The 2023 Callaway opinion is a straightforward application of Hemphill to a new fact pattern (sole bidder). The number of bidders doesn't change the rule.
Citations and references
Statutes:
- Miss. Code Ann. § 31-7-13(c) (formal bidding requirements for purchases over threshold dollar amount)
- Miss. Code Ann. § 31-7-13(d)(iv) (negotiation authority limited to bids within ten percent of allocated funds)
Case:
- Hemphill Constr. Co., Inc. v. City of Clarksdale, 250 So. 3d 1258 (Miss. 2018) (Mississippi Supreme Court holding that § 31-7-13(d)(iv) is unambiguous; no negotiation authority for bids exceeding ten percent of allocated funds)
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/11/B.Callaway-November-28-2023-Negotiations-with-Sole-Bidder.pdf
Original opinion text
November 28, 2023
Bryan H. Callaway, Esq.
Attorney, City of Natchez
Post Office Box 21
Natchez, Mississippi 39121
Re: Negotiations with Sole Bidder
Dear Mr. Callaway:
The Office of the Attorney General has received your request for an official opinion.
Background
According to your request, the city of Natchez ("City") is seeking to obtain a contractor to construct a roadway. The estimated costs and funds allocation is in excess of $75,000, and the City requested bids pursuant to Mississippi Code Annotated Section 31-7-13(c). All of the initial bids for construction were in excess of the funds allocated for the project by more than ten percent. The Board of Aldermen rejected the bids and agreed to advertise and request bids a second time. Only one contractor bid on the project following the second request for bids, but that bid also exceeded the funds allocated by more than ten percent.
Question Presented
May the City negotiate with a contractor that is the sole bidder even though the bid is in excess of ten percent of the funds allocated?
Brief Response
The City may only negotiate with the lowest and best bidder if the bid is not more than ten percent above the amount of funds allocated for the project.
Applicable Law and Discussion
Section 31-7-13(d)(iv) provides:
If the lowest and best bid is not more than ten percent (10%) above the amount of funds allocated for a public construction or renovation project, then the agency or governing authority shall be permitted to negotiate with the lowest bidder in order to enter into a contract for an amount not to exceed the funds allocated.
(emphasis added.) The state supreme court has held that this subsection "is unambiguous. In its plainest terms, the statute provides that an agency or governing authority (here, the City) shall be permitted to 'negotiate . . . to enter into a contract' if the 'bid is not more than ten percent (10%) above the amount of funds allocated' for the project." Hemphill Constr. Co., Inc. v. City of Clarksdale, 250 So. 3d 1258, 1263 (Miss. 2018). In Hemphill, the city of Clarksdale received two bids, both of which exceeded the project's allocated funds by more than ten percent. Id. at 1260. Clarksdale conditionally awarded the contract to the lower bidder dependent upon the city's obtaining additional funds to match the bid. Id. The Court held that "[b]ecause both bids exceeded ten percent of the funds allocated, the City had no authority to 'negotiate . . . to enter into a contract' with either bidder." Id. at 1264.
Your request suggests that the City could potentially use Section 31-7-13(d)(iv) to negotiate with a bidder if the bid is more than ten percent above the amount of funds allocated, but the parties are able to negotiate to less than ten percent of the funds allocated. However, that is not what the statute provides. Section 31-7-13(d)(iv) only applies if the lowest and best bid is not more than ten percent above the funds allocated for the project. Further, the number of bidders is irrelevant to the applicability of the provision. Based on the plain language of Section 31-7-13(d)(iv) and in accordance with the holding in Hemphill, the Board may only negotiate with the lowest bidder if the bid is "not more than ten percent above the amount of funds allocated."
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General