When a SD local government wants to piggyback on another local government's competitive bid under SDCL 5-18-18, can it change the specifications, buy a newer model, ignore a trade-in that was part of the original bid, or convert a trade-in bid into a cash-only purchase?
Plain-English summary
SD local governments are generally required to use competitive bidding for large purchases under SDCL 5-18-1 through 5-18-17. SDCL 5-18-18 carves out an efficiency exception: when one local government has competitively bid an item and selected a low bidder, another local government can piggyback on that bid for up to 12 months, buying the same item from the same vendor at the same or lower price, without running its own bid process. The exception saves duplicate paperwork and gives smaller governments the benefit of larger governments' bid leverage.
Mr. Christiansen wanted to know how flexible the exemption was. Four scenarios. Can the piggyback government change the specs at all? Can it substitute a newer model that came out since the original bid? Can it ignore the trade-in that was part of the original bid by trading in different equipment? Can it skip the trade-in entirely and pay cash?
The 1994 AG worked through them with a single guiding standard: substantial compliance with the original bid. Fonder v. City of Sioux Falls says competitive bidding statutes exist to prevent favoritism and corruption and should be construed against erosion through exception. The piggyback exemption must be read narrowly. The Gridley/Fenske "material variance" test asks whether the difference between the original bid and the new purchase gives one bidder a substantial advantage; if it does, the variance is material and the exemption is unavailable.
Applying that standard:
Spec variations: only non-material ones are allowed. The piggyback purchase must look like what the original bid procurement would have looked like if substantial compliance had been demanded at the time. Even substantial compliance is a high bar in this context.
Newer-model substitution: allowed only if the new model has no material variance from the original specifications. Many manufacturers release "new" models that are functionally indistinguishable from the prior model; those substitutions are fine. Models with materially different specs do not qualify.
Trade-in mismatch: never allowed. Trade-in specifications are inherently item-specific. Two trade-ins are never the same. Allowing a piggyback to use a trade-in bid for different trade-in equipment would effectively be a new contract on different terms.
Cash-out conversion: also not allowed. If the original bid was structured as a net bid (original price minus trade-in allowance equals net), the piggyback government cannot strip the trade-in and pay cash on the original gross. That would be a different contract.
The opinion adds a structural observation: SDCL 5-18-18 was designed for standard-grade commodity purchases that genuinely could be common across multiple governments. It was not designed for large customized equipment buys where trade-ins, configurations, and service contracts are entity-specific.
Currency note
This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL chapter 5-18 has been amended multiple times since 1994. Modern SD procurement also draws on cooperative-purchasing statutes that were added later (state cooperative contracts, federal cooperative programs like GSA Schedule). The piggyback rule and its limits may now sit within a broader cooperative-purchasing framework. Verify the current statute and any current administrative rules before relying on this opinion for any modern procurement decision.
What the opinion meant at the time
For SD municipal purchasing officers in the 1990s, the opinion put bright lines around what looked like a flexible shortcut. Piggyback could save time on a clean spec match; it could not be used as a substitute for fresh competition when the purchase departed materially from the original.
For SD county and school district business managers facing tight purchasing windows, the opinion confirmed that piggybacking a standard-equipment bid (a fleet pickup, a copier, a baseline software license) was within bounds. Piggybacking a heavy-equipment bid with a different trade-in was not.
For SD vendors who had won a competitive bid, the opinion explained why other local governments would call asking to buy at the same price. The vendor could fulfill those requests, but had to be careful: a substitution that involved a different trade-in or different specs would have to go through its own bid process at the second government.
For SD city attorneys advising purchasing decisions, the opinion gave a usable test: ask whether the difference between the original bid and the proposed piggyback purchase would, if presented as a bid variance during the original procurement, have given the winning bidder a material advantage over the other bidders. If yes, the piggyback is unavailable.
For SD taxpayers, the opinion preserved the integrity of competitive bidding by preventing local governments from using the SDCL 5-18-18 shortcut to award sweetheart contracts.
Common questions
Q: What is the SDCL 5-18-18 piggyback exemption?
A: A local government can buy from the low bidder of another local government's (or the state's) competitive bid within 12 months of that bid award, at the bid price or less, without having to run its own competitive bid for the same item.
Q: Can the piggyback government change the specs?
A: Only in non-material ways. The change has to satisfy "substantial compliance" with the original specifications.
Q: What is a "material variance"?
A: Per Gridley v. Engelhart, a variance is material if it gives one bidder a substantial advantage or benefit not enjoyed by other bidders. The test is comparative: how would this variance have looked to the other bidders during the original procurement?
Q: Can the piggyback government buy a newer model?
A: Yes, if the newer model has no material variance from the original specifications. Many manufacturers refresh model numbers without changing meaningful specs; those are fine. Real spec changes are not.
Q: What about a trade-in?
A: Trade-ins are always materially specific. The first government's trade-in is not the second government's trade-in. The exemption cannot be used to piggyback a trade-in bid for a different trade-in.
Q: Can the piggyback government just pay cash and ignore the trade-in line in the original bid?
A: No. Removing the trade-in changes the deal's structure. The original bid was a net bid; converting it to a gross cash bid is a different contract.
Q: Why is SDCL 5-18-18 read so narrowly?
A: Fonder v. City of Sioux Falls says exceptions to competitive bidding statutes should be construed narrowly because the statutes exist to prevent favoritism, fraud, and corruption. A wide reading of the exception would undermine the bidding regime.
Q: What kinds of purchases does SDCL 5-18-18 work well for?
A: Standard-grade commodity purchases where the same item is genuinely useful across multiple governments. The opinion identifies this as the intended use case.
Background and statutory framework
South Dakota requires competitive bidding for local government purchases above a statutory threshold. The framework is SDCL 5-18-1 through 5-18-17. The bidding requirement exists, as Fonder v. City of Sioux Falls explains, "to guard against favoritism, improvidence, extravagance, fraud and corruption." The SD Supreme Court treats the bidding statutes as a bulwark, not a procedural detail, and reads exceptions narrowly.
SDCL 5-18-18 is one of the exceptions. It lets a local government skip its own bid process when a recent competitive bid from another local government (or the state) covers the same item, the same vendor is still willing to sell, and the price is no higher than the original bid. The legislative goal was efficiency: a small city should not have to re-bid a standard pickup truck if a larger neighboring city just bid one.
The "material variance" test traces to Gridley v. Engelhart and was re-articulated in Fenske Printing Co. v. Brinkman. A variance is material if it would have given the winning bidder a substantial advantage over other bidders during the original procurement. The test imports a fairness check into the piggyback exception: the piggyback purchase has to be close enough to the original that the original bidding process would have produced the same result for the same vendor.
The 1994 AG synthesized this case law into the four-scenario framework. The structural takeaway: SDCL 5-18-18 is a commodity-purchase tool, not a way to make large customized purchases without fresh bidding. Trade-ins, in particular, are not commodity matters; they are entity-specific and they invalidate any piggyback attempt that would change the trade-in arrangement.
Citations and references
Statutes:
- SDCL 5-18-1 through 5-18-17 (competitive bidding framework)
- SDCL 5-18-18 (piggyback exemption)
Cases:
- Fonder v. City of Sioux Falls, 71 N.W.2d 618 (S.D. 1955) (narrow construction of bidding exceptions)
- Fenske Printing Co. v. Brinkman, 349 N.W.2d 47 (S.D. 1984) (substantial compliance test)
- Gridley v. Engelhart, 322 N.W.2d 3 (S.D. 1982) (material variance test)
Source
Original opinion text
OFFICIAL OPINION NO. 94-08
Purchasing items competitively bid by other government entities
Dear Mr. Christiansen:
You have requested an official opinion from this Office regarding the following factual situation:
FACTS:
In some instances, the specifications relating to the purchase of a piece of equipment are lengthy and very detailed. The specifications correspond to the needs of the purchaser, which generally vary from entity to entity. To accommodate its specific needs, a subsequent purchaser may desire to make a number of changes in specifications.
SDCL 5-18-18 allows one local government entity to enter into a contract with the lowest responsible bidder of an item competitively bid by another government for up to twelve months after the date of the contract award. However, certain industries experience rapid changes in technology. The models of certain products, such as computers, are often updated and changed within a few months of a bid award. The newer models may be cheaper, better and faster than the models they replaced.
One of the specifications involved in bidding is a trade-in. A trade-in simply means that an entity wants to trade in an item that is no longer needed to help reduce the cash necessary to purchase the new items. A bid proposal incorporating a trade-in typically begins with an original bid amount, less the trade-in allowance established by the bidder, resulting in the net bid amount.
To illustrate, assume government Y desires to purchase item B by trading-in item A. Three bidders submit proposals.
Original bid amount of item B
| Bidder 1 | Bidder 2 | Bidder 3 |
| $200,000 | $125,000 | $150,000 |
Less: Trade-in allowance of item A
Net bid price
Government Y would award the contract to Bidder 1, as the lowest responsible bid.
Taking the circumstances of the above trade-in a step farther, in some instances the original bid amount of the lowest responsible bidder (Bidder 1), is utilized by other entities for cash outright purposes.
Based on that factual scenario, you have asked the following questions:
QUESTION NO. 1: If one entity awards a contract based on the bid of another entity, may the item acquired vary from the specs of the original bid? If so, is there a limit to the amount of changes allowed?
QUESTION NO. 2: May an entity utilize another entity's bid to purchase a model other than the one originally purchased by the first bidder if the alternative model still meets the original specifications?
QUESTION NO. 3: If one entity accepts a bid net of a trade-in allowance, may another entity utilize the accepted bid if it has a similar item to trade-in? If so, may differences in trade-in allowance be accepted in such circumstances?
QUESTION NO. 4: If one entity accepts a bid net of trade-in allowances, may another entity contract with the successful bidder by utilizing the original bid amount for a cash outright purchase?
IN RE QUESTION 1:
SDCL 5-18-18 provides in pertinent part:
The provisions of §§ 5-18-1 to 5-18-17, inclusive, may not be construed to regulate or apply to . . . the purchase by one local government entity from the lowest responsible bidder of an item competitively bid in the previous twelve months by itself or another local government entity or the state at the bid price or less. . . .
The South Dakota Supreme Court in Fonder v. City of Sioux Falls, 71 N.W.2d 618, 620 (S.D. 1955) noted that the legislative objective underlying the requirement of competitive bidding by public corporations is "to guard against favoritism, improvidence, extravagance, fraud and corruption." The Fonder court quoted American Jurisprudence with approval:
Since they are based upon public economy and are of great importance to the taxpayers, laws requiring competitive bidding as a condition precedent to the letting of public contracts ought not to be frittered away by exceptions, but, on the contrary, should receive a construction always which will fully, fairly, and reasonably effectuate and advance their true intent and purpose, and which will avoid the likelihood of their being circumvented, evaded, or defeated.
Fonder, 71 N.W.2d at 620-621, quoting, 43 Am.Jur., Public Works and Contracts, 26. Given that Supreme Court standard, exceptions to competitive bidding laws must be narrowly construed by this Office.
Under the Fonder standard, it is my opinion that a governmental entity entering into a contract on the basis of the lowest responsible bid proposed to another government entity, as provided in SDCL 5-18-18, has only limited authority to vary its specifications from those of the original bid. It must achieve "substantial compliance" with the original bid letting, the same standard that the governing body would have applied in selecting a lowest responsible bidder had the later contract been the result of a fresh competitive bidding process. Fenske Printing Co. v. Brinkman, 349 N.W.2d 47, 48 (S.D. 1984). The test approved by the court in Fenske to assess "substantial compliance" is whether the variance between a bid and the underlying specifications are "material." Gridley v. Engelhart, 322 N.W.2d 3, 8 (S.D. 1982). Materiality occurs when the variance gives one bidder a substantial advantage or benefit not enjoyed by other bidders. Id.
The answer to your first question is that to take advantage of the statute, the variance between items purchased by way of an original and then a subsequent bid may not be "material" and that the new item must be in "substantial compliance" with the specifications set out in the original bid letting.
IN RE QUESTION 2:
The answer to the second question is "yes," again assuming that the different model's specifications contain no "material" variance from the original bid specifications. In answering this question, I am aware that many manufacturers routinely offer newer models that actually represent only negligible product changes. As long as the item purchased from the lowest responsible bidder contains no material variance from the original specifications, the second government entity may purchase the alternative model item from the low bidder.
IN RE QUESTION 3:
It is my opinion that a governing entity may not utilize the exception under SDCL 5-18-18 to purchase an item from another entity's low bidder when the original bid specifications included a trade-in allowance. In my opinion, the trade-in specification represents a material specification which, by its very nature, must be modified for the subsequent purchase. Simply speaking, two trade-ins are never the same and, consequently, it would be a contravention of the bid laws to allow a secondary entity to piggyback a bid when that initial bid specification included a specified trade-in provision.
IN RE QUESTION 4:
Given my answer to Question 3, above, the clear answer to your fourth question is, "No." As stated in the answer to Question 3, a trade-in allowance is a material specification, so the exception under SDCL 5-18-18 cannot be utilized when the secondary entity intends no trade-in. It is my opinion that the SDCL 5-18-18 exception is intended to be implemented by governing bodies purchasing quantities of standard grade items. Obviously, that is not the situation with large equipment where most such bids include a trade-in allowance for a specific piece of equipment. The statutory exception is a narrow one and was not intended to allow governing bodies to circumvent the bid laws just because the item or a similar item has been purchased by another governmental entity through the competitive bid process.
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