October 28, 1174
Mr. C iller, DirOoter
'anaaiL ring Diviadto
Southre t Floried Water
r. 0. NlB 457
Brooklville, florida 35512
Stsried to rean h you by tflbhO e, but was uable to do so,
so I eaolMsSag a is of our opiiates ~ the matter of
bidA for driXl ig ai9 whish Jiastl a provision for a oest
of living inarase.
It you will send m the proposed bid sp..ifisions being
advertised, I vwil semi the am an a dd t nssmeaqr
wording ommA--g the coast of living increase provisios.
I suggest that yra task to NMb Vea ob oesaing whether the
mw ium inmxae should be $4, l0t, 15% or 20m.
If you have aw or .lcta s up a osmemaaing the on-
clesed opeAsn, pleame let as hbr a yuea.
Tours eray truly,
Iyfor m. aibbms
es Mr. Robert a. Vaf hn
TO: Myron Gibbons
FROM: Rob Williams
RE: Whether SWFWMD can advertisefor bids on a drill rig with
a cost of living increase provision.
DATE: October 18, 1974
The District intends to buy a drill rig but has learned that
due to inflation and due to the fact that it will take approximately
nine (9) months to manufacture the drill rig that the manufacturers
will probably require a cost of living provision in any contract to
take care of cost increases which arise during the nine (9) month
period needed for production.
Can the District advertise for bids on a drill rig and include
in such advertisements a provision for a cost of living increase?
Yes, as long as a definite cost of living cap is included in
The purposes of bidding provisions generally are to secure
economy in the construction of public works and the expenditures
of public funds for materials and supplies needed by public bodies;
to protect the public from collusive contracts; to prevent favor-
tism, fraud, extravagance, and improvidence in the procurement of
these things for the use of the State and its local self-governing
subdivisions; and to promote actual, honest, and effective competition
to the end that each proposal or bid received and considered for the
construction of a public improvement, the supplying of materials for
public use, etc., may be in competition with all other bids upon the
same basis, so that all such public contracts may be secured at the
lowest cost to tax payers. See 64 Am. Jur. 2d, Public Works And
An advertisement for bids which is drawn so as to accomplish
the above purposes will not be held invalid. See 10 McQuillen On
Municipal Corporations 29.52. In short, the advertisement should
be clear, definite, reasonable, and identical to all bidders so as
to require competit ion on every material item given. Id.
a ^ 74-99
Little authority has been found with respect to the
inclusion of a cost of living provision in an advertisement
for bids on public contracts. However, in Attorney General's
Opinion 53-30, the Attorney General of Florida was presented
with the following question:
May Dade County, under Section 125.08, Florida
Statutes, 1951, accept a bid for supplying it
with petroleum products, which is not a firm
bid but one having attached thereto an "escalator"
or "posted market price" clause, thereby coming
subject to an increase or decrease in the market
price of the products upon the dates of actual
In answering the question, the Attorney General noted that the
statute required the acceptance of a bid from the "lowest respons-
ible bidder" unless all bids are rejected, he then queried "does
the competitive bidding statute contemplate an arrangement whereby
the amount paid by the county fluctuates and is determined at some
future date now uncertain, by the then market price of the commodity?"
He further noted that one of the basic purposes for competitive bid-
ding is that the political subdivision concerned may be able to
determine with finality the extent of its financial obligation
required for the purchase of goods or products. Finally, the Attorney
We recognize that a contract between private
individuals or firms containing "escalator"
or "posted market price" clauses may be bind-
ing, as well as desirable in this age of a
highly inflated economy, particularly where
the contract extends over a considerable
period of time. However, we are here con-
cerned with the expenditure of public funds
and confined by statutes as construed by
Court decision, relating to how they may be
properly expended. Definitness in the amount
of the bid in the contract price is an essential
requirement of the competitive bidding statute.
Consequently, I am not in a position to advise
that the Board is authorized to accept bids and
enter into contracts which contain "escalator"
or "posted market price" clauses. The question
is accordingly, answered in the negative.
More recently our present Attorney General has opined that the
rationale of AGP 53-30 is still applicable where a school board
desire to accept bids for the supply of petroleum products and where
such bids would contain an "escalator" clause.
^ ~ 14100
There is some question in my mind as to whether the District
has to comply with competitive bidding requirements at all. See
Attorney General's Opinion 74-7, where our present Attorney General
concluded that the Captiva Erosion Prevention District, not being
a state agency or political subdivision within the meaning of
Section 287.26 Florida Statutes and not having any other statutory
requirement for competitive bidding it is not required to take
competitive bids on purchases and contracts. Nevertheless, whether
the District comes under Chapter 287 or not, it is my opinion that
the rationale of Attorney General's Opinion 53-30, cited above,
logically infers that the primary objection to escalator clauses
in public contracts is the lack of finality and indefinity in the
amount of the contract price. Accordingly, it would logically follow
that if an advertisement for bids contained in it a maximum cap on
the amount of any cost of living increase then the requisite finality
would attach and the competitive purpose of the advertisement for
bids would not be frustrated.
Based on the above discussion, I believe that the District
can advertise for a drilling rig and accept a contract with a cost
of living clause if there is a definite provision for the maximum
cost of living increase to be allowed. Moreover, such an advertise-
ment for bid should be drafted in such a way that the competitive
nature of the bidding is in no way undermined.