By John McGill, Attorney At Law, Archer Norris
Bidding on public works projects is usually a one shot deal: you are either the low bidder or you aren’t. Public agencies are required to take the lowest responsible bidder whose bid is responsive. Being responsible in the jargon of the Public Contract Code means being capable of performing the work based on your past experience with similar projects. Typically there is a pre qualification process that eliminates this requirement. This doesn’t always apply to subcontractors but for the General Contractor, this requirement can be predetermined.
Submitting a responsive bid is the second criteria and while it seems that this should be fairly straightforward, in practice it often allows the second or even third low bidder to get another bite at the apple by challenging the apparent low bidder’s bid. Sometimes it works; sometimes not. In a recent case, Bay Cities Paving and Grading v City of San Leandro, the court rejected the second low bidders protest and in the process reviewed and clarified what needs to happen in order for the challenge to be successful.
Bay Cities Paving was the second low bid on a pedestrian interface project in downtown San Leandro. The City provided a bid package- the “Contract Book”- for the project that included various requirements for the project as well as the required documents that had to accompany the contractor’s bid. One of those documents was a Bid Bond that had to be submitted along with the bid. The Bid Bond assures that if the contractor submits the low bid but refuses to accept the award of the contract, the public owner can use the Bid Bond amount to offset, in whole or in part, the difference between the next low bid and the refusing contractor’s bid.
In this case, the low bidder, Gallagher & Burk (“G&B”), forgot to include the first page of the Bid Bond, although it did include the second page with the signatures of the contractor and the contractor’s Surety that issued the Bond. Bay Cities wrote a protest letter to the City and insisted that the omission rendered the G&B bid non-responsive. Therefore, Bay Cities, as the second low bidder, was entitled to the award of the project. The City disagreed and rejected the protest.
Bay Cities went to court to obtain a temporary restraining order. The court heard the motion and denied it. Bay Cities then filed a petition for Writ of Mandamus, basically a demand that the court order the City not to award the contract to G&B but rather award it to Bay Cities. The court heard the Petition and rejected it, finding that the City acted reasonably and that the award of the contract was proper and within the City’s discretion. Bay Cities filed an appeal.
In rejecting Bay Cities’ arguments the appellate court reviewed how bid challenges work and what is required for them to be successful.
First, a bid must substantially conform to the bid document requirements. A public agency has discretion to overlook certain “inconsequential deviations” but it cannot ignore deviations that are “capable of facilitating corruption or likely to affect the amount of bids or the response of potential bidders”. This last proviso is where most challenges to the low bid will come; when the bid allows the submitter an advantage that other bidders do not have.
The key case of Valley Crest v City Council involved a landscape contract that required the contractor to self perform a maximum of 50% of the work. The low bidder identified that it would self perform 83% of the work. When the next low bidder, Valley Crest, challenged the award, the low bid contractor resubmitted a bid showing that it would self perform less than 50%. The City accepted the revised bid and Valley Crest went to court. On appeal, the Court sided with Valley Crest.
The Valley Crest court held that the non responsive bid allowed the contractor an advantage that no other contractors bidding the project had: they could pull their bid based on mistake and suffer no consequences (they would not need to offer the bid bond) or they could keep the contract and perform the work. No other contractor had that same opportunity. Because it had an unfair advantage at bid time, the bid had to be rejected and the City could not waive the deviation.
In the Bay Cities case, the court reviewed what advantage the omitted first page gave the low bidder and also whether the City had acted within its discretion to waive the irregularity. The court found that the bid bond form was complete because it contained all of the necessary information. Furthermore, the Surety had written the City to assure it that the bond was in place and would be honored if the contractor refused to perform.
The court also found that the City acted properly and within its discretion because it reviewed all of the factual issues- the bid bond as presented, the letter from the Surety, its own evaluation of the bid bond’s enforceability- and then made its decision. More to the point, the City determined, as did the Court, that the omission of the first page of a standard form that was included in the Contract Book did not amount to a unfair advantage to the low bidder. As long as the Bond was enforceable, G&B did not obtain an unfair advantage at bid time.
Challenging the low bid of a competitor is a worthwhile endeavor under some circumstances. For example, if the work to be performed requires a specific license and your competitor does not have the license, then a challenge could be successful. Similarly, if your competitor did not list work that you know would amount to more than 1/2 of 1% of the bid (all work over this threshold must be listed), then they must self-perform that work. If you know that they cannot for some reason, then a challenge might be successful.
Finally, if the low bid does not include all of the required bid items or is otherwise not compliant with the bid form, then write the letter and challenge the bid. Be sure of your facts though because court challenges are expensive and time consuming. By the time you are finished with the legal proceedings the project might be done as well, so weigh the costs and the benefits before you try for that second bite.
John McGill is an attorney with Archer Norris, Walnut Creek, and can be reached at 925-930-6600
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