- Public/private sectors
- Difference in bid rules
- Bidding statutes
- Bid document addendum
- Purpose of bidding statutes
- Influence of the federal policy
- Requirements of the United States Code
- Public owner’s compliance with bidding rules
- Material impropriety
- Factual determination of low bid
- Unit prices
- Written price extensions
- Bid total
- Alternate bids
- Responsive bidder
- Responsible bidder
- Late bids
- Rejection of all bids
- Irregularities and informalities
- Bidder’s property right to the contract
- Bid protests
- Successful protests
- Right to reject all bids not absolute
Public and Private Sector Bidding
Bidding practices of the public and private sectors of the industry differ tremendously. The term public in this context means that the construction work is financed by public funds in the form of tax dollars or the proceeds from the sale of municipal, state, or federal bonds.
Public and private work have different bid rules. Public construction contracts are advertised and let in accordance with the bidding statutes and other legislatively mandated rules of the particular governmental entity that is paying for the construction work. For instance, when the work is financed with federal funds, the laws and regulations promulgated by federal agencies and bodies govern the process of advertising and awarding construction contracts. Similarly, state, county, and municipal governments have statutes and regulations that govern when their funds are used to pay for the cost of the work. In addition, special governmental or quasi-governmental bodies such as sewer or rapid transit districts are often established by special enabling legislation. The enabling legislation usually provides definitive rules for advertising and awarding the construction contracts required to carry out the mission of the particular special body involved.
Unlike public owners, private owners can establish whatever rules that they want. They also can change the rules at will with the result that these rules are not necessarily observed. Although the public owner has the ability to set particular rules and to change them by issuing an addendum to the bidding documents, this power is severely regulated. A bid document addendum is a modification to the bidding documents formally issued by the owner to all holders of bidding documents before bids are received. In the public sector, there must be a reasonable time period from the issue date of the last addendum issued and the date of the bid opening to ensure that all bidders have sufficient time to reflect properly the import of the addendum in their bids. Bidders are required to list on the bid form all addenda received for their bids to be considered responsive. Failure to list addenda may result in the bid being rejected.
In the private sector anything can happen, whereas in the public sector the result will usually be that the job will be awarded to the lowest “responsive” and “responsible” bidder. These terms have important special meanings that will be discussed later in this chapter.
Public Bidding Statutes
The requirements of the federal, state, and local bidding statutes and resulting regulations make the outcome of the bidding process in the public sector very predictable compared to the private sector. The purposes of public bidding statutes are:
- To protect public funds. In other words, bidding statues are designed to ensure that the public pays the minimum possible price for construction work determined by open competitive bidding.
- To protect and ensure a continuation of the free enterprise system upon which the political and economic structure of the United States is founded.
The public bidding statutes are stringently written and enforced to ensure that public sector construction contracting remains honest. Increasingly, those who violate the rules find themselves subject to both civil and criminal liability. Errant construction companies have been assessed large fines and their owners or officers sent to prison along with the corrupt public officials who have been caught, tried, and convicted of violating the public trust.
Federal Construction Contract Procurement Policy
Because numerous separate statutes regulate the public bidding and contract award process for different public owners, a discussion of specific rules that may apply in a particular case is not practical. However, examining the federal construction contract procurement policy, which is broadly reflected throughout all public construction work in the United States today, will help in understanding the basic principles behind most bidding statutes. The influence of the federal government policy has been enormous, and the federal contracting rules serve as a model for the rest of the public sector. Therefore, understanding the major federal rules will aid in understanding the general requirements of public sector bidding and contract award at most other levels.
The federal rules set forth in the United States Code include the following five broad requirements:
- There must be sufficient advertising time between the first advertisement of the bid and the bid opening so that prospective bidders know about the project and have sufficient opportunity to prepare their bids.
- The bidding documents must be sufficiently clear and detailed to assure free and open competition. The purpose of this requirement is to assure that each bid received represents a price tendered by each individual bidder to construct the identical project.
- There must be a public bid opening and a public reading of all bids received at the date, time, and place stated in the bid advertisement. This requirement ensures that every person present at the bid opening has the opportunity to hear the bid prices tendered by the various bidders. It follows from this requirement that the contents of all the bids received and opened become public knowledge and that any bid received may be examined by any person with a legitimate interest in doing so. It should be noted in connection with this rule that a procurement procedure leading to a negotiated contract is also permitted by the federal rules and is occasionally employed for certain projects. In these cases, there is no public bid opening, and the government does not publicly divulge the contents of the various proposals received. The procedure requiring a public bid opening and a public reading of all bids received and opened is far more common.
- The contract must be awarded to the lowest responsive and responsible bidder whose bid is in the best interest of the government. For contracts other than those awarded on a negotiated basis, this requirement will usually be satisfied by the lowest bid received from a responsible bidder that is fully responsive to the terms and conditions of the bidding documents. The requirement also applies to contracts that are negotiated in that the government is required to award the contract to the bidder whose proposal is determined (price and other factors considered) to be in the best interest of the government.
- All bids may be rejected when rejection is determined to be in the best interest of the government.
When these federal rules are applied to public sector bidding, the usual result will be that the contract is awarded to the lowest responsive, responsible bidder. It matters not that this bidder has no past relationship with the public owner or that the public owner might prefer that another bidder had won the contract. All that matters is that the bidder to whom the job is awarded be the lowest responsible bidder whose bid is responsive to the terms and conditions stated in the bidding documents.
Public Owners’ Actions After Bids Received
To comply with the basic principles just stated, a public owner will normally take a number of separate actions once bids or proposals have been received for a construction project.
A public owner must determine whether there is any material impropriety that would preclude award of a public contract. A material impropriety can be anything that is not proper in either the bidding documents or the bidding process. Examples include such acts as bribery, bid rigging, or offering private clarification of bid document requirements to selected bidders, or anything else that would impugn the integrity of the bidding process. A material impropriety can also include unfair or improper resolution of errors or ambiguities in the bidding documents or in the bids received that make it impossible to be certain that each bid is for exactly the same intended work.
Factual Determination of the Low Bid
A public owner must make a factual determination of the low bid. This is more complicated than simply noting and recording which bid submitted has the lowest dollar figure written in the space for the total bid price. The public owner must also make certain that the bids received include no arithmetic mistakes or discrepancies, or, if such mistakes or discrepancies are found, that the apparent low bid remains low when they are corrected.
The rules governing the determination of the low bid may be set forth in the bidding statutes applying to the project and are usually stated in the bidding documents themselves. One common question is whether the unit price or the written price extension determines the intended bid price for a bid item in a schedule-of-bid-items bid when there is a discrepancy between them. Typically, the rules state that the unit price governs. Also, when the price extensions and lump sum prices in a schedule-of-bid-items bid are totaled, they sometimes do not equal the written bid total. The normal rule in this situation is that the correct total be substituted for the figure written in the bid form and be considered the bidder’s intended bid.
The preceding rules are illustrated by an Alaska case where the State Department of Transportation took bids for grading and drainage work. This project was advertised as a schedule-of-bid-items contract by the Alaska State Department of Transportation. The apparent low bidder was announced at the bid opening, but it was later discovered when the bids were checked that the sixth bidder had made an arithmetical mistake when summing the total of the bid-item extensions. This resulted in an apparent bid total higher than the arithmetical total of all of the bid-item extensions. The Department of Transportation corrected the sixth bidder’s arithmetical mistake, making them the low bidder. Over the original low bidder’s protest, the contract was awarded to the sixth bidder on the basis of the corrected bid. The low bidder filed suit to set aside the award.
The standard specifications governing the bid provided that, in case of discrepancies between prices written in words and those written in figures, the prices written in words would govern and that, in case of discrepancy between unit bid prices and extensions, unit prices would govern. The original low bidder argued that these provisions did not apply since there was no discrepancy in the sixth bidder’s bid between the unit prices written in words or numbers or between the unit prices and the bid-item extensions. The error occurred in the addition of the extensions. The State Department of Transportation argued that if the specifications permitted correcting unit price extensions, the State clearly had the power to correct the addition error in totaling the extensions. The Supreme Court of Alaska agreed that, if the State Department of Transportation was empowered to correct arithmetic errors in bid-item extensions, it was implicitly empowered to correct the arithmetic total of those extensions. Additionally, the court noted that the bid specifications provided that the total of the bid-item extensions was merely for informational and comparative purposes at the bid opening. The unit prices controlled, and the downward correction of the sixth bidder’s bid total was proper.
Alternate bids will be considered in making the factual determination of the low bid if the bid documents provide for alternate bids and include the rules for evaluating alternates. These rules must be such that the determination of which bid is low will be a factual and objective process wherein all bidders are treated equally.
A final point is that the low bid determination cannot be made on a basis different from that indicated in the bid documents. That is, the public owner cannot change the basis expressly stated or implied by the bid documents for determining the low bid and then make a determination on this changed basis. For instance, if after the bids are opened, the owner alters the bid quantities on a schedule-of-bid-items bid to quantities different from the quantities stated in the bid documents, the order of bidders, low to high, may be drastically altered. Such a practice is strictly prohibited.
The preceding point was convincingly demonstrated to this author in the mid-1970s when a division of his company was the low bidder by a narrow margin on a contract for driving eight 20 ft. diameter tunnels through a railroad embankment. Each tunnel was approximately 300 feet long, and payment was to be made on the basis of a unit price per foot of tunnel actually driven and measured for payment. The bid quantity for the tunnel excavation bid item was stated to be approximately 2,400 feet.
The bid schedule contained one lump sum bid item for mobilization and seven other unit-price bid items, all of them for minor work except for the tunnel excavation bid item, which constituted more than 95% of the work of the project. The specified contract duration was two years. The contract stated that after the expiration of one year, the owner, a medium-sized city, could elect to delete one of the eight tunnels from the contract even though bids were to be submitted for constructing all eight tunnels. This fact resulted in individual bidders distributing fixed indirect costs and anticipated job profit to the individual bid items in a highly variable manner.
At a meeting the day after the bid opening attended by the city engineer, the city attorney, and the author, the city engineer announced that he had determined that, if the city decided after the first year of construction to delete one of the tunnels, which the city engineer considered to be likely, the author’s company would become the third bidder on the basis of seven tunnels even though we were the low bidder on the basis of the as-advertised eight tunnels. The city engineer then indicated his inclination to award the construction contract on the basis of the seven-tunnel scenario. Before I had an opportunity to voice my objection, the city attorney interrupted, advising the city engineer in no uncertain terms that such an act on the city’s part would be illegal and would not receive the support of the city attorney’s office. The matter was thereupon immediately dropped, and the discussion shifted to details germane to award of the contract on the basis of our bid. Bids for public work must be evaluated on the basis advertised in the bid documents, not on some other basis.
Responsive and Responsible Bidders
The public owner must make a separate determination that the low bidder is both a responsive bidder and a responsible bidder. These terms sound like much the same thing but are, in fact, very different.
A responsive bidder is one who has filled out and signed the bid forms in accordance with the bidding instructions and who has submitted an unqualified bid in full conformance with the requirements of the bid documents. There may be no additions or alterations of any kind.
A responsible bidder is one who possesses sufficient financial resources to undertake the project and, in addition, has the necessary experience and a track record indicating the ability to execute successfully the work of the contract.
A public contract cannot be properly awarded to a bidder who has not been determined by the public owner to be both responsive and responsible. Bid responsiveness is determined by examination of the bid itself, which cannot be altered by the bidder once it is submitted and opened. On the other hand, bidder responsibility is a matter that the public owner can determine after the bid opening. Both bid responsiveness and bidder responsibility must be conclusively demonstrated to the public owner’s satisfaction prior to the award of the contract.
Three federal contract decisions by the Comptroller General of the United States are good examples where low bids were rejected on the grounds that they were nonresponsive. In the first case, the low bidder had submitted a preprinted bid bond that differed materially from the terms of the required bid bond for government contracts.
In the second case, the apparent low bidder submitted a bid bond that contained the following notation:
If this contract includes the removal of asbestos materials, then this bond is to be null and void.
Removal of asbestos materials was, in fact, required by the contract. Post-bid-opening assurances by the low bidder’s bonding company that they would waive the restriction noted in the bond were to no avail in persuading the Comptroller General to consider the bid responsive, since determination of bidder responsiveness is a matter that must be based entirely on the bid as it appeared at the time of the bid opening.
In the third case, the low bid had been declared nonresponsive by the Army Corps of Engineers because the bidder “clarified” the specifications by adding the following statement to the bid:
Bid based on Army furnishing four voice-grade phone lines to building 9370.
The Comptroller General supported the Corps’ determination of nonresponsiveness stating:
By qualifying its bid, Howard has attempted to shield itself from responsibilities from which other bidders would not be similarly protected. Since the phone lines at issue will be required under the contract, Howard’s clarification has the effect of shifting these costs to the Army. We therefore find that Howard’s bid was properly rejected as nonresponsive.
A case where the low bidder was denied the contract on the grounds that they failed to meet the bidder responsibility requirements occurred in New Jersey where the Army Corps of Engineers took bids for a hazardous waste remediation project. The Corps asked the low bidder to provide references as part of the pre-award survey. They then contacted the references provided as well as reviewed internal government records regarding prior projects performed by the bidder. Considerable negative information emerged, including a prior project owner’s complaint that the bidder had refused to honor a warranty, an allegation that on a prior contract the bidder had allowed the release of contaminated water and gas, and an incident where the bidder’s personnel had been indicted and convicted for submitting false payment requests. Additionally, the low bidder’s proposed project manager appeared to lack adequate experience on similar projects. When the government contracting officer determined that the low bidder was a nonresponsible bidder and ineligible for contract award, the low bidder went to court arguing that it had been improperly debarred from government contracting without due process of law. The U.S. District Court for the District of Columbia determined that a rational basis for the government’s nonresponsibility determination existed and refused to disturb the contracting officer’s finding.
In another case, however, the Comptroller General allowed a bidder to furnish information after the bid opening demonstrating that its proposed subcontractor possessed the required specialized experience. The low bidder had submitted a list of projects performed by its proposed subcontractor, but this list did not meet the five-year experience period required by the specifications. When questioned by the contracting officer after the bid, the low bidder supplied additional information showing earlier projects and was awarded the contract. The second low bidder protested that the low bidder’s bid should have been rejected as nonresponsive because complete information had not been supplied with the bid. In rejecting the second bidder’s protest, the Comptroller General stated:
Even though the solicitation provided that a bidder’s failure to submit with its bid evidence of compliance with this requirement would render the bid nonresponsive, such a solicitation provision is not effective to convert a matter of responsibility into one of responsiveness. Information concerning a prospective contractor’s responsibility may be submitted any time prior to award.
Rejection of Late Bids
A public owner normally must reject bids received after the time specified in the bid documents for submitting bids. The only exception might be when a bidder can show that the lateness in submitting the bid is due to circumstances totally beyond that bidder’s control and that accepting the bid would not prejudice the position of other bidders whose bids were submitted within the time limit. In other words, for a late bid to be accepted, it must be determined that the late bidder gained no advantage over competitors as a result of submitting the bid late, such as receiving a last-minute price cut in a major subcontract quotation.
In practice, late bids are usually rejected, but not always. For instance, a New Jersey court permitted the acceptance of a late bid where the bidder had phoned in shortly before the bid opening, advising that it was being delayed by inclement weather and would arrive shortly. The bidder submitted the bid two minutes late, but before any bids had been opened. Under these circumstances, the court judged that permitting the acceptance of the bid and awarding the contract to the late bidder was proper. Similarly, the Comptroller General permitted the acceptance of a late bid because a government representative had directed the bidder to the wrong room. The bidder arrived at the designated place for the bid opening about a minute early. A government representative mistakenly gave the bidder inaccurate information on where the bids were being received. In this case, the tardiness was caused by improper government action, no bids had been opened when the bid was received, and the Comptroller General ruled that the acceptance of the bid and award of the contract was proper.
In spite of occasional exceptions, bidders should assume that bids will be rejected if submitted late.
Rejection of All Bids
Public owners may reject all bids upon a determination that rejection is in the public interest. However, once a public owner has rejected all bids, the contract cannot be awarded later unless the entire advertising and bidding process is repeated and entirely new bids are received. Once bids are rejected, they remain rejected.
Bid Irregularities / Informalities
As previously pointed out, one form of a material impropriety precluding award of a public contract is error or ambiguity in the bids received that make it impossible to determine that each bid is for exactly the same work. Such error and/or ambiguity are known as bid irregularities or informalities. If a public owner awards a contract on the basis of a bid containing an irregularity or informality, the other bidders may sue to prevent the award of the contract or, if it has already been awarded, to set aside the award. Therefore, it is important to understand what these terms mean and when their presence may disqualify a bid.
Major and Minor Irregularities / Informalities
The terms bid irregularity and bid informality mean the same thing; both have to do with bidder responsiveness. Essentially, they refer to a deviation from the literal requirements of the bidding instructions in the format and content of a submitted bid. A bid with an irregularity or informality is, by definition, not fully responsive, so the question becomes one of deciding whether the deviation is significant enough to cause the bid to be rejected.
A major irregularity or informality means one that has an important effect on the terms of the bid, whereas a minor irregularity or informality is one of less significance. A bid containing a major irregularity is required to be rejected, whereas a minor irregularity may be waived by the owner.
Rule for Determining Major or Minor Irregularities
How does the public owner determine whether an irregularity is major or minor? Although there are no universally accepted rules, there is one very practical guide that serves to identify a major irregularity or informality. If the irregularity or informality is such that it could reasonably relieve the bidder of the contractual obligations that they assumed by submitting the bid, the irregularity or informality should be deemed major. An obvious example of this type of irregularity or informality is the submittal of an unsigned bid. Since a bidder usually cannot be legally held to the terms of an unsigned bid, this irregularity would probably be considered major, requiring the bid to be rejected even though the bidder may want the owner to accept the bid and award the contract. Other examples of major irregularities are the failure to list subcontractors when such a listing is required by bidding statutes or the failure to include a signed bid bond in the required form with the bid.
An example where a minor informality was waived is afforded by a federal case where the Comptroller General ruled that the low bidder’s failure to acknowledge receipt of a bid addendum extending the contract performance time could be waived as a minor informality. The addendum in question changed the contract performance time on a river channel project from 100 calendar days to 130 calendar days. The low bidder failed to acknowledge receipt of the amendment in its bid. The Army Corps of Engineers waived this irregularity and awarded the contract, and the second lowest bidder filed a protest. The Comptroller General noted that failure to acknowledge all addendums usually renders a bid nonresponsive; but when the effect of an addendum is to make the contract requirements less stringent rather than more stringent, failure to acknowledge may be waived as a minor informality.
In another case, however, the Comptroller General ruled that failure of the low bidder to acknowledge receipt of an addendum altering a Davis-Bacon wage rate determination may not be waived and rendered the bid nonresponsive. The low bidder argued that its collective bargaining agreement obligated it to pay Davis-Bacon wages and that its low bid would remain unchanged, with or without the addendum. Therefore, the government should have waived this minor informality. The Comptroller General disagreed, stating that Davis-Bacon wage rate determinations exist for the protection of the contractor’s employees and their rights may not be waived under any circumstances. Therefore, the low bidder’s failure to acknowledge the correction to the Davis-Bacon wage determination was an informality that rendered the bid nonresponsive.
Similarly, the Delaware Supreme Court ruled that subcontractor listing requirements must be strictly followed when receiving bids. On a project for improvements to sewage treatment facilities, the low bidder failed to list the subcontractors that it intended to employ on the project. The Delaware statutes required bidders on state projects to list all subcontractors that would be used. The low bidder had indicated “none” in the space provided for listing the electrical subcontractor. When the State Department of Natural Resources and Environmental Control rejected the bid, the low bidder went to court to have the decision reversed. In upholding the rejection of the bid, the Delaware Supreme Court acknowledged that rejection of the low bid would result in higher costs to the taxpayers but, nonetheless, stated that the state statute reflected a clear legislative intent to prevent “bid shopping and the evils which are said to arise from such a practice.” Therefore, the statute must be strictly enforced despite the increased expenditure of public funds.
Bidder’s Property Right to the Contract
The usual result of the public bidding process, as just described, is that the lowest responsive and responsible bidder is awarded the contract. However, there is no property right to the potential construction contract established by the mere fact that a bidder is the low bidder. We have already seen that a bidder must be determined by the public owner to also be responsive and responsible before the contract can be awarded. Even when the low bidder is determined to be both responsive and responsible, the bidder still does not acquire a property right in the potential contract because the owner may reject all of the bids if such an action is in the public interest. Only when the public owner decides to award the contract can the lowest responsive and responsible bidder be thought to have a property right to the contract.
Bid protests are formal objections filed by a bidder to some aspect of the bidding process. They may be objections to the bid document terms and conditions, in which case they should be filed before the bid opening date. Bid protests can also be filed after the bids have been opened to challenge the award of a contract to a low bidder if the protester believed that bid was irregular or improper.
Status to File Bid Protests
Not just anyone has the status (standing) to file a bid protest. Who does? Generally, this right is vested in any potential bidder when the protest is lodged prior to the bid opening. Similarly, any actual bidder has status to file a bid protest after the bid opening. There may also be others, but those just cited are always considered to have status.
The timeliness of the protest affects its chance of success. Protests concerning the terms and conditions of the bid documents should be made before rather than after the bid opening. Those lodged after the bid opening will probably be to no avail. The further in advance of the bid opening date that such a protest is made, the better chance it will have.
A bid protest regarding the award of the contract should be made as soon as possible after the bid opening and/or the owner’s declared intention to make the award.
Protest to Whom?
Bid protests can be directed to the administrative bodies overseeing the particular office of the public owner who is taking bids. Such bodies can be expected to investigate and intervene if the protest is meritorious. Alternatively, bid protests may be directed to a court of law having jurisdiction in the locality where the bids are taken. In that case, the bid protester would seek injunctive action by the court. Also, bid protests may be simultaneously directed to both the agency administrative body and the courts. Typically, the court’s decision will prevail—that is, the court may support the protest and order relief with respect to a bid protest that has been previously rejected by the administrative agency involved.
What Can Be Gained by a Bid Protest?
Successful protests depend on both the timing and nature of the protest. For example, when the protest concerns the terms and conditions of the bid documents, a successful protest can result in an injunction issued by a court or administration action on the part of the public owner’s parent agency that prevents bids from being taken until the objectionable terms in the bid documents are changed. On the other hand, when the protest concerns the awarding of the contract, a successful protest can result in injunctive or administrative action to prevent the public owner from awarding the contract or to compel cancellation of the original award and re-award of the contract to a named alternative bidder.
A number of years ago, the author’s company and another general contractor were each individually certified by a major city to have met all bidder prequalification requirements for a sewer tunnel project funded by the federal Environmental Protection Agency (EPA). Bidder prequalification was required as a condition for bidding. As frequently happens, the two companies decided during the bidding period to bid together as a joint venture and asked the city to furnish a registered set of bidding documents in the name of the agreed joint venture. The city arrogantly refused to certify the joint venture as meeting prequalification requirements, even though each partner was individually prequalified, and refused to issue the registered set of bid documents that would permit the joint venture to bid.
Such an egregious, arbitrary action clearly has the effect of limiting free and open competition. We therefore immediately lodged an administrative protest with the EPA office disbursing federal funds for the project. After conducting a fact-finding hearing, the EPA froze the funding for the project, delaying the bid opening for over a month. To restore the federal funding, the city was required to rescind their previous action, permitting our joint venture to bid. This result came about only because of the strong protest lodged with the EPA.
The chances of securing the preceding results are much improved by a timely filing of the bid protest. However, it sometimes happens that, due to the time required to resolve the issue, all that can be gained is a “paper victory” or, at best, a recovery of the costs of bid preparation and submittal. For example, if a contract award protest is not resolved until after the contract has been awarded and the work started, a court is not likely to force the owner to cancel the existing contract in midstream and award the balance of the work to the bidder filing the protest. The court may, however, award the protesting bidder damages equal to the bid preparation and submittal costs.
Rejection of All Bids in the Public Interest
As previously stated, a public owner has the right to reject all bids. However, this right is not absolute. There are limitations.
The first limitation is that bids may be properly rejected only after a formal determination or finding that such rejection is in the public interest. This determination cannot be arbitrary and must be based on reasonably compelling grounds. Examples of reasonably compelling grounds would include discovery of major irregularities or informalities in the bidding documents or in the bids received, the low bid exceeding available funds (or, even if within available funds, exceeding the architect’s or engineer’s estimate), some demonstrable last-minute change in the immediate or ultimate need for the project work, and so on.
For instance, in a New Jersey bid protest case, a court ruled that economic considerations, including the prospect of a more favorable bidding climate, justified the owner’s rejection of all bids. The Township of Belleville took bids for a street and utility improvement contract. The apparent low bidder had omitted the bid bond and was allowed to go to its office, retrieve the bond, and return to the bid opening 20 minutes later with the bond. The township then accepted the low bid. The second low bidder protested that the bid submitted without the bond at the time of bid opening was nonresponsive and had to be rejected. A trial court agreed with this second bidder. However, rather than award the contract to the second bidder, the township then elected to reject all bids and resolicit at a later date. The second bidder challenged this decision. The Superior Court of New Jersey ruled in favor of the township, stating that, although a public project owner is not allowed unfettered discretion in rejecting all bids, they are allowed to take economics into consideration. In the opinion of the court, the township made a good-faith decision that the best interest of the public would be served by a rebid.
The second limitation is that if the public owner rejects all bids and cannot justify the determination that the rejection of the bids was in the public interest, the bid rejection is subject to court challenge and reversal. Although the outcome of such a case is uncertain and the benefit of any doubt will probably be given to the public owner, reversal is possible.
A Louisiana court ruled that when a public owner rejects all bids, it must inform the bidders of the cause for the rejection. The State of Louisiana Legislative Budgetary Control Consul took bids for renovation on the state capitol building. All bids were rejected and the project put out to bid again. One of the original bidders demanded to know the reasons for all bids being rejected and went to court to compel an answer. The Consul argued that they were not expressly required to divulge the reason for the rejection of the bids.
The Court of Appeals of Louisiana agreed that the state statute authorizing public owners to reject all bids did not expressly require divulgence of the cause for the rejection but said that divulgence was an implicit requirement if the statute was to serve its intended purpose. The court said:
If only the public entity knows the reason for the rejection of bids, but yet refuses to divulge the reason for the rejection, then what safeguard is there that the rejection was for just cause? To conclude otherwise is to make a mockery of the law. We are of the opinion that the bidder in the instant case has a right to know the reason for the rejection, and the legislature has imposed a duty on the public entity to inform a requesting bidder of the reason for the rejection.
All bids received will normally not be rejected, and the outcome of the bid opening will be that the construction contract will be awarded to the lowest responsive and responsible bidder.
This chapter emphasized the great difference in bidding practices of the public and private sectors of the construction industry, the importance of public bidding statutes, and the tremendous influence of the federal bidding policy as set forth in the United States Code. The actions that should be taken by a public owner after taking bids were discussed as well as the general subjects of bidder responsiveness and responsibility, bid irregularities and informalities, late bids, bid protests, and rejection of all bids in the public’s best interest. Chapter 12 deals with the important subject of mistakes in bids.
Questions and Problems
- What is the fundamental difference between public and private bidding? What are two examples mentioned in this chapter illustrating the freedom that private owners have in setting bidding terms and conditions? Can the public owner set its own rules? Can a public owner change the rules once a set of bid documents has been issued? What is an addendum?
- What are two main purposes served by public bidding statutes? Who creates these statutes? What three sources of bidding statutes were discussed?
- What are the five main requirements of the federal bidding policy as set forth in the United States Code?
- Is the federal policy very influential? Must all federal contracts be awarded to the lowest responsive and responsible bidder?
- What is a material impropriety? When an extension for a unit-price bid item on a schedule-of-bid-items bid conflicts with the unit price that was bid, which usually governs? When the sum of the lump sum items and the extensions of the unit-price items on a schedule-of-bid-items bid form is incorrectly added and entered as the bid total, what will be taken to be the bidder’s intended bid—the total written in or the correct total?
- Can alternate bids be considered in making a determination of the low bid? Under what conditions? Can a public owner change the basis for determination of the low bid from that explicitly or implicitly stated in the published bid documents?
- What does bidder responsiveness mean? What does bidder responsibility mean? At what point in time must bidder responsiveness be demonstrated? How about bidder responsibility?
- What are bid irregularities or informalities? Explain the two broad classes of bid irregularities and informalities discussed in this chapter. What is the rule discussed in this chapter as a practical test to distinguish one class from the other? What three examples of major irregularities were mentioned?
- Does a bidder necessarily have a property right to a contract on which it was the lowest bidder? To a contract on which it was the lowest responsive and responsible bidder? Does a bidder ever have a property right to a contract? Under what circumstances?
- Who has status to file a bid protest prior to bids being opened? How about following bid opening? When should protests concerning bidding terms and conditions be filed? When should protests of the award of the contract to a particular bidder be filed?
- What can a protester hope to gain from a bid protest concerning bidding terms and conditions? A protest concerning award to a particular bidder? A protest to contract award to a particular bidder once the job is well under way?
- What are the two kinds of bodies to which a bid protest can be made? Can the protest be made to both simultaneously? In case of differing decisions, which body’s decision governs?
- What must a public owner do prior to rejecting all bids received? What may happen if the public owner fails to perform this step or does so without having reasonably compelling grounds? Is the outcome certain in these cases? What are three examples of reasonably compelling grounds?
- Vintage Constr., Inc. v. State Dept. of Transp., 713 P.2d 1213 (Alaska 1986). ↵
- Matter of Allgood Electric Co. Comp. Gen. No. B-235171 (July 18, 1989). ↵
- Matter of Star Brite Construction Co., Inc. Comp. Gen. No. B-255206 (February 8, 1994). ↵
- Matter of Howard Electrical & Mechanical, Inc. Comp. Gen. No. B-228356 (January 6, 1988). ↵
- Geo-Con, Inc., 853 F.Supp. 537 (D.D.C. 1994). ↵
- Matter of BBC Brown Boveri, Inc., Comp. Gen. No. B-227903 (September 28, 1987). ↵
- William M. Young & Co., Inc. v. West Orange Redeveloping Agency, 311 A.2d 390 (N.J. Super. A.D. 1973). ↵
- Matter of Baeten Construction Co., Comp. Gen. No. B-210681 (August 12, 1983). ↵
- Matter of Patterson Enterprises Limited, Comp. Gen. No. B-207105 (August 16, 1982). ↵
- Matter of Bin Construction Co., Inc., Comp. Gen. No. B-206526 (June 30, 1982). ↵
- George & Lynch, Inc. v. Division of Parks and Recreation, 465 A.2d 345 (Del. 1983). ↵
- Marvec Construction Corp. v. Township of Belleville, 603 A.2d 184 (N.J. Super. L. 1992). ↵
- Milton J. Womac, Inc. v. Legislative Budgetary Control Consul, 470 So.2d 460 (La. App. 1985). ↵