© Kirk W. Buffington, 2009 Procurement Case Law – Court Decisions Affecting Procurement Virginia...

© Kirk W. Buffington, 2009

Procurement Case Law – Court Decisions Affecting Procurement

Virginia Association of Governmental Purchasing Fall Conference

October 28th, 2011

KIRK W. BUFFINGTON, CPPO, C.P.M., MBAActing Deputy Director of Finance

City of Fort Lauderdale, FL [email protected]

954-828-5144


Introduction

Discussion will focus on several court cases from across the Country which have an impact on interpretation of procurement contracts and bid documents.


Why


Introduction

Finding applicable case law– Trial court decisions are only binding on

parties involved– State Appeals court decisions may or may not

be controlling – but establish an interpretation– State Supreme Court decisions are always

controlling, within the state of proceedings – U.S. Supreme Court Decisions – constitutional

issues


Gibbs Construction vs. Board of Supervisors, Louisiana State University (447 So. 2d, 90)

Formal bid advertisement required attendance at mandatory pre-bidOne bidder at pre-bid Gibbs was not present, but submitted low bidAfter pre-bid, project architect contacted Gibbs and requested they submit a bid – architect lined through portion of document requiring attendanceGibbs bid rejected, and bid was awarded to another – Gibbs filed suit**


Findings - Gibbs

Court of Appeals – university properly refused to consider bid by Gibbs because the company was not represented at pre-bid, as required in bid documentsDirection by project architect could not override the document requirements*

Qualicon Corp v City of Norfolk, VA

Minor technicality or major variation– Building of hypolimnetic aeration system – Following requirement in bidding documents:

• Following information shall be included as part of all submittals: 1) detailed drawings and descriptions of all items of equipment, showing all dimensions, parts, construction details, … product data including the make and model of each major item of equipment.”

• Major equipment items were defined as “…aerators, in-lake piping, marker buoys, and maintenance boat.”



Bids opened and PWC (Peters & White Construction) was low bidder– PWC failed to include any information regarding the in-lake

piping with its bid– Notwithstanding the PWC Commission, City awarded bid to

PWC– Qualicon filed bid protest letter – City rejected protest (PWC’s Commission did not affect the

essential competitive elements)– Qualicon filed for judgment in Circuit Court



Is this a minor defect which can be waived


Qualicon Corp v City of Norfolk, VAIFB required strict complianceIs City seeking to override clear language requirements of their own IFBCourt is required to reverse an agency’s decision if it is established that the award is not an honest exercise of discretion VA code defines minor defect of a bid as being a defect that does not affect the price, quality, quantity or delivery schedule for the goods/services


Findings

Court reversed award to PWC– Engineering testimony that bidders were aware that

submittals were not really required– PWC was intending to submit requirements when

PWC was notified by City, on the eve of bids due, that submittals would not be required



Harry Pepper & Associates v. City of Cape Coral (352 So. 2d, 1190)

Bid for construction of water treatment plant – required all pump mfg. to be used, must be submitted for approval and acceptanceGulf contracting submitted bid, but submitted name of mfg. that had not been approved and was not acceptable to engineerGulf was apparent low bidderCity engineer contacted Gulf and asked them to indicate they would use acceptable pump mfg. if awarded bid – Gulf did so


Harry Pepper (cont.)

Contract awarded to GulfPepper, number two bidder, filed suit, contending change was unlawfulCity contended it was a minor irregularity, and in the best interests of the City*


Findings – Harry Pepper

Found an unfair atmosphere had been created, as Gulf had everything to gain, and nothing to loseGulf was in a position to decide whether it wanted the job bad enough to incur the additional expense of supplying pumps*

Peninsula Therapy Center v. VA Dept of Corrections

ITB for providing sex offender treatmentPurpose: competitive sealed bids to obtain treatment for sex offendersMultiple awards – per person/per sessionServices could be provided at DofC, provider’s

location, or a combination


Peninsula Therapy

First Addendum issued– Determination to term shall be sole discretion of the

agency/provider may make recommendations

Second addendum– Determination to terminate shall not be made without

conferring w/probation officer in advance. Decision shall be based upon mutual agreement between provider and agency


Peninsula Therapy

Notice of Award – Peninsula not listed Vendor advised that agency found them non-responsive– Part of Peninsula response: “determination to

terminate shall be at sole discretion of agency”.


Peninsula Therapy

Part to Peninsula's response stated: “if a problem presented does not fall in the staff’s expertise, Peninsula will make appropriate referral”. This issue was not addressed in ITB, and no mention of payment responsibility Agency found that Peninsula submitted a proposal, not a bidPeninsula argued that it was providing additional information above the minimum requirement


Peninsula Therapy

Peninsula further believed that be signing the declaration that it intended to follow the ITB, made the variances moot, and Peninsula responsive. Sec 2.2-4301 VA code defines responsive as: a person who has submitted a bid that conforms in all material respects to the Invitation to Bid.


Peninsula Therapy

Peninsula further argued that other bidders deviated and these bidders were found to be informalities; these variances consisted of:

• Bidders who did not attach bidder certificate were allowed to at later time

• Bidder failed to sign/acknowledge addendum• Bidder failed to certify insurance• Bidder failed to provide copy of license

Why was Peninsula non-responsive, and the others not?


Peninsula Therapy

Sec 5.13 (c)(1) Vendor’s manual (informality) • A minor defect or variation of a bid or proposal from the

exact requirements of the ITB or RFP, which does not affect the price, quality, quantity, or delivery schedule for the good… the procuring agency may, in its sole discretion, waive such informalities or permit the bidder/offeror to correct


Accela, Inc., v. Sarasota County

Challenged piggybacking by County – Purchase of software to track land management – County conducted two site visits where software had

been implemented – County ‘piggybacked’ on vendor’s (CSDC) most

current contract from Wisconsin

Accela

From 9 modules to 40 (only 8 common between both) County argued this made the contract “substantially the same”

From $176k to $711kImplementation from $269k to $688K5 YR maintenance from $31K to 179K

Accela

“In practice of course, the County (or any agency) and the vendor must draw up a fresh contract. The degree to which this contract can diverge from the other government entity's contract is a significant issue in the present lawsuit.”

Accela

Was gov’t arbitrary or capricious in awarding to Gov’t agency must follow it’s own rules ordinances (City of Hollywood v. Witt) Terms and scope of new ‘piggybacked’ contract must be substantially the same as original Cannot use another entity to ‘begin’ negotiation

Accela

“…given that the piggyback process contemplated by the Code is intended to be competitive, we cannot agree that the County and CSDC's contract-making process represented a valid manifestation of the piggyback provision. That is, the County was not permitted to use another entity's contracts merely as a “basis to begin negotiations,…”

Accela

a public body has wide discretion in soliciting and accepting bids for public improvements and its decision, when based on an honest exercise of this discretion, will not be overturned by a court even if it may appear erroneous and even if reasonable persons may disagree.” Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla.1982).

Accela

However, we conclude that that County went beyond the bounds of its discretion when it violated its Procurement Code. See Dep't of Transp. v. Groves-Watkins Constructors, 530 So.2d 912, 913 (Fla.1988) (noting that the rule that “an honest exercise of ... discretion cannot be overturned” does not apply when there is a finding of “ ‘illegality, fraud, oppression, or misconduct’ ” (emphasis added)) (quoting Liberty County, 421 So.2d at 507).


Contract for construction work at airport Date and time for receipt of bids set in advertisementHewitt submitted a timely bid as requiredAnother contractor submitted bid after advertised deadlineThis bid was lowest, and ultimately accepted by Airport AuthorityHewitt sued, contending untimeliness of bid submittal disallowed the award to bidder*

Hewitt Contracting Company, Inc. v. Melbourne Regional Airport (528 So. 2d 122)


Trial court upheld right of airport to award to low bidder of their choice Hewitt appealed this trial ruling to 5th District Court of Appeal*

Hewitt Contracting (cont.)


Findings – Hewitt Contracting

Appeals court affirmed ruling of trial courtAirport agency’s legal authority to award a construction contract to a contractor whose bid submission was not timely. The appellate court found that appellee (airport) has, and should have, the discretion to waive the irregularity of a contractor's untimely bid and to accept the late bid under the circumstances.


Dedmond vs. Escambia County Government (244 So., 2d, 758)

Dedmond submitted successful bid for beach concessions – Commission at regular meeting awarded contract to DedmondClerk advised Dedmond, in writing, of contact awardOne month later, Commission voted to rescind its award to Dedmond, and to rebid contractInitial trial court held no binding contract existed as lease had not been executed, and County was within its rights to rescindDedmond appealed trial court decision*


Findings - Dedmond

Appellant court reversed trial court, and found for Dedmond Ruling was erroneousUntil acceptance of a bid, bidder is able to withdraw bid, conversely, acceptance of a bid by agency results in a contract, even though formal contract had not been executed*

Petroleum Traders Corp, v Baltimore County, MD

\

When is a contract, a contract

Baltimore County is a member of cooperative purchasing groupContract for gasoline and diesel fuelParticipating entities would purchase all fuel from successful bidderCounties had option to lock-in a fixed price for fuel over a set period of time, instead of prevailing indexWinning bidder would purchase futures to ensure supply at fixed price

PTC informed by County that it had won bid and awarded contract

County issued term contract award to PTC signed by Deputy Purchasing Agent “this is notice that contract…has been awarded to you…” County purchased fuel for a year and a halfElected to lock in prices for co-op during 3 different periodsMarket price rose during each period above locked in price,

thus yielding a considerable savings

2005 (Katrina and Wilma)Prices began to riseCounty locked in for 2 additional periods including Dec,

05 to April, 06DOil prices then began to fall (significantly) and

locked in prices exceeded the available market priceCounty demanded PTC re-negotiate pricing and PTC

refused having already purchased futuresRelationship became adversarial County continued to order and use of lock in of prices

County asked for locked in prices in December, 05, for period April, 06 through December, 06Prior to purchasing additional futures, PTC requested estimated quantities of fuel and assurances County would honor contractCounty construed this as a delay and breach of contractCounty formally terminated contract December 7, 2005PTC advised County of significant loss this would cause as PTC had purchased the futures as requested. PTC suffered a significant loss and filed suit against County

Arguments

What was County’s original argument and justification for termination?

County added an additional argument during initial litigation. What was it?

County argued there was never a valid contract – Charter requires that County exec or designee execute

commodities contract and that attorney approve as to form.

– As neither of these formalities were meant, the contract could not be valid

– However the code vests significant authority in the County Agent “to make all purchases for supplies… a power which he may delegate

– County was simultaneously arguing that PTC breached a contract, but that no valid contract existed

Findings of Trail Jury


Martel Constructing v. Montana State Board of Examiners (668 P. 2d., 222)

Successful bidder had failed to acknowledge certain addenda, but was awarded contract, after assurances that bid price included changes required in addendaMartel (second bidder) filed suit contending failure by bidder to acknowledge addenda made bidder non-responsiveTrial court held in favor of Martel, and ordered State to reject awarded contractCase was appealed to state supreme court*

Findings – Martel

Supreme court reversed lower courtState, in determining qualifications of bidder and ability to perform, are acting in discretionary mannerThere was a meeting of the minds between the state and bidderSuccessful bidder, in submitting bid bound itself to full performance of contract documentsFailure of successful bidder to make written acknowledgement of receipt of addenda was an immaterial irregularity that could be waived by stateWide discretion in determining what is best for the agency*



Rushlight Sprinkler Co., v. City of Portland (219 P. 2d, 732)

Rushlight submitted bid in the amount of $429,444.20., with bid bondNext low bid was $671,000After opening, Rushlight noted an error in their bid, (omission of $99,225.68), and asked to withdraw bidBid was awarded to Rushlight, and bid deposit check was cashedRushlight refused to proceed and sought to recover damages*


Rushlight – some facts

3rd and 4th lowest bids were $673,232 and $684,291City officials surmised low bid was too good to be trueEngineer stated bid was “very low”, and a very decided difference between bid and City’s estimate


Findings - RushlightCourt noted that an offer and acceptance are deemed to effect a meeting of the minds, even if offeror made a material mistake, providing acceptor (City) was NOT aware of mistakeBut, if acceptor knew of mistake, and if it was basic, or if a reasonable man, should have inferred there was a basic mistake, a meeting of the minds does NOT occurBidder must prove that not only was a mistake made, but acceptor had reason to be awareCity was aware of mistake, and sought to take unconscionable advantage of errorEquity is always prepared to grant relief from such situations *


Chris Berg v. Alaska DOT (680 P. 2d, 93)

Berg, low bidder, entered price information on wrong line of bid submittalMistake did not effect bottom line of bid in any wayState rejected bid as non-responsiveBerg filed suitDistrict trial court denied Berg’s request for injunction against award, andSuit was brought to State Supreme Court *


Findings - Berg

Supreme court reversed trial court, finding variance was not material and therefore did not compel rejectionDetermination of responsiveness of bid is within agency’s discretion, subject to judicial reviewBid error was minor technical defect, not affecting substance of low bid, and therefore it was an abuse of discretion to reject bid on that basis*


Fenske Printing v. Brinkman (349 N.W. 2d, 47, South Dakota)

Contract for purchase of legislative printingEach bidder was required to submit a sample of 50# paper with bid, colors were specifically required to be goldenrod and blueLow bidder submitted a 50# sample of goldenrod, but a 70# sample of blue

• Bid awarded to this bidder• Unsuccessful bidder filed suit claiming low bid was

non-responsive*


Findings – Fenske

• Supreme court held that unsuccessful bidder had not shown that Fenske’s failure to submit two samples of 50# paper gave Fenske any advantage over other bidders, or prevented State from conducting any tests

• Failure to show non-responsiveness• In general-unsuccessful bidder has burden of

showing successful bidder was non-responsive*


James C. Berry v. Okaloosa County (334 So. 2d, 349)

• Berry submitted bid for construction of airport facility• Board voted to award contract to Berry• Approx. 1 hour later, passed another motion “to

rescind the motion to award the contract to Berry” • Passed another motion to re-advertise and rebid• Berry filed suit, contenting a binding contract was

created at time of first motion , which could not be rejected except by showing fraud, collusion or other misconduct, none of which was alleged by the Commission*


Findings - Berry

• trial court found commission was meeting in a continuous session, without adjournment, and therefore contract was not created

• Final motion, is controlling motion• Appellant court affirmed lower court ruling, finding

there was an absence of formal notification, and until that occurs, commission has right to rescind because no obligation is created by acceptance, until acceptance is transmitted to offeror*


Stilsing Electric v. Town of Colonie (96 A.D. 2d, 993, NY)

• ITB provided for 3 options in making the bid submittal

• One bidder added a fourth option, which Town accepted as lowest, responsible bid

• Unsuccessful bidder filed suit


Findings - Stilsing

• N.Y. Supreme Court found Town was not required to reject bid which included 4th option, even though bid form only provided for three

• Bid is not required to be rejected because bidder produces an innovative proposal that results in savings to the agency

• Unsuccessful bidder was not put at competitive disadvantage by his failure to anticipate other possible options for meeting bid specification


Prairie Valley Schools v. Sawyer (665 S.W. 2d, 606, TX)

• School district completed an abandoned project, acting as general contractor

• School district had not secured bonding from contractor who abandoned the project

• Subcontractors and material men brought action for services and materials supplied to the project up to abandonment, but which were not paid

• Subcontractors alleged that school district’s failure to secure performance bond made the SB liable for payments not made by their selected general contractor


Findings – Prairie Valley

• Although bond requirement may be waived by agency, it is reasonable for sub-contractors and suppliers to assume that agency will require bond from general contractor

• Thus, if agency chooses to waive bond, it cannot claim subs only remedy for non-payment is against the general

• Since school district controlled project after abandonment, school district assumed position of general

• Therefore, school district liable for payment to subs and suppliers**


Findings – Prairie Valley (Cont.)

• Plaintiff (sub-contractors) were seeking fair value of goods/services provided,

• Even lacking a formal contract between the parties (in this case between the School district and the sub-contractors)


Kennedy Temporaries v. Comptroller of the Treasury

(468 A. 2d, 1026, MD)

• ITB required “bids exceeding $25,000 must be accompanied by 5% bid bond”

• Low bidder submitted bid of $30,000• Low bidder bid bond was in the amount of

$1092.05, in proper form, but $407.95 short of the 5% requirement ($1500.00)

• Contract awarded to low bidder


Kennedy Temporaries (Cont.)

• Challenge to contract award – an unsuccessful bidder alleged that low bidder should have been disqualified for submitting insufficient bid bond

• The Challenging bidder had failed to submit any bond, but instead submitted a letter of guarantee from a bank, pledging to provide collateral to be held against performance*


Findings - Kennedy

• Court found unsuccessful bidder did not qualify as “responsive bidder”, and thus had no legal standing

• Maryland bank letter did not meet requirements of bid bond, because the pledge of collateral was against “performance”, and not against loss by virtue of default

• Court did not rule on whether the bid bond was lacking due to insufficiency


Times Publishing Co. v. City of Clearwater, (830 So. 2d, 844)

Supreme Court of Florida

• Public Records jurisdiction case • Personal/private e-mail sent from municipal

computer• Are all e-mails transmitted or received by public

employees of a government agency subject to public records under Section 119?

• Times reporter requested copies of ALL e-mails sent/received by two Clearwater employees using City’s computer network


Times Publishing (cont.)

• Employee’s reviewed their e-mail for public/personal – (in accordance with City policy)

• No other review of e-mails• City copies “public” e-mails and provided them to

Times Publishing• Times Publishing filed suit to obtain e-mails

designated “private”• Asserted, under 119, that Times was entitled to

ALL e-mails generated and stored on City’s computer network


Findings - Times Publishing Co.

• Circuit court granted injunction and ordered City to “make every reasonable effort to retrieve, preserve and secure from destruction” all e-mails sent or received by employees in question

• At trial court, injunction was denied, thereby not forcing City to provide all e-mails

• Second District affirmed trial court order, after a review of e-mails in question

• Sent to the Supreme Court by the District Court, as the issue was of great public importance*


Findings - Times Publishing Co. (cont.)

• “Private” or “personal” e-mails fall outside the current definition of public records, because– they are neither “made or received pursuant to law

or ordinance” or “created or received in conjunction with official business of the City, or

– ‘in connection with official business of the City’, or ‘in connection with the transaction of official business’

• AGO opinion that creation of e-mail header makes all e-mails, regardless of content, public record – Supreme Court disagreed– Unanimous Supreme Court decision **


Liberty County v. Baxter’s Asphalt (421 So. 2d, 505)

• ITB requested bidders to bid on Alternate A and B• Gulf, low bidder, misunderstood, and only

submitted on Alternate B• Commission waived irregularity and awarded the

contract on the basis of Gulf’s Alternate B submission

• Baxter filed suit*


Findings – Liberty County

• District court disqualified Gulf, on theory that County’s action was illegal

• Supreme court reversed district court, and found Gulf’s failure to comply was not material, and further

• “a public body has wide discretion in soliciting and accepting bids for public improvements and it’s decision, when based on an honest exercise of this discretion, will not be overturned by a court”

• Court found that Gulf was not put in a superior position to Baxter or other bidders, by its failure to submit a bid on Alternate A*


Robinson Electric v. Dade County (417 So. 2d, 1032)

• Dade Housing Authority issued bid for renovation of housing project

• Bid specs required bid bond or certified check or bank draft in the amount of 5% of total bid

• In addendum, this was restated as “security was to be in the form of 5% bid bond”

• Robinson was apparent low bidder, but submitted bid bond in the form of cashier’s check

• Commission awarded contract to Robinson*


Robinson Electric (con’t)

• Number three bidder, (Markowitz), filed for injunction, contending Robinson’s bid was non-responsive, because it lacked the required security – County argued this was a minor irregularity

• Trial court agreed with Markowitz, and ordered County to rebid

• County reversed its opinion, agreed with trial court that documents were ambiguous and rebid*


Findings – Robinson

• Appeals court reversed trial court, and ordered award to Robinson

• In determining whether specific non-compliance constitutes non-waivable irregularity, courts have applied two criteria;

• 1) whether the effect of a waiver would deprive the City of its assurance that the contract will be entered into, performed and guaranteed according to specified requirements, AND


• 2) whether it is such a nature that its waiver would adversely effect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the common standard of competition

• i.e., a variance is material if it gives the bidder a substantial advantage over the other bidders, and thereby restricts competition

• Here, the courts concluded no irregularity existed, and it was apparent that competitive bidding was not affected. It prevented none from bidding, and all were on equal footing*

Findings – Robinson (Cont.)


Web sites of interest

• www.leg.state.fl.us/statues– FL State Statutes site – search

• www.oyez.at.nwu.edu/cases– Northwestern University U.S. Supreme Court site

• www.supremecourtus.gov– Site for Supreme Court of the United States

• www.lexis.com• Legal research site – word search and citation

search• www.abanet.org/contact/state

– ABA Section of Public Contract Law


Web sites of interest• www.findlaw.com

– Good basic legal research for non-attorney• www.leg.state.fl.us

– FL legislative site – search and follow bills through the legislative process

• www.legal.firn.edu/opinions – FL Attorney General’s opinions

• www.legal.firn.edu/sunshine– FL Attorney General’s ‘Gov’t in the Sunshine Law’ site

• www.flcourts.org– FL State Courts


QUESTIONS ???

Maybe some answers

[email protected]


Dickinson Co. vs. City of Des Moines (347 NW, 2d, 436)

• Dickinson 2nd low bidder in initial bid and rebid• Low bidder did not submit bid bond –found not

to meet specs. • City chose to reject and rebid, instead of

accepting Dickinson bid• In rebid – original low bidder was again low, and

complied with all terms/conditions• Dickinson filed suit, claiming low bidder was

non-responsive, and should have been disqualified*


Findings - Dickinson

• In absence of fraud or conspiracy, an unsuccessful bidder, although he may be low, has no remedy

• Public agencies have wide discretion• City has authority to reject all bids, even without

declaring the lowest bidder is not the lowest responsible bidder

• Contractor has no legally enforceable right, property interest or entitlement that was harmed by City’s actions (standing)

© Kirk W. Buffington, 2009 Procurement Case Law – Court Decisions Affecting Procurement Virginia...

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