An Overview of Competitive Bidding On
California Public Works Projects
A recent appellate court decision concerning competitive bidding standards in California public works projects presents an excellent tutorial on the subject. This month=s article will review the standards for the award of a competitively bid California public works project and discuss the significance of the recent case.
Competitive Bidding: You must be responsive and responsible
There are two Public Contract Code sections (20161 and 20162) that mandate that California public works projects be competitively bid. The public works competitive bidding laws are intended Ato eliminate favoritism, fraud and corruption in the awarding of public contracts.@ Work that is exempt from competitive bidding includes emergency work, small contracts (each agency defines a different amount for Asmall@) and specialized personal services. There are three requirements that must be met before the bid can be awarded. Generally, the project can only be awarded to the lowest responsible bidder who submits a responsive bid.
A responsible bidder must typically be a licensed contractor who has not been barred from government contracts for prior misconduct. In addition, a responsible bidder must have the equipment and skills necessary to perform the work in question or have a subcontractor who has those particular skills. If the bidder is deemed not responsible because it does not meet the above criteria, the public agency need not award the contract the lowest bidder.
The second requirement is that the bid be responsive. Quite simply, the bid must be an unconditional offer to provide the goods and services that are being bid upon and the bid must comply with all the bid procedures that are set forth in the requirements of the bid documents. For example, a bid which excludes a portion of the work which was to be bid on is deemed non-responsive.
Waiver of Irregularities, Rejection of Bids and Bid Protests
A public entity can reserve the right to waive minor irregularities relative to the responsiveness of the bid. However, if the entity waives the regularity it cannot result in the bid process being unfair or give the low bidder an unfair advantage over the other bidders.
In turn, a public entity has authority and discretion to reject all bids and to re-advertise for bids. For example, it is not uncommon for a public entity to reject all bids and re-bid the project when the bids exceed the budgeted amount for the work. Occasionally, a public entity will reject all the bids to avoid a bid protest. Irrespective, if the rejection of all bids is done in bad faith, an unsuccessful bidder should consider informing the governing body of the awarding entity of the reasons why the staff=s recommendation for rejection is in bad faith.
Alternatively, the public entity can reject the lowest bidder if the lowest contractor (a) is not a responsible bidder, (b) the lowest bidder refuses to sign a contract, or (c) the bid is not responsive. However, the awarding body must act in good faith. If a public entity rejects the lowest bidder, that bidder may be entitled to a hearing if the rejected bidder was deemed be not responsible.
A disgruntled bidder, including a rejected low bidder, can file a protest with the awarding public entity. If the public entity does not satisfactorily resolve the dispute, the bidder can file a legal action seeking a writ of mandate requiring the public entity to review the contract.
A public entity must comply with all bidding statutes and laws, and any failure to do so voids any contract entered into by the public agency as illegal. Furthermore, the contractor who performs the work cannot be paid. The contractor is presumed to know the authority of contract officer and the public entity.
Awarding a Project Based On A Selection Of Alternatives Is Improper
In the cite Cathedral City case the city requested bids for a library construction project. The bid request included a base bid and sixteen alternates. As most contractors who bid on public works projects are aware, the inclusion of alternates is common. The court was concerned as to the use of the base bid and selected alternates as a means of manipulating the competitive bidding statutes. The appellate court held in Cathedral City that the public entity can award the bid to the contractor who had the lowest base bid without consideration of how the alternates will effect the ultimate cost. The court further held, that it would be improper for Cathedral City to award the bid to the contractor with lowest base bid and the lowest chosen alternatives.
In conclusion, contractors should closely review the bidding process to ensure that the public entity is complying with the competitive bidding statutes. If the unsuccessful contractor decides to protest the award it should immediately notify the awarding entity, in writing, as to the nature of the protest. The protesting contractor should appear before the public entity at the time and place where the governing body will vote on awarding or rejecting the bid. If the protesting bidder is unsuccessful, it may want to consider seeking court intervention. Such court intervention should be sought within a few days of the public entity voting to award the contract to another bidder.
This article, 81998, was written by William C. Last, Jr. Mr. Last is an attorney specializing in Construction Law. He can be contacted at 415-764-1990 or 650-425-7679. This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.