Handli s and 2016 A. Christopher M. Fallon TH STREET, 16 TH FLOOR FRESNO, CALIFORNIA T: (559) F: (559)

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1 6033 WEST CENTURY BOULEVARD, TH 5 FLOOR LOS ANGELES, CALIFORNIA T: (310) F: (310) MAIN STREET, 7 TH FLOOR SAN FRANCISCO, CALIFORNIA T: (415) F: (415) NORTH N PALM AVENUE,, SUITE WEST "C" STREET, SUITE TH STREET, 16 TH FLOOR FRESNO, CALIFORNIA T: (559) F: (559) SAN DIEGO, CALIFORNIA T: (619) F: (619) SACRAMENTO, CALIFORNIAA T: (916) F: (916) A ANNUAL CALIFC ORNIA PARKS AND RECRER EATION SOCIETY C CONFERENCE AND EXPO Y (CPRS) Handli ing Bid Protestss Understand the Legal Issues s and Take Charge 3/10/2016 PRESENTED BY: Christopher M. Fallon

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3 Handling Bid Protests Understand the Legal Issues and Take Charge 2016 California Parks & Recreation Society (CPRS) Conference & Expo March 10, 2016 Bid Protest Questionnaire 1. How many formal bid protests have you received in the last two fiscal periods? 2. How many informal bid protests have you received (never taken to the Board)? 3. How were these resolved? 4. Did any of the bid protests end up in litigation? 2 Bid Protests What is a Bid Protest Prepare For Protests Understand the Bidding Process Contract and Bid Documents Plans and Specifications Pre-Bid Requirements and Walk-Through 3 1

4 Purpose of Competitive Bidding Competitive bidding laws are passed for the benefit and protection of the taxpaying public, not for the benefit and enrichment of bidders. Their purposes are to guard against favoritism, improvidence, extravagance, fraud and corruption; to prevent the waste of public funds; and obtain best economic result for the public. Stacy & Witbeck v. CCSF (1995) 36 Cal.App.4 th 1074, Competitive Bidding Must Competitively Bid Public Project Contracts: New construction, alterations, maintenance, or repairs estimated to cost over $25,000 (PCC ) Contracts for materials and supplies estimated to cost over $25,000 Cannot split projects to avoid bidding Non-compliance = void contract PCC Exceptions from Competitive Bidding Below bid limit Emergency (PCC (c), 22050) Force account Professional services Attorney and Insurance services When Bidding would be unavailing, impractical, or futile Need Resolution of Futility 6 2

5 Bids and Contract Award Bids are irrevocable offers Bid bond (10%) may be submitted with public project bid. Forfeited if low bidder refuses to enter into contract. Low bid may be withdrawn only for typographical or arithmetical errors not errors in judgment (PCC 5103) After bid opening, District must either: Award contract to Responsible bidder who submitted the Lowest Responsive bid OR Reject all bids. 7 Responsibility Responsible bidder: Focuses on the bidder (not the bid) Trustworthiness Quality, fitness, capacity and experience to satisfactorily perform the work Complex matter often dependent on info from outside the bidding process and requiring exercise of subtle judgment Public Contract Code 1103 Great West v. Irvine USD (2010) 187 Cal.App.4th 1425, Responsibility Determination Public body has discretion to determine which bidders are responsible Determination that bidder is not responsible requires due process hearing: 1. Notice of evidence against bidder 2. Opportunity for bidder to rebut evidence 3. Permit bidder to present evidence of qualifications Boydston v. Napa Sanitation (1990) 222 Cal.App.3d

6 Responsiveness Responsive bid: Focuses on the bid (not the bidder) A bid is responsive if it promises to do what the bidding instructions demand Can be determined from the face of the bid Minimal due process afforded no right to a hearing (Ghilotti v. Richmond (1996) 45 Cal.App.4 th 897) Great West v. Irvine USD (2010) 187 Cal.App.4th 1425, Discretion to Reject All Bids There can be no doubt at all that the director, acting well within his conferred discretion, could reject all bids Competitive bidding statutes are not passed for the benefit of bidders, but for the benefit and protection of the public. Harney v. Durkee (1952)107 Cal.App.2d 570 Universal By-Products v. Modesto (1974)43 Cal.App.3d Agency s Duty to Follow Own Rules This court has no power to direct the award of a public contract to any individual. We can, however, direct an agency to follow its own rules when it has a ministerial duty to do so or when it has abused its discretion. Pozar v. Dept. of Trans. (1983) 145 Cal.App.3d 269,

7 Bid Protest Liability? Statutory immunities provided by [the Government Code] preclude any liability on [the government and government employees] even if, as alleged, the director abused his discretion when he awarded the contract to plaintiffs competitor. Rubino v. Lolli (1970) 10 Cal.App.3d 1059, Improper Contract Award Public entity may not pay a claim under agreement made without authority of law. Cal. Constitution Art. XI, 10 A contract made without compliance with the statute is void an unenforceable as being in excess of the agency s power. Miller v. McKinnon (1942) 20 Cal.2d Statutory Change Blameless Contractor If the contract is later determined to be invalid due to a defects in the competitive bidding process caused solely by the public entity, the contractor shall be entitled to be paid the reasonable cost, specifically excluding profit, of work furnished by the contractor. Public Contract Code 5110 (2004) Marshall v. Pasadena USD (2004) 119 Ca.App.4 th

8 Great West v. Irvine USD Great West low bidder on two District construction projects Bid protests filed alleging GW inaccurately answered question whether other licenses GW held other license, but never performed work under it District found GW s bid non-responsive District awarded the two contracts to other bidders - $500,000 and $300,000 more than GW s bids Great West v. Irvine USD (2010) 187 Cal.App.4th Great West v. Irvine USD Public interest in guarding against Tammany-style favoritism & corruption Indeed, favoritism most foul It doesn t take Hamlet to figure out that something rotten happened in this case District s sweaty haste to contract with third lowest bidder was susceptible to at least an inference that the fix was in Great West v. Irvine USD (2010) 187 Cal.App.4th Great West v. Irvine USD DECISION District incorrect in finding GW s low bid non-responsive GW was entitled to a hearing on its responsibility re: license issue Remanded to allow GW to seek bid preparation costs 18 6

9 Case Study No. 1 District requested bids for copy machines based on price per copy District set performance specifications required for various classes of copiers. A bid 1.5 cents per copy, but copiers met most but not all performance specs B bid 2 cents per copy, and copiers met all performance specs. District determined A s copiers were good enough and awarded based on low price. B filed a bid protest. 19 Konica v. UC Regents (1988) We presume Copy-Line equipment will substantially perform the service actually required even though it does not meet the performance and production specified in every category. We then limit our analysis to whether the deviations gave Copy-Line an unfair competitive advantage by allowing it to make a lower bid that it would have been able to make without the deviations. Konica v. Regents of UC (1988) 206 Cal.App.3d 449, Case Study No. 2 Bids for Construction Project General Contractor Bidder A low bid of $699,000 Bidder B - $726,000 Bidder A failed to sign bid in required primary location, but signed in secondary locations. A s bid bond signed by bidder and surety District Counsel advised A s bid nonresponsive Board waived A s defect and awarded contract to bidder A 21 7

10 Menefee v. County of Fresno (1985) Bid form: the legal name of the corporation shall be set forth together with the signature of the officer authorized to sign contracts Decision: Here, no one signed the proposal form [but] there is no express statement that an unsigned bid will be rejected. This mandatory language controls the bidder, not the board of supervisors. It requires the bidder to sign his bid, but does not control the board s discretion to waive the requirement. Menefee v. Fresno Co. (1985) 163 Cal.App.3d 1175, Case Study No. 3 District bid construction contract Specifications required bidder to perform at least 50% of work itself Bidder A - $2,400,000 Bidder B - $2,700,000 Bidder A s bid showed it would perform less than 50% of the work itself Bidder A argued that it could purchase some of its subcontractors materials and thereby meet the subcontracting limitation requirement Bidder B protests argues A s failure to meet the specifications is a material deviation 23 Ghilotti Construction Co. v. Richmond The rule of strict compliance with bidding requirements does not preclude waiving inconsequential deviations These considerations must be evaluated from a practical rather than hypothetical standpoint They must also be viewed in light of the public interest, rather than the private interest of a disappointed bidder. It would amount to a disservice to the public if a losing bidder were to be permitted to comb through the proposal of the low bidder after the fact and cancel the low bid on minor technicalities. Ghilotti Const. v. Richmond (1996) 45 Cal.App.4 th 897,

11 Case Study No. 4 District bid for construction of a park Specifications required bidder to perform at least 50% of work itself Bidder A - $4,077,000 Bidder B - $4,088,000 Bidder A s bid showed it subcontractors would perform 83% of the work B filed bid protest failure to perform 50% A said percentages listed not correct submitted correction showing subcontractors would perform 45% of the work 25 Valley Crest v.davis (1996) The real issue in determining the validity of a bid is whether the bidder would be liable on its bond if it attempted to back out after the bid was accepted. Waiver of an irregularity in a bid should be allowed if it would not give that bidder an unfair advantage by allowing the bidder to withdraw its bid without forfeiting its bid bond Valley Crest v. Davis (1996) 41 Cal.App.4 th 1432, Case Study No. 5 Agency bid construction contract to build freeway ramps. A bid $64 million -- B bid $66 million Bid specifications required: certain info turned in at 2pm, other info at 5 pm list each subcontractor, its work, and its price. A s bid failed to list price to be paid to 7 subcontractors B s submitted some info due at 2 pm at 5 pm Staff recommended finding A s bid non-responsive Staff recommended waving defect in B s bid A argued that (1) requirements to list price exceeded state law, (2) failure to list price for subs did not affect amount of its bid, and (3) staff recommendation to waive defect in B s bid but not to waive defect in A s bid constituted favoritism. 27 9

12 MCM v. CCSF (1998) No case cited by MCM holds that where the City can waive a deviation it must do so. The point of discretion is that the agency may properly act in either direction. It may waive or refuse to waive deviations. MCM Const. v. CC San Francisco 66 Cal.App.4 th 359, Questions? Christopher Fallon Attorney Los Angeles Office cfallon@lcwlegal.com

13 Handling Bid Protests 1. Bid Protests on Competitively Bid Project a. Claim that successful bidder s bid is non-responsive or that bidder is not responsible 2. Public agencies must address timely submitted Bid Protests 3. Claim of Non-Responsive Bid a. Determined from the face of the bid b. Bid will be responsive if it promises to comply with bidding instructions c. Agency may waive inconsequential defects which do not impact price or give bidder an advantage over other bidders. 4. Claim of Non-Responsible Bidder a. Focuses on bidder s ability to perform, not responsiveness of the bid b. Agency may determine if a bidder is responsible. c. Bidder entitled to due process hearing and the ability to prevent and rebut evidence of qualifications before Agency may declare it not responsible. 5. Agency May Reject All Bids 6. Agencies Must Follow Their Own Bids and Rules and May Not Abuse Their Discretion in Addressing Bid Protests Christopher M. Fallon Attorney Los Angeles Office cfallon@lcwlegal.com L o s A n g e l e s S a n F r a n c i s c o F r e s n o S a n D i e g o S a c r a m e n t o