“THE WHY’S AND WHEREFORE’S OF PUBLIC CONTRACT BID PROTESTS ”
by Jonathan P. Sauer
Attorney at Law
Suite 416
1410 Providence Highway
Norwood , MA 02062
Phone: 781-255-0222 / Fax: 781-255-9777
October 21, 1999
Introduction
The purpose of this article is to discuss how bid protests can be made administratively (in front of the Attorney General’s Office) or in court, discussing generally how these protests are made and the advantages and disadvantages of each such process.
The Bid Protest Process
The public contract procurement system is not for the weak-kneed or for the ill-informed. Issues of prequalification, prevailing wage, the filed subbid system, bonding requirements and familiarity with obtuse and lengthy general conditions make this type of work a minefield for its participants while still offering an opportunity for most contractors - particularly newer contractors - to participate therein. For, the purposes of the competitive bid statute as annunciated in Interstate Engineering Corp. v Fitchburg, 367 Mass. 751, 757-758 (1975) are:
“ . . . First, the statute enables the public contracting authority to obtain the lowest price for its work that competition among responsible contractors can secure. . . Second, the statute establishes an honest and open procedure for competition for public contracts and, in so doing, places all general contractors and subbidders on an equal footing in the competition to gain the contract.” Thus, the fact that substantial work opportunities exist for a new business not having a substantial track record or established business relationships with general contractors and owners makes public work very attractive to many. Moreover, as compared with private owners, there is a greater expectation of getting paid when working for a public owner, particularly for subcontractors and material suppliers who have 100% protection for their claims under the C. 149, s. 29 general contractor payment bond. Claims under such bonds earn 12% interest and attorneys’ fees to prevailing claimants.
The public bid system for contractors is contained within various sections of C. 149, s. 44A-H of the General Laws (for buildings) and C. 30, s. 39M of the General Laws (for public works, which generally means non-buildings - road work, bridges, sewer work, etc.) Generally speaking, for buildings there is a filed subbid system where certain enumerated trades bid separately to the public owner before the general contractors submit their bids. These bids are available to any general contractor bidding on the work except where a subcontractor restricts its bid away from certain designated generals (a statutory right) or where a subcontractor restricts its bid to a certain general bidder, which quite often describes the situation for ‘captive’ subcontractors or where a general contractor itself bids on a filed subbid trade to be included later in its own general bid.
The ordinary standard for award for general contractors on public buildings and public works is that the work is awarded to the lowest responsible, eligible, responsive general bidder. The filed subbid system, however, does not require (or promise) that the lowest filed subbidder for any particular trade get the award. While there are market pressures to help ensure that result and where an awarding authority has the statutory right to insist that the apparent general contractor awardee substitute down to the lowest filed subbidder against whom the general contractor has no objection as to competency, the fact that one is low in and of itself as a filed subbidder is not a guarantee of the job.
What happens, though, when there is a difficulty in the bid procurement process?
What happens where there is a particular error in the bid procurement process itself - requiring rebidding - or where a particular bidder’s bid is defective in some way? Frequently, if a disappointed bidder can knock out one or two other bidders, that bidder becomes low and gets the work.
There are two ways to knock out a bidder: court or an administrative bid protest..
A. Using Court Processes:
The first way - court - is very expensive and not too practical, although sometimes is the only available or effective remedy. That is to file a suit in court seeking a declaratory judgment and an injunction against a particular bidder’s getting the award or against any award being made with regard to a claimed defective procurement. Here are the problems with this. First of all, it is expensive and any significant suit will involve an investment of several thousand dollars to get through the injunction stage. The disappointed bidder has to become a plaintiff and commence a litigation by the filing of a verified complaint. To prepare such a complaint will take an experienced practitioner a matter of hours, probably six or more. Then one has to prepare a brief and probably an affidavit to support the requested relief. This is a matter of another six or more hours. One then files the complaint, requests a short order of notice and attempts to get a hearing as quickly as possible. The opposing parties file opposing papers and a superior court judge - most of whom are not well- versed on the intricacies of the bid law - will decide the matter.
What one seeks here is an injunction - which is a court order that someone do or not do something pending further order of the court.
Obtaining an injunction in bid matters in the ordinary case is quite difficult, legally, because of the fact that injunctions are given by “the equity side” of the court. In fact, until 1974, Massachusetts had courts of equity and courts of law, which mirrored somewhat English practice. (Presently, the Massachusetts superior court civil system has but one court, which has equity and law functions.) Greatly oversimplified, courts of law do what is legal and courts of equity (try to) do what is fair. Put another way, a court of law enforces legal obligations fairly strictly in conformance with the contracts parties assume and judges parties’ conduct as measured against applicable statutes, case law (decisions by various courts) and so on. Courts of equity, as Paul Harvey might say, try to look at “the rest of the story” and try to accomplish substantial justice. But just as Paul Harvey needs commercials to be able to tell the rest of the story, someone seeking equity has to deal with the difficulties of obtaining equity. Because injunctions for and against certain behaviors and action can be every bit as effective in the short run as judgments - which are only generally issued after lengthy litigation and trial with sworn testimony - there are certain hurdles that injunction applicants have to jump over before this awesome power can be invoked. A big problem in bid issues is the fact that equity will not exercise injunctive powers if the parties have an adequate remedy at law. Since in bid matters a disappointed plaintiff has the possibility of obtaining either bid preparation costs or lost profits in an action at law, most courts refrain from issuing injunctive relief.
For, in the ordinary case where there is an “ordinary” bid error on the part of the awarding authority, the plaintiff can obtain its bid preparation costs. Paul Sardella Construction Co. v. Braintree Housing Authority, 3 Mass. App. Ct. 326 (1975).
Under very limited circumstances with demonstrable bad faith on the part of a public owner, lost profit damages may be available. In Bradford & Bigelow, Inc. v. Commonwealth, 24 Mass. App. Ct. 349 (1987). At issue was the bidding and award of a printing contract. Here an inspector for the Department of Labor and Industries essentially disqualified the bid of the low bidder by claiming that the low bidder did not pay the prevailing wage rates required for such contracts, although ultimately it was determined that the inspector applied the wrong rates in that factual determination. (The inspector applied Boston rates, which were higher, rather than Essex County rates, which would have been applicable.) The state procurement officer decided to rebid the contract, claiming that Bradford & Bigelow did not qualify because of the prevailing rate issue and the other bidder’s bid did not comply with the contract specifications. On the rebid, the previous second low bidder, Acme, was now low with Bradford & Bigelow now being higher. As stated on page 359 of the decision:
“These most pertinent Massachusetts decisions leave undecided the issue whether failure of officers or agencies of the Commonwealth itself (and not merely a private general contractor or a local government or a public authority) to consider public contract bids fairly, in good faith, and in compliance with the applicable competitive bidding statutes, will subject the Commonwealth to liability for profits lost by the bidder to whom the contract should have been awarded in all fairness. The public objectives of public competitive bidding statutes, discussed by the Supreme Judicial Court in the Sardella case and by this court in that case and in the Roblin Hope cases, seem to us to be equally cogent, whether it is the Commonwealth which is soliciting bids or some political subdivision or authority doing so. Failure to give fair consideration in good faith to all bids in either situation will tend to discourage bidders and to destroy public confidence in the competitive bidding system. Upon adequate proof that agencies or officers of the Commonwealth have set aside in bad faith an award of a contract to a qualified low bidder, the cases already mentioned should be extended appropriately to permit recovery by the bidder of its lost profits.”
Therefore, courts considering injunctions, which employ the equitable side of the court, are loathe to restrain public procurements when there is not only one possible measure of damages (bid preparation costs) but a second one (lost profits), as well.
Another problem! To get an injunction, there are other various tests that have to be met. Does the moving party - the party seeking the injunction - demonstrate a likelihood of success on the merits, meaning that a motion judge can pretty much tell that the plaintiff ultimately is going to win? If this is not there, no injunction. Also, a court considering an injunction request tries to “balance the equities”. In other words, is the plaintiff more harmed by not getting the injunction than the defendant(s) will be if the injunction issues? A big problem in this area also is that of “public interest”. A public owner in resisting an injunction request usually argues that a job’s not going forward will damage the public interest. The arguments go thusly: “If this school work can not be done this summer, we will not have a place for the kids in September.” “If this sewer work does not get done presently, the Town will violate a consent order with the DEP.”
These types of arguments are tough for a court to deal with (or resist). Adding the possibility of damages to the fact that the judge may not fully understand the law combined with public interest questions and the fact that it is easier to say ‘no’ than to say ‘yes’, it is difficult - but not impossible - to enjoin public work.
Here is where court is preferable to the administrative alternative - the bid protest. A big problem with bid protests is that ordinarily the Attorney General’s Office, who hears the protests, will not go into court to enforce its own decisions as it has the statutory right - but not obligation - to do. “Players” (those experienced) in the bid protest process know this. Some state agencies believe that where they are co-equal to the Attorney General’s Office on some organization chart they are not required to follow these decisions. Some towns find it hard to give up the cost savings that using a defective bid (or process) might gain them. Therefore, some protestors will go into court either initially or after the bid protest decision in any event.
Court really is attractive when time is of the essence (there is no time for the bid protest mechanism, which start to finish typically takes somewhere between one and three months). Court is also preferable when the dollars become larger and the five to ten thousand dollar investment to seek an injunction becomes less important. Court becomes mandatory when the Attorney General’s Office finds against you or where it refuses to issue a decision on the issue or the public owner refuses to follow its decision. In court, bid protest decisions have weight when considering requests for injunctions, although the judge has complete discretion and ability to give the decision of the Attorney General as much weight - or as little weight - as he or she determines. Ultimately, a court consideration of a bid matter after administrative bid protest is a de novo investigation, meaning that the Court has a full ability to decide the matter as it sees fit. This is because, among other reasons, an administrative bid protest is not an “adjudicatory” proceeding inasmuch as it does not have subpoena power, does not swear witnesses, does not conduct an actual trial, etc. Court is also a good idea where a bidder is looking for a judicial decision on a situation which arises often in its work. Also, the Attorney General’s Office is only charged with interpreting the bid law within the confines of the existing bid law and does not have the authority to actually declare new law, which is a power that a court has. So, when individuals or organizations seek to influence, modify or make new law, court is the preferred procedure.
B. Administrative Bid Protests befor the Attorney General’s Office:
Many bid protests start and end here.
In a thumbnail sketch, here is the procedure.
The Bid Protest Letter
If one wishes to protest a bid or bid procurement, one writes to the Attorney General’s Office. Presently, one would file a protest by writing to the following address:
Office of the Attorney General
Fair Labor Division, Second Floor
200 Portland St .
Boston , MA 02114 **
Protests are initiated by letter, which should include a check made payable to the “ Commonwealth of Massachusetts” in the amount of one hundred dollars (the filing fee). There is no specific form which is required or any absolutely required content. The letter should identify the project, who is protesting, the Owner, any affected bidders (copy all parties on your letter and indicate that you have done so to speed up your actual hearing) and a detailed and documented description of what the claimed error is. Keep in mind that while the Attorney General’s Office is charged with interpreting and enforcing the bid law, there is not an absolute right to get a hearing. Put another way, the investigation that the Attorney General’s Office performs does not of necessity guarantee to you a hearing. Therefore, when you describe the bid problem, do so in detail and with whatever resort to authority (the law) available to you to facilitate the chances of getting a protest hearing. Moreover, as in any adversarial procedure, where you have the first “say”, make it count. Obviously, you want to try to get the hearing officer seeing the matter your way from the beginning. A good initial presentation works towards that goal and quite often will minimize your costs by not requiring further later briefing.
The following are sources of the law that are considered by the Attorney General’s Office. Initially, the General Laws are of paramount important. These can be found in virtually every public library. Of specific importance are Chapters 30, s. 39M (for public works) and C. 149, s. 44A-H (for public buildings). If possible, find an annotated set of the General Laws, which list court case summaries interpreting specific sections of the bid law. Then, the decisions of the Appeals Court and Supreme Judicial Court are of great importance. These may only be available in law libraries but are generally available and are indexed in a variety of ways.
Of particular importance are previous decisions of the Attorney General’s Office and of its predecessor, the Department of Labor and Industries. These are not generally available and are not well-indexed. The last index the author is aware of is dated in October of 1995 and is summary (brief) at best. The Attorney General’s Office maintains these decisions at its office in a series of three ring binders. Frequent practitioners in this area may maintain these decisions in their own offices which has the further advantage of saving time, as bid protests are frequently an eleventh hour matter. The author, as an example, has all of the bid protest decisions of the Attorney General’s Office and of the Department of Labor and Industries going back to January of 1987. Citing to the Attorney General’s Office its own previous decisions is a plus, as these decisions will influence the ultimate decision of that office.
The Bid Protest Process, Hearing and Decision
After the protest is filed, ordinarily, the Attorney General’s Office will send a letter to the Owner and obviously involved parties advising of the bid protest and asking the Owner not to make any ultimate decision on the procurement until the investigation has been conducted.
In due course, usually in a month or less, the matter is set down for hearing. If you do not receive a notice for a hearing in the first month, it is acceptable practice to call up and specifically ask that the matter be set down for hearing.
At the hearing, ordinarily the protesting party will present the basis of the protest. Reference may be made to the bid document, the forms, letters, etc. No witnesses are sworn and there is no subpoena power available. After the protestor has spoken, the awarding authority gets to speak its piece and, lastly, any other affected parties - including opposing contractors - have an opportunity to speak. Then there is typically a rebuttal round where everyone gets to comment on the mistakes and improper legal applications made by the other parties during the first round. The hearing officer may question the witnesses although the usual procedure is for the various parties to speak for themselves. There is no specific mechanism for the parties to call opposing or other witnesses or to cross-examine each other. Parties usually submit legal memoranda at the hearing. If you, as protestor, have filed a good initial bid protest letter with your authorities, no further brief may be required except, possibly, to respond to points that the opposing parties may raise. The hearing usually takes about an hour.
A decision in writing is issued within two or three weeks after the hearing and the parties are then in a position to consider what further action, if any, might be warranted or available. Quite often, if the matter has not been to court yet, resort to court is available when one is unhappy with the bid protest result.
The Two Kinds of Bid Protests
The subject matter of bid protests contains two broad areas of inquiry (or, attack).
A. Problems with the Procurement
The first is that there is something wrong with the procurement - not with any specific bidder’s bid. The owner did not comply in some way with the bid laws. The following are examples only and not in any particular order of importance. The owner received bids after the deadline for bids stated in the bid documents. The bid documents were defective in some way, not containing, for example, statutorily-required language or forms (e.g. affidavits of non-collusion). A public building job was advertised under the laws pertaining to public works (which would mean, ordinarily, that the filed subbidders are prejudiced in that they would not be required.) Filed subbids were not required for the appropriate trades which should have had them. The procurement specifically calls for a proprietary item which can not be supported under the facts as being required or necessary.
Protesting the procurement - rather than a specific bid - is one of those ‘good news, bad news’ situations. The good news is that if you are correct, the job will be rebid. The bad news is that if you are correct, the job will be rebid! Meaning, that the error in the process does not allow the protesting party to actually get the job: only another opportunity to bid the job again.
B. Protesting Another Bidder’s Bid
Protesting another bidder is the meat and potatoes of the bid protest practice. Here is an opportunity to knock out a competitor and get a public job.
Initially, it is a good idea to examine your competitors’ bids on bid day. This may be your only opportunity to do so and is certainly the easiest way to see the actual bids and check them for errors. While the bids are probably “public records” and are probably later available under the various ‘freedom of information’ laws, those laws do not specifically provide the short timetable that a bid protest may require. Also, once the public owner has decided on a course of action, access to these bids may be practically limited or slowed down.
What are the grounds (opportunities) for bid protests? The author responds by asking how many stars are there in the sky! The following are common areas of protest.
First, is the bid form completely filled out? Is it signed? Is there bid security for 5% of the total possible value of the bid, including alternates? Is the bid bond conditional (in that it has a rider reducing potential coverage)? Is the bid ‘obscure’ in that some important element of the bid relating to scope or price is not unequivocally provided or filled out? Are all the subsidiary forms - non-collusion affidavit, for example - filled out completely? Has a filed subbidder indicated his subcontractors when not asked to do so? Is the bid in any way conditional, incomplete, containing items not asked for or a counter-offer? Are all of the addenda affecting in any significant manner scope or price acknowledged? Has the bidder included any required prequalification statements and updates required by the bid document? Have the various MBE and WBE letters of intent - when required - been included? Is there any contradiction between the written numbers and the actual numbers? Is there any confusion as to the scope of the work or the price of the work? Is the bidder debarred from submitting a bid for any reason? Was the bid delivered in time for the bid opening? If the general contractor has carried himself/herself as a filed subbidder for a particular trade, does he/she have a demonstrated track record in this trade? Is there ‘penny bidding’ involved on any significant unit price item? Does the bidder have all required licenses to perform the work (e.g. for an electrician, does the corporation have in its own name a master’s license)? Is any specific bid sufficiently labor intensive that under no set of circumstances could the bidder meet the prevailing wages for the job in question? Does a particular competitor have an overwhelmingly bad record for this type of work to necessarily keep an Owner from finding him/her to be a ‘responsible’ bidder? Does the bidder meet the experience requirements for submitting a bid? Is a bidder attempting to meet the experience requirements called for in the bid document by using for that experience that of a predecessor/sister/affiliated company?
Some Hints
Don’t overuse the process. These matters at any given time are only heard by one or two individuals and, human nature being what it is, if you file a number of ‘light’ bid protests, this could prejudice you down the road when you have a really good one. Don’t misrepresent the facts or the law to the Attorney General’s Office. Try to get other affected parties to attend the protest, particularly when you are protesting the procurement rather than a specific bidder. For example, if an incorrect procurement is unfair to both subcontractors and general contractors, try to get representatives of each to attend.
If there is no clear violation of the law or the matter is really a judgment call for the owner, there is some tendency on the part of the Attorney General’s Office to defer to the public owner. Therefore, getting the Owner on your side in the protest can be helpful, sometimes extremely helpful.
Don’t expect the Attorney General’s Office to do your work for you. In other words, it is incumbent on you as the protestor to try to develop the facts, the law, the documents and the witnesses. Because of time and business pressures, the Attorney General’s investigation is not going to be very active in many cases but will rely on the parties to develop the subject matter. As a matter of law, the protestor has the burden of persuasion to demonstrate a violation of the bid law.
The Attorney General’s Office generally will not take jurisdiction over a bid protest if the same matter has already been to court. However, the fact that a matter has already had a bid protest hearing does not prevent the matter from being later presented to court. Therefore, if time and circumstances permit and you wish to preserve the opportunity of two possible bites at the apple, typically one will file a bid protest administratively first and then proceed with court second.
Don’t bring politicians into the arena! Many times clients have told me that they know the governor or a senator or a representative and that person is going to make some calls to the Attorney General’s Office on that person’s behalf. To the best of my long recollection, I have never seen this work. Moreover, it presents various possibilities of backfiring and/or annoying the hearing officer.
CONCLUSION
Bid protests are an important potential remedy for the public bidder which when properly utilized can produce jobs for its lucky, knowledgeable and experienced practitioners.
** Sometimes they hold hearings at 100 Cambridge Street in Boston at the older State Office Building. . Call the Fair Labor Practices Division of the Attorney General’s Office before you file the protest so as to have the correct address.
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This article is not intended to be specific legal advice and should not be taken as such. Rather, it is intended for general educational purposes only. Questions of your rights and obligations under the bid law are best addressed to legal professionals.
The Law Office of Jonathan Sauer sees part of its mission as providing information and education to the contractors it daily serves. Articles are available on a number of construction subjects (e.g. rights under payment bonds, how to present payment bond claims, the mechanics’ lien law, how to file a demand for direct payment) to those who request them.
Copyright Jonathan Sauer 1999
Jonathan P. Sauer
Attorney at Law
Suite 416
1410 Providence Highway
Norwood , MA 02062
Phone: 781-255-0222 / Fax: 781-255-9777