The Complexity of Bid Protests & Monetary Awards

The Complexity of Bid Protests & Monetary Awards

By Richard M. Harris

The California Court of Appeal released a decision about appropriate damages in a state court bid protest case.  However, the case, West Coast Air Conditioning Co. Inc. v. Department of Corrections & Rehabilitation (2018), is far more helpful in opening the black box that is state and local contract bid protests.

In the case, West Coast Air Conditioning (West Coast) and Hansel Phelps (HP), bid a contract for the California Department of Corrections and Rehabilitation (CDCR).  HP was the low bidder, with West Coast coming in approximately $10 Million higher. Typically, an agency like the CDCR is required to accept the lowest bid unless it is “not responsive,” meaning that the bid does not provide what the agency asks for.  An agency can reject a bid for minor errors, but it is only required to reject a bid if the errors are sufficient to give an advantage to that bidder. The only other option available to an agency is to reject all bids and rebid the work.

Here, HP’s bid was replete with problems, including failing to list subcontractor’s license numbers and having arithmetical and typographical errors.  After the bid opening, HP even submitted a supplement “clarifying” its bid, changing the percentages work that would be subcontracted after bids had closed.

West Coast claimed that these errors led to an advantage for HP.  West Coast Argued that HP did not have to spend as much time checking its math as the other bidders, giving HP an advantage.  Moreover, HP had enough errors that, after the bids were opened, it could have withdrawn its bid (an opportunity a bidder without errors does not enjoy).  West Coast protested the bid, and when the CDCR awarded to HP, West Coast filed a bid protest in court.

Ultimately, the court permanently enjoined the CDCR from contracting with HP under a well-trod path in state contracting law: 1) HP’s bid was flawed, and it could have withdrawn its bid after bid opening because of those flaws, 2) because HP could have withdrawn its bid, the flaws gave HP an advantage other bidders don’t have, 3) because HP had an advantage, it would be illegal for CDCR to contract with them.

West Coast tried to negotiate with the CDCR to award it the contract, but this was ultimately in vein.  When the CDCR would not award the contract to West Coast, the contractor claimed it was owed bid preparation costs.  At trial, the court found that bid preparation costs must be awarded to West Coast because the injunction keeping the CDCR from contracting with HP was an “ineffective” remedy for West Coast if it was not actually awarded the contract.  West Coast was awarded $250,000.00 in bid preparation costs.

More interesting than the particular result in this case, however, is the lengthy and difficult process of bid protests. Even in a case like this one, where the low bidder’s paperwork was hopelessly flawed and West Coast acted quickly to get an injunction, the court did not enjoin the CDCR from continuing to work for well over six months, when 8% of the work was complete.  Though their protest was meritorious, the CDCR was still not required to contract with West Coast for the work.

In the future, a state or local agency reviewing this case should conclude that if there is even a minor risk of protest, the appropriate step is to reject all bids and rebid the work.  This is always an option to a public agency, and leaves the agency with no risk, and the protesting contractor with no remedy other than to bid the work a second time.

At the state and local level, the bid protest process is difficult, and can easily end with little to show for a bidder’s efforts.  Ending with bid preparation costs is not typical, and the CDCR had many opportunities to end the protest process without consequence.  This case should remind a contractor that being correct on the law is not always enough to end up with the work.

Contact RJO

If you have questions about bid protests, please contact Rogers Joseph O’Donnell. Our construction and government contracts practice groups have extensive experience successfully representing public and private construction firms and subcontractors on a wide range of matters including bid protests, payment disputes and contract negotiations.

About Richard M. Harris

Mr. Harris is a member of the firm’s Construction and Government Contracts Practice Groups. Mr. Harris served as General Counsel for a public works construction firm for over six years. He has extensive legal experience in public and private construction matters, including bid protests, contract negotiation, and claims including unforeseen conditions and delay claims. He has mediated, arbitrated, and litigated construction disputes of many types. He has resolved disputes with general contractors, suppliers, and state and local government owners.

Education

J.D., Georgetown University Law Center

With honors

B.S., University of Colorado at Boulder

With distinction