By: Cordell Parvin
In highway-construction bidding, rarely does a disappointed bidder overturn
a decision by state or local government officials because to do so generally
requires a finding that the officials exercised their discretion arbitrarily.
While, in general, state agencies are required to award public works contracts
to the lowest responsible bidder, that requirement is not absolute.
In most states, the DOT can award the contract to another bidder in cases
where it is determined that this action will better serve the state's interests,
provided that the DOT sets down its reasons for the award to a contractor
other than the lowest responsible bidder, and clearly describes how the
state's interest is better served.
A Delaware case, Harmony Construction, Inc. v. State of Delaware Department
of Transportation, 668 A.2d 746 (1995), illustrates a situation where the
court determined that a DOT's decision not to award a highway-construction
contract to the lowest bidder was arbitrary and capricious.
In Harmony, the contractor was found to be the lowest responsible bidder
on Contract 03, a highway-construction project. It was also the lowest responsible
bidder on four other Delaware DOT (DelDOT) state highway projects. DelDOT
had concerns regarding Harmony's ability to perform all five contracts satisfactorily
and directed Harmony to provide-in writing-a work schedule illustrating
how it would proceed to perform all five contracts if they were awarded.
However, DelDOT did not instruct Harmony to assume a specific start-up date
for purposes of preparing the work schedule. Additionally, DelDOT asked
Harmony to submit payroll and equipment lists and the names of the superintendents
who would be assigned to each project. When DelDOT subsequently decided
not to award Contract 03 to Harmony but did award the company the remaining
contracts, Harmony brought action to enjoin DelDOT from awarding Contract
03 to the second-lowest bidder.
During the trial, DelDOT presented four reasons for not awarding Contract
03 to Harmony: Harmony was a new company that had no track record with DelDOT;
Harmony's proposed work schedule would be "unworkable" and awarding
the company Contract 03 would result in "too much" work for the
contractor to perform; Harmony's equipment was titled to two other companies
in addition to itself, compromising Harmony's ability to perform Contract
03 since the equipment could potentially be pulled off the job; and the
same person would be acting as superintendent of Contract 03 and one of
the other DelDOT contracts awarded to Harmony.
The court determined that only the second reason, the workability of Harmony's
proposed schedule, played a significant role in DelDOT's decision. The remaining
reasons had no credibility, especially in light of DelDOT's decision to
award the four other contracts, all pertaining to road construction, to
Harmony.
The court pointed out that, after DelDOT concluded that Harmony's start-up
dates were unrealistic, the department assumed different start-up dates
and developed a revised work schedule, which it did not share with Harmony.
DelDOT further concluded that there would be overlaps between certain of
the four other contracts that would ultimately prevent Harmony from satisfactorily
performing Contract 03.
Referring to Delaware case law, the court explained the term "arbitrary
and capricious" as actions that are unreason- able or irrational, or
that are unconsidered or willful and not the result of a winnowing or sifting
process. In other words, the term means action taken without consideration,
and in disregard of the facts and circumstances of the case.
The court stated that, in this instance, it was DelDOT's responsibility
to show the existence of a decision-making process rationally designed to
uncover and address the available facts and evidence related to the issue
to be decided.
Here, the court noted, DelDOT had no established rules or procedures to
guide its representatives or the contractor in making a determination of
this kind. Rather, DelDOT made the rules up as it went along, never told
Harmony what they were, and only after the game was over was Harmony told
it had "flunked."
This case is obviously unique. However, it points out that when the low
bid is rejected, the state or local government should have a good reason
for the rejection.
Parvin is a shareholder in the law firm of Leonard, Hurt & Parvin,
P.C., which has offices in Dallas, Houston and Austin, Texas; Washington,
D.C.; and Richmond, Va. Leonard, Hurt & Parvin engages in many specialties
affecting the construction industry, including litigation, alternative dispute
resolution, preparation and analysis of contract claims, partnering facilitation,
environmental law, employment law, project financing, and disadvantaged
business enterprise. You may write him in care of the editor.
