Procurement Case Law

Procurement Case Law –
Court Decisions Affecting Procurement
Virginia Association of Governmental Purchasing
Fall Conference
October 28th, 2011
Acting Deputy Director of Finance
City of Fort Lauderdale, FL
[email protected]
© Kirk W. Buffington, 2009
Discussion will focus on several court
cases from across the Country which
have an impact on interpretation of
procurement contracts and bid
© Kirk W. Buffington, 2009
© Kirk W. Buffington, 2009
Finding applicable case law
– Trial court decisions are only binding on
parties involved
– State Appeals court decisions may or may not
be controlling – but establish an interpretation
– State Supreme Court decisions are always
controlling, within the state of proceedings
– U.S. Supreme Court Decisions – constitutional
© Kirk W. Buffington, 2009
Gibbs Construction vs. Board of Supervisors,
Louisiana State University (447 So. 2d, 90)
Formal bid advertisement required attendance at
mandatory pre-bid
One bidder at pre-bid
Gibbs was not present, but submitted low bid
After pre-bid, project architect contacted Gibbs and
requested they submit a bid – architect lined
through portion of document requiring attendance
Gibbs bid rejected, and bid was awarded to
another – Gibbs filed suit**
© Kirk W. Buffington, 2009
Findings - Gibbs
Court of Appeals – university properly refused to
consider bid by Gibbs because the company was
not represented at pre-bid, as required in bid
Direction by project architect could not override
the document requirements*
© Kirk W. Buffington, 2009
Qualicon Corp v City of Norfolk, VA
Minor technicality or major variation
– Building of hypolimnetic aeration system
– Following requirement in bidding documents:
• Following information shall be included as part of all
submittals: 1) detailed drawings and descriptions of all items
of equipment, showing all dimensions, parts, construction
details, … product data including the make and model of
each major item of equipment.”
• Major equipment items were defined as “…aerators, in-lake
piping, marker buoys, and maintenance boat.”
© Kirk W. Buffington, 2009
Qualicon Corp v City of Norfolk, VA
Bids opened and PWC (Peters & White
Construction) was low bidder
– PWC failed to include any information regarding the in-lake
piping with its bid
– Notwithstanding the PWC Commission, City awarded bid to
– Qualicon filed bid protest letter
– City rejected protest (PWC’s Commission did not affect the
essential competitive elements)
– Qualicon filed for judgment in Circuit Court
© Kirk W. Buffington, 2009
Qualicon Corp v City of Norfolk, VA
Is this a minor defect which can be waived
© Kirk W. Buffington, 2009
Qualicon Corp v City of Norfolk, VA
IFB required strict compliance
Is City seeking to override clear language requirements
of their own IFB
Court is required to reverse an agency’s decision if it is
established that the award is not an honest exercise of
VA code defines minor defect of a bid as being a defect
that does not affect the price, quality, quantity or
delivery schedule for the goods/services
© Kirk W. Buffington, 2009
Court reversed award to PWC
– Engineering testimony that bidders were aware that
submittals were not really required
– PWC was intending to submit requirements when
PWC was notified by City, on the eve of bids due,
that submittals would not be required
© Kirk W. Buffington, 2009
Harry Pepper & Associates v.
City of Cape Coral (352 So. 2d, 1190)
Bid for construction of water treatment plant –
required all pump mfg. to be used, must be
submitted for approval and acceptance
Gulf contracting submitted bid, but submitted
name of mfg. that had not been approved and was
not acceptable to engineer
Gulf was apparent low bidder
City engineer contacted Gulf and asked them to
indicate they would use acceptable pump mfg. if
awarded bid – Gulf did so
© Kirk W. Buffington, 2009
Harry Pepper (cont.)
Contract awarded to Gulf
Pepper, number two bidder, filed suit, contending
change was unlawful
City contended it was a minor irregularity, and in
the best interests of the City*
© Kirk W. Buffington, 2009
Findings – Harry Pepper
Found an unfair atmosphere had been created, as
Gulf had everything to gain, and nothing to lose
Gulf was in a position to decide whether it wanted
the job bad enough to incur the additional expense
of supplying pumps*
© Kirk W. Buffington, 2009
Peninsula Therapy Center v. VA Dept of
ITB for providing sex offender treatment
Purpose: competitive sealed bids to obtain
treatment for sex offenders
Multiple awards – per person/per session
Services could be provided at DofC, provider’s
location, or a combination
© Kirk W. Buffington, 2009
Peninsula Therapy
First Addendum issued
– Determination to term shall be sole discretion of the
agency/provider may make recommendations
Second addendum
– Determination to terminate shall not be made without
conferring w/probation officer in advance. Decision
shall be based upon mutual agreement between
provider and agency
© Kirk W. Buffington, 2009
Peninsula Therapy
Notice of Award – Peninsula not listed
Vendor advised that agency found them nonresponsive
– Part of Peninsula response: “determination to
terminate shall be at sole discretion of agency”.
© Kirk W. Buffington, 2009
Peninsula Therapy
Part to Peninsula's response stated: “if a problem
presented does not fall in the staff’s expertise,
Peninsula will make appropriate referral”. This issue
was not addressed in ITB, and no mention of payment
Agency found that Peninsula submitted a
proposal, not a bid
Peninsula argued that it was providing additional
information above the minimum requirement
© Kirk W. Buffington, 2009
Peninsula Therapy
Peninsula further believed that be signing the
declaration that it intended to follow the ITB,
made the variances moot, and Peninsula
Sec 2.2-4301 VA code defines responsive as: a
person who has submitted a bid that conforms in
all material respects to the Invitation to Bid.
© Kirk W. Buffington, 2009
Peninsula Therapy
Peninsula further argued that other bidders
deviated and these bidders were found to be
informalities; these variances consisted of:
• Bidders who did not attach bidder certificate were allowed
to at later time
• Bidder failed to sign/acknowledge addendum
• Bidder failed to certify insurance
• Bidder failed to provide copy of license
Why was Peninsula non-responsive, and the others not?
© Kirk W. Buffington, 2009
Peninsula Therapy
Sec 5.13 (c)(1) Vendor’s manual (informality)
• A minor defect or variation of a bid or proposal from the
exact requirements of the ITB or RFP, which does not
affect the price, quality, quantity, or delivery schedule for
the good… the procuring agency may, in its sole
discretion, waive such informalities or permit the
bidder/offeror to correct
© Kirk W. Buffington, 2009
Accela, Inc., v. Sarasota County
Challenged piggybacking by County
– Purchase of software to track land management
– County conducted two site visits where software had
been implemented
– County ‘piggybacked’ on vendor’s (CSDC) most
current contract from Wisconsin
From 9 modules to 40 (only 8 common between
both) County argued this made the contract
“substantially the same”
From $176k to $711k
Implementation from $269k to $688K
5 YR maintenance from $31K to 179K
“In practice of course, the County (or any
agency) and the vendor must draw up a fresh
contract. The degree to which this contract can
diverge from the other government entity's
contract is a significant issue in the present
Was gov’t arbitrary or capricious in awarding to
Gov’t agency must follow it’s own rules
ordinances (City of Hollywood v. Witt)
Terms and scope of new ‘piggybacked’
contract must be substantially the same as
Cannot use another entity to ‘begin’ negotiation
“…given that the piggyback process
contemplated by the Code is intended to be
competitive, we cannot agree that the County
and CSDC's contract-making process
represented a valid manifestation of the
piggyback provision. That is, the County was not
permitted to use another entity's contracts
merely as a “basis to begin negotiations,…”
a public body has wide discretion in soliciting
and accepting bids for public improvements and
its decision, when based on an honest exercise
of this discretion, will not be overturned by a
court even if it may appear erroneous and even
if reasonable persons may disagree.” Liberty
County v. Baxter's Asphalt & Concrete, Inc., 421
So.2d 505, 507 (Fla.1982).
However, we conclude that that County went beyond the bounds
of its discretion when it violated its Procurement Code. See Dep't
of Transp. v. Groves-Watkins Constructors, 530 So.2d 912, 913
(Fla.1988) (noting that the rule that “an honest exercise of ...
discretion cannot be overturned” does not apply when there is a
finding of “ ‘illegality, fraud, oppression, or misconduct’ ”
(emphasis added)) (quoting Liberty County, 421 So.2d at 507).
Hewitt Contracting Company, Inc. v.
Melbourne Regional Airport (528 So. 2d 122)
Contract for construction work at airport
Date and time for receipt of bids set in
Hewitt submitted a timely bid as required
Another contractor submitted bid after advertised
This bid was lowest, and ultimately accepted by
Airport Authority
Hewitt sued, contending untimeliness of bid
submittal disallowed the award to bidder*
© Kirk W. Buffington, 2009
Hewitt Contracting (cont.)
Trial court upheld right of airport to award to
low bidder of their choice
Hewitt appealed this trial ruling to 5th District
Court of Appeal*
© Kirk W. Buffington, 2009
Findings – Hewitt Contracting
Appeals court affirmed ruling of trial court
Airport agency’s legal authority to award a
construction contract to a contractor whose bid
submission was not timely.
The appellate court found that appellee (airport)
has, and should have, the discretion to waive the
irregularity of a contractor's untimely bid and to
accept the late bid under the circumstances.
© Kirk W. Buffington, 2009
Dedmond vs. Escambia County
Government (244 So., 2d, 758)
© Kirk W. Buffington, 2009
Dedmond submitted successful bid for beach
concessions – Commission at regular meeting
awarded contract to Dedmond
Clerk advised Dedmond, in writing, of contact
One month later, Commission voted to rescind
its award to Dedmond, and to rebid contract
Initial trial court held no binding contract existed
as lease had not been executed, and County
was within its rights to rescind
Dedmond appealed trial court decision*
Findings - Dedmond
Appellant court reversed trial court, and found for
Ruling was erroneous
Until acceptance of a bid, bidder is able to
withdraw bid, conversely, acceptance of a bid by
agency results in a contract, even though formal
contract had not been executed*
© Kirk W. Buffington, 2009
Petroleum Traders Corp, v
Baltimore County, MD
When is a contract, a contract
Baltimore County is a member of cooperative
purchasing group
Contract for gasoline and diesel fuel
Participating entities would purchase all fuel from
successful bidder
Counties had option to lock-in a fixed price for fuel
over a set period of time, instead of prevailing index
Winning bidder would purchase futures to ensure
supply at fixed price
 PTC informed by County that it had won bid and
awarded contract
 County issued term contract award to PTC signed by
Deputy Purchasing Agent “this is notice that
contract…has been awarded to you…”
County purchased fuel for a year and a half
Elected to lock in prices for co-op during 3 different periods
Market price rose during each period above locked in price,
thus yielding a considerable savings
 2005 (Katrina and Wilma)
Prices began to rise
County locked in for 2 additional periods including Dec,
05 to April, 06D
 Oil prices then began to fall (significantly) and
locked in prices exceeded the available market price
County demanded PTC re-negotiate pricing and PTC
refused having already purchased futures
Relationship became adversarial
County continued to order and use of lock in of prices
County asked for locked in prices in December, 05, for
period April, 06 through December, 06
Prior to purchasing additional futures, PTC requested
estimated quantities of fuel and assurances County
would honor contract
County construed this as a delay and breach of
County formally terminated contract December 7, 2005
PTC advised County of significant loss this would
cause as PTC had purchased the futures as
requested. PTC suffered a significant loss and filed suit
against County
What was County’s original argument and
justification for termination?
County added an additional argument during
initial litigation. What was it?
County argued there was never a valid contract
– Charter requires that County exec or designee execute
commodities contract and that attorney approve as to
– As neither of these formalities were meant, the contract
could not be valid
– However the code vests significant authority in the
County Agent “to make all purchases for supplies… a
power which he may delegate
– County was simultaneously arguing that PTC breached a
contract, but that no valid contract existed
Findings of Trail Jury
Martel Constructing v. Montana
State Board of Examiners (668 P. 2d., 222)
Successful bidder had failed to acknowledge
certain addenda, but was awarded contract, after
assurances that bid price included changes
required in addenda
Martel (second bidder) filed suit contending failure
by bidder to acknowledge addenda made bidder
Trial court held in favor of Martel, and ordered
State to reject awarded contract
Case was appealed to state supreme court*
© Kirk W. Buffington, 2009
Findings – Martel
Supreme court reversed lower court
State, in determining qualifications of bidder and ability to
perform, are acting in discretionary manner
There was a meeting of the minds between the state and bidder
Successful bidder, in submitting bid bound itself to full
performance of contract documents
Failure of successful bidder to make written acknowledgement of
receipt of addenda was an immaterial irregularity that could be
waived by state
Wide discretion in determining what is best for the agency*
© Kirk W. Buffington, 2009
Rushlight Sprinkler Co., v.
City of Portland (219 P. 2d, 732)
Rushlight submitted bid in the amount of
$429,444.20., with bid bond
Next low bid was $671,000
After opening, Rushlight noted an error in their bid,
(omission of $99,225.68), and asked to withdraw bid
Bid was awarded to Rushlight, and bid deposit check
was cashed
Rushlight refused to proceed and sought to recover
© Kirk W. Buffington, 2009
Rushlight – some facts
3rd and 4th lowest bids were $673,232 and
City officials surmised low bid was too good to be
Engineer stated bid was “very low”, and a very
decided difference between bid and City’s
© Kirk W. Buffington, 2009
Findings - Rushlight
Court noted that an offer and acceptance are deemed to
effect a meeting of the minds, even if offeror made a
material mistake, providing acceptor (City) was NOT aware
of mistake
But, if acceptor knew of mistake, and if it was basic, or if a
reasonable man, should have inferred there was a basic
mistake, a meeting of the minds does NOT occur
Bidder must prove that not only was a mistake made, but
acceptor had reason to be aware
City was aware of mistake, and sought to take
unconscionable advantage of error
Equity is always prepared to grant relief from such
situations *
© Kirk W. Buffington, 2009
Chris Berg v. Alaska DOT (680 P. 2d, 93)
Berg, low bidder, entered price information on
wrong line of bid submittal
Mistake did not effect bottom line of bid in any way
State rejected bid as non-responsive
Berg filed suit
District trial court denied Berg’s request for
injunction against award, and
Suit was brought to State Supreme Court *
© Kirk W. Buffington, 2009
Findings - Berg
Supreme court reversed trial court, finding
variance was not material and therefore did not
compel rejection
Determination of responsiveness of bid is within
agency’s discretion, subject to judicial review
Bid error was minor technical defect, not affecting
substance of low bid, and therefore it was an
abuse of discretion to reject bid on that basis*
© Kirk W. Buffington, 2009
Fenske Printing v. Brinkman
(349 N.W. 2d, 47, South Dakota)
Contract for purchase of legislative printing
Each bidder was required to submit a sample of
50# paper with bid, colors were specifically
required to be goldenrod and blue
Low bidder submitted a 50# sample of goldenrod,
but a 70# sample of blue
Bid awarded to this bidder
Unsuccessful bidder filed suit claiming low bid was
© Kirk W. Buffington, 2009
Findings – Fenske
Supreme court held that unsuccessful bidder had
not shown that Fenske’s failure to submit two
samples of 50# paper gave Fenske any advantage
over other bidders, or prevented State from
conducting any tests
Failure to show non-responsiveness
In general-unsuccessful bidder has burden of
showing successful bidder was non-responsive*
© Kirk W. Buffington, 2009
James C. Berry v. Okaloosa County
(334 So. 2d, 349)
Berry submitted bid for construction of airport facility
Board voted to award contract to Berry
Approx. 1 hour later, passed another motion “to
rescind the motion to award the contract to Berry”
Passed another motion to re-advertise and rebid
Berry filed suit, contenting a binding contract was
created at time of first motion , which could not be
rejected except by showing fraud, collusion or other
misconduct, none of which was alleged by the
© Kirk W. Buffington, 2009
Findings - Berry
trial court found commission was meeting in a
continuous session, without adjournment, and
therefore contract was not created
Final motion, is controlling motion
Appellant court affirmed lower court ruling, finding
there was an absence of formal notification, and
until that occurs, commission has right to rescind
because no obligation is created by acceptance,
until acceptance is transmitted to offeror*
© Kirk W. Buffington, 2009
Stilsing Electric v. Town of Colonie
(96 A.D. 2d, 993, NY)
ITB provided for 3 options in making the bid
One bidder added a fourth option, which Town
accepted as lowest, responsible bid
Unsuccessful bidder filed suit
© Kirk W. Buffington, 2009
Findings - Stilsing
N.Y. Supreme Court found Town was not required
to reject bid which included 4th option, even though
bid form only provided for three
Bid is not required to be rejected because bidder
produces an innovative proposal that results in
savings to the agency
Unsuccessful bidder was not put at competitive
disadvantage by his failure to anticipate other
possible options for meeting bid specification
© Kirk W. Buffington, 2009
Prairie Valley Schools v. Sawyer
(665 S.W. 2d, 606, TX)
School district completed an abandoned project,
acting as general contractor
School district had not secured bonding from
contractor who abandoned the project
Subcontractors and material men brought action
for services and materials supplied to the project
up to abandonment, but which were not paid
Subcontractors alleged that school district’s
failure to secure performance bond made the SB
liable for payments not made by their selected
general contractor
© Kirk W. Buffington, 2009
Findings – Prairie Valley
Although bond requirement may be waived by
agency, it is reasonable for sub-contractors and
suppliers to assume that agency will require bond
from general contractor
Thus, if agency chooses to waive bond, it cannot
claim subs only remedy for non-payment is against
the general
Since school district controlled project after
abandonment, school district assumed position of
Therefore, school district liable for payment to subs
and suppliers**
© Kirk W. Buffington, 2009
Findings – Prairie Valley (Cont.)
Plaintiff (sub-contractors) were seeking fair value
of goods/services provided,
Even lacking a formal contract between the parties
(in this case between the School district and the
© Kirk W. Buffington, 2009
Kennedy Temporaries v.
Comptroller of the Treasury
(468 A. 2d, 1026, MD)
ITB required “bids exceeding $25,000 must be
accompanied by 5% bid bond”
Low bidder submitted bid of $30,000
Low bidder bid bond was in the amount of
$1092.05, in proper form, but $407.95 short of
the 5% requirement ($1500.00)
Contract awarded to low bidder
© Kirk W. Buffington, 2009
Kennedy Temporaries (Cont.)
Challenge to contract award – an unsuccessful
bidder alleged that low bidder should have been
disqualified for submitting insufficient bid bond
The Challenging bidder had failed to submit any
bond, but instead submitted a letter of guarantee
from a bank, pledging to provide collateral to be
held against performance*
© Kirk W. Buffington, 2009
Findings - Kennedy
Court found unsuccessful bidder did not qualify as
“responsive bidder”, and thus had no legal
Maryland bank letter did not meet requirements of
bid bond, because the pledge of collateral was
against “performance”, and not against loss by
virtue of default
Court did not rule on whether the bid bond was
lacking due to insufficiency
© Kirk W. Buffington, 2009
Times Publishing Co. v.
City of Clearwater, (830 So. 2d, 844)
Supreme Court of Florida
Public Records jurisdiction case
Personal/private e-mail sent from municipal
Are all e-mails transmitted or received by public
employees of a government agency subject to
public records under Section 119?
Times reporter requested copies of ALL e-mails
sent/received by two Clearwater employees using
City’s computer network
© Kirk W. Buffington, 2009
Times Publishing (cont.)
Employee’s reviewed their e-mail for
public/personal – (in accordance with City policy)
No other review of e-mails
City copies “public” e-mails and provided them to
Times Publishing
Times Publishing filed suit to obtain e-mails
designated “private”
Asserted, under 119, that Times was entitled to
ALL e-mails generated and stored on City’s
computer network
© Kirk W. Buffington, 2009
Findings - Times Publishing Co.
Circuit court granted injunction and ordered City to
“make every reasonable effort to retrieve,
preserve and secure from destruction” all e-mails
sent or received by employees in question
At trial court, injunction was denied, thereby not
forcing City to provide all e-mails
Second District affirmed trial court order, after a
review of e-mails in question
Sent to the Supreme Court by the District Court,
as the issue was of great public importance*
© Kirk W. Buffington, 2009
Findings - Times Publishing Co.
“Private” or “personal” e-mails fall outside the
current definition of public records, because
– they are neither “made or received pursuant to law
or ordinance” or “created or received in
conjunction with official business of the City, or
– ‘in connection with official business of the City’, or
‘in connection with the transaction of official
AGO opinion that creation of e-mail header makes
all e-mails, regardless of content, public record –
Supreme Court disagreed
– Unanimous Supreme Court decision **
© Kirk W. Buffington, 2009
Liberty County v. Baxter’s Asphalt
(421 So. 2d, 505)
ITB requested bidders to bid on Alternate A and B
Gulf, low bidder, misunderstood, and only
submitted on Alternate B
Commission waived irregularity and awarded the
contract on the basis of Gulf’s Alternate B
Baxter filed suit*
© Kirk W. Buffington, 2009
Findings – Liberty County
District court disqualified Gulf, on theory that
County’s action was illegal
Supreme court reversed district court, and found
Gulf’s failure to comply was not material, and
“a public body has wide discretion in soliciting and
accepting bids for public improvements and it’s
decision, when based on an honest exercise of this
discretion, will not be overturned by a court”
Court found that Gulf was not put in a superior
position to Baxter or other bidders, by its failure to
© Kirk W. Buffington, 2009
submit a bid on Alternate A*
Robinson Electric v. Dade County
(417 So. 2d, 1032)
Dade Housing Authority issued bid for renovation
of housing project
Bid specs required bid bond or certified check or
bank draft in the amount of 5% of total bid
In addendum, this was restated as
“security was to be in the form of 5% bid bond”
Robinson was apparent low bidder, but submitted
bid bond in the form of cashier’s check
Commission awarded contract to Robinson*
© Kirk W. Buffington, 2009
Robinson Electric (con’t)
Number three bidder, (Markowitz), filed for
injunction, contending Robinson’s bid was nonresponsive, because it lacked the required security
– County argued this was a minor irregularity
Trial court agreed with Markowitz, and ordered
County to rebid
County reversed its opinion, agreed with trial court
that documents were ambiguous and rebid*
© Kirk W. Buffington, 2009
Findings – Robinson
Appeals court reversed trial court, and ordered
award to Robinson
In determining whether specific non-compliance
constitutes non-waivable irregularity, courts have
applied two criteria;
1) whether the effect of a waiver would deprive the
City of its assurance that the contract will be entered
into, performed and guaranteed according to
specified requirements, AND
© Kirk W. Buffington, 2009
Findings – Robinson (Cont.)
2) whether it is such a nature that its waiver would
adversely effect competitive bidding by placing a
bidder in a position of advantage over other bidders
or by otherwise undermining the common standard
of competition
i.e., a variance is material if it gives the bidder a
substantial advantage over the other bidders, and
thereby restricts competition
Here, the courts concluded no irregularity existed,
and it was apparent that competitive bidding was not
affected. It prevented none from bidding, and all
© Kirk W. Buffington, 2009
were on equal footing*
Web sites of interest
– FL State Statutes site – search
– Northwestern University U.S. Supreme Court site
– Site for Supreme Court of the United States
• Legal research site – word search and citation
© Kirk W. Buffington, 2009– ABA Section of Public Contract Law
Web sites of interest
– Good basic legal research for non-attorney
– FL legislative site – search and follow bills through the
legislative process
– FL Attorney General’s opinions
– FL Attorney General’s ‘Gov’t in the Sunshine Law’
– FL State Courts
© Kirk W. Buffington, 2009
Maybe some answers
[email protected]
© Kirk W. Buffington, 2009
Dickinson Co. vs. City of Des Moines
(347 NW, 2d, 436)
Dickinson 2nd low bidder in initial bid and rebid
Low bidder did not submit bid bond –found not
to meet specs.
City chose to reject and rebid, instead of
accepting Dickinson bid
In rebid – original low bidder was again low, and
complied with all terms/conditions
Dickinson filed suit, claiming low bidder was
non-responsive, and should have been
© Kirk W. Buffington, 2009
Findings - Dickinson
In absence of fraud or conspiracy, an
unsuccessful bidder, although he may be low, has
no remedy
Public agencies have wide discretion
City has authority to reject all bids, even without
declaring the lowest bidder is not the lowest
responsible bidder
Contractor has no legally enforceable right,
property interest or entitlement that was harmed
by City’s actions (standing)
© Kirk W. Buffington, 2009

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