Bid Problems Do Not Have to Be Big Problems Part One: Avoiding Bid Protests

• Publication year: 2016
• Author: By Clare M. Gibson*

Bid Problems Do Not Have to Be Big Problems Part One: Avoiding Bid Protests

By Clare M. Gibson*

I. INTRODUCTION

This is a good time for public agency attorneys to consider practical measures to reduce exposure to the cost and risk of public works bid protests. Pending state legislation, if approved, could result in billions of dollars of new funding for state and local public works projects in California. The November ballot will also include local bond and parcel tax measures for funding local and regional infrastructure projects. Most of the projects which may benefit from these future funding sources will be subject to public bidding requirements.¹ And when public bidding is required, there is always the possibility that a bid protest may be filed.

Not every public bid draws a protest, but even routine protests can be costly and time-consuming. At worst, protests can result in litigation, project delay, and even loss of project funding. This Part One of a two-part series on bid protests provides practical recommendations for avoiding bid protests - or at least those that can be avoided. Part Two, which will appear in the fall issue of the Public Law Journal, will focus on effectively managing bid protests when they do arise.²

II. THE LEGAL FRAMEWORK

Most public contract bid protests are not particularly complex from a legal perspective and there is a well-developed body of law in California governing bidding and award of public contracts.³ Understanding the legal context is important, not simply to evaluate the merits of a bid protest, but also to inform a practical strategy to avoid and manage protests.

While some bid protests are based on objections to the manner in which a public agency is conducting the bid, most involve a higher bidder seeking to invalidate the bid of the low bidder in order to secure the contract - at a higher price. These bidder-against-bidder protests are based either on allegations that the low bid was "nonresponsive" or that the low bidder is not "responsible" (or both).

Responsiveness refers to the bid itself, which encompasses all of the documents that must be submitted by each bidder within its sealed bid envelope. That includes the bid proposal form, bid security, the subcontractor list form, the non-collusion declaration, and any other documents that the bidders are required to submit for a particular bid. A bid is responsive if it promises to do what the bidding instructions require.⁴ Responsiveness is determined from the face of the bid, without outside investigation or information.⁵

A determination of responsiveness boils down to whether the bidder complied with the bidding instructions.⁶ If a bid deviates from the bidding instructions, a secondary question applies: whether the deviation is material or immaterial. If it is material, the agency must reject the bid. If the deviation is not material, the agency has the option - though not the requirement - to waive the deviation and accept the bid.⁷

Responsibility refers to the bidder. Public Contract Code section 1103 defines "responsible bidder" to mean "a bidder who has demonstrated the attributes of trustworthiness, as well as quality, fitness, capacity, and experience to satisfactorily perform the public works contract." Thus, determinations of responsibility are based on the "personal quality of the bidder."⁸

Determinations of responsibility are more complex, since they require investigation into the bidder's history, experience, and "trustworthiness." Therefore, before a bidder can be disqualified as non-responsible, the bidder is entitled to basic due process:

[Page 10]

"[T]he public body must (1) notify that bidder of any evidence reflecting upon the bidder's responsibility received from others or adduced as a result of independent investigation, (2) afford the bidder an opportunity to rebut such adverse evidence, and (3) permit the bidder to present evidence of qualification." ⁹

Disqualification based on a finding that a bidder is not responsible is often vigorously contested since it may adversely affect the bidder's reputation and even its bonding capacity.

Responsibility and responsiveness are legal issues. As such, bid protests raising these issues should be evaluated by the agency's legal counsel, for a legal opinion on the merits of the protest to the agency's governing body or awarding official. In addition to playing a reactive role by responding to bid protests, agency counsel should consider implementing preventive measures, including drafting and review of the bid and contract documents. That is the focus of the following practical recommendations, most of which are intended to reduce the risk of protests by limiting opportunities for human error.

III. PRACTICAL MEASURES FOR AVOIDING BID PROTESTS

A. Time for Legal Review of Bid Documents.

Avoiding bid protests can start during the early planning stages of a project. Many avoidable bidding errors arise from problems with the bid documents¹⁰ themselves, sometimes due to unclear or inconsistent bidding instructions. Often these problems can be avoided simply by ensuring time for legal review before the bid documents are released to bidders.

If a design professional is preparing the bid documents, the professional services agreement should require the design professional to complete the bid documents in time for legal...