The Sugar Mill Case: Public Waste and the Public Bid Law
| Author | Louis Ducote |
| Pages | 1068-1093 |
I would like to send my deepest regards to Judge Melvin A. Shortess (ret.) and Professor Kenneth M. Murchison for their guidance and assistance with this note. Without them, this note would not have been possible.
"Lord Polonius: What do you read my lord? "Hamlet: Words, words, words."1
Page 1068
A series of reports published in 2006 on the construction of a 45 million dollar syrup mill in Lacassine, Louisiana made Agriculture Commissioner Bob Odom out to be a sweet-toothed robber baron eager to exploit local farmers and taxpayers for more sugar money.2 The Louisiana Department of Agriculture and Forestry built the Lacassine mill to help sugarcane farmers cope with rising trucking costs.3 The mill condenses cane stalks into syrup, which allows more sugar to fit into each load, and offers a rail spur for bulk shipments to refineries in New Iberia.4
Financing for the mill's construction came from state bonds secured by an annual $12 million in gambling taxes.5Commissioner Odom planned to recoup the mill's cost by selling the mill to a nonprofit farmer's cooperative.6 The farmers would use profits from the mill's operations to pay off the bonds, thereby shifting the construction costs off taxpayers.7
Critics of the Department's efforts regarded the facility as an irresponsible waste of tax money. The credit sale to farmers did not soothe fears that the mill would fail to generate profits without significant increases in cane production.8 If the mill failed, bond holders would be entitled to the gambling money to repay the debt.9 The project's speculative benefits coupled with the vast Page 1069 amount of money involved led some to suspect the Commissioner was engaged in self-dealing.10
Suspicions were no doubt heightened after the Commissioner announced he had changed his mind about selling the mill to the farmer's co-op.11 Under the new plan, the mill would be offered to unidentified outside investors while the co-op would receive a lease.12 Odom claimed the unknown investors were offering as much as $60 million to buy the facility.13
While the media was busy coloring the Commissioner as the sugar king of south Louisiana, no one was paying attention to the legal problems looming in the background. In building the Lacassine mill, the Department of Agriculture and Forestry ignored the Public Bid Law.14 Under the law, state agencies must advertise public works contracts and award them to the lowest responsible bidder.15 No bids were ever solicited for the Lacassine mill. Commissioner Odom acted as the project's general contractor.16 Under Odom's direction, firemen and office clerks who worked for the Department of Agriculture and Forestry furnished labor for the mill's construction.17 For specialized projects, the Commissioner hand-picked the contractors.18
On behalf of its members, Louisiana Associated General Contractors challenged the Commissioner's authority to run the project. The association sued for an injunction ordering the Page 1070 Commissioner and others to comply with the Public Bid Law.19 In response, the Commissioner answered that the Agricultural Finance Act exempted him from compliance.20 The trial court ruled for the Commissioner and the Louisiana First Circuit Court of Appeal affirmed.21
The first circuit treated the case purely as an issue of statutory construction and made no attempt to address the substantive policies that underlie the Public Bid Law.22 In Louisiana Associated General Contractors v. Louisiana Department of Agriculture and Forestry (the Sugar Mill Case), the Louisiana Supreme Court reviewed the first circuit's decision.23 The supreme court unanimously affirmed the first circuit's decision, but shockingly, Justice Victory's opinion did nothing to develop the lower courts' rationale. Instead, the high court adopted the first circuit's "plain meaning" interpretation.24
After the supreme court's decision, the fate of millions of tax dollars and an enlargement of the Agriculture Commissioner's powers were decided by consideration of nothing more than the words on a page. This note analyzes the far-reaching consequences of the court's decision. Part II of this note describes the case and the Public Bid Law in more detail. Part III demonstrates why the court's plain meaning approach fails to provide an adequate solution under accepted principles of law and linguistics. Part IV concludes with an alternative analysis and a proposal to abolish the intra-agency borrowing of bid law exemptions. Page 1071
The Louisiana Public Bid Law lays out procedural and substantive rules that govern the awarding of public works contracts. The legislature adopted the Public Bid Law to insulate public funds from fraud and official malfeasance.25 The law achieves this end by requiring competitive bidding for a wide range of public activities and by limiting the discretion of officials to reject bids.26 The Public Bid Law provides fairness to contractors and increases transparency.27 Together these mechanisms drive down the cost of financing public works and reduce the ability of officials to line the pockets of favored campaign contributors by passing exorbitant public contracts under the table.28
The Public Bid Law requires all public entities to advertise the undertaking of public works over $100,000 and to award the project to the "lowest responsible bidder" who bids in accordance with the project's specifications.29 "Public entities" subject to the statute include "any agency, board, commission, department, . . . or any political subdivision of the state."30 Generally, public officers also qualify as "public entities."31 The term "public works" includes the "construction, alteration, improvement, or repair of any public facility or immovable property owned, used, or leased by a public entity."32
Advertisements soliciting bids for public contracts must be published at least once a week in a local newspaper.33 The Page 1072 advertisements must run for at least three weeks and must come at least twenty-five days before bids are eligible for receipt.34 The successful bidder must sign a contract with the public entity and in most cases must provide a bond for security.35 Any contract awarded without following these procedures is an absolute nullity.36 Local district attorneys and the attorney general have authority under the act to sue for nullification of contracts awarded without complying with these procedures.37 The act also authorizes citizens' suits against public entities that disregard the Public Bid Law.38
Public entities also face substantive limits on the award of public contracts. Public entities must award public works contracts to the "lowest responsible bidder."39 The responsible bidder standard is designed to make contract awards less discretionary.40Traditionally, public entities were entitled to reject any and all bids.41 The government could then readvertise the project.42 To end this practice, the legislature amended the law to require a just cause for rejection.43 The just cause standard diminishes the discretion available to public officials under prior law, but does not eliminate it. Officials make the initial determination as to which bidders qualify as "responsible."44 The Public Bid Law expressly allows officials to consider available funding for the project and changes in the project's scope in making their determination.45 Page 1073 Louisiana jurisprudence permits public officials to consider the contractor's financial stability, experience, and reputation.46
The jurisprudence has so far treated the responsible bidder issue as a question of good faith.47 In New Orleans Rosenbush Claims Service, Inc. v. City of New Orleans, Rosenbush Claims Service was the low bidder on a public service contract advertised by the City of New Orleans.48 The City decided to reject all bids and readvertise the project.49 The City's position was that readvertisement was in the public's best interest.50 Under prior law, this explanation would have sufficed, but in Rosenbush, the City's conclusory assertions failed to meet the just cause standard.51 By contrast, in C.R. Kirby Contractors, Inc. v. City of Lake Charles, the third circuit upheld the City's rejection of bids on a road patching deal based on the City's good faith assertion that it wanted to prevent bid shopping among subcontractors.52Other decisions have upheld rejections based on the state's finances,53 and the use of unacceptable subcontractors.54
Underlying the need for the Public Bid Law is concern about human greed. Government officials have a perverse incentive to spend public funds in ways that maximize the benefits to themselves. Public servants could be tempted to hire friends, family, or constituents at premiums that fail to reflect the value of their services to the taxpayer. The choice makes perfect sense from the perspective of the public servant because the benefits to the favored individuals are directly apparent whereas the damage to the taxpayer is imperceptible. Page 1074
The legislature enacted the Public Bid Law to resolve this conflict of interest in favor of taxpayers.55...
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