By Alexander A. Miuccio, Esq. CIC General Counsel and Adam W. Downs, Esq.
New York’s competitive bidding statutes serve a dual purpose. The primary purpose is to benefit the taxpaying public by enabling government agencies to obtain the best price for public construction projects through open, competitive bidding. The secondary purpose is to assure that contractors are on an equal footing when bidding public works.
These statutes are designed to reject a contractor who is unqualified or whose bid is not responsive to the invitation for bid. The award must be made to the lowest responsible and responsive bidder. The factor most likely to cause problems in the bid selection process is responsiveness, as shown in the recent case of Total Construction Corp. v. City of New York.
The New York City Department and of Parks and Recreation solicited bids for two contracts. The bid documents relating to each contract required the submission of an original bid bond or bid deposit with a contractor’s bid. Total Construction bid on each contract, and submitted a bid bond for each. The bid bond submitted by the contractor was not an original but rather a faxed copy. Additionally, the bond itself was a reproduction which had the word “VOID” appearing throughout the face of the document. Also, much of the actual text on the document was difficult to read if not illegible. Upon receiving the bid bond, the Parks Department contacted the surety named on the bond. The surety representative confirmed that the bond copy, as presented, was invalid.
Based on the bid bond deficiencies, the Parks Department rejected the contractor’s bids as non-responsive. The contractor appealed the Department’s determination, arguing that on numerous prior occasions over the course of several years, the Department had accepted facsimile copies of bid bonds without objection. The contractor also stated that it would provide a letter from its surety attesting to the validity of the bid bond.
In denying the appeal, the Department again focused on the deficiencies of the bond. The Department also noted that the contractor failed to provide specific examples that in the past the Department accepted faxed copies of bid bonds from the contractor without objection. Additionally, the Department stated that even if faxed copies were accepted in the past, the Department did not waive the requirement of receiving an original bond in this particular instance. The Department also noted that despite the appeal, still no original bond was provided. Upon the denial of the contractor’s appeal, the contractor sued the Department.
The Court approved of the Department’s non-responsive determination. The Court noted that the bonds were not originals, could not be read, and that the word “VOID” appeared all over the bonds. The Court stated, “under these circumstances, where the bonds appeared invalid on their face, the Parks Department had a rational basis for rejecting petitioners bids as non-responsive, since petitioner failed to submit bonds in literal compliance with the bid specifications.” The Court further pointed out that “the court may not substitute its judgment for that of the agency responsible for making the determination, but must ascertain only whether there is a rational basis for the decision or whether it is arbitrary or capricious.”
The Court also noted that the agency has the right to determine whether a variance from bid specifications is material or should be waived as a mere irregularity, and that determination must be upheld by the court if supported by any rational basis. Here, the Court found that the Department had a rational basis for rejecting the contractor’s bids as non-responsive because of its failure to comply with the bond requirements of the bid specifications.
There is no conclusive formula for determining on a case by case basis what constitutes a mere irregularity or technical noncompliance with bid specifications as opposed to a material noncompliance with the bid requirements. The courts give broad direction to public authorities in determining whether a bid is responsive. Where the agency’s insistence upon strict compliance with the bid specifications has a rational basis, the courts will uphold the determination of non-responsiveness.
About the author: Mr. Miuccio and Mr. Downs are attorneys of the law firm of Welby, Brady & Greenblatt, LLP Mr. Miuccio is General Counsel to the Construction Industry Council of Westchester & Hudson Valley, Inc.