July 2004
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
Failure to bid on one or more "alternates" for a public improvement contract is one example of a persistent problem Ñ contractors' failure to devote sufficient care to the preparation of their bids and to comply fully with all instructions contained in the bid package. A recent appeals court decision illustrates the difficulties encountered by a low bidder not awarded the contract due to its failure to bid on an alternate. Court challenges to awards to rival bidders seldom succeed where the unsuccessful bidder has "shot itself in the foot" by failing to comply with the bid requirements.
Background
In Sicoli & Massaro, Inc. v. Grand Island Central School District, a disappointed bidder unsuccessfully tried to overturn the award of a public improvement contract on which it was the low bidder. The petitioner, Sicoli & Massaro, Inc. ("Sicoli & Massaro") chose not to bid one of the alternate bids, known as Alternate M. A rival contractor, Summit Construction Group, Inc. ("Summit"), did bid Alternate M, and was awarded the contract. Sicoli & Massaro went to court seeking to compel the school district to award it the contract as the low bidder, and to stay the school district from awarding the contract to Summit.
Decision
The trial court dismissed Sicoli & Massaro's proceeding, and it vacated the temporary stay prohibiting the school district from awarding the contract to Summit, the second low bidder. On appeal, the Appellate Division affirmed the lower court's decision.
Part 13.2 of the bid instructions stated, "the contract will be awarded to that qualified bidder whose base bid, together with any alternates which the [school district] may wish to accept, totals the lowest number of dollars." Sicoli & Massaro contended that the school district violated Section 103 of the General Municipal Law in awarding the contract to Summit, and in failing to prioritize alternates prior to bidding. Sicoli & Massaro argued further that the school district improperly changed the bid specifications after the close of bidding, because it knew that a part of Alternate M could not be built as specified. The appeals court rejected those arguments.
The court conceded that the school district's failure to prioritize alternates prior to bids being opened might have injected an "appearance of impropriety" into the process, but it held nonetheless that this was not sufficient to invalidate the award. The court stated that Sicoli & Massaro had the burden to show not merely an "appearance of impropriety," but "actual impropriety, unfair dealing or some other violation of statutory requirements." Sicoli & Massaro failed to carry this burden.
The court found that the school district had provided a plausible explanation for not ranking the alternates Ñ namely, that it was unable to prioritize the alternates until it opened the bids and learned what the various alternates would cost. According to the court, Sicoli & Massaro also should have known that its failure to bid on one of the alternates rendered its bid irregular and subject to rejection. Because the school district had a rational basis for its decision to include Alternate M in its bid, and Sicoli & Massaro failed to bid on that alternate, the disappointed contractor could not overcome the presumption of regularity. The appeals court accordingly found that the lower court had properly dismissed Sicoli & Massaro's challenge to the award.
The court also rejected Sicoli & Massaro's argument that, because a part of Alternate M could not be built, the school district in effect had changed the specifications after the close of the bidding process.
The court reiterated that the competitive bidding statues do not apply where the changes involved are merely incidental to the original contract. The court said, "The law recognizes the necessity for changes in public contracts as construction goes forward. Change orders may be issued without competitive bidding as to details and minor particulars."
The court held that the deletion of a part of Alternate M was not a material variance or an "important general changeÉwhich so varies from the original plan or is of such importance as to constitute a new undertaking." The court concluded that the omission of a part of Alternate M was a merely "incidental" change, not rising to the level required to invalidate the award to Summit.
Commentary
A bidder that elects not to bid an alternate on a public improvement contract does so at its peril. It is self-defeating for a contractor to invest the time and effort needed to prepare a bid, obtain a bid bond, and possibly forego other opportunities, only to lose the contract because of a failure to comply fully with the public owner's bidding requirements.
The law accords a presumption of regularity in favor of the public agency, and any plausible reasons put forward for electing a particular alternate, or not prioritizing the alternates, will usually suffice to defeat a disappointed bidder's legal challenge.
A bidder mounting such a challenge has the difficult task to prove actual favoritism or actual impropriety; a mere "appearance of impropriety" will not sustain the challenge. Also, a mere incidental change in the project after the bidding process is completed furnishes no basis to overturn the award. The courts will not require that the bid process be done anew, unless the changes are so profound as to fundamentally change what the parties are bidding.
About the author: Mr. Miuccio is a partner in the law firm of Goldberg
& Connolly, and general counsel to the Construction Industry Council of
Westchester and Hudson Valley, Inc. Geoffrey S. Pope, a senior associate with
the firm, assisted in the preparation of this article.