Awarding Authority’s Discretion to Determine Low Bidder is Alive & Well

The Louisiana Public Bid Law requires that public contracts estimated to cost in excess of $100,000 be awarded to the lowest responsible bidder who had bid according to the contract, plans, and specifications as advertised. The Public Bid Law “is a prohibitory law founded on public policy. It was enacted in the interest of the taxpaying citizens and has for its purpose the protecting of them against contracts of public officials entered into because of favoritism and involving exorbitant and extortionate prices. It was not passed for the benefit of the officials and the entities which they represent.” Boxwell v. Department of Highways, 203 La. 760, 770-71, 14 So.2d 627, 631 (1943).

Historically, public entities had discretion to determine the low bidder subject to judicial review under an abuse of discretion (arbitrary and capricious) standard. Louisiana appellate courts have often said that a public entity “has the right to be wrong, dead wrong; but not unfairly, arbitrarily wrong.” Housing Authority of the City of Opelousas v. Pittman Construction Company, Inc., 264 F.2d 695, 703 (5th Cir. 1959); Williams v. Board of Supervisors, 388 So.2d 438 (La.App. 2 Cir. 1980); Tide Equipment Co. v. Pointe Coupee Parish Police Jury, 312 So.2d 154 (La.App. 1 Cir.), writ denied, 315 So.2d 38 (1975); Toye Bros. Yellow Cab Company v. City of New Orleans, 264 So.2d 768 (La. App. 4 Cir.), writ refused, 263 La. 102, 267 So.2d 210 (1972).

Through a series of amendments to the Public Bid Law, the Louisiana Legislature has virtually eliminated any discretion previously afforded public entities by instituting a bright line rule forbidding waiver of bidding errors as mere informalities, but recent decisions by the Louisiana First Circuit Court of Appeal still allow the public entity considerable discretion in dealing with bidder errors. This article will discuss these recent decisions interpreting the amendments to the Public Bid Law and holding, in effect, that public entities continue to have discretion to determine the low bidder.

The Amendments To La. R.S. 38:2212A(1)(b) –

Irregularities Shall Not Be Waived Louisiana Revised Statute 38:2212 provides that the award of public works contracts shall be made to the lowest responsible bidder who had bid according to the contract, plans, and specifications as advertised. In 1984, the Legislature amended 2212 (A)(1)(b) to provide: “The provisions and requirements of this Section shall not be waived by any public entity.” In 1986, 2212A(1)(b) was amended again and provided: “The provisions and requirements of this Section of the Public Bid Law and those stated in the advertisement for bids shall not be considered as informalities and shall not be waived by any public entity.” Then, in a final amendment in 1987, the statute was amended to read as it does today:

The provisions and requirements of this Section, those stated in the advertisement or bids, and those required on the bid form shall not be considered as informalities and shall not be waived by any public entity.

Prior to the amendments, the court distinguished between bidder errors of substance which required rejection of the bid, from those of form which could be waived. In Pittman Construction Company, Inc. v. Parish of East Baton Rouge, 493 So.2d 178, 191 (La.App. 1 Cir.), writ denied, 493 So.2d 1206 (1986), the First Circuit Court of Appeal described that distinction as follows:

When the variance in the bid does not affect the integrity of the contract; does not result in favoritism or prejudice to the bidders or to the taxpaying public; does not permit circumvention of the Public Bid Law or the rules of open and fair competition and does not discourage public bidding, it is insubstantial, does not constitute “just cause” and the public entity does not have the discretion or right to reject the bid because of that variance.

Since the amendments to La. R.S. 38:2212A(1)(b), the First Circuit Court of Appeal continues to apply the same discretionary standard in force prior to the 1984 amendments. Boh Bros. Construction Co., L.L.C. v. Department of Transportation and Development, 97 0168 (La.App. 1 Cir. 7/14/97), 698 So.2d 675, writ denied, 97-2113 (La. 11/21/97), 703 So.2d 1309; Hebert Brothers Engineers, Inc. v. Department of Transportation and Development, 98-1208 (La.App. 1 Cir. 12/25/98), 744 So.2d 40, writ denied, 99-0681 (La. 4/23/99), 742 So.2d 893. In Boh Bros., the court upheld the waiver by DOTD of errors in the Equal Employment Opportunity Form required by the bidding specifications and also a $1,000.00 discrepancy in the bid bond amount from that required by the advertisement. In doing so, the court interpreted 2212A(1)(b) as only precluding waiver of substantive provisions of the bid form or the advertisement. To make that determination, the court in Boh Bros. (p. 678) used the same substance versus form analysis that was required prior to the 1987 amendments. The court reasoned that:

To deny a public entity the power to waive insignificant deviations in order to select a low bid on every public works project is contrary to the interests of the taxpaying citizens of this state.

The amendments to 2212A(1)(b) were intended as a bright line rule prohibiting waivers in order to reduce the number of bidding disputes and reduce the cost of public work. The Legislature balanced the competing policy interests, as is their role, and found that it is in the best interest of the taxpayers of Louisiana to award contracts in favor of a bidder who had complied with the bidding requirements in all respects. Such a policy prevents fraud and favoritism which is, after all, the ultimate goal of the public bidding system and encourages fair and equal competition.

Furthermore, a contract entered into in violation of the Public Bid Law is null and void ab initio. The court can enjoin further performance of the contract and order that another contractor determined to be the low bidder be awarded the contract. This may occur after work has already begun, and eventually leads to additional disputes and more litigation over payment due one or both contractors, all at the expense of the taxpayer.

The purpose of avoiding bidding disputes would be accomplished by simply applying 2212A(1)(b) as written to require strict compliance with the bidding requirements and prohibiting waiver altogether. The statute is not unclear or unambiguous. Louisiana Civil Code article 9 provides: “When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature.” From the words chosen in 2212A(1)(b), the Legislature could not have been more clear. The First Circuit even acknowledges that the law is clear in subsequent cases by saying: “The Public Bid Law could not be more clear in stating that a bidder’s failure to comply with every detail can invalidate the bid.” Barriere Construction Co., L.L.C. v. Terrebonne Parish Consolidated Government, 99 2271 (La.App. 1 Cir. 2/18/00), 754 So.2d 1123, 1127, writ denied, 00-0801 (La. 5/5/00), 761 So.2d 546. [Emphasis added.] The court in Boh Bros. did not discuss any reason or rationale to interpret 2212A(1)(b) beyond the plain meaning of the words used in the statute.

Other circuits and the Louisiana Attorney General support a bright line interpretation. Donald Clement Contractor, Inc. v. St. Charles Parish, 524 So.2d 86 (La.App. 5 Cir. 1988); V.C. Nora, Jr. Building & Remodeling, Inc. v. State, Department of Transportation and Development, 93-1469 (La.App. 3 Cir. 3/30/94), 635 So.2d 466; La. Atty Gen. Op. No. 90-421(1990). In V.C. Nora, (p. 470), the court, in response to DOTD¿s position at the time, said: “[T]he legislature has . . . admonished us to consider no public contract provision as a mere formality.” Judge Lottinger, dissenting in Boh Bros. (p. 682) quoting the Third Circuit in V.C. Nora said: “Even though DOTD’s rigid specifications as to the bid form may have seemingly harsh results, any interpretation but the most literal would contravene the stricti juris nature of the public contract laws.” Also, in Donald Clement Contractor, Inc. v. St. Charles Parish, supra, the Fifth Circuit held that public entities could no longer waive irregularities of form by virtue of the amendment to La. R.S. 38:2212A(1)(b).

The Louisiana Supreme Court denied writs in Boh Bros. despite the earlier conflicting opinions from other circuits.The Amendments to La. R.S. 38:2214 –

Just Cause Required To Reject Any And All Bids

In 1982 and 1983 though a series of amendments, the Public Bid Law was also amended to require just cause for rejection of any or all bids. Prior to 1982, cause was not necessary to reject any or all bids. Milton J. Womack, Inc. v. Legislative Budgetary Control Council, 470 So.2d 460, 463 (La.App. 1 Cir. 1985).

In construing the statute, the First Circuit in Pittman Construction Company, Inc. v. Parish of East Baton Rouge, supra, held that minor or insubstantial deviations of form do not constitute just cause and, in the absence of just cause, the rejection of a bid is reprobated by law. See also, Barriere Construction Co., L.L.C. v. Terrebonne Parish Consolidated Government, supra. Therefore, under that reasoning, if a bidding error or irregularity is waivable, then no just cause exists to reject that bid, and the error or irregularity must be waived. However, in Barriere, the First Circuit has now retreated from that holding.

The court in Barriere, distinguishing Pittman and construing 2214 in pari materia with 2212A(1)(b), found just cause for rejection of the bid to exist, although the bidding error complained of was simply an error of form that would not have required the bid be rejected. In Barriere, the bidder failed to write on the bid-form envelope the project name and number as required. The court found there was no confusion in that case about what project the bid was for and said that “if TPSG had decided to waive the irregularity and open Barriere’s bid, this court would probably have allowed that decision to stand.” Despite its earlier ruling in Pittman to the contrary, the Barriere court held that this error, though only of form, was sufficient to constitute just cause to reject. The court reasoned that uncertainty would be created if waiver of such defects were required:

It would put public entities in a totally untenable situation if this court were to require the waiver of certain irregularities in the face of the statutory prohibition. There could never be any certainty for the public entity during the bid opening procedure if a court could simply second-guess the process and state that a particular kind of defect should have been waived. Barriere Construction Co., L.L.C. v. Terrebonne Parish Consolidated Government, supra at p. 1127-28.

But wouldn’t “certainty for the public entity during the bid opening” be achieved by a bright line interpretation of 2212A(1)(b) denying waiver of all informalities? The uncertainty the court speaks of is only an issue when public entities are allowed discretion to waive informalities in the first place. If the bidder errs in completing the envelope, the bid should be rejected as irregular. In that case, there is no dispute to resolve and no delay to the project – no uncertainty or confusion.

Fair and equal rules of competition which are disregarded in the process of exercising discretion is detrimental to the best interests of our system of contracting. Thus by allowing the awarding authority discretion to waive informalities, the court then must also find that just cause exists to reject, or else create uncertainty and confusion in the bid process. The effect is to allow public entities discretion to determine the low bidder by either waiving the informality or rejecting the bid in favor of the next lowest bidder. Is this consistent with the purpose and policy of the law to guard against fraud and favoritism?

CONCLUSION

Where the Legislature, through amendments to the Public Bid Law, has clearly eliminated the discretion of the public entity to determine the low bidder, the First Circuit in Boh Bros. and Barriere has construed the amendments so as to protect that discretion. The Supreme Court has in each case denied writs despite conflicting opinions. Despite the clear and unmistakable language, the First Circuit refuses to find that discretion of the public entity has been eliminated in favor of a bright line standard requiring rejection of any bid that deviates from the strict bidding requirements.

In doing so, the court has read into La. R.S. 38:2212A(1)(b) that only substantive requirements not be waived. But, in neither of these cases did the court address whether 2212A(1)(b) was in some way unclear or in need of interpretation beyond the plain meaning of the words used. When a law is clear, and its application does not lead to absurdity, the court must apply the law as written. What else could the Legislature have said to make its intention to eliminate discretion to waive bidder errors more apparent?