Construction Law Update

Improper bid award results in unsuccessful bidder being allowed to pursue damages against the City of New Orleans

The requirements of public bidding laws are strictly construed against bidders who fail to comply with bid instructions and statutory requirements. Although minor deviations in a bid may be waived, material deviations may not be waived. The failure to comply with bidding requirements on a public works project — even if a mistake is clerical in nature — can be fatal to an otherwise low bidder.

In Command Construction Industries LLC v. City of New Orleans (Oct. 23, 2013), a Louisiana court of appeal held that a successful low bidder could not correct a clerical error after bids were opened, and therefore, the City of New Orleans should not have awarded the contract. As a result, an unsuccessful bidder was allowed to pursue a claim for damages against the city.

This matter involved a bid dispute arising out of a contract for the Harrison Avenue Streetscape Project. The city’s bid instructions included the warning that “[b]ids containing any conditions, omissions, unexplained alterations or irregularities of any kind may be rejected as informal.” The city’s bid documents further indicated that “[t]he prices should be expressed in words and figures … [and] [i]n case of discrepancy between the prices written in the bid and those given in the figures, the price in writing will be considered as the bid.” Modifications to bids were permitted before bidding was opened. These guidelines implied that once bids were opened, modifications were no longer permitted.

in-courtUntitled-1The form used by the bidders, a Louisiana Uniform Public Work Bid Form, requires a certification that each bidder will provide “all labor, materials, tools, appliances and facilities as required to perform, in a workmanlike manner, all work and services for the construction and completion of [the Project], all in strict accordance with the Bidding Documents.” The bid form then sought a “Total Base Bid” amount, which stated that it was for “all work required by the Bidding Documents (including any and all unit prices designated as ‘Base Bid’ but not alternates).” Immediately after the Total Base Bid, each bidder was to supply three alternates, each in a lump sum amount, for a “[c]ross walk,” “planting in median area” and “PVC sleeves and pull boxes.”

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On July 10, 2012, the City of New Orleans received and opened bids. Three bids were received from FH Paschen Tectronics, Inc. (FHP), Durr Heavy Construction LLC (Durr) and Command Construction Industries LLC (Command). Although FHP submitted the lowest bid, FHP’s bid was not considered due to bid defects. Command submitted the next lowest bid of $2,793,046.00. Durr submitted a bid of $2,974,275.00.

On July 11, 2012 — the day after bids were publicly opened — Durr sent a letter attempting to revise its bid due to a “clerical error,” and substituted a revised base bid of $2,444,850.80. Durr’s initial bid was mistakenly comprised of the base bid plus the three lump-sum alternates. When the three alternates were subtracted from Durr’s total base bid, however, Durr’s base bid was $2,444,850.80, as stated in its July 11, 2012 letter. Thus, Durr’s revised bid of $2.44 million was approximately $350,000 lower than Command’s initial bid of $2.79 million. The city indicated its intent to award the contract to Durr, and Command protested by letter dated July 27, 2012.

On Aug. 17, 2012, Command filed a lawsuit requesting the court issue a temporary restraining order and injunction to prevent the City of New Orleans from awarding the contract to Durr. The trial court denied Command’s request. As a result, Durr filed an appeal.

The appeals court stated the main issue was whether Durr’s revised bid of $2,444,850.80 complied with the requirements of the Louisiana Public Bid Law, found at Louisiana Revised Statutes section 38:2212, et seq. Specifically, the issue was whether the city was required to consider only Durr’s initial bid of $2,974,975, or whether it could consider Durr’s entire bid packet (of seven pages) to determine the correct amount of its total base bid.

Command argued that even if Durr’s original bid contained a clerical, accounting error, Durr’s attempt after bid opening to substitute the first page of bid documents was improper. Command further argued the requirements in Louisiana’s Public Bid Law and a public entity’s bid documents may not be waived. Command maintained that Durr’s sole remedy for a clerical error in its bid was to withdraw its bid without forfeiting its bid bond.

The appeals court reviewed Louisiana’s Public Bid Law. Prior court decisions, including a decision by the Louisiana Supreme Court, made clear the requirements of the Public Bid Law, the advertisement for bids and the bid form shall not be waived by any public entity, regardless of whether they could be considered as informalities. In Louisiana, irregularities in bid forms, even if clerical errors or seemingly minor and inconsequential, may not be waived.

As a result, the court of appeals found Command was the lowest bidder, and the city improperly awarded the contract to Durr. Because the contract was wrongfully awarded to Durr and went forward, the court allowed Command to pursue its claim for damages against the city.

The Command Construction matter highlights the importance of carefully reviewing and double checking bids prior to submission for compliance with all bid requirements. In addition, it further illustrates the importance of carefully scrutinizing and promptly challenging, as appropriate, another party’s bid that is revised downward after bid opening. The Command Construction court noted if an unsuccessful bidder timely seeks legal relief, it may recover damages. Here, Command’s prompt legal challenge to Durr’s revised bid resulted in Command being allowed to pursue a claim for damages against the City of New Orleans.

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