Public entities typically possess the right to reject all bids and rebid the project. In many instances, this decision is made to “get it right the second time” in response to a bid protest that raises legitimate issues. As a recent case in Nevada illustrates, however, the right to reject all bids is not unfettered, and courts will scrutinize these decisions.
The precise details of the bidding process in Fisher Sand & Gravel Co. v. Clark County, Nevada, 2010 WL 99218 (D. Nev. 2010) are too voluminous to recite, but the highlights are as follows: Clark County received seven bids for a roadway improvement project in Las Vegas. Fisher submitted the lowest bid of $112,233,445.50 and Las Vegas Paving Corp. (LVP) was second at $116,820,814.40. Thereafter, the Clark County Board of County Commissioners voted to award the contract to LVP due to information revealed at the board meeting by LVP and local union officials concerning statutory and regulatory violations by Fisher on other projects.
Fisher, a nonunion company, filed a lawsuit and contended that the board’s consideration of information obtained after the bid opening violated state law. The state court agreed and ordered the board to reconsider the matter without the objectionable information. At the rehearing, the board allowed a union representative to testify on alleged federal indictments against several of Fisher’s officers and other alleged statutory and regulatory violations by Fisher. The board also considered a past EEOC sexual harassment and retaliation complaint and civil citations from various governmental agencies. After hearing the testimony and questioning Fisher, the board determined that Fisher was not a responsible bidder and it once again awarded the contract to LVP.
Fisher responded with a civil rights lawsuit against the board, and the matter was heard in federal court. Fisher complained that it was denied due process by the board’s failure to give it proper notice of the issues it would be considering at the second hearing. Fisher also contended that the board’s actions and ultimate decision against Fisher stemmed from improper favoritism toward local unions and improper influence of those unions on the board.
The federal court agreed and vacated the board’s nonresponsibility decision. It ordered the board to reconsider the matter once again, but this time to give Fisher forewarning of any information it would be considering at the hearing so that Fisher could have a fair and impartial hearing with notice and an opportunity to be heard as required by the Due Process Clause of the 14th Amendment.
In advance of the third hearing, the board provided no notice to Fisher of information it would consider, yet it allowed all interested parties, including Fisher and those who opposed Fisher, to speak on Fisher’s history. Thereafter, the board voted to reject all bids due to what it characterized as a “strong likelihood of continued, expensive litigation” that would further delay the project and an existing economic environment that would likely result in lower bids the second time around. These considerations, the board contended, were in the public’s best interest. Fisher filed suit a third time and called the board’s decision to reject all bids “a crude circumvention of [the] Court’s order.”
In the court’s view, the board “decided that if LVP couldn’t have the project, nobody could.” It also likened the board to “a jealous lover who murders the object of his affection so that no one else may have her.”
The court thus ordered the board to award the project to Fisher, but in doing so, it adopted a new rule that essentially prohibits public entities in Nevada from rejecting all bids once a bid has been accepted unless it is determined that all remaining bids are either nonresponsive or the bidder is not responsible.
The court obviously reached the right result in Fisher, but some public entities may view the new rule as tantamount to throwing the baby out with the proverbial bath water and as an impediment to their flexibility in dealing with procurement abnormalities.
