As the use of design-build contracting in highway and transportation construction has increased over the years, state highway departments (SHA) have homed in on the most appropriate technical criteria upon which to judge bidders and their proposals, and qualitative scoring formulas are constantly being revised to more accurately reflect the relative importance of such criteria.
There is a growing concern, however, that an unfair emphasis is being placed on a bidder’s history of filing claims on previous projects, and a recently decided case in Texas may provide the impetus for a successful challenge to the practice.
In Oscar Renda Contracting, Inc. v. City of Lubbock, 463 F.3d 378 (5th Cir. 2006), a contractor submitted the lowest responsive bid on a public works project. At a post-bid meeting with the low bidder, the city expressed concern about a lawsuit the low bidder had filed against a neighboring jurisdiction and revealed that it was concerned the low bidder was “lawsuit happy.” The low bidder explained the circumstances of the lawsuit and informed the city that it had prevailed in that case.
The city staff accepted the explanation and recommended award to the low bidder. However, the city council awarded the contract to the second-lowest bidder due to reservations it had concerning the low bidder’s “business practices.” In response, the low bidder filed a lawsuit in federal court seeking damages and other relief because the city retaliated against it for exercising its First Amendment rights.
The U.S. District Court dismissed the case, and the low bidder appealed to the U.S. Court of Appeals for the Fifth Circuit. The Fifth Circuit, recognizing that the filing of the suit is a “protected activity” under the First Amendment, ruled that just as a governmental agency cannot deny employment to a person for exercising his or her First Amendment rights, a contractor cannot be denied a project award on those grounds. The Fifth Circuit thus remanded the case back to the District Court for further proceedings. As it turned out, the contractor lost at trial because it failed to prove that the city’s decision was based on the low bidder’s previous lawsuit. The city’s files indicated that the contractor had past job-safety and performance problems in other jurisdictions. Nevertheless, the Fifth Circuit’s decision should be the source of concern for SHAs that penalize bidders in their best-value calculations merely for filing claims or filing lawsuits on other projects.
On one hand, the rationale underlying an SHA’s desire to “dock” a bidder points for filing claims or instituting litigation in the past is understandable in that everyone desires an owner-contractor relationship that is fostered by cooperation and a spirit of partnering. On the other hand, the existence of claims or past litigation is not necessarily a reliable indicator of a contractor’s ability or willingness to cooperate or partner with an owner. Indeed, although it is plausible that a contractor who filed claims in the past is “claims happy,” it is equally plausible that the owner was the culprit and the contractor had no option but to resort to claims or litigation.
An SHA that penalizes a bidder on a technical score solely for filing claims or suing an owner in the past assumes the bidder was at fault. It also penalizes the bidder for resorting to contractual or statutory remedies the owner itself established for the bidder’s use. This is precisely what the Fifth Circuit found objectionable in Oscar Renda Contracting.
So, what if the SHA takes into account in its technical scoring the outcome of the claims or litigation process? Presumably, the results say something about whether the contractor was warranted in its action. If a case goes to trial and a clear winner is declared, the outcome might be reasonably considered. However, not all trials result in a clear winner. More importantly, most claims and litigation settle, and the terms of settlement are not always indicia of whether one party was right or wrong.