Most contractors do not like it, but an increasing number of transportation construction contracts are being awarded on the basis of "best value." A recent Minnesota Court of Appeals case demonstrates the extensive discretion a public agency has in awarding a contract on the basis of "best value."
Siemens Transportation Systems Inc., Sacramento, Calif., filed suit against the Minnesota Metropolitan Council alleging that the Council acted illegally in awarding a contract to Bombardier Transit Corp, Quebec. In Siemens Transportation Systems Inc. v. Metropolitan Council and Bombardier Transit Corp., No. C8-00-2213, 2001 Minn. App. Lexis 671 (2001), the court affirmed the district court’s decision denying Siemens injunctive relief or a declaratory judgment to prevent the award of a contract for light-rail vehicles (LRVs) to Bombardier.
Catch 22
In June 2000, the Council issued a request for Best and Final Offers (BAFOs) for the supply of 18 LRVs. The request provided that the Council would evaluate BAFOs and select the highest-ranked bidder. The final scores would be forwarded, along with a recommendation by the scoring committees, to an evaluation panel. The evaluation panel was to make a recommendation, which would be presented for approval to the Council.
The contract award section of the request provided: "The Council will award a contract to the Bidder whose Best and Final Offer yields the highest combined score in accordance with the evaluation criteria in Section 1.12 and, when considered in its entirety, best conforms to the overall long term interests of the Council."
While Siemens received the highest final score (83.14), the evaluation panel determined that Bombardier’s bid provided the best value and unanimously recommended awarding the contract to Bombardier, which received the second highest final score (82.23). The council’s request for bids represented a best value procurement method, where both quality and price are considered. The bidders knew that the Council had restricted the bid request due to budget constraints to 18 cars, with an option to purchase additional cars.
The Court of Appeals said, "Bombardier’s price allowed the council to order 22 vehicles within its budget and Siemens’s price did not. The evaluation panel concluded that given the small disparity in quality and the $5.3 million disparity in price, Bombardier’s bid conformed best to the overall long-term interests of the council."
Siemens contended that the terms of the request required the evaluation panel to recommend the bidder with the highest score and the Council to award the contract accordingly. The court of appeals concluded that nothing in the request required the evaluation panel to make its recommendations solely on highest score ranking, finding that the express language of the request gives the Council discretion to consider the scores in relation to its overall long-term interests before making an award.
Siemens contended that the Council’s award of the contract to an offeror other than the highest-scoring bidder allowed impermissible ambiguity and discretion in public bidding.
"The purpose of competitive bidding is to limit the discretion of contract-letting public officials for the purpose of preventing fraud, favoritism, improvidence and extravagance," said the court, citing Griswald v. County of Ramsey, 65 N.W. 2d 647 652 (Minn. 1954).
Siemens asserted that the Council retained too much discretion because the "long-term best interests of the Council" factor was not clearly defined, affecting the integrity of the contract award process. The court concluded that Siemens was on notice from the language in the request that consideration would be given to that factor.
This case is another example of a court not interfering with an agency’s exercise of its discretion in the awarding of a contract. The "best value" procurement method allows a public entity substantial discretion in awarding contracts. As long as the agency follows its adopted competitive-bidding method, a contractor will have a difficult time proving the agency’s actions rise to the level of "an arbitrary, capricious or unreasonable exercise of power." The problem associated with an agency having more discretionary power is that, left unchecked, it can run contrary to the purpose behind competitive-bidding statutes—to ensure that all bidders are on equal footing and no one bidder has an unfair advantage.
