This month, I want to share with you a unique bid protest case involving an apparent attempt by an ineligible bidder to procure a project through a related company.
The case involves a project let by the Louisiana Department of Transportation and Development (DOTD) for bridge joint repairs and replacements. A provision in the bid documents required the apparent low bidder to submit to the DOTD within 10 days after being notified Form CS-6AAA, which shall contain Disadvantaged Business Enterprise participation information. That provision further stated the following:
An apparent low bidder’s failure, neglect, or refusal to submit Form CS-6AAA . . . shall constitute just cause for forfeiture of the proposal guarantee and the DOTD rejecting the bid, pursuing award to the next lowest bidder, and/or re-advertising the project. The apparent low bidder will not be allowed to bid on the project should re-advertisement occur.
In January 2010, the DOTD received bids, but the apparent low bidder, TOPCOR Services Inc., failed to submit Form CS-6AAA. Consequently, the DOTD decided to re-advertise the project. When the DOTD re-let the project, Lamplighter Construction LLC was the apparent low bidder. However, the DOTD determined that Lamplighter should be disqualified because a principal officer and owner of Lamplighter also is a principal officer and owner of TOPCOR, the ineligible bidder from the first letting. The DOTD relied upon Section 102.08(g) of the Louisiana Standard Specifications for Roads and Bridges, which provides that “[b]ids may be considered irregular and non-responsive and will be subject to rejection . . . [i]f an owner or a principal officer(s) of the bidding entity is an owner or a principal officer(s) of a contracting entity which has been declared by the [DOTD] to be ineligible to bid.”
In response to a protest by Lamplighter, the DOTD surprisingly reversed its decision and issued a notice of award to Lamplighter. This led to a protest by the second bidder, Gibson & Associates Inc., which the DOTD denied. Gibson filed suit seeking an injunction against the award to Lamplighter and a writ of mandamus ordering the DOTD to award the project to Gibson. The trial court agreed with Gibson, and it ordered the DOTD to award the project to Gibson even though the DOTD expressed its desire to reject all bids and re-let the project. The DOTD appealed.
On appeal, Gibson argued that (1) Lamplighter, as an entity having an officer and part owner who also was an officer and part owner of TOPCOR, was disqualified from bidding pursuant to Section 102.08(g) of the specifications; and (2) the DOTD violated public procurement statutes by failing to reject a bid that was not submitted in accordance with the bid requirements—i.e., it ignored Lamplighter’s non-compliance with Section 102.08(g) of the specifications. The DOTD did not contest the dual officership and ownership of TOPCOR and Lamplighter. Rather, the DOTD argued that by its express terms, Section 102.08(g) applies only to “contracting entities” that had been disqualified from bidding projects due to, for example, contract performance issues, and not to “bidders” who were disqualified from bidding for reasons unrelated to their actions under a contract with the DOTD.
The appeals court criticized the DOTD’s reading of Section 102.08(g) as too narrow and pointed out that such a reading is contrary to the public policies underlying the bidding statutes to protect against favoritism and unfair pricing. The court also explained that such a reading would permit unscrupulous, ineligible contractors to simply create new companies to avoid ineligibility. It thus held in favor of Gibson and upheld the lower court’s injunction prohibiting the award to Lamplighter.
On the mandamus issue, however, the appeals court sided with the DOTD and overruled the lower court’s mandamus which ordered the DOTD to award the contract to Gibson. The appeals court determined that the lower court had failed to consider whether the DOTD had discretion to reject the remaining bids once the first bidder was disqualified. If an act is “discretionary” rather than “ministerial,” no court had the power to issue a mandamus. Because the trial court did not consider this issue before ordering the DOTD to enter into the contract with the successful protester, the appeals court remanded the case back for further consideration in that regard. In practice, it is rare for a court to order a public entity to award a contract to a successful protester.