A Good Roadmap: OH Court Concludes that Disappointed Bidder Can Recover Bid Preparation Costs
It can be a daunting task to mine through the federal and state laws, regulations and court decisions to determine what rights and remedies you may have as a disappointed bidder on a public project. In a case involving a state university construction project, the Ohio Supreme Court recently provided a good road map of what do in such situations.
In Meccon, Inc. v. University of Akron (pdf), a contractor sought a temporary restraining order and other relief resulting from the university's failure to award it the HVAC contract. The facts of Meccon are intricate because the project involved multiple scopes of work that could be submitted by offerors as stand-alone bids or combined bids. Ultimately, the contractor alleged that the university wrongfully awarded three of the stand-alone bids to the awardee—after the awardee had withdrawn its combined bid—which was in violation of the university's own "Instructions to Bidders" documents and public bidding statutes. The contractor sought injunctive relief, as well as damages for its bid-preparation costs.
On appeal, the Supreme Court of Ohio concluded that when a rejected bidder establishes that a public authority violated state competitive-bidding laws in awarding a public-improvement contract, that bidder may recover reasonable bid-preparation costs as damages if: (1) the bidder promptly sought, but was denied, an injunction to suspend work on the project pending resolution of the bid dispute; and (2) it is later determined that the bidder was wrongfully rejected and injunctive relief is no longer available. [Note: You can view the oral arguments before the Ohio Supreme Court by clicking here.]
Wow. That's a mouthful! What does that practically mean? The decision provides a useful road map for what the court called "mitigation of damages" in a public contract. For instance, if a rejected bidder alleges that the public authority violated its competitive-bidding laws, the bidder should immediately seek injunctive relief from the court or agency to stop the award of the contract to the successful bidder.
If the request is granted, then the wrongfully rejected bidder will have avoided the damages that would otherwise flow from the wrongful conduct by the public authority. If the request is denied, then that means the allegation of "wrongful conduct" by the public authority will not be determined until a later date after a full hearing on the merits. Absent the temporary restraining order or preliminary injunction, the rejected bidder will never be able to perform because work will have commenced or will be completed. Under the Meccon decision, the rejected bidder is entitled to recover reasonable bid-preparation costs where it seeks, but is denied, injunctive relief and it is later determined that the bid was wrongfully rejected.
Hat tip to fellow colleague Mark Leach for sending the case!
Image: Michael Meiser
Very interesting case. With the tight economy, we will probably be seeing more of these be challenged. When times are good, too many companies are too busy going after other work to bother! I had a somewhat similar case where I represented the low bidder on a state project here in NC. Because certain paperwork wasn't, allegedly, submitted on time thereafter, they were going to go w/ second lowest bidder. We moved for injunction (at which time they offered to re-bid entire job, but that wouldn't guarantee my client the job). At injunction hearing, we prevailed, so it never went any further and my client got the job.