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COMPETITIVE BIDDING

Donald W. GregoryOhio Prosecuting Attorneys Association

December 3, 2015

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What is Happening in the Construction Industry?

+Less Work and Lower Margins

+Desperation for Contractors, Good Value for Owners

+Many More Bid Disputes

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Why a Requirement for Competitive Bidding?

“To provide for open and honest competition in bidding for public contracts and to save the public harmless, as well as bidders themselves, from any kind of favoritism or fraud in its varied forms.”

Cedar Bay Constr., Inc. v. Fremont (1990), 50 Ohio St.3d 19, 21

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What Exceptions Exist?

Professional Services- architect, engineer, construction manager

Less than $50,000

Real and present danger declared by unanimous vote

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New County Bidding Threshold

$50,000 9-28-12

R.C. §307.86

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What Advertising is Required?

Once a week for not less than 2 weeks(2nd can be avoided by posting online)

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What Standard Applies to Counties?

“LOWEST AND BEST” BIDDER(more subjective)

UNLESS “LOWEST, RESPONSIVE & RESPONSIBLE” BIDDER standard adopted(more objective)

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What Standard Applies to Municipalities?

“LOWEST AND BEST” BIDDER

UNLESS DIFFERENT STANDARD ADOPTEDUNDER HOME RULE

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What Standard Applies to Most State Agencies?

“LOWEST, RESPONSIVE & RESPONSIBLE” BIDDER(more objective)

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What is “Responsive”?

Satisfies the bid instructions in all MATERIAL respects

and

Does not give the bidder a COMPETITIVE ADVANTAGE (i.e. price)

[Can WAIVE MINOR IRREGULARITIES]

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What is “Responsible”?

Apply 9.312 factors including:

+Experience

+Management skills

+Financial resources

+Facilities

+Conduct & performance on previous contracts

+Ability to execute the contract properly

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What is “Best”?

May depend on the criteria in the bid solicitation

but basically who can perform best for the price

[Can consider previous dealings, references, etc.]

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Must Announce Bid Criteria

If base award on unannounced criteria, the award is subject to attack.

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NON-COLLUSIVE AFFIDAVITS

+Promise no agreement on price or terms with competitors

+Must be notarized

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BID MAY BE WITHDRAWN IF MISTAKE

+Particularly if math or clerical mistake

WITHIN 48 HOURS OF BID OPENING

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What discretion is vested with the Public Owner?

Cannot act in arbitrary or unreasonable fashion.

Heavy burden to prove an abuse of discretion.

Courts reluctant to substitute their judgment.

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LOW BIDDER ENTITLED TO BID PROTEST MEETING

If Pubic Owner adopts “lowest, responsive and responsible” bidder standard

or promise this in bid criteria

IF REQUESTED by low bidder within 5 days of notice of rejection.

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WHAT HAPPENS AT THE BID PROTEST MEETING?

Opportunity to be heard (the contractor’s opportunity to tell “his side of the story”)

But no guaranteed due process or constitutional rights such as cross-examination

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WHAT “DISCOVERY” IS PERMITTED?

Owners should expect a public records request and unilateral discovery in advance of the bid protest meeting and suit

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WHEN IS A REBID PERMITTED?

ANYTIME for any reason

REQUIRED IF COST (OF PROJECT) EXCEEDS PUBLISHED ESTIMATE BY MORE THAN 10%

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WHAT MUST A DISGRUNTLED BIDDER PROVE TO OBTAIN AN INJUNCTION?

1. Strong likelihood of success on the merits;

2. Irreparable injuries (no adequate remedy at law);

3. Injunction would not cause substantial harm to others; and

4. Injunction would serve the public interest.

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What Can A Public Owner Do if Injunction Granted?

+Proceed Anyway and Take Chances(Automatic Stay upon Appeal without Bond)

+Re-bid

+Go with Successful Challenger

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Can a Contractor Recover Money Damages?

Generally, No.

No Lost Profits: Cementech

But Bid Preparation Costs May Be Recovered:Meccon v. Akron U.

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What about “Quality Contracting” Standards?

Have been enforced when the criteria is expressly referenced in the bid instructions.

Subject to much gamesmanship on labor issues.

Courts reluctant to second-guess even if only minor deviations (i.e. minor prevailing wage violations)….until Associated Builders.

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Associated Builders: Huntington Ballpark

+TPC was low bidder but rejected due to prevailing wage “violations”.

+ Injunctions denied and ballpark completed before case arrived in Supreme Court.

+Supreme Court found abuse of discretion by Commissioners – substituted their judgment?

+TPC pursued bid preparation costs and fees.

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CONSTRUCTION REFORM

+Eliminated the requirement of multiple prime bidders (MEP trades)

+Authorized General Contracting (with no MEP bidding to compare costs)

+Authorized Design-Build and Construction-Manager (at risk) on “Best Value” basis

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+ Lower Claim Cost

+ Single Source Responsibility

+ Less Coordination

+ Lower Bid Cost

+ More Cost Certainty Upfront

SINGLE PRIME v. MULTIPLE PRIMEAdvantages

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“Best Value” Selection+ Determined through RFQ & RFP process

(like A/E selection)

+ Factors include:- Competence- Past Performance- Financial Responsibility- Workload- Diversity

+Contracted on Open-book “cost-plus” basis

+Guaranteed Maximum Price (“GMP”)

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Contract and Bond Forms

+Can Use as Prime Contract:- AIA- ConsensusDOCS- State DAS- DBIA or EJDC (design – build)- CMAA (construction – manager)

+ Subcontract must include:- State form

+ 100% bonds are still required.

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Questions?

Don GregoryKegler Brown Hill + Ritter