2. © Kirk W. Buffington, 2009 Procurement Case Law – Court Decisions Affecting Procurement Virginia Association of Governmental Purchasing Fall Conference October 28 th, 2011 KIRK W. BUFFINGTON, CPPO, C.P.M., MBA Acting Deputy Director of Finance City of Fort Lauderdale, FL kbuffington@fortlauderdale.gov 954-828-5144

3. © Kirk W. Buffington, 2009 Introduction Discussion will focus on several court cases from across the Country which have an impact on interpretation of procurement contracts and bid documents.

4. © Kirk W. Buffington, 2009 Why

5. © Kirk W. Buffington, 2009 Introduction Finding applicable case law –Trial court decisions are only binding on parties involved –State Appeals court decisions may or may not be controlling – but establish an interpretation –State Supreme Court decisions are always controlling, within the state of proceedings –U.S. Supreme Court Decisions – constitutional issues

6. © Kirk W. Buffington, 2009 Gibbs Construction vs. Board of Supervisors, Louisiana State University (447 So. 2d, 90) Formal bid advertisement required attendance at mandatory pre-bid One bidder at pre-bid Gibbs was not present, but submitted low bid After pre-bid, project architect contacted Gibbs and requested they submit a bid – architect lined through portion of document requiring attendance Gibbs bid rejected, and bid was awarded to another – Gibbs filed suit**

7. © Kirk W. Buffington, 2009 Findings - Gibbs Court of Appeals – university properly refused to consider bid by Gibbs because the company was not represented at pre-bid, as required in bid documents Direction by project architect could not override the document requirements*

8. Qualicon Corp v City of Norfolk, VA Minor technicality or major variation –Building of hypolimnetic aeration system –Following requirement in bidding documents: Following information shall be included as part of all submittals: 1) detailed drawings and descriptions of all items of equipment, showing all dimensions, parts, construction details, … product data including the make and model of each major item of equipment. Major equipment items were defined as …aerators, in-lake piping, marker buoys, and maintenance boat. © Kirk W. Buffington, 2009

9. Qualicon Corp v City of Norfolk, VA Bids opened and PWC (Peters & White Construction) was low bidder –PWC failed to include any information regarding the in-lake piping with its bid –Notwithstanding the PWC Commission, City awarded bid to PWC –Qualicon filed bid protest letter –City rejected protest (PWCs Commission did not affect the essential competitive elements) –Qualicon filed for judgment in Circuit Court © Kirk W. Buffington, 2009

10. Qualicon Corp v City of Norfolk, VA Is this a minor defect which can be waived © Kirk W. Buffington, 2009

11. Qualicon Corp v City of Norfolk, VA IFB required strict compliance Is City seeking to override clear language requirements of their own IFB Court is required to reverse an agencys decision if it is established that the award is not an honest exercise of discretion VA code defines minor defect of a bid as being a defect that does not affect the price, quality, quantity or delivery schedule for the goods/services © Kirk W. Buffington, 2009

12. Findings Court reversed award to PWC –Engineering testimony that bidders were aware that submittals were not really required –PWC was intending to submit requirements when PWC was notified by City, on the eve of bids due, that submittals would not be required © Kirk W. Buffington, 2009

13. Harry Pepper & Associates v. City of Cape Coral (352 So. 2d, 1190) Bid for construction of water treatment plant – required all pump mfg. to be used, must be submitted for approval and acceptance Gulf contracting submitted bid, but submitted name of mfg. that had not been approved and was not acceptable to engineer Gulf was apparent low bidder City engineer contacted Gulf and asked them to indicate they would use acceptable pump mfg. if awarded bid – Gulf did so

14. © Kirk W. Buffington, 2009 Harry Pepper (cont.) Contract awarded to Gulf Pepper, number two bidder, filed suit, contending change was unlawful City contended it was a minor irregularity, and in the best interests of the City*

15. © Kirk W. Buffington, 2009 Findings – Harry Pepper Found an unfair atmosphere had been created, as Gulf had everything to gain, and nothing to lose Gulf was in a position to decide whether it wanted the job bad enough to incur the additional expense of supplying pumps*

16. Peninsula Therapy Center v. VA Dept of Corrections ITB for providing sex offender treatment Purpose: competitive sealed bids to obtain treatment for sex offenders Multiple awards – per person/per session Services could be provided at DofC, providers location, or a combination © Kirk W. Buffington, 2009

17. Peninsula Therapy First Addendum issued –Determination to term shall be sole discretion of the agency/provider may make recommendations Second addendum –Determination to terminate shall not be made without conferring w/probation officer in advance. Decision shall be based upon mutual agreement between provider and agency © Kirk W. Buffington, 2009

18. Peninsula Therapy Notice of Award – Peninsula not listed Vendor advised that agency found them non- responsive –Part of Peninsula response: determination to terminate shall be at sole discretion of agency. © Kirk W. Buffington, 2009

19. Peninsula Therapy Part to Peninsula's response stated: if a problem presented does not fall in the staffs expertise, Peninsula will make appropriate referral. This issue was not addressed in ITB, and no mention of payment responsibility Agency found that Peninsula submitted a proposal, not a bid Peninsula argued that it was providing additional information above the minimum requirement © Kirk W. Buffington, 2009

20. Peninsula Therapy Peninsula further believed that be signing the declaration that it intended to follow the ITB, made the variances moot, and Peninsula responsive. Sec 2.2-4301 VA code defines responsive as: a person who has submitted a bid that conforms in all material respects to the Invitation to Bid. © Kirk W. Buffington, 2009

21. Peninsula Therapy Peninsula further argued that other bidders deviated and these bidders were found to be informalities; these variances consisted of: Bidders who did not attach bidder certificate were allowed to at later time Bidder failed to sign/acknowledge addendum Bidder failed to certify insurance Bidder failed to provide copy of license Why was Peninsula non-responsive, and the others not? © Kirk W. Buffington, 2009

22. Peninsula Therapy Sec 5.13 (c)(1) Vendors manual (informality) A minor defect or variation of a bid or proposal from the exact requirements of the ITB or RFP, which does not affect the price, quality, quantity, or delivery schedule for the good… the procuring agency may, in its sole discretion, waive such informalities or permit the bidder/offeror to correct © Kirk W. Buffington, 2009

23. Accela, Inc., v. Sarasota County Challenged piggybacking by County –Purchase of software to track land management –County conducted two site visits where software had been implemented –County piggybacked on vendors ( CSDC) most current contract from Wisconsin

24. Accela From 9 modules to 40 (only 8 common between both) County argued this made the contract substantially the same From $176k to $711k Implementation from $269k to $688K 5 YR maintenance from $31K to 179K

25. Accela In practice of course, the County ( or any agency) and the vendor must draw up a fresh contract. The degree to which this contract can diverge from the other government entity's contract is a significant issue in the present lawsuit.

26. Accela Was govt arbitrary or capricious in awarding to Govt agency must follow its own rules ordinances (City of Hollywood v. Witt) Terms and scope of new piggybacked contract must be substantially the same as original Cannot use another entity to begin negotiation

27. Accela …given that the piggyback process contemplated by the Code is intended to be competitive, we cannot agree that the County and CSDC's contract-making process represented a valid manifestation of the piggyback provision. That is, the County was not permitted to use another entity's contracts merely as a basis to begin negotiations,…

28. Accela a public body has wide discretion in soliciting and accepting bids for public improvements and its decision, when based on an honest exercise of this discretion, will not be overturned by a court even if it may appear erroneous and even if reasonable persons may disagree. Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla.1982). Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla.1982)

29. Accela However, we conclude that that County went beyond the bounds of its discretion when it violated its Procurement Code. See Dep't of Transp. v. Groves-Watkins Constructors, 530 So.2d 912, 913 (Fla.1988) (noting that the rule that an honest exercise of... discretion cannot be overturned does not apply when there is a finding of illegality, fraud, oppression, or misconduct (emphasis added)) (quoting Liberty County, 421 So.2d at 507).Dep't of Transp. v. Groves-Watkins Constructors, 530 So.2d 912, 913 (Fla.1988) Liberty County, 421 So.2d at 507).

30. © Kirk W. Buffington, 2009 Contract for construction work at airport Date and time for receipt of bids set in advertisement Hewitt submitted a timely bid as required Another contractor submitted bid after advertised deadline This bid was lowest, and ultimately accepted by Airport Authority Hewitt sued, contending untimeliness of bid submittal disallowed the award to bidder* Hewitt Contracting Company, Inc. v. Melbourne Regional Airport (528 So. 2d 122)

31. © Kirk W. Buffington, 2009 Trial court upheld right of airport to award to low bidder of their choice Hewitt appealed this trial ruling to 5 th District Court of Appeal* Hewitt Contracting (cont.)

32. © Kirk W. Buffington, 2009 Findings – Hewitt Contracting Appeals court affirmed ruling of trial court Airport agencys legal authority to award a construction contract to a contractor whose bid submission was not timely. The appellate court found that appellee (airport) has, and should have, the discretion to waive the irregularity of a contractor's untimely bid and to accept the late bid under the circumstances.

33. © Kirk W. Buffington, 2009 Dedmond vs. Escambia County Government (244 So., 2d, 758) Dedmond submitted successful bid for beach concessions – Commission at regular meeting awarded contract to Dedmond Clerk advised Dedmond, in writing, of contact award One month later, Commission voted to rescind its award to Dedmond, and to rebid contract Initial trial court held no binding contract existed as lease had not been executed, and County was within its rights to rescind Dedmond appealed trial court decision*

34. © Kirk W. Buffington, 2009 Findings - Dedmond Appellant court reversed trial court, and found for Dedmond Ruling was erroneous Until acceptance of a bid, bidder is able to withdraw bid, conversely, acceptance of a bid by agency results in a contract, even though formal contract had not been executed*

35. Petroleum Traders Corp, v Baltimore County, MD \

36. When is a contract, a contract Baltimore County is a member of cooperative purchasing group Contract for gasoline and diesel fuel Participating entities would purchase all fuel from successful bidder Counties had option to lock-in a fixed price for fuel over a set period of time, instead of prevailing index Winning bidder would purchase futures to ensure supply at fixed price

37. PTC informed by County that it had won bid and awarded contract County issued term contract award to PTC signed by Deputy Purchasing Agent this is notice that contract…has been awarded to you… County purchased fuel for a year and a half Elected to lock in prices for co-op during 3 different periods Market price rose during each period above locked in price, thus yielding a considerable savings

38. 2005 (Katrina and Wilma) Prices began to rise County locked in for 2 additional periods including Dec, 05 to April, 06D Oil prices then began to fall (significantly) and locked in prices exceeded the available market price County demanded PTC re-negotiate pricing and PTC refused having already purchased futures Relationship became adversarial County continued to order and use of lock in of prices

39. County asked for locked in prices in December, 05, for period April, 06 through December, 06 Prior to purchasing additional futures, PTC requested estimated quantities of fuel and assurances County would honor contract County construed this as a delay and breach of contract County formally terminated contract December 7, 2005 PTC advised County of significant loss this would cause as PTC had purchased the futures as requested. PTC suffered a significant loss and filed suit against County

40. Arguments What was Countys original argument and justification for termination? County added an additional argument during initial litigation. What was it?

41. County argued there was never a valid contract –Charter requires that County exec or designee execute commodities contract and that attorney approve as to form. –As neither of these formalities were meant, the contract could not be valid –However the code vests significant authority in the County Agent to make all purchases for supplies… a power which he may delegate –County was simultaneously arguing that PTC breached a contract, but that no valid contract existed

42. Findings of Trail Jury

43. © Kirk W. Buffington, 2009 Martel Constructing v. Montana State Board of Examiners (668 P. 2d., 222) Successful bidder had failed to acknowledge certain addenda, but was awarded contract, after assurances that bid price included changes required in addenda Martel (second bidder) filed suit contending failure by bidder to acknowledge addenda made bidder non-responsive Trial court held in favor of Martel, and ordered State to reject awarded contract Case was appealed to state supreme court*

44. Findings – Martel Supreme court reversed lower court State, in determining qualifications of bidder and ability to perform, are acting in discretionary manner There was a meeting of the minds between the state and bidder Successful bidder, in submitting bid bound itself to full performance of contract documents Failure of successful bidder to make written acknowledgement of receipt of addenda was an immaterial irregularity that could be waived by state Wide discretion in determining what is best for the agency* © Kirk W. Buffington, 2009

45. Rushlight Sprinkler Co., v. City of Portland (219 P. 2d, 732) Rushlight submitted bid in the amount of $429,444.20., with bid bond Next low bid was $671,000 After opening, Rushlight noted an error in their bid, (omission of $99,225.68), and asked to withdraw bid Bid was awarded to Rushlight, and bid deposit check was cashed Rushlight refused to proceed and sought to recover damages*

46. © Kirk W. Buffington, 2009 Rushlight – some facts 3 rd and 4 th lowest bids were $673,232 and $684,291 City officials surmised low bid was too good to be true Engineer stated bid was very low, and a very decided difference between bid and Citys estimate

47. © Kirk W. Buffington, 2009 Findings - Rushlight Court noted that an offer and acceptance are deemed to effect a meeting of the minds, even if offeror made a material mistake, providing acceptor (City) was NOT aware of mistake But, if acceptor knew of mistake, and if it was basic, or if a reasonable man, should have inferred there was a basic mistake, a meeting of the minds does NOT occur Bidder must prove that not only was a mistake made, but acceptor had reason to be aware City was aware of mistake, and sought to take unconscionable advantage of error Equity is always prepared to grant relief from such situations *

48. © Kirk W. Buffington, 2009 Chris Berg v. Alaska DOT (680 P. 2d, 93) Berg, low bidder, entered price information on wrong line of bid submittal Mistake did not effect bottom line of bid in any way State rejected bid as non-responsive Berg filed suit District trial court denied Bergs request for injunction against award, and Suit was brought to State Supreme Court *

49. © Kirk W. Buffington, 2009 Findings - Berg Supreme court reversed trial court, finding variance was not material and therefore did not compel rejection Determination of responsiveness of bid is within agencys discretion, subject to judicial review Bid error was minor technical defect, not affecting substance of low bid, and therefore it was an abuse of discretion to reject bid on that basis*

50. © Kirk W. Buffington, 2009 Fenske Printing v. Brinkman (349 N.W. 2d, 47, South Dakota) Contract for purchase of legislative printing Each bidder was required to submit a sample of 50# paper with bid, colors were specifically required to be goldenrod and blue Low bidder submitted a 50# sample of goldenrod, but a 70# sample of blue Bid awarded to this bidder Unsuccessful bidder filed suit claiming low bid was non-responsive*

51. © Kirk W. Buffington, 2009 Findings – Fenske Supreme court held that unsuccessful bidder had not shown that Fenskes failure to submit two samples of 50# paper gave Fenske any advantage over other bidders, or prevented State from conducting any tests Failure to show non-responsiveness In general-unsuccessful bidder has burden of showing successful bidder was non-responsive*

52. © Kirk W. Buffington, 2009 James C. Berry v. Okaloosa County (334 So. 2d, 349) Berry submitted bid for construction of airport facility Board voted to award contract to Berry Approx. 1 hour later, passed another motion to rescind the motion to award the contract to Berry Passed another motion to re-advertise and rebid Berry filed suit, contenting a binding contract was created at time of first motion, which could not be rejected except by showing fraud, collusion or other misconduct, none of which was alleged by the Commission*

53. © Kirk W. Buffington, 2009 Findings - Berry trial court found commission was meeting in a continuous session, without adjournment, and therefore contract was not created Final motion, is controlling motion Appellant court affirmed lower court ruling, finding there was an absence of formal notification, and until that occurs, commission has right to rescind because no obligation is created by acceptance, until acceptance is transmitted to offeror*

54. © Kirk W. Buffington, 2009 Stilsing Electric v. Town of Colonie (96 A.D. 2d, 993, NY) ITB provided for 3 options in making the bid submittal One bidder added a fourth option, which Town accepted as lowest, responsible bid Unsuccessful bidder filed suit

55. © Kirk W. Buffington, 2009 Findings - Stilsing N.Y. Supreme Court found Town was not required to reject bid which included 4 th option, even though bid form only provided for three Bid is not required to be rejected because bidder produces an innovative proposal that results in savings to the agency Unsuccessful bidder was not put at competitive disadvantage by his failure to anticipate other possible options for meeting bid specification

56. © Kirk W. Buffington, 2009 Prairie Valley Schools v. Sawyer (665 S.W. 2d, 606, TX) School district completed an abandoned project, acting as general contractor School district had not secured bonding from contractor who abandoned the project Subcontractors and material men brought action for services and materials supplied to the project up to abandonment, but which were not paid Subcontractors alleged that school districts failure to secure performance bond made the SB liable for payments not made by their selected general contractor

57. © Kirk W. Buffington, 2009 Findings – Prairie Valley Although bond requirement may be waived by agency, it is reasonable for sub-contractors and suppliers to assume that agency will require bond from general contractor Thus, if agency chooses to waive bond, it cannot claim subs only remedy for non-payment is against the general Since school district controlled project after abandonment, school district assumed position of general Therefore, school district liable for payment to subs and suppliers**

58. © Kirk W. Buffington, 2009 Findings – Prairie Valley (Cont.) Plaintiff (sub-contractors) were seeking fair value of goods/services provided, Even lacking a formal contract between the parties (in this case between the School district and the sub-contractors)

59. © Kirk W. Buffington, 2009 Kennedy Temporaries v. Comptroller of the Treasury (468 A. 2d, 1026, MD) ITB required bids exceeding $25,000 must be accompanied by 5% bid bond Low bidder submitted bid of $30,000 Low bidder bid bond was in the amount of $1092.05, in proper form, but $407.95 short of the 5% requirement ($1500.00) Contract awarded to low bidder

60. © Kirk W. Buffington, 2009 Kennedy Temporaries (Cont.) Challenge to contract award – an unsuccessful bidder alleged that low bidder should have been disqualified for submitting insufficient bid bond The Challenging bidder had failed to submit any bond, but instead submitted a letter of guarantee from a bank, pledging to provide collateral to be held against performance*

61. © Kirk W. Buffington, 2009 Findings - Kennedy Court found unsuccessful bidder did not qualify asresponsive bidder, and thus had no legal standing Maryland bank letter did not meet requirements of bid bond, because the pledge of collateral was against performance, and not against loss by virtue of default Court did not rule on whether the bid bond was lacking due to insufficiency

62. © Kirk W. Buffington, 2009 Times Publishing Co. v. City of Clearwater, (830 So. 2d, 844) Supreme Court of Florida Public Records jurisdiction case Personal/private e-mail sent from municipal computer Are all e-mails transmitted or received by public employees of a government agency subject to public records under Section 119? Times reporter requested copies of ALL e-mails sent/received by two Clearwater employees using Citys computer network

63. © Kirk W. Buffington, 2009 Times Publishing (cont.) Employees reviewed their e-mail for public/personal – (in accordance with City policy) No other review of e-mails City copies public e-mails and provided them to Times Publishing Times Publishing filed suit to obtain e-mails designated private Asserted, under 119, that Times was entitled to ALL e-mails generated and stored on Citys computer network

64. © Kirk W. Buffington, 2009 Findings - Times Publishing Co. Circuit court granted injunction and ordered City to make every reasonable effort to retrieve, preserve and secure from destruction all e-mails sent or received by employees in question At trial court, injunction was denied, thereby not forcing City to provide all e-mails Second District affirmed trial court order, after a review of e-mails in question Sent to the Supreme Court by the District Court, as the issue was of great public importance*

65. © Kirk W. Buffington, 2009 Findings - Times Publishing Co. (cont.) Private or personal e-mails fall outside the current definition of public records, because –they are neither made or received pursuant to law or ordinance or created or received in conjunction with official business of the City, or –in connection with official business of the City, orin connection with the transaction of official business AGO opinion that creation of e-mail header makes all e-mails, regardless of content, public record – Supreme Court disagreed –Unanimous Supreme Court decision **

66. © Kirk W. Buffington, 2009 Liberty County v. Baxters Asphalt (421 So. 2d, 505) ITB requested bidders to bid on Alternate A and B Gulf, low bidder, misunderstood, and only submitted on Alternate B Commission waived irregularity and awarded the contract on the basis of Gulfs Alternate B submission Baxter filed suit*

67. © Kirk W. Buffington, 2009 Findings – Liberty County District court disqualified Gulf, on theory that Countys action was illegal Supreme court reversed district court, and found Gulfs failure to comply was not material, and further a public body has wide discretion in soliciting and accepting bids for public improvements and its decision, when based on an honest exercise of this discretion, will not be overturned by a court Court found that Gulf was not put in a superior position to Baxter or other bidders, by its failure to submit a bid on Alternate A*

68. © Kirk W. Buffington, 2009 Robinson Electric v. Dade County (417 So. 2d, 1032) Dade Housing Authority issued bid for renovation of housing project Bid specs required bid bond or certified check or bank draft in the amount of 5% of total bid In addendum, this was restated assecurity was to be in the form of 5% bid bond Robinson was apparent low bidder, but submitted bid bond in the form of cashiers check Commission awarded contract to Robinson*

69. © Kirk W. Buffington, 2009 Robinson Electric (cont) Number three bidder, (Markowitz), filed for injunction, contending Robinsons bid was non- responsive, because it lacked the required security – County argued this was a minor irregularity Trial court agreed with Markowitz, and ordered County to rebid County reversed its opinion, agreed with trial court that documents were ambiguous and rebid*

70. © Kirk W. Buffington, 2009 Findings – Robinson Appeals court reversed trial court, and ordered award to Robinson In determining whether specific non-compliance constitutes non-waivable irregularity, courts have applied two criteria; 1) whether the effect of a waiver would deprive the City of its assurance that the contract will be entered into, performed and guaranteed according to specified requirements, AND

71. © Kirk W. Buffington, 2009 2) whether it is such a nature that its waiver would adversely effect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the common standard of competition i.e., a variance is material if it gives the bidder a substantial advantage over the other bidders, and thereby restricts competition Here, the courts concluded no irregularity existed, and it was apparent that competitive bidding was not affected. It prevented none from bidding, and all were on equal footing* Findings – Robinson (Cont.)

72. © Kirk W. Buffington, 2009 Web sites of interest www.leg.state.fl.us/statues –FL State Statutes site – search www.oyez.at.nwu.edu/cases –Northwestern University U.S. Supreme Court site www.supremecourtus.gov –Site for Supreme Court of the United States www.lexis.com Legal research site – word search and citation search www.abanet.org/contact/state –ABA Section of Public Contract Law

73. © Kirk W. Buffington, 2009 Web sites of interest www.findlaw.com –Good basic legal research for non-attorney www.leg.state.fl.us –FL legislative site – search and follow bills through the legislative process www.legal.firn.edu/opinions –FL Attorney Generals opinions www.legal.firn.edu/sunshine –FL Attorney Generals Govt in the Sunshine Law site www.flcourts.org –FL State Courts

74. © Kirk W. Buffington, 2009 QUESTIONS ??? Maybe some answers Kbuffington@fortlauderdale.gov

75. © Kirk W. Buffington, 2009 Dickinson Co. vs. City of Des Moines (347 NW, 2d, 436) Dickinson 2 nd low bidder in initial bid and rebid Low bidder did not submit bid bond –found not to meet specs. City chose to reject and rebid, instead of accepting Dickinson bid In rebid – original low bidder was again low, and complied with all terms/conditions Dickinson filed suit, claiming low bidder was non-responsive, and should have been disqualified*

76. © Kirk W. Buffington, 2009 Findings - Dickinson In absence of fraud or conspiracy, an unsuccessful bidder, although he may be low, has no remedy Public agencies have wide discretion City has authority to reject all bids, even without declaring the lowest bidder is not the lowest responsible bidder Contractor has no legally enforceable right, property interest or entitlement that was harmed by Citys actions (standing)