From time to time, some governmental entities abuse their authority and behave as if the law does not apply to their actions. Unfortunately, more often than not, the victims of their abuse are private businesses with lesser bargaining power. The story below describes recent abuse by the City of Lewiston which was ultimately overturned by the Idaho Supreme Court.
Prior to 2005, the statutes governing the procurement of goods and services by local public entities (school districts, highway districts, cities, counties, etc.) were located throughout the Idaho Code. No uniformity existed. In large part, the only common principle that applied to competitive bidding was that contract awards were made to the lowest responsible bidder.
In 2005, the legislature enacted a uniform law governing the procedures by which local public entities purchase goods and services. In an effort to eliminate varying and sometimes conflicting statutes relevant to public procurement (and to eliminate varying and conflicting court decisions pertaining to those statues), the legislature enacted a uniform set of laws to be followed by virtually all public entities in the state.
In creating a single set of procurement statutes, the legislature codified the traditional means of competitive bidding and an alternative means of competitive bidding utilizing pre-qualification of bidders. The effort was collaborative and included input from the contracting community. In the end, it appeared that both the interests of the public entities and the interests of the contracting community were served as the legislature created a statutory scheme which provided: (1) a traditional means of competitive bidding; and (2) a method utilizing subjective criteria by way of pre-qualification.
Most public entities adhered to the new statute without difficulty. In large part, most public entities continued to award projects to the lowest bidder as they had traditionally done for years. A few public entities prequalified contractors pursuant to the statute.
Unfortunately, some public entities attempted to exploit what they perceived to be a loophole in the law. Instead of awarding jobs to the lowest bidder or going through the prescribed pre-qualification process, a few public entities sought to award projects on a completely subjective basis without regard to the statutory requirements. The City of Lewiston was one of those entities.
On Wednesday, November 2, 2011, the Supreme Court issued a decision rebuking Lewiston’s attempt to ignore statutory constraints and award contracts on the basis of the City’s subjective criteria. Rather than following the law, Lewiston invited bids without pre-qualifying prospective bidders for the City’s golf-course construction project, then, after-the-fact, the City decided to subjectively determine which bidder was most qualified, from the City’s standpoint. In essence, the City simply selected the bidder that it wished to do business with, without regard to the law. The 2005 law provides that a public entity may award contracts to the lowest pre-qualified bidder. However, Lewiston acted as if the law permitted it to subjectively select the winning bidder after-the-fact without regard whether the contractor had submitted the lowest bid amongst bidders pre-qualified by the City.
The City believed the statute permitted the City to qualify bidders in any manner the City saw fit, at any time, and even to permit a favored bidder to modify its bid after-the-fact. The district court in Lewiston supported the City’s decision, ruling that the law permitted public entities to award contracts to bidders without regard to price.
The Supreme Court in Hillside Landscape Construction vs. City of Lewiston corrected the City’s attempt to disregard the law. The Supreme Court held that the 2005 law did not give license to public entities to award contracts to whomever they wished. Rather, the Court held that public entities may pre-qualify bidders using the criteria set forth in the statute (and then award to the lowest pre-qualified bidder), or the public entity may simply award contracts to the lowest bidder without pre-qualification, unless the apparent low bidder is clearly not acceptable due to something like demonstrated irresponsibility on other projects, or licensing issues, or significant bid irregularities.
The Hillside case re-affirms the interpretation of the 2005 statutes as they were understood by the contracting community and the majority of public entities throughout the state. From time to time rogue public entities will exercise their power in ways far beyond their statutory authority. Fortunately, our judicial system still has the power to curb those transgressions.
Geoff McConnell is a partner at McConnell, Wagner, Sykes + Stacey PLLC, focusing his practice in the areas of construction law, commercial litigation and business law. He has been recognized each year since 2008 by Best Lawyers in America and Mountain States Super Lawyers for his legal expertise in construction law, litigation and government contracts. Mr. McConnell can be contacted at (208) 489-0100.
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