Lagging Economy and State Budget Woes Create a Trend in Publicly Bid Projects That Has Public Entities and Contractors Feeling Troubled

August 2010
Construction Law

A lagging economy and state budget woes have worked together to create a trend in publicly bid projects that has both public entities and contractors feeling troubled—an increase in the number of bid protests. There are simply fewer public projects to go around, and both contractors and the government are feeling the pinch.

As a result, bids are close. Razor-thin margins separate the winning bidder from the second-place finishers, and the stakes for some bidders are very high. For some, a single job can mean the difference in keeping the doors open, and unlike several years ago, there is often not another project waiting in the wings to refocus a losing bidder. On the legal end, we are seeing more bid protests, and the protests are more technical in nature. Adding volatility to the mix are the often special funding sources for public projects. Federal green-energy grants, TARP funds, and other forms of funding come with numerous prerequisites, many of which mandate that a project be completed within a certain time frame. This creates pressure on already-stretched public entities to move forward quickly and not invest the time and money on a long protest battle or litigation.  As a result, public entities are less likely to fight a protest battle, and are much more likely to reject all bids and find an alternative either through re-bid or some sole-source method.

Here are some of the issues we've been helping both public entities and contractors to address in their bid procedures.

1. Yes, Sweat the Small Stuff
Every requirement of a bid package needs to be followed—even the small stuff. Any information that is omitted or not properly provided can make a bid non-responsive—and that's an invitation to a protestor.

2. Be Clear and Concise
Bid documents should be as clear as possible, and if they are not clear, contractors should request clarification. We recently saw a protest where bid documents required information relating to the subcontractor listing law, even though the listing law did not apply. The low bid was challenged because it did not list subcontractors. The protestor's argument was that even though the listing law did not apply, the bid documents themselves required this information, and as a result the low bidder's bid was nonresponsive. It helps both sides when documents are clear and concise.

3. Beware Licensure Requirements
If the bid specifically requires a particular type of license (and in some cases when it does not), and a bidder does not have the license, a bid could be non-responsive or the bidder could be deemed non-responsible.

4. Be Careful What You Say
If the bid contains "supplemental information" that is not specifically required, look it over carefully. The supplemental information could contain information that creates a basis for a challenge where one did not previously exist.  As a general rule, avoid saying more than specifically required.

5. Avoid the Taboo Alternative or Contingent Bid
Typically, alternative or contingent bids are taboo unless requested by the bid. Providing some sort of contingency could place what is called a "string on the bid," and make the bid invalid. A "string on the bid" means that if a bid contains a mistake or clerical error that would give a contractor the right to withdraw a bid because of mistake after bid opening, then there is a "string on the bid" that could subject the bid to challenge.

6. Try Saying “Bid Bond” Five Times Fast—Then Make Sure You Include A Valid One
If a bid requires a bid bond, make sure it is provided by a valid California surety, otherwise the bid could be challenged.  We have seen protests based on bonds provided by sureties not approved to write bonds in California.

7. Don't Forget Subcontractors
If subcontractors need to be listed, they need a proper, active license to perform the work for which they are listed. If not—you guessed it—a basis for a challenge may exist.

8. Ensure Your Insurance
If a bid package has particular insurance requirements, bidders need to make sure they meet them.  Otherwise, it could be the basis for a challenge.  Likewise, both general contractors and subcontractors need valid worker's compensation insurance to have valid licenses, unless exempted. Don't overlook this important detail.

9. Watch Where You Walk
Be extra vigilant when mandatory pre-bid walks are required. If you are a public entity, records should be kept about who attended the walk and for what entity. For contractors attending a pre-bid job walk, ensure that the attendance list is accurate and reflects individual names and company names. One recent issue we've seen involved whether or not a contractor participated in a mandatory pre-bid site visit. The protesting contractor disputed a bid when an individual attended the site visit but an employer was not listed.

10. Double-Check Any Identified Past Projects
If the bid requires listing past projects similar to the one in question, make sure the listed projects are both sufficiently similar and performed by the bidding entity (rather than a joint-venture or affiliated entity).

There are many reasons a bid could be protested, and there are many inventive reasons being found for staging a bid protest. It's critical to cross the T's and dot the I's in both the bid package and the bid itself. If an unfounded bid protest is filed, consult with counsel and respond quickly. It is critical that public entities take care in crafting bids, and that contractors ensure their bids are in compliance. A little preparation can avoid delayed projects, lost bids and unnecessary attorney's fees.

© 2010 All rights reserved. Please note that the information contained herein is not intended to provide specific legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.

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