On December 14, 2015, California's Third District Court of Appeal upheld a bidder's challenge to the California Department of Transportation's ("CalTrans") award of a highway construction project in DeSilva Gates Construction, LP v. Department of Transportation (2015) ____ Cal.Rptr.3d _____, (2015 WL 8732256).
In July of 2012, CalTrans issued a call for bids for a project on Highway 99. The three lowest bidders included Security Paving Company, DeSilva, and Papich. Security was found to be non-responsive after it made revisions to its subcontractor list, and DeSilva became the apparent low bidder.
On September 26, 2015, after the bids were opened, CalTrans sent Papich a letter noting that it had failed to provide a written acknowledgement of an addendum to the bid package, which CalTrans noted was a “material amendment to the contract.” In that same letter, CalTrans invited Papich to cure the defect by providing a written acknowledgement of the addendum.
In the meantime, DeSilva had provided a post-opening subcontractor list, in compliance with the call for bids, which included an additional fencing contractor not included in the original bid response. On September 28, 2015, DeSilva sent CalTrans a letter pointing out that their post-opening subcontractor list included the fencing contractor in error as the named contractor was only going to provide 1/10th of one percent of the work on the project and was thus not required to be listed under Public Contract Code section 4104.
CalTrans rejected DeSilva’s bid on October 9, 2015 as non-responsive due to providing the extraneous information on its subcontractor list. Later, after some further discussions, CalTrans waived Papich’s failure to provide timely written acknowledgement of the addendum and awarded the project to Papich.
The Court determined that CalTrans should not have rejected DeSilva’s bid for providing more information than was required by law. The Court noted that “[i]t certainly would amount to a disservice to the public if a losing bidder were to be permitted to comb through the bid proposal or license application of the low bidder after the fact, [and] cancel the low bid on minor technicalities, with the hope of securing acceptance of his, a higher bid.” The Court determined that the additional information provided by DeSilva did not interfere with the competitive bidding process, and did not render DeSilva’s bid non-responsive.
On the other hand, the Court found that CalTrans should not have waived Papich’s failure to provide a written acknowledgement of a bid addendum, which CalTrans, in its own letter, called a “material amendment to the contract.”
Of note in the opinion, the Court discusses how, by giving Papich the opportunity to cure the bid defect, CalTrans gave Papich an “unfair advantage”. The unfair advantage arose in that, upon receiving CalTrans’ offer to cure, Papich had the option to not provide the additional information and thereby effectively withdraw its bid without risking its bid bond. The Court reiterated that ““[w]aiver of an irregularity in a bid should only be allowed if it would not give that bidder an unfair advantage by allowing the bidder to withdraw its bid without forfeiting its bid bond.”
What this case means to you
It is disruptive and costly to have a project award overturned by a court. To avoid such disruption, we recommend that awarding agencies refrain from inviting a bidder to cure a post-opening bid defect if doing so would allow them to effectively withdraw their bid without losing their bid bond. Furthermore, staff should consult with legal counsel before deeming a bid non-responsive based on a defect if there is any question as to the materiality or non-materiality of the defect.
If you have any questions concerning this Legal Alert, please contact Maggie W. Stern or the attorney with whom you normally consult.