Earlier this year, South Carolina’s Chief Procurement Officer for Construction (CPOC) determined that Instructions to Bidders for competitively bid projects are part of the contract documents and are therefore binding on both bidders and agencies. Tyler Construction Group, Inc. v. University of South Carolina, http://www.procurementlaw.sc.gov/webfiles/OSE_main/Protests/
Tyler_v_USC.pdf. This decision had the effect of requiring USC to award the contract to the higher bidder on the actual scope of work to be performed.

Bids were solicited for a renovation project, including a base bid and an alternative bid for additional work. The bid documents included Standard Supplemental Instructions to Bidders (Form 00201-OSE). Section 5.4.2 of the Instructions stated that the contract would be awarded to the “apparent low bidder,” the bidder with the lowest total base plus alternative bids.

After receiving the bids, USC determined that their budget would only allow for the work in the base bid, and awarded the contract to the bidder with the lowest base bid. However, another bidder had offered a lower combined bid and was therefore the apparent low bidder. When the apparent low bidder protested, the CPOC found that they should have been awarded the contract and directed USC to award the contract according to the terms of the Instructions.

Not surprisingly, the standard form has been modified since this determination was made. http://www.mmo.sc.gov/webfiles/OSE_manual/Appendices/
0201_OSE_Standard_Supplemental_Instructions_to_Bidders.pdf. The instructions now call for bids to be in the form of “Alternate Base Bids” rather than a base bid plus alternatives, such that contracts will be awarded on the basis of the lowest bid for the alternative that is actually to be used. The alternate base bids are treated as separate bids. This means that a low bidder on one alternative may be awarded a contract for that alternative, notwithstanding that their bid was not the lowest for, or even responsive to, other alternatives.

A public entity issued an RFP for insurance. Two parties responded, “A” and “B”. The executive of the public entity favored “A” for personal reasons. The executive ordered an independent analysis of the proposals. The expert recommended “B.” The executive sought another opinion. The second opinion criticized both “A” and “B”. Immediately the entity issued a determination that the RFP had been inadequate and determined to use its emergency procurement powers to obtain its insurance. “B” protested.

“B” alleged that the entity acted arbitrarily in cancelling the RFP when its proposal had been found to be the best by one expert and had not been found to be inadequate by either expert although it was criticized by the second expert. “B” alleged that the “emergency” claimed by the entity was manufactured because the entity had known from the beginning about the pretextual reasons it used to say the RFP itself was inadequate.

“B” alleged the cancellation was demonstrably capricious since (1) each of the criticisms was either patently false or could be easily remedied and (2) one of the key distinctions between an RFP and a hard bid is that RFP responses are inherently negotiable. Where a bid states a certain result the entity wants, an RFP states a problem the entity has and seeks a proposal for responding to it.

“B” also alleged that the executive had a personal conflict of interest in that the executive’s brother stood to gain financially if “A” was selected.

The protest was to be decided under the entity’s procurement policy. The entity was not a state agency. Therefore the South Carolina Consolidated Procurement Code did not apply although a state statute required that the entity’s procurement policy be “substantially similar.” The entity first argued that cancellation of a solicitation is not protestable. The procurement policy, however, said “Any …offeror… who is aggrieved in connection with the solicitation of a contractor shall protest…with in fifteen days of the Request for proposal….”

After “B” ’s bid protest unequivocally demonstrated that “B” ‘s proposal (a) was better than “A” ’s (b) met the entity’s needs and (c) the executive was acting out of self interest, the matter was settled. The moral of the story is that public entities have an obligation to the public to avoid arbitrary and capricious behavior in public procurement.

The state of South Carolina launched into uncharted territory when it disallowed the protest of the second low bidder in the case of Martin Engineering, Inc. v. Lexington School District One, 365 S.C. 1, 615 S.E. 2d 110 (2005).

The school District put a school renovation project out for bid. Sharpe was the low bidder and Martin was second. When the bids were opened Sharpe asked to add $613,000 to its $16MM bid saying it had forgotten to include the built up roofing.

Martin protested saying that the School District procurement policy only allowed bid correction when the mistake was clearly evident from the face of the bid, the correction does not cause the bidder to have the low bid and it would not be prejudicial to fair competition.

The Supreme court found that the mistake was not apparent from the face of the bid but said “the mistake is clear, and the amount Sharpe intended to bid for the roof is evident, by examining the roofing sub’s sub-bid….” Furthermore, the Court found that allowing the upward correction was not prejudicial to fair competition.

The contrary view is that allowing the after the fact upward correction encourages unscrupulous contractors to play games with the bidding process. A contractor can deliberately leave out 10% of his price, as was the case in Martin Engineering, become the low bidder and then ask to correct saying that it is obvious he made a mistake. Then he can have his cake and eat it too. Such gamesmanship is almost impossible to prevent in the bid protest arena where there is no discovery and the case must usually be made in ten days or less.

Bryan Barnes
barnes@rtt-law.com