Federal Court Bars Public Owner from Arbitrarily Labeling Bidder “Not Responsible”
Recently, the United States Court of Appeals for the Third Circuit limited the ability of a public entity to arbitrarily (1) declare that a low-bidder on a project is “not responsible,” and (2) award a contract to the next-lowest bidder. In the case of Alpha Painting & Construction Co., Inc., v. Delaware River Port Authority of the Commonwealth of Pennsylvania and the State of New Jersey, the Court held that a public owner must have a rational basis for its procurement decision and that it may not treat bidders unequally by favoring one bidder over another through its conduct in reviewing and analyzing competing bids.
The Plaintiff, Alpha Painting & Construction Company, Inc. (Alpha), was the lowest bidder on a bridge painting project for the Delaware River Port Authority (DRPA). The second-lowest bidder was Corcon, Inc. (“Corcon”). After reviewing the bids, DRPA deemed that Alpha was not a responsible bidder due to Alpha’s failure to submit certain forms containing safety and insurance data. DRPA then awarded the contract to Corcon, despite the fact that Corcon’s bid was missing one of the same forms that resulted in the rejection of Alpha’s bid. Rather than reject Corcon’s bid in the same manner, DRPA took it upon itself to request the missing form from Corcon. Additionally, DRPA unilaterally corrected the “miscalculation” of a line item in Corcon’s bid that would have otherwise disqualified it from being awarded the contract.
Alpha filed an injunction in the United States District Court for the District of New Jersey, seeking to prevent DRPA from awarding the contract to Corcon. After a bench trial, the District Court granted the injunction and directed that the contract be awarded to Alpha. On appeal, the Third Circuit held that DRPA impermissibly went out of its way to award the contract to Corcon and not Alpha. It held that DRPA had no rational basis for declaring that Alpha was not a responsible bidder and that, at most, the missing forms rendered Alpha’s bid non-responsive. Furthermore, in addition to evidencing inequitable treatment of the bids, the Court found that DRPA’s request that Corcon provide additional documentation demonstrated that it could have, and should have, made the same request of Alpha, thus giving Alpha an opportunity to remedy its bid’s non-responsiveness. The Court also noted that DRPA could have, pursuant to its own bidding guidelines, searched for relevant safety information regarding Alpha’s past work experience, but that DRPA went out of its way to avoid locating the information. Finally, the Court held that DRPA’s decision to modify Corcon’s bid, similar to its responsibility determination, appeared out of thin air and that DRPA lacked the authority to make the modification. As a result, the Court upheld the majority of Alpha’s injunction, only altering it to restore Alpha back to competition, rather than to award it the contract outright.
The Alpha decision makes clear that, while an agency is given broad latitude to make procurement decisions, it may not abuse its discretion by irrationally rejecting bids and/or giving favorable treatment to certain bidders. Contractors who have been declared “not responsible” should be aware of their right to challenge these determinations when they are made on an ad hoc basis by a public owner.