Construction Bid Process
Standard of Review for Appealing Bid Protests
Chris Pothering
August 30, 2012
A public works project is as exciting to win as it is disappointing to lose. But a win is not always a win nor a loss a loss – not when the results are subject to protest and appeal.
Public works contract selection is governed by a bid procurement process, ostensibly “a fair forum for those interested in undertaking public projects.”Gostovich v. West Richland, 75 Wn.2d 583, 587, 452 P.2d 737 (1969). Such level playing field “encourages larger numbers of competitors to bid and lowers costs to the public.” Dick Enters., Inc. v. King County, 83 Wn. App. 566, 571 (1996). Thus, to ” impartial treatment for all those participating in public bidding” a bid must be rejected if a “material defect” is found in the bid. A.A.B. Elec. v. Stevenson Public Sch. Dist., 5 Wn. App. 887, 890 (1971).
Defects are not uncommon. Bid proposals for major projects, such as the WSDOT, are complicated and negotiations with subcontractors can progress right up to the deadline. Mistakes happen. Some mistakes are forgivable, for purposes of the process, and some are not. A public agency must properly reject a bid proposal that “materially deviates” from requirements set forth in the bid invitation. See Farmer Constr. v. State, 98 Wn.2d 600, 603 (1983). What does that mean? A “material” deviation is one which gives a bidder a benefit other bidders do not enjoy. For example, if a contractor submits a bid that is not signed, that is a material deviation because without a signature, the contractor can refuse to perform if its bid is accepted – an “out clause” other contractors do not have. On the other hand, if a bidder puts his bid in the mail a day before the deadline, but it does not arrive until after the deadline, Courts have found that gave the bidder no real advantage and found the deviation “immaterial.”
The first to consider this question is the public agency. A bidder, dissatisfied with the agency’s determination, can seek injunctive relief in Superior Court. The question arises, however, what is the standard of review? Does the Court start fresh and reach its own decision or must it give deference to the State agency and check for plain error?
The answer is not as straight forward as one might hope. As a general rule, Courts have “inherent authority” to review a state agency decision. Foss v. Department of Corrections, 82 Wn.App.355, 359, 918 P.2d 521 (1996) and the scope of that review is “quite narrow.” Decisions may be reversed only if they are “arbitrary, capricious, or contrary to law” Foss, 82 Wn.App at 362-63. In some cases, this standard of review is codified by the statute and the standard of review is easily ascertained. In Equitable Shipyards, Inc. v. State of Washington, 93 Wn.2d 465, 611 P.2d 396 (1980), a dispute over a bid for a ferry construction project, the Court could rely on a statute, RCW 47.60.650(6), which directed the Court to review for arbitrary and capricious decisions. But what if the statute implies a different standard? For example, RCW 47.28.090, which governs public works on highways, states that a bid may only be rejected for “good cause.” It has been argued that this means the Court must review and determine if the agency, in this the WSDOT, complied with the statute and had, in the Court’s view, “good cause.”
The counter argument is that the standard of review, for courts, is not identified in this statute and thus the presumptive “arbitrary and capricious” standard applies. It is not for the Court to decide if the agency had good cause, as the Court weighs the facts and circumstances, but rather to determine if the agency’s judgment that good cause was present was manifestly unreasonable, arbitrary, or capricious. Washington Courts have not decided this question directly, but the better argument is the latter. It was, at least, has been persuasive in Superior Court where SCB attorneys have defended, and attacked, bid awards.
If, when the bid award is announced, you find yourself celebrating a win, or mourning a loss, – give us a call. We are excited to help keep your win a win, or turn your loss into one.