An Ohio court has ruled that when a public project owner violated competitive bidding statutes, a disappointed bidder, while not entitled to lost profit on the contract, could seek recovery of bid preparation costs and attorney fees.
The University of Akron issued a solicitation for four bid packages involving construction of a football stadium. Three bid packages were for stand-alone trade contracts: heating, ventilation and air conditioning (HVAC), plumbing and fire protection. The fourth bid was inclusive of all three individual trade contracts. Bidders were free to bid on as many packages as they chose.
S. A. Comunale submitted the low bid for each of the three trade contracts, as well as the low bid for the combination package. Meccon Inc. bid only the HVAC contract and was the second low bidder. S. A. Comunale saw that its combination bid was $1.2 million lower than the next lowest bidder. Apparently detecting a mistake, Comunale withdrew its bids on the combination package and the plumbing contract, leaving in place its bids on the HVAC and fire protection contracts.
The Ohio competitive bidding statutes prohibit the withdrawal of a bid when the result would be the award of a contract on another bid by the same bidder. Ohio R.C. 9.31. Nevertheless, the University of Akron awarded the HVAC and fire protection contracts to Comunale.
Meccon sued the university in the Ohio Court of Claims, seeking bid preparation costs and attorney fees. The university moved to dismiss the suit on the grounds that the Ohio Supreme Court prohibited the recovery of money damages by disappointed bidders. The claims court granted the motion to dismiss. Meccon appealed.
The Court of Appeals of Ohio said the case relied on by the university, Cementech, Inc. v. Fairlawn, 109 Ohio St. 3rd 475 (2006), did not involve the recovery of bid preparation costs, only lost profit on the contract. "The issue of whether bid preparation costs can be recovered was not before the court. Therefore, it is our understanding that the Ohio Supreme Court has yet to rule on this issue."
The court said that although recovery of lost profit by a disappointed bidder would impose great financial hardship on public project owners, the recovery of bid preparation costs and attorney fees would be less onerous. And, said the court, recovery would serve an important public policy purpose.
"First, without some penalty, there is little deterrent to a public entity who fails to follow the competitive bidding statutes. Second, contractors may be reluctant to bid on public projects when they suspect the competitive bidding will not be conducted fairly. Ultimately, refusal to bid harms the public as the pool of qualified bidders shrinks. Any harm to the public from these types of damages is de minimus when compared to the harm to the public from the recovery of lost profits. Allowing recovery of bid preparation costs will serve to enhance the integrity of the competitive bidding process."
The court reversed the dismissal of Meccon’s suit and remanded the matter to the claims court for further proceedings on the issues of bid preparation costs and attorney fees.
The court cited precedent from California, where the state Supreme Court has allowed recovery of bid preparation costs, but not lost profit. Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority, 23 Cal. 4th 305 (2000).