Procurement Case Law

1. Procurement Case Law Beth Fleming, CPSM, C.P.M., CPPO Director of Purchasing Denton County

2. Types and Sources of Contract Law • Uniform Commercial Code (UCC) • statutes for wide range of commercial topics relative to the purchase and sale of goods • Written law • constitution, statutes, ordinances and charters • Administrative law • rules and regulations and entity policy • AG Opinions • written interpretation of existing law. They do not address matters of fact, and they are neither legislative nor judicial in nature. • Common Law • based on customs and traditions of English settlers – decisions by judges – also referred to as case law • In the common law tradition case law regulates, via precedents, how laws are to be understood, based on how prior cases have been decided. Case law governs the impact court decisions have on future cases. Common law systems follow the doctrine of stare decisis in which lower courts usually make decisions consistent with previous decisions of higher courts.

3. Process • Review case facts and positions of each party • Small groups review facts and determine how they believe the case was judicially resolved and why • Review case decisions • Discuss decisions and ramifications for public purchasing

4. Case 1 Planning and Design Solutions v. City of Santa Fe Planning and Design Solutions v. City of Santa Fe, 885, P.2d 628 (NM 1994)

5. Case 1: Planning and Design Solutions (PDS) v. City of Santa Fe • In 1992, City published RFP for professional services for developing a mixed-use community • RFP listed and weighted 4 evaluation factors • 25% Project Approach • 10% Project Schedule • 30% Experience and Expertise of the Firm • 35% Experience and Expertise of Assigned Personnel • Purchasing Manual (and Code) states committee shall select and rank no less than 3 firms deemed to be the most highly qualified based on listed criterion and recommend a contract • Locality is a criterion which the City may legitimately consider, but it was not listed on this RFP • Regulations state “No criteria may be used that are not set forth in RFP” • PDS, a California company, inquired whether local firms would receive preference and was verbally informed they would not

6. Case 1: Planning and Design Solutions (PDS) v. City of Santa Fe • City received 11 proposals which were evaluated by a selection committee • Committee determined PDS submitted the most advantageous proposal • Mazria and Associates, a New Mexico company, was ranked 4th • Committee negotiated contract with PDS and which was approved by Finance Committee, but the contract required ratification by City Council • City Council could have responded to the recommendation: • Approve it or table it; • Appoint a new selection committee or renegotiate the contract; • Disqualify the recommended bidder based on new information; or • Reject all bids and re-advertise

7. Case 1: Planning and Design Solutions v. City of Santa Fe • Contract with PDS was presented to City Council who voted unanimously to award to Mazria “the highest local firm on list” • PDS filed bid protest and suit with District Court • District Court enjoined City from awarding contract to any other business other than PDS • At next meeting, City Council rescinded award to Mazria and voted to reject all 11 proposals • City Council further decided to reissue RFP and change evaluation criteria to include locality • City filed a summary motion with District Court • District Court denied the motion stating City violated its own Purchasing Manual and ruled that PDS should be awarded its costs in preparing the bid • District Court ruled the contract to Mazria was unlawful and that although they rescinded the contract, it did not cure its previous unlawful action • City filed an appeal stating they did not have a contract with PDS • How would you rule and why?

8. Case 1: Planning and Design Solutions (PDS) v. City of Santa Fe • Appeals Court affirmed the District Court ruling stating: • City violated its own Purchasing Manual rules • Although there was no formal contract with PDS, there was implied contract that City would consider bids in accordance with Code • Judicial relief is available to the disappointed bidder when a City acts in an arbitrary and capricious manner and violates the integrity of the Code • The City could not evade the Code “under the color of a rejection” in this case where the contract to Mazria was unlawful and that although they rescinded the contract, it did not cure its previous unlawful action • Strict enforcement of the procurement laws and penalties for their violation will serve the public interest • PDS was awarded bid preparation costs at $25,769.93 Planning and Design Solutions v. City of Santa Fe, 885, P.2d 628 (NM 1994)

9. Case 2 Professional Building Maintenance Corporation (PBM) v. School Board of County of Spotsylvania Professional Building Maintenance Corp. v. School Board of County of Spotsylvania, No. 110410 (Virginia Supreme Court, 2012)

10. Case 2: PBM v. School Board of Spotsylvania • School Board published a “Best Value” IFB for custodial services in various schools • Evaluation factors were: • 50 pts – Expertise and experience • 5 pts – Experience of personnel • 5 pts – Supplies and equipment • 10 pts – Quality control program • 30 pts – Price • Specifications indicated the intent to award contract to highest score according to the points given • PBM submitted the lowest cost but did not receive the award and filed suit arguing School Board violated Act and: • did not award to lowest responsive and responsible bidder; • considered criteria not stated in IFB; and • failed to describe method for awarding points

11. Case 2: PBM v. School Board of Spotsylvania • School Board filed demurrer stating contract was to be awarded to best value bidder, not the lowest responsible bidder • Circuit Court sustained School Board’s demurrer finding “Best Value” is a method permitted and the IFB sufficiently meets the requirements of the law for a “Best Value” solicitation • PBM files an appeal stating Circuit Court erred and did not consider the complaint of the School Board violated its Act and considered criteria not stated in IFB; and failed to describe method for awarding points

12. Case 2: PBM v. School Board of Spotsylvania • PBM claims the School Board acted arbitrary or capricious, and specifically states: • At the first debriefing, PBM was told they failed to adequately describe the supplies and equipment • At the second debriefing, PBM was given 2 reasons it was not successful (neither of which were listed in criteria): • Failure to address a transition plan • Failure to identify how background checks would be handled • Act requires the basis for evaluating bids must be stated in IFB and at debriefing, School Board was unable to articulate the factors considered in how the points were allocated or how the points were awarded • How would you rule and why?

13. Case 2: PBM v. School Board of Spotsylvania • Supreme Court overrules the Circuit Court stating: • School Board’s actions were arbitrary and capricious and did not comply with the distinct best value statutory mandate • The criteria, factors and basis for consideration of best value and process for the consideration of best value shall be as stated in the procurement solicitation • Different reasons were given during debriefings for the unsuccessful bid of which the second debriefing explanations were not listed in the criteria Professional Building Maintenance Corp. v. School Board of County of Spotsylvania, No. 110410 (Virginia Supreme Court, 2012)

14. Case 3 Jasper Seating Company vs. New Jersey Division of Purchase and Property 406 N.J. Super. 213; 967 A.2d. 350; 2009 N.J. Super. LEXIS 72

15. Case 3: Jasper Seating vs. NJ Div. of Purchase • 2006 - Division issued RFP for non-modular furniture with intent to make one state-wide award for each brand listed in RFP • Contract would cover all cooperative agencies for a term of 18 months • Specs mandated that published price lists submitted should be adequate for the evaluators to analyze proposal • Specs state: It is the sole responsibility of the bidder to be knowledgeable of all addenda • Addenda issued to further clarify that: • There will be no adjustments to price lists and only most updated manufacturer’s preprinted price lists will be acceptable • The price list submitted must not contain any sticker increases, up-charges, etc. and discount being bid will be taken directly from the price list submitted

16. Case 3: Jasper Seating vs. NJ Div. of Purchase • Sept. 2006 - Jasper submitted bids on behalf of two of its divisions • Jasper included pre-printed list price catalogs with stickers on the covers indicating prices would increase by 4% effective January, 2007 • Three other bidders also submitted bids with price increase stickers • All were rejected as non-conforming • Jasper protested stating that in spite of the sticker, no price increase was to be applied and resubmitted price lists with stickers crossed out

17. Case 3: Jasper Seating vs. NJ Div. of Purchase • Division issues a Final Agency Determination rejecting Jasper’s protest • Determination that Jaspers bids constituted a non-waivable, material deviation from the RFP which required rejection in its entirety • Jasper’s attorney argued: • his signature guarantees the prices in the catalog • sticker was non-issue because the sticker would be ignored as per terms of the RFP • Division’s final determination stands • Jasper hires another attorney and re-argues: • They believe the RFP meant that the sticker would be disregarded • Jasper is notified that recourse is available through courts • Jasper files suit with appellate court • How would you rule and why?

18. Case 3: Jasper Seating vs. NJ Div. of Purchase • Appellate Court affirms the Division’s determination citing: • Generally, courts will not interfere with a Final Agency Determination which pertains to contract awards unless there is a finding of bad faith, corruption, fraud or gross abuse of discretion. • The Director could not waive the deviation from the terms of the RFP and controlling addenda and the bids were properly rejected as non-conforming. • Waivers of an RFP deviation which would permit “post-bid . . . manipulation of the results have been declared unlawful. “Such post-bid manipulations are repugnant to our public bidding laws.” • To reverse the Director’s determination in this matter, and grant one disappointed contractor a statewide re-bid, would be a costly and unnecessary exercise. 406 N.J. Super. 213; 967 A.2d. 350; 2009 N.J. Super. LEXIS 72

19. Case 4 Language Line Services v. Pennsylvania Department of General Services 991 A.2d 383; 2010 Pa. Commw. LEXIS 109

20. Case 4: Language Line v. Pennsylvania DGS • 2008 – DGS issued RFP to procure statewide interpretation, translation and language services • RFP listed evaluation criteria in order of importance: technical, cost, disadvantaged business participation (DB), enterprise zone small business participation, and domestic workforce utilization • Prior to opening, relative importance was established as: • 50% Technical • 30% Cost • 20% DB • Six proposals were received on Lot 1 and all were deemed to be responsive • RFP established only 2 mandatory responsiveness requirements – timely submitted and properly signed

21. Case 4: Language Line v. Pennsylvania DGS • Language Line’s (LL) proposal did not include a DB submittal and received no points in that category • LSA qualified as a DB and received 170 points in that category • LSA received second highest overall score of 832.01 • LL was fifth with overall score of 708.0 • DGS proceeded BAFO with those reasonably susceptible of being selected for award • BAFO request was sent to top 3 who all scored within 100 points of each other (LSA was included, but not LL) • BAFO evaluation resulted in LSA with highest score and award

22. Case 4: Language Line v. Pennsylvania DGS • LL filed timely protest claiming LSA’s misclassified employees as independent contractors and did not qualify as DB (must have less than 100 employees for small business) • DGS issued determination denying protest indicating: • employees were properly classified and LSA had 87 employees • competitive range was acceptable as those within 100 points of the highest scoring firm • RFP established only 2 mandatory responsiveness requirements – timely submitted and properly signed • LL filed suit stating DGS erred in determining LSA’s interpreters were independent contractors • Court rules that no errors of law were committed and the necessary findings of fact were supported by substantial evidence

23. Case 4: Language Line v. Pennsylvania DGS • LL appealed stating: • DGS erred in determining LSA’s interpreters were independent contractors • Even if it is found that they qualified for DB status, they now employ more than 100 people and do not qualify for DB – in fact they grew to more than 100 between submittal and award • Asserted that DGS did not treat all offers with fair and equal treatment and that DGS was required to accept BAFO’s from all responsible offerors • DGS erred in awarding contract to LSA when it failed to meet several non-waivable requirements in RFP • How would you rule and why?

24. Case 4: Language Line v. Pennsylvania DGS • Appellate Court affirmed DGS’s determination to deny LL’s bid protest stating: • Did not find that LSA’s DB status was erroneous • DGS properly determined that LSA was qualified for DB status at the time of scoring the proposals • LL misinterpreted the statute for “fair and equal treatment” as a competitive range may be selected before BAFO • Only 2 mandatory requirements in RFP and all other deficiencies were evaluated and scored properly 991 A.2d 383; 2010 Pa. Commw. LEXIS 109

25. Case 5 Peabody Construction v. City of Boston Peabody Construction Co, Inc. v. City of Boston, 28 Mass. App. Ct. 100 (1989)

26. Case 5: Peabody Construction v. City of Boston • City of Boston issued bid specifications for construction project • City states in bid and requires at time of bid: • Set aside portion of work for M/WB enterprises • Must be in city directory as certified by city • Or, submit with bid a copy of certification from state and application for city certification • Bid Language states: • If bidder failed to submit such data (M/WB), then city reserves right to rule the omission as an informality and bidder is allowed to submit data within 5 days

27. Case 5: Peabody Construction v. City of Boston • Bids were received: • Peabody - $10,879,000 • Suffolk - $11, 243,200 • Sciaba - $11,582,200 • Peabody submitted subcontractor K&R as certified by state, but did not include certification or application • Day after bid opening, City notified Peabody bid was rejected, on the same day, city received application and certification • City signed contract with Sciaba (unknown why award was not made to Suffolk)

28. Case 5: Peabody Construction v. City of Boston • Peabody files suit and argues: • that the city was compelled to exercise its right to treat Peabody’s omission as an informality • that the city, in its bidding documents, made compliance with M/WB procedures permissive rather than mandatory • City argues: • that they retained the right in the bidding documents to reject as non-responsive a bid that does not comply with requirements • No language that compels a city to treat an omission as an informality • Fact that bidder is substantially low does not divest the city of its discretion in the matter • How would you rule and why?

29. Case 5: Peabody Construction v. City of Boston • Motion judge denied injunction and concluded that Peabody not only did not demonstrate a likelihood of success on the underlying merits, but also did not demonstrate a sufficient showing of irreparable harm • Peabody files appeal • Appeals court affirmed decision •  KASS, Justice (concurring). “Courts, in general, should not second-guess the honest exercise of discretion by bidding authorities for the excellent reason that a bidding authority is in a better position to evaluate the significance of an apparently minor deviation than a judge is. Nevertheless, I give voice to my concern that the city of Boston has acted with undue rigidity and perhaps without sufficient regard to the public interest--$703,200 worth of public interest (the difference between Peabody's bid and Sciaba's bid).” Peabody Construction Co, Inc. v. City of Boston, 28 Mass. App. Ct. 100 (1989)

30. Beth D. Fleming, CPSM, C.P.M., CPPO beth.fleming@dentoncounty.com