E. Pierpont Electrical Contracting, Inc. v. A. Prete Construction Co., Inc. et al. (2010)

MEMORANDUM OF DECISION

This civil action was initiated by the plaintiff E. Pierpont Electrical Contracting, Inc. (Pierpont) on September 17, 2009 by the filing of a verified complaint and seeking an ex parte temporary restraining order restraining the defendants from performing any of the electrical work for the Davis Street Arts Magnet School in New Haven, Connecticut (Project).

The verified complaint alleged, in substance, that Pierpont is a certified Small Business Enterprise with the defendant City, that the defendants A. Prete Construction Company, Inc. (Prete) and Ed-Mor Electric Co., Inc. (Ed-Mor) are Connecticut corporations with principal places of business in New Haven, Connecticut, and that the defendant City of New Haven (City) is a political subdivision of the State of Connecticut and receiving funds from the State of Connecticut for the construction of the Project.

The temporary restraining order would have enjoined the defendants from proceeding with any electrical work on the Project until the court ruled on the application for the temporary restraining order.   The court (Zemetis, J.) did not grant the ex parte request but ordered the parties to appear in court on September 21, 2009.   On that date the plaintiff withdrew its request for a temporary order, and the parties agreed to close the pleadings and to have a trial on the merits of the complaint.   This court heard the matter in a bench trial on October 7 and 8, 2009, with the issue being whether the court would issue permanent orders restraining Prete and the City from executing a contract on the project with Ed-Mor, and directing Prete to designate the plaintiff as the lowest responsible bidder on the electrical portion of the project.

The verified complaint alleges, in substance, that the plaintiff submitted the lowest responsible bid for the electrical work on the project to Prete, the construction manager at risk on the project who was responsible for receiving and evaluating the bids, and responsible for designating the lowest responsible bidder.   Prete has a contract with the Board of Education that it will build the project for a guaranteed maximum price, that the work will be done by various trade subcontractors, and that the bidding process will meet all City and State bidding requirements.   The complaint alleges that the plaintiffs' base bid was $2,400,000, that the bid complied with all of the requirements as set forth in the bidding documents that it received from Prete, but that Prete designated Ed-Mor as the lowest responsible bidder even though Ed-Mor's base bid was $2,478,000.   The reason given by Prete to the plaintiff as to why the plaintiff was not designated as the lowest responsible bidder was that the plaintiff had not signed its bid bond.   The City has approved Prete's selection of Ed-Mor as the lowest responsible bidder for the electrical work on the project.   The complaint, in conclusion, alleges that the reason Prete and the City designated Ed-Mor as the low responsible bidder and awarded the electrical subcontract to Ed-Mor was because of favoritism to Ed-Mor, because of a personal relationship between the principals of Prete and the principals of Ed-Mor, because fraud, corruption or favoritism has influenced the conduct of the bidding officials, corrupting the bidding process of the City, and that the very object and integrity of the competitive bidding process is defeated by the aforesaid conduct of Prete and the City.

The pleadings in this case raise the issue of whether this court has jurisdiction to consider the matter based on a claim by the defendants that the plaintiff, an unsuccessful bidder on a public contract, has no standing to challenge the award of the contract to Ed-Mor.  “In Perkins v. Lukens Steel Co., 310 U.S. 113, 125-30, 60 S.Ct. 869, 84 L.Ed. 1108 (1940), it was held that prospective bidders had no standing to challenge an administrative interpretation of a public contract law because the competitive bidding statutes were enacted solely for the protection of the public and conferred no enforceable rights upon those seeking to do business with the government.   “Courts should not, where Congress has not done so, subject purchasing agencies of Government to the delays necessarily incident to judicial scrutiny at the instance of potential sellers, which would be contrary to traditional governmental practice and would create a new concept of judicial controversies.”  Id., 130.   Recently, in Spiniello Construction Co. v. Manchester, 189 Conn. 539, 456 A.2d 1199 (1983), we held that only “where fraud, corruption or favoritism has influenced the conduct of the bidding officials or when the very object and integrity of the competitive bidding process is defeated by the conduct of municipal officials,” does an unsuccessful bidder have standing to challenge the award.  Id., 544.

“Standing is the legal right to set judicial machinery in motion.   One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.”  Hiland v. Ives, 28 Conn.Sup. 243, 245, 257 A.2d 822 (1966).

“This court has declared that “[a] bid, even the lowest responsible one, submitted in response to an invitation for bids is only an offer which, until accepted by the municipality, does not give rise to a contract between the parties.”   An unsuccessful bidder, therefore, has no legal or equitable right in the contract.   Not unlike any other person whose offer has been rejected, the disappointed bidder has no right to judicial intervention.   See Perkins v. Lukens Steel Co., supra, 129;  Austin v. Housing Authority, supra, 349.

“Nor does the competitive bidding statute provide the disappointed bidder with standing.   This court has frequently declared “[m]unicipal competitive bidding laws are enacted to guard against such evils as favoritism, fraud or corruption in the award of contracts, to secure the best product at the lowest price, and to benefit the taxpayers, not the bidders ․

“In Spiniello Construction Co. v. Manchester, 189 Conn. 539, 456 A.2d 1199 (1983), we recognized that our prior decisions had the effect of preventing judicial review of potentially meritorious claims concerning the implementation and execution of competitive bidding statutes.   We also acknowledged the fact that the group most benefited by the statute-the public-had no effective means of protecting their interests.   We substantially adopted the position in Scanwell that “[t]he public interest in preventing the granting of contracts through arbitrary or capricious action can properly be vindicated through a suit brought by one who suffers injury as a result of the illegal activity, but the suit itself is brought in the public interest by one acting essentially as a ‘private attorney general.’  “ Scanwell Laboratories, Inc. v. Shaffer, supra, 864;  see generally Davis, Administrative Law Treatise (2nd Ed.) §§ 24:2, 24:3.   Thus, we held that where fraud, corruption or acts undermining the objective and integrity of the bidding process existed, an unsuccessful bidder did have standing under the public bidding statute.   We limited the scope of our holding in order to strike the proper balance between fulfilling the purposes of the competitive bidding statutes and preventing frequent litigation that might result in extensive delay in the commencement and completion of government projects to the detriment of the public.  Ardmare Construction Co. v. Freedman, 191 Conn. 497.

“The general rule of standing cited by the plaintiffs is not contested.   As the trial court noted, however, that rule is not inconsistent with the particular standard applicable to disappointed and would-be bidders:  “By requiring [the association] to produce evidence that the bidding process was undermined by fraud, corruption or favoritism, the court is simply forcing the party challenging the competitive bidding process to make a colorable claim of injury that it is within the zone of interests protected by the competitive bidding laws ․” Although the plaintiffs were not required to prove the merits of their claim, they did have the lesser burden of establishing a colorable claim.   See Maloney v. Pac, supra, 183 Conn. 321.   Under the test for standing set forth in Unisys Corp. Ardmare Construction Co. and Spiniello Construction Co., the trial court was required to conduct an evidentiary hearing to decide whether the plaintiffs had established a colorable claim that the project labor agreement requirement had undermined the integrity or objectives of the competitive bidding process.”  Connecticut Associated Builders & Contractors v. Hartford, 251 Conn. 169, 181-82.

The various bid documents were in evidence.   They consist of the invitation to bid, the instruction to bidders, mandatory bidding forms, and specifications.

The “Invitation To Bid” provided, in part:

1.  The “Instructions To Bidders” found in the Specifications must be followed in all respects.   Any bid not prepared and submitted in accordance with the provisions set forth in the Bid Documents will be considered informal and may be subject to rejection.

5. All bids must be submitted with a Bid Bond, equal to five percent (5%) of the base bid.   Bonds shall be made out to “A. Prete Construction Company, Inc.”

15.  A.  Prete Construction Company, Inc. and the City of New Haven reserve the right to reject any and all bids or to waive any informalities, irregularities, or technical defects in the bids.

The “Instructions To Bidders” provided in part:

5. BIDS

A.  Each bid must be submitted on copies of the prescribed bid forms from the “Mandatory Bidding Forms” section of the specification book.

D. The Owner will consider informal any bid not prepared and submitted in accordance with the provisions hereof, and may at its option waive any informalities, or accept or reject any and all bids.

8. The right is reserved to reject any bid where an investigation of the available evidence or information does not satisfy the City that the bidder is qualified to carry out properly the terms of the Contract.

14. AWARD OF CONTRACT:  REJECTION OF BIDS

A.  The Contract will be awarded within ninety (90) days after the date of the bid opening, to the responsible bidder submitting the lowest bid complying with the conditions of the Invitation for Bids. The bidder to whom the award is made will be notified at the earliest possible date.   The Owner and/or Construction Manager, however, reserve the right to reject any and all bids or to waive any informality in submitted bid documents whenever such rejection or waiver is in its interest.

The mandatory bidding forms package included the bid bond form which the plaintiff used as part of its bid.   The bid bond was signed by an officer on behalf of the surety but no one signed on behalf of the plaintiff, who is the principal on the bond.   Joseph Ryan, who was the employee of Prete who evaluated the bids, and found that Ed-Mor was the low responsible bidder, testified that he advised the plaintiff that its bid was rejected because of the failure to submit a signed bid bond.   In the evidentiary hearing he mentioned several other matters of concern with respect to the plaintiff's bid.   The bid bond was for 10% of the amount of the bid, rather than 5% which was called for in the instructions.   Mr. Ryan testified that this indicated that the bidder, the plaintiff, was unable to follow instructions.   An additional item of concern to Mr. Ryan was that the amount of the credit line on the plaintiff's bid available for the job was one hundred thousand dollars.   His concern was that on this particular job the plaintiff probably wouldn't receive an initial payment for at least seventy-five days and the plaintiff's costs in the first seventy-five days would probably be two to two hundred and fifty thousand dollars.   The final item that concerned Mr. Ryan was the fact that the plaintiff submitted a certificate of insurance with its bid when it is not required and the amount of insurance did not satisfy the policy limits required by the contract documents.   These issues caused Prete, acting through Mr. Ryan, to have concerns with respect to the plaintiff's bid.   The concern was that if the plaintiff wasn't able to follow the instructions with respect to the submission of its bid then it is going to have problems following the instructions included in the contract, and those problems would delay the project resulting in the costs of the project increasing.

Because of his concerns about the plaintiff's bid Mr. Ryan then reviewed the bid of Ed-Mor, the next low bidder.   There were some defects in that bid but Mr. Ryan did not feel they were as significant as those found in the plaintiff's bid and, in accordance with the bidding instructions, he exercised his discretion, waived the defects in the Ed-Mor bid, and designated Ed-Mor as the low responsible bidder.

Paragraphs 25-28 of the complaint specifically set forth allegations that the conduct of the City and Prete demonstrate favoritism to Ed-Mor, that there may be a personal relationship between the principals of Prete and the principals of Ed-Mor which motivated Prete to award the contract to Ed-Mor, that fraud, corruption or favoritism influenced the conduct of Prete and the City, and that the object and integrity of the competitive bidding process is defeated by the conduct of Prete and the City as is alleged in the complaint.   There was no evidence that the principals of Prete and the principals of Ed-Mor had any personal relationship or that Prete and Ed-Mor had ever worked together.   The other conclusory allegations of these paragraphs are based on the conduct of Prete in evaluating the alleged defects in the respective bids.   The instructions to bidders reserves to Prete and the City the right to reject any bids and to waive any informality in any bids whenever such rejection or waiver is in its interest.   Mr. Ryan explained his reasoning in rejecting the plaintiff's bid and in waiving the alleged defects in Ed-Mor's bid.   The court accepts his explanations as a proper exercise of his discretion in accordance with the bidding documents.

The court finds that the plaintiff has failed to establish a colorable claim that the bidding process in this case was undermined by fraud, corruption or favoritism, or that the bidding process had undermined the integrity or objectives of the competitive bidding process.   The plaintiff's request for permanent injunctions restraining Prete and the City from executing a contract on the project with Ed-Mor, and directing Prete to designate the plaintiff as the lowest responsible bidder on the electrical portion of the project is denied.

Judgment may enter in favor of the defendants.

William L. Hadden, Jr., JTR

Hadden, William L., J.T.R.