Owner’s entitlement to reject bid as non-responsive based on bidder’s failure to cite a prior successful project of similar size, scope, and complexity. Matter of Framan Mechanical, Inc. v. State University Construction Fund. New York Appellate Division (2017), by Hugh Anderson

Summary: The State University Construction Fund sought bids for an HVAC upgrade project at the SUNY Downstate Medical Campus. The instructions to bidders required that each bidder demonstrate that it had successfully completed a project of similar size, scope, and complexity within the last five years. Framan Mechanical was the low bidder. In response to the prior-project requirement, Framan cited a prior project for the same owner, completed within the last year.

The owner informed Framan that the prior project that it had cited did not satisfy the bidding requirement, and invited Framan to cite another project. Framan declined to submit an alternative prior project, but instead contested the rejection of the recent university HVAC project. The owner responded that the prior project had not been successfully completed and demonstrated a clear inability of Framan to meet the contract requirements of the project. The owner supported thisconclusion with a lengthy list of problems that had occurred on the prior project, ranging from flagrant safety violations, to disruption of the occupants of the building, to failure to complete the work.

In the bid protest that followed, Framan contended that the pattern of problems on the prior project was “fabricated” and that the real reason that the owner rejected its bid was that Framan had filed a claim for additional compensation on the prior project. The trial court ruled that it was obligated to support the owner’s decision to reject the bid if that determination was supported by a “rational basis”—which the court concluded that it was.

Decision: The appellate court agreed with the trial court’s support of owner’s decision to reject the bid as non-responsive. The court noted that the rejected bidder bore the burden of demonstrating that the rejection was “irrational,” and stated that the record supported the conclusion that the rejection was rational. The appellate court acknowledged that the merits of the problems and disputes on the prior project had not yet been resolved, but held that under the circumstances the rejection was rational.

Comment: The courts give substantial deference to the decisions of public owners regarding bidding issues. The New York rule that the owner’s decision must merely be “rational” is similar to rules in other states, and is not a difficult standard to meet. One of the underlying reasons for this deference is the need for a procurement process that moves forward efficiently. Contracts must be awarded promptly and construction must commence. If owners faced substantial exposure to the possibility of an award being nullified, or to significant damages despite a good faith award decision, the procurement process would be adversely affected. That is not to say that courts will decide every bidding dispute in favor of the owner, but rather that aggrieved bidders face an uphill battle and must have a powerful case to prevail.

The issue in this case was ultimately the qualifications of the bidder to perform the work. Qualifications at their core relate to whether the bidder is a “responsible bidder,” one of the two basic statutory criteria of most competitive bidding laws. Here, however, the issue was framed as one of responsiveness, because the bidder had failed to submit a reference to a successful prior project. The specific bidding requirement about demonstrating success on a similar prior project perhaps made the owner’s process and decision easier than if it had merely relied on an assertion that the bidder was not “responsible”—though the problems with the prior project would have been a factor in either case.