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City May Waive Low Bidder’s Failure to Include First Page of a Bid Bond as an Inconsequential Irregularity




by:
Kronick Moskovitz Tiedemann Girard A Law Corporation - Sacramento Office

 
March 3, 2014

Previously published on February 26, 2014

In Bay Cities Paving & Grading, Inc. v. San Leandro (January 28, 2014, A137971 ) ---Cal.App.4th ---- [14 Cal. Daily Op. Serv. 1559], the City of San Leandro (“City”) awarded a public works contract for the construction of a BART-Downtown Pedestrian Interface Project (“Project”) to the lowest bidder, Oliver DeSilva, Inc., dba Gallagher & Burk (“G&B”). The second lowest bidder, Bay Cities Paving and Grading, Inc. ("Bay Cities") sought a petition for writ of mandate alleging the City could not properly award the contract to G&B because a missing page in G&B's bid bond was a material deviation from the contract specifications. The trial court denied the petition and the Court of Appeals affirmed the judgment.

The City solicited bids for the Project, requiring prospective bidders to submit a proposal and a bid deposit in the form of cash, cashier’s certificated check, or bidder’s bond. The City provided prospective bidders with a contract book which contained copies of the required proposal form and of the City's standard form of bid bond. G&B submitted the lowest bid, but inadvertently omitted the first page of its bid bond. The City engineer determined the omission could be waived as an inconsequential bid defect and the City Council adopted a resolution waiving any irregularities in G&B’s proposal or bid.

Bay Cities filed a petition for writ of mandate and a complaint contesting the award to G&B. The trial court found substantial evidence supported the City’s decision that G&B’s failure to submit the first page of the bond form was a “‘minor irregularity’ not affecting the amount of the bid” that did not give G&B an “advantage or benefit not allowed to other bidders.” Bay Cities appealed, claiming that the defect in G&B’s bid was material and thus the City abused its discretion by waiving the deviation as inconsequential.

"Generally, cities, as well as other public entities, are required to put significant contracts out for competitive bidding and to award the contract to the lowest responsible bidder.” (MCM Construction, Inc. v. City and County of San Francisco (1998) 66 Cal.App.4th 359, 368.) “A basic rule of competitive bidding is that bids must conform to [bid] specifications, and that if a bid does not so conform, it may not be accepted. [Citations.] However, it is further well established that a bid which substantially conforms to a call for bids may, though it is not strictly responsive, be accepted if the variance cannot have affected the amount of the bid or given a bidder an advantage or benefit not allowed other bidders or, in other words, if the variance is inconsequential." (Ghilotti Construction Co. v. City of Richmond (1996) 45 Cal.App.4th 897, 904.)

The appellate court found that substantial evidence supported the City’s determination that G&B’s failure to include the first page of the bid bond was inconsequential because the City had sufficient information to determine that G&B had complied with the bid security requirement imposed by both the specifications of the Project and the Public Contracting Code. Since the second page of the bond form included text that identified the document as the “Bid Bond” for the “Bart-Downtown Pedestrian Interface” project and included the project number, the City was able to determine that G&B had obtained the bond using the City’s standard form bid bond. Furthermore, the City was able to use the page of the bid bond form that was submitted to establish that G&B had satisfied the requirement to actually secure the required bid bond from an approved security.

The court rejected Bay Cities’ argument that the omission of the bid bond from the original bid package gave G&B a competitive advantage over other bidders because it created an opportunity for G&B to dispute the validity of its bond. The court found that “the idea that somebody might attempt to avoid a contractual obligation is not evidence that he has an actual competitive advantage.” Thus, the appellate court found the City’s conclusion was supported by substantial evidence that the failure to submit the first page of the bid bond form was a minor irregularity.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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