Archive for the ‘Bidding’ Category

Louisiana Supreme Court Reverses Bad Decision That Allowed Bidders to Defraud the State

On August 4, 2011 Author By Scott Wolfe Jr

If you recall, on October 19, 2010, I discussed what I believed to be a very poor decision rendered by the Louisiana First Circuit, concluding that when a bidder on a public project defrauds the State, the State is refused any remedies.

Well, apparently the Louisiana Supreme Court agreed with me (for once), because it just reversed the First Circuit’s decision!

On May 10, 2011, the Louisiana Supreme Court decided that the decision rendered by the First Circuit in State of Louisiana v. Infinity Surety Agency, LLC, et al, 2010 CA 0123, Louisiana First Circuit Court of Appeal (Rendered September 10, 2010) was wrong and the case was remanded for trial. This decision by the La. Supreme Court definitely changes things for the better.

Before this decision was rendered, the First Circuit decided that a successful bidder to a public works project in Louisiana could defraud the State by providing an unauthorized surety and, despite the misrepresentation and failing to perform the contract in a specified time, the State would not be entitled to liquidated damages. The reasoning behind the line of thought was that State should have known that the surety was unauthorized thereby making the bidder unresponsive. The First Circuit placed an affirmative duty upon the State alone that was unfair and certainly unduly burdensome.

Now, the Supreme Court has decided that an appeals court does not have the power to make such a determination.

Whether Joint Venture breached the contract; whether Joint Venture’s bid was responsive; whether Joint Venture was the lowest responsible and responsive bidder; whether the State, as opposed to the bidder, had the sole and affirmative duty to determine if Infinity Surety was an authorized surety under the bid form; whether the State could instead reasonably rely on the representations of the bidder and the surety in the bid form; whether the State should have or could have rejected the bid as defective; whether the insurance codes precludes Infinity Surety as an unauthorized insurer from asserting its surety contract is void; and whether the State could have waived any purported defects in the bid bond, are all issues that should be resolved at trial…

These were all factual determinations that were not for the appeals court to decide and should be decided at trial. The La. Supreme Court here very smartly narrowed in on the particular issue that was to be resolved, namely whether the State alleged enough facts to assert a legitimate cause of action against the defendants, rather than allowing the decision of the court below extend its power beyond that which is lawful.

The unnecessary burden placed on the State in public works projects to investigate a surety that is being represented as authorized and fit for the purpose of the contract has been lifted.  In public works projects, the State should be allowed to rely on representations made by the other party that should be made in good faith, a notion that is fundamental to the law of contracts, and this decision properly reflects that.

Posted in:     Bidding, Louisiana, State & Federal Contracting  /  Tags: , , ,   /   Leave a comment

For Louisiana Contractors Bidding on Public Works Projects: This Case is for You

On August 2, 2011 Author By Scott Wolfe Jr

For all you Louisiana public works contractors out there bidding for public works projects to expand your private business or bidding for public works projects because that’s what you’ve always done – whatever the case may be – the 4th Circuit Court of Appeals is on your side. For cities and states trying to construct public works projects to improve their turf, take notes please.

We’ve written before about what happens in Louisiana when a bidder on a public project violates time requirements under the Louisiana Public Works Act, but what happens when Louisiana or a city within violates time requirements in failing to execute contracts  and notices to proceed with a winning bidder for a public project?

On April 27th of this year, the 4th Circuit Court of Appeals decided in the Wallance C. Drennan, Inc. v. City of New Orleans case, nuances of certain provisions of the Louisiana Public Works Act (La RS 38:2252 and 38:2212) that ultimately address the question above and render the law more stringent for cities and states advertising for public works bids.

In Wallace, the City of New Orleans advertised bids for two different public works projects under the Louisiana Public Works Act to renovate some streets around town. These two projects were to be partially or fully funded by the Louisiana and Federal governments, but financing was not finalized at the time the bids were received. Wallace C. Drennan, Inc. was the contractor that was the lowest responsive bidder and, thus, won both jobs.

However, because the City delayed executing the contracts for the two jobs within the required 45-day time limit from the day it awarded it to Wallace and because it did not thereafter within 30 days issue “Notices to Proceed,” Wallace sued the City for damages due to delay and tardiness under La. R.S. 38:2215 and 38:2212 of the Louisiana Public Works Act, both provisions cited above.

Wallace won on the issue of liability before trial began. The City appealed to the 4th Circuit, arguing that it gave the requisite notice of delay, but they lost again.

Why? Well, La. R.S. 38:2212(B) states that, “in the event the time limit stipulated herein is not applicable [namely the 45-day and 30-day notice requirements] because of…[an] exception [i.e. delayed financing], this fact shall be mentioned.” Ultimately, the City did not “mention this fact,” according to the 4th Circuit.

If a statutory time limit will not apply, in this case for the reason of tentative financing, that fact must be stated within the project specifications and the official advertisements. A reasonable bidder must be lead to believe that there will be a time delay. Because this was not the case in Wallace and the City did not give requisite notice, it lost the appeal.

The City tried to argue, in what was likely a last ditch effort to save itself from losing, that Wallace waived its right to complain about the imprecise notice. But, as is clearly stated in the statute, the applicable provisions are not subject to waiver by the bidder.

What should cities and states furthering public works projects take away from this case? As the Court itself advises, if a situation like this arises regarding the possibility of delayed financing and time delays in general, rejecting all bids for just cause or extending the deadline by mutual consent with the lowest bidder are both wiser routes to take.

It’s important to remember that public bid law and public works law are founded on the notion of public policy; Courts will almost always refuse to take any action inconsistent with these laws, so all builders take note!

Posted in:     Bidding, Delays, Louisiana, State & Federal Contracting  /  Tags: , , , , , ,   /   Leave a comment

New Mississippi Resident Preference Law Is Important for Louisiana Contractors Crossing Border

On November 11, 2010 Author By Scott Wolfe Jr

Earlier this year, Mississippi passed into law Senate Bill 2370, amending the resident preference statute for Mississippi public works projects:  Miss. Code Ann. § 31-3-21(3).   The bill is extremely important to Louisiana contractors who do (are want to do) business on public projects in Mississippi.  If you fail to abide, you’re bid will be considered non-responsive.

What Is A “Resident Preference Statute?”

So, you may be wondering…what in the world is a “resident preference statute?”

As we live in a country of independent states, our nation has a rich history of state governments and trade associations fighting very hard to protect the jobs within their state.   And how do you protect those jobs?   You restrict out-of-state folks from coming in and taking those jobs.

One result of this tendency are “resident preference statutes” like they have in Mississippi.   The statute does not prevent out-of-state contractors from bidding on public projects in Mississippi (the Constitution doesn’t allow that), but it does allow the state to give a slight preference to Mississippi contractors.

KeanMiller’s Louisiana Law Blog has a great summary on how these preference statutes work with the following:

Each state has different resident bidder preference laws. Some states require either that a non-resident’s bid amount be reduced by a certain percentage or that a resident’s bid be increased by a certain percentage if a non-resident bidder also bids on the project. Other states require that a resident bidder’s amount be increased only to the same percentage as allowed in a non-resident’s state, if a non-resident bids on the contract. Still other states have no bidder preference laws at all.

What Changed in Mississippi?

Mississippi’s new law only amends a statute that already exists, it doesn’t create a new concept for public bidders.   Previously, it was “mandatory” that a non-resident bidder attach to its bid a copy of their state’s bidder preference laws.    The State of Mississippi wanted to know how your state would treat a Mississippi contractor, so it can determine how to treat you.

The problem was an opinion from the Mississippi Attorney General that a failure to provide the attachment wasn’t enough to reject the out-of-state bid.

The amendment changes that.  The new language is quite specific about the mandatory nature of the requirement, and the consequence for failing to attach your state’s preference laws to the bid:

When a nonresident contractor submits a bid for a public project, he shall attach thereto a copy of his resident state’s current law pertaining to such state’s treatment of nonresident contractors. Any bid submitted by a nonresident contractor which does not include the nonresident contractor’s current state law shall be rejected and not considered for award.

The changes are now in effect, and took effect on July 1, 2010.

Good Resource:    Blog Post on Construction Law Toolbox

Where Do I Find Louisiana’s Law?

Now that you know that the Louisiana preference law must be attached, you’re now likely wondering…where do I find the Louisiana preference law?

It’s really best to consult with a Louisiana attorney who can review the bid materials to ensure that all applicable preference laws are attached.  State laws can be complex, and there may be a preference law for various components of your project.

With that said, here are the basic statutes related to Louisiana’s residence preferences on public works project.   You can click on the statute link to go to the legislature’s website with full text of the statute:

La. R.S. 38:2225: This statute is referred to as providing reciprocal preference.   It requires that if an out-of-state bidder is low, a Louisiana bidder maybe given the job if the home state of the out-of-state bidder gives him a preference in his own state, and the Louisiana bidder is within the margin of that state’s preference for its own state bidders.   (Summary complements of Richard McGimsey, Assistant Attorney General for Louisiana Department of Justice, in “Understanding The Public Bid Law” workshop).

La. R.S. 38:2251:   Relates to preferences for Louisiana products….not Louisiana vendors!   This statute is a bit more complex to summarize here, but you can click on the link and read all the juicy details.

Posted in:     Bidding, Law Changes & Updates, State & Federal Contracting  /  Tags: , , , , , , ,   /   Leave a comment

How To Get Your Small Contracting Business Considered for King County Public Works Projects

On November 4, 2010 Author By Scott Wolfe Jr

Not every public works contract is worth millions of dollars…and legislatures across the country (including the U.S. Congress) is interested in giving some public work to small and/or minority contractors.

An example of this public interest can be found in RCW 39.04.155, which establishes “small works roster contract procedures” for Washington counties.    This statute authorizes counties to create a “roster” of qualifying small contractors.   When a public works project fits the bill (is less than a certain amount of money), the county can submit the project to a contractor on the roster…as opposed to advertising the project and accepting bids.

This statute gives counties the authority to create a small works roster – it does not required it.

Relying on §39.04.155, King County has established a construction roster for small contractors.   Thanks to Mike Purdy’s Public Contracting Blog for pointing this out with his October 26th blog post:  County Establishes Construction Roster for Small Contractors.

The “Limited Public Works Roster” is explained on King County’s website here.   Here is a snippet that really explains how the roster will work in King County:

Public Works projects estimated to cost less than $35,000 may be awarded using the Limited Public Works Roster process in accordance with the Revised Code of Washington. These projects are not advertised in the newspaper. Instead where possible, a minimum of three contractors on the Roster are invited to bid for each project. These bidders are then rotated, so that all bidders in a trade category are invited to bid before any bidder receives a second invitation to bid.

Do You Qualify? The first question to ask is whether your company qualifies as a small contractor to get on this roster.    To be eligible for inclusion in the King County Limited Public Works Roster, a contractor must have either:  (i) gross revenues under $250,000 annually as reported on their Federal Tax Returns; or (ii) gross revenues under $1,000,000 annually as reported on their Federal Tax Returns.

So, what’s the difference between companies with less than $250k revenue and those with less than $1m revenue?

It’s not entirely clear.   As Mike Purdy explains:

It’s unclear to me how the County intends to use these two categories, especially since there doesn’t appear to be authority to restrict competition to contractors with revenues less than $250,000, but only to “encourage” these firms to submit bids.

How Do You Get On The Roster? This is easy.  You just provide all the information requested in the Limited Public Works Roster Application Form, which you can download from the King County website at this link.

Posted in:     Bidding, State & Federal Contracting, Washington  /  Tags: , , , ,   /   Leave a comment

When Bidder on Public Project Defrauds the State, Louisiana 1st Circuit Refuses the State Any Remedies

On October 19, 2010 Author By Scott Wolfe Jr

In my view, the Louisiana First Circuit just rendered a very poor decision.   The decision was written by Judge William J. Kline (serving pro tempore) in the matter State of Louisiana v. Infinity Surety Agency, LLC, et al, 2010 CA 0123, Louisiana First Circuit Court of Appeal (Rendered September 10, 2010).

In Louisiana, when a successful bidder to a public works project fails to execute the contract within the specified time frame, the State has a right to retain the bid bond as liquidated damages.

So, what happens when the successful bidder represents that it could provide an acceptable performance…but through an unauthorized surety?    In such a case, the successful bidder is awarded the contract, but cannot proceed with work within the required time frame because of a failure to bond the project pursuant to the La. R.S. 38:2219 requirements.

A case last month out of the Louisiana First Circuit addressed this question, concluding that the State was not entitled to liquidated damages.

The reason?

Since the purported surety was unauthorized, the bid itself did not meet the statutory requirements of the Public Works Act.   The bid, in other words, was non-responsive and should have been rejected by the State.

What if the bidder made a misrepresentation – an outright fraudulent misrepresentation – that the surety had authority to bond the project and would in fact bond it?   The First Circuit says it doesn’t matter:

Although the State also argues that [the contractor and surety] should not be allowed to escape paying the penalty by its alleged fraud, there is no ambiguity in the statute.   The bid did not meet the requirements of the statute and is null and void.  When a law is clear and unambiguous and its application does not lead to absurd consequences, the law should be applied as written.

Doesn’t this remedy seem harsh, or maybe an absurd consequence?   After all, the contractor and surety defrauded the state intentionally….while the State was just guilty of an oversight, or was duped.   The First Circuit says this:

Admittedly, this conclusion seems harsh because in circumstances of this sort, when there are two breaches of statutory responsibility, one breach could be intentional and the other an oversight…Had the State rejected the bid up front, however, there would have been no delay in awarding the contract to the lowest responsible bidder.

I think the Court might have made a mistake here.   This explanation for the “harsh” conclusion is lacking of any good logic, acknowledging two breaches of statutory authority, but failing to acknowledge that maybe the State couldn’t have rejected the bid upfront…because it was lied to.

In this decision, the First Circuit has chosen to read one statutory mandate as more important than the other.  Namely, the First Circuit reads the duty of the State to reject non-conforming bids literally and without sympathy, but merely glazes over any statutory and legal requirement that the contractor and surety not commit a fraud on the State.

Further, the First Circuit ignores clear language elsewhere in the Public Works Act:  that if the bidder is awarded the contract, and does not perform, it forfeits its bid bond.   Here, clearly, the bidder was awarded the contract, and did not perform.   The conclusion that the bid might have been unresponsive because of a mistake in the bid or outright fraud, doesn’t change the facts:  the bidder won, and could not perform.

What about the State’s tort claim against the contractor and surety for the misrepresentations?  Surely, the tort claim would have merit – or at least be deserving of a trial….

Not so, said the First Circuit.   “The alleged tort claim should never have arisen,” it concludes, because the bid should have been rejected.

Posted in:     Bidding, Louisiana, State & Federal Contracting  /  Tags: , , , , ,   /   2 Comments
Next Page »