New York’s competitive bidding laws dictate that contracts for public works must be awarded to the lowest responsible and responsive bidder. In determining the lowest responsible bidder, a public agency investigates such qualitative factors as the bidder’s skill, experience, background and integrity. A bidder must also comply with the requirements of the bid specifications to be considered a responsive bidder.
In the case of AAA Carting and Rubbish Removal, Inc. v. Town of Southeast, New York’s highest court annulled the Town Board’s rejection of the low bidder because the second lowest bidder was considered "more responsible".
The Town Board of Southeast in Putnam County solicited competitive bids from qualified contractors to handle the Town’s waste removal needs. The Town prepared a bid request which set forth the qualifications that the Town required from the prospective contractor. Those qualifications included, among other factors, that the work of the contractor be done in a prompt, proper, and workmanlike manner, that the contractor provide operating and safety training for its personnel, that the contractor’s equipment be maintained in safe and sanitary condition, and that there is reserve equipment that could be put into operation within two hours of a breakdown.
The Town Board received three bids. AAA Carting and Rubbish Removal, Inc. submitted a bid for $1,210,500 per year, Suburban Carting submitted a bid for $1,496,205 per year and Advanced Waste Systems submitted a bid for $1,692,306 per year. After reviewing the bids, the Town Board undertook a due diligence procedure, which included visits to AAA and Suburban. The Board members prepared a report indicating that "AAA can reasonably be construed as being responsible in addition to being the lowest bidder". However, the report also stated that Suburban’s "operations, cleanliness and professionalism and process are head-and-shoulders superior to that of AAA."
The Town Board held a meeting and voted to award the contract to Suburban, the second lowest bidder. The Board members who voted in favor of the award noted that safety and reliability were determinative factors in their selection of the higher bid. However, at no time during the meeting, or at any other time prior to the vote awarding the contract to Suburban, was there any suggestion that AAA was not a responsible bidder or did not adequately fulfill any of the requirements as set forth in the bid request.
After its bid was rejected, AAA filed a petition with the court to set aside the award of the contract to Suburban and to direct the Town to award the contract to AAA. The trial court ruled in favor of AAA. The Town appealed, and appellate court reversed, ruling in favor of the Town. AAA was then granted permission to appeal to New York’s highest court, the Court of Appeals.
The Court of Appeals ruled in favor of AAA. The court noted that under the controlling public bidding law, all contracts for public work must be awarded to the lowest responsible and responsive bidder. This does not mean that a contract must be awarded to the more responsible bidder. The court pointed out that the record before the Town Board did not find that AAA lacked responsibility. The rejection of AAA’s bid was based on the Town’s finding that Suburban was more responsible than AAA. However, the criteria used by the Town to reject AAA was not contained in the bid specifications. Accordingly, the court ruled that there was no good reason to reject the low bid from AAA.
The general requirement that contracts for public works be awarded to the lowest responsible and responsive bidder has long been the law in New York. The purpose is to prevent corruption, favoritism, and potential influence, while obtaining the best possible contract price. However, as this case demonstrates, accepting a higher bid based on subjective assessment of criteria not specified in the bid proposal gives rise to speculation that favoritism may have played a role in the Town Board’s decision.