By: Alexander A. Miuccio Gregory J. Spaun Published: February 2018

Court Rules on Rejection of Low Bidder for Non-Responsibility

New York’s competitive bidding statutes governing construction contracts for public works require contracts to be awarded to the lowest responsive and responsible bidder. A “responsive” bidder is a contractor who has complied with the exact requirements of the bid invitation. A “responsible” bidder is a contractor who has the skill, integrity, experience, financial and technical resources to complete the work in a satisfactory manner.

In the recent case of Matter of Lunati Paving & Construction of NY, Inc. v Suffolk County Water Authority, the court determined whether good cause existed for the Water Authority’s rejection of the low bidder as a “non-responsible” bidder.

Background

In late-2015, the Suffolk County Water Authority solicited bids for a contract to replace certain specified concrete, bituminous patches and concrete curbs, and to perform other sidewalk restoration. On January 20, 2016, the Water Authority opened the bids, and Lunati Paving & Construction of NY was the apparent lowest bidder.

On February 5, 2016, the Water Authority notified Lunati that although Lunati was the lowest bidder, the Water Authority would recommend a determination of Lunati’s “non-responsibility” on the basis of Lunati’s unsatisfactory performance under a prior contract for substantially the same scope of work as the contract to be awarded. The Water Authority was dissatisfied with Lunati’s documented delays in completing work orders, as well as unprofessional conduct and behavior of Lunati’s personnel. Further evidence of Lunati’s unsatisfactory performance of the prior contract was the State’s having barred the Water Authority from performing work on State roads based on Lunati’s poor performance. Consequently, the Water Authority had to reassign to another contractor work that Lunati failed to perform in accordance with the prior contract specifications.

Despite the Water Authority’s concerns, it afforded Lunati several opportunities, in person and in writing, to address the issues of performance under the prior contract. However, after evaluating Lunati’s (late) response, the Water Authority’s Board rejected Lunati’s bid as having been submitted by a non-responsible bidder, and it awarded the contract to the next lowest bidder. Lunati initiated an Article 78 proceeding challenging the Water Authority’s determination as arbitrary and capricious, and lacking a rational basis.

Decision

The court ruled against Lunati and denied its petition. In doing so, the court relied on well-established case law that permits a municipal agency to consider a contractor’s past unsatisfactory or inadequate performance of other public works in determining whether the bidder is sufficiently responsible to carry out the work in question. Here, because the Water Authority had a rational basis to determine that Lunati was not a responsible bidder (Lunati’s own past history), its determination could not be said to be arbitrary or capricious.

Comment

Challenging a contracting agency’s determination of non-responsibility as either arbitrary or capricious is a high burden to meet. Courts will not substitute their judgment for that of the agency unless its determination was irrational, dishonest, or otherwise unlawful. Public contracting agencies have broad discretion in determining whether a bidder is not responsible. As this case demonstrates, the agency is permitted to maintain an “institutional memory” and use a contractor’s past unsatisfactory performance to determine whether the contractor is a responsible bidder. Contractors should also bear in mind that one agency’s determination of non-responsibility often has to be disclosed when bidding on other public works projects, thereby potentially leading to a “snowball effect” of further determinations of non-responsibility. 

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