New York’s competitive bidding laws provide that public construction contracts must be awarded to the “lowest responsible and responsive bidder”. A “responsible” bidder is a contractor who has the skill, financial and technical resources to complete the work in a satisfactory manner. A “responsive” bidder is a contractor who has complied with the exact requirements of the bid invitation.
Bid protests frequently arise where the contractor’s bid is rejected on the grounds of non-responsiveness, as shown in the case of Matter of M.L. Caccamise Electric Corp. v City of Rochester.
In 2013, the City of Rochester purchased certain existing street lights from Rochester Gas and Electric. In October of that year, the City solicited competitive bids for a project involving separation of these street lights from RG&E’s power system. The purchase and sale agreement between the City and RG&E required the City to “employ a contractor acceptable to RG&E to complete the isolation work.” The bid specifications, in turn, set forth that it was the City’s intent “to obtain the services of an RG&E approved electrical utility contractor with the necessary expertise to isolate/separate the specified City owned Street Lighting facilities from the RG&E distribution network as directed by the City.”
After the bids were opened, Caccamise was the low bidder on the project. However, Caccamise was not on the list of RG&E approved contractors. Accordingly, the City determined that as Caccamise did not meet the bid qualifications, its bid was non-responsive and, therefore,
was rejected. The contract was subsequently awarded to the next lowest bidder, Poward Construction Group, Inc. (PCG), an RG&E approved contractor.
Caccamise filed an Article 78 bid protest proceeding to vacate the award of the contract, and award that contract to Caccamise. Caccamise maintained that New York State’s competitive bidding laws do not allow a municipality to adopt a private (PCG), non-municipal third party’s list of favored or preferred contractors as a pre-qualification requirement to bid. After noting the City’s concession that it was fully qualified to perform the work, Caccamise argued that RG&E’s approval bore no rational relationship to obtaining the best work at the lowest price because the condition had no bearing on the qualifications of contractors bidding.
Caccamise argued that the pre-qualification requirement for approval of the bidder by PCG limits competitive bids. Caccamise pointed out that three of the four, who bid on the contract were not RG&E approved, resulting in PCG being the only successful bidder.
In opposition, the City argued that RG&E’s approval was necessary because the work involved working in confined spaces in proximity to high voltage cables and equipment critical to RG&E’s electric system, and that contractors needed to have experience working on utility high voltage systems and be able to recognize high voltage equipment. The City also noted that the job required work on RG&E’s secondary distribution cables which serve multiple customers, and that RG&E’s reliability commitments to the NYS Public Service Commission would be threatened if those customers lose power resulting from improper work.
The trial court cited the principle that a bidding precondition is not per se unlawful and will be upheld, unless it impedes competition and bears no rational relationship to obtaining the best work at the lowest price, bearing in mind that specifications that exclude a class of would-be bidders must be both rational and essential to the public interest.
In denying Caccamise’s bid protest, the trial court indicated that the work to be done involved direct interaction with RG&E facilities. The court held that the safety of the individuals completing the work, the integrity of RG&E equipment and the uninterrupted provision of service were rational requirements for the undertaking. Further, the court found that the restriction was not anti-competitive because the bids were solicited by the City and not RG&E, and that RG&E had no financial stake in the transaction.
Caccamise appealed, but the appellate court affirmed. In doing so, that court held that the City’s rejection of Caccamise’s bid as non-responsive, was not arbitrary and capricious or an abuse of discretion. The City’s bid invitation specifically provided that its intent was to retain a contractor approved by RG&E, because the contractor needed the specific knowledge and expertise in dealing with RG&E’s power system in order to isolate and separate the City’s new street lights from that system. Given the unique nature of the project, which required the contractor who was hired for the project to work on private RG&E property, facilities, and equipment, the court held that the bidding requirement of RG&E approval was valid, did not impede competition and had a rational relationship to obtaining the best work at the lowest price.
Public agencies have broad discretion in both determining what preconditions are rationally related to obtaining the best work at the lowest price, and what constitutes compliance with the bid documents. An agency, however, may not include bid specifications which would give one bidder an unfair competitive advantage over other bidders. Nevertheless, the court in this case held that the City had good reasons for pre-qualification bid requirement of approval of the bidder by RG&E as a private, third party.