New York’s competitive bidding laws require that contracts for public works projects be awarded to the lowest responsive and responsible bidder. A responsive bidder is a contractor who has complied with the literal requirements of the bid specifications. Whether a bid is responsive to the bid specifications is often a cause of litigation in the bid selection process, as shown in the recent case of Matter of Primer Construction Corp. v City of New York.
In November of 2013, the New York City Department of Environmental Protection solicited bids for a construction project for a chlorine reduction facility in Coney Island. The project included plumbing and gas fitting work, and the bid solicitation required bidding contractors to specifically identify the subcontractor that the bidder intended to use to perform the plumbing work. The bid specifications also required that the successful bidder have all licenses necessary to perform the work. New York City’s Administrative Code requires a plumbing contracting business to be majority owned by a licensed master plumber. On January 9, 2014, Primer Construction Corp. submitted its bid to DEP for the project. In its bid, Primer named itself as the plumbing subcontractor.
A week after submitting its bid, a representative from DEP contacted Primer and inquired as to how Primer intended to perform the plumbing and gas fitting scope of work, to which Primer responded that it would utilize union plumbers, and that the licensed master plumber who it was putting on the payroll was “in the process of switching [his] license over to Primer”. The next day, DEP issued a Non-Responsiveness Determination to Primer, stating that DEP’s search of the Department of Buildings’ skilled trades database revealed that Primer was a general contractor and not in a master plumbing business. In the absence of Primer’s principal owner holding a master plumber’s license, Primer could not legally perform the plumbing work. DEP also pointed out that since Primer itself is not in a master plumbing business, no individual can use his master license on its behalf.
Primer appealed the determination within the DEP, this time stating that it was in the process of creating a plumbing subsidiary which would be 51% owned by a specified licensed master plumber. As a subsidiary, Primer argued, the new entity was not a subcontractor and, thus, did not have to be separately disclosed on the bid documents. DEP rejected this appeal not only because it was untimely, but because Primer could not lawfully self-perform the plumbing work, as it has disclosed was its intention, because Primer’s principal owner was not a licensed master plumber. The DEP also found that Primer’s disclosure of a new subsidiary directly contradicted Primer’s initial response that it would use union plumbers, and that the specified licensed plumber was transferring his license to Primer. Further, since the purported subsidiary would be majority owned by the specified licensed plumber and not Primer, it could not legally be considered a subsidiary and, thus, had to be separately disclosed.
Primer commenced an Article 78 proceeding in court challenging DEP’s finding that it was a non-responsive bidder, claiming that the determination was arbitrary and capricious.
The court dismissed Primer’s challenge, holding that Primer’s identification of itself as the plumbing subcontractor was non-responsive to the bid because Primer could not lawfully self-perform the plumbing work. As for Primer’s so-called subsidiary, the court stated that the fact that the majority of its ownership would not be held by Primer—as was required for it to be considered a licensed plumbing entity—would necessarily disqualify it from being considered a subsidiary of Primer. The court relied on well settled case law that an agency has broad discretion in determining what constitutes a non-responsive bid, and that the DEP’s determination of non-responsiveness, under these circumstances, had a rational basis.
Contractors would be well advised to strictly comply with the bid specifications. Public agencies have broad discretion in determining what constitutes compliance with the bid documents. Here, the agency’s determination of Primer’s non-compliance with the bid instructions for a bidder to hold—or retain a subcontractor who holds—a master plumber’s license to perform the work was neither arbitrary nor capricious. This case demonstrates that a court will not substitute its judgment for that of the agency unless its decision was irrational, dishonest or otherwise unlawful.