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Court of Appeal Affirms the Discretion of a City in Waiving an Error in a Bid for a Public Works Project

Meyers Nave successfully defended the City of San Leandro (“City”) in a legal challenge brought by a disappointed bidder in a major public works case. On January 28, 2014, the Court of Appeal, First Appellate District, affirmed the decision of the City in waiving a bid defect in the case, Bay Cities Paving & Grading v. City of San Leandro, et. al. The case was certified for publication on February 13, 2014. There, the Court held that the City did not abuse its discretion by accepting an immaterial deviation in the low bidder’s bid bond. In applying the substantial evidence standard of review, the Court evaluated the City’s actions and determined that it had properly complied with its procedures. Accordingly, the Court did not second guess the City’s decision in awarding the contract for the BART Pedestrian Interface Project to the low bidder, Gallagher & Burk, Inc.

In a well-reasoned opinion, the Court reinforced the well-established rules that a bid which substantially conforms to a request for bids may, though not strictly responsive, be accepted if the variance cannot have affected the amount of the bid or given a bidder an advantage or benefit not allowed other bidders.

On September 4, 2012, the City sought competitive bids for the construction of the BART-Downtown Pedestrian Interface Project along San Leandro Boulevard. Gallagher & Burk, Inc., a division of Oliver DeSilva, Inc. (“G&B”) submitted the lowest bid on the contract, in the amount of $4,846,700. Appellant, Bay Cities Paving & Grading (“Bay Cities”) submitted the second lowest bid in the amount of $5,359,725, i.e., over $500,000 more than the G&B bid.

However, the bid package that G&B had submitted was missing the first page of its bid bond, which was a form contained in the City’s specification book. G&B’s bid package did, however, include the second page of the bond, which contained the signatures of both the surety’s attorney-in-fact and G&B’s president, as well as notary certificates for both signatures. Bay Cities submitted a bid protest, challenging the inadvertent omission by G&B, claiming that this error rendered its bid non-responsive. In its instruction to bidders, prospective contractors were required to submit bid security in the form a bidder’s bond executed by an authorized surety company.

On advice of the City Attorney, the City Council of San Leandro rejected Bay Cities’ bid protest. The City Council then unanimously adopted a resolution which identified G&B’s bid as the lowest responsible bid for the project, rejected all other proposals or bids, waived “any irregularities in the proposal or bid of” G&B, and awarded the contract for the project G&B.

The following day, November 20, Bay Cities filed a petition for a writ of mandate and a complaint in the Alameda County Superior Court. It also sought a Temporary Restraining Order contesting the City’s award of the contract to G&B. Alameda Superior Court Judge Evelio Grillo conducted a hearing on Bay Cities’ application and promptly denied its request for a temporary restraining order. On January 16, 2013, Judge Grillo held a hearing on Bay Cities petition for a writ of mandate and, a week later, denied it.

Bay Cities appealed from an order and judgment denying its petition for a writ of mandate. In that petition, Bay Cities alleged that the City had no discretion to waive a minor clerical error in G&B’s bid bond and because the missing page in G&B’s bid amounted to a material deviation from the contract specifications. Bay Cities also alleged that the City’s waiver of the defect provided G&B with an advantage not conferred on other bidders.

The Court of Appeal affirmed the trial court’s decision and held that both Judge Grillo and City’s decisions were well-reasoned and, thus, there was no need to disturb the City’s exclusive discretion in awarding its public works project in accordance with its own procedures. The League of California Cities, which represents all 467 California cities, submitted an amicus (“Friends of the Court”) brief in support of San Leandro.  The decision on appeal was unpublished. However, the League of California Cities sought publication from the Court of Appeal, which certified the opinion for publication on February 13, 2014.