A public works project is as exciting to win as it is disappointing to lose. But a win is not always a win, nor is a loss always a loss – if the results are subject to protest and appeal.
Public works contract selection is governed by a bid procurement process, ostensibly “a fair forum for those interested in undertaking public projects.” Gostovich v. West Richland, 75 Wn.2d 583, 587, 452 P.2d 737 (1969). Such level playing field “encourages larger numbers of competitors to bid and lowers costs to the public.” Dick Enters., Inc. v. King County, 83 Wn. App. 566, 571 (1996). Thus, to assure “impartial treatment for all those participating in public bidding” a bid must be rejected if a “material defect” is found in the bid. A.A.B. Elec. v. Stevenson Public Sch. Dist., 5 Wn. App. 887, 890 (1971).
Defects are not uncommon. Bid proposals for major public projects are complicated and negotiations with subcontractors can progress right up to the deadline. Mistakes happen. Some mistakes are forgivable, for purposes of the process, and some are not. A public agency must properly reject a bid proposal that “materially deviates” from requirements set forth in the bid invitation. See Farmer Constr. v. State, 98 Wn.2d 600, 603 (1983). But what does that mean? The simplest answer is a “material” deviation is one which gives a bidder a benefit other bidders do not enjoy. For example, if a contractor submits a bid that is not signed, that is a material deviation because without a signature the contractor can refuse to perform if its bid is accepted – an “out clause” other contractors do not have. On the other hand, if a bidder puts his bid in the mail a day before the deadline, but it does not arrive until after the deadline, Courts have found that gave the bidder no real advantage and found the deviation “immaterial.”
The first to decide whether a defect is “material” is the public agency. The decision is made in the first case by announcing the winning bidder, and if necessary those rejected for having a material defect. Those decisions are appealable to the agency, which renders a final decision. A bidder, if dissatisfied with the agency’s determination, must then seek injunctive relief in Superior Court. This might be a bidder whose winning bid was rejected by the agency, or it might be a bidder who would win if only the public agency would reject the winning bid for an alleged defect. In either case, the question arises: what is the standard of review? Does the Court start fresh and reach its own decision or must it give deference to the State agency and check for plain error?
The answer is not as straightforward as one might hope. As a general rule, Courts have “inherent authority” to review a state agency decision. Foss v. Department of Corrections, 82 Wn. App. 355, 359, 918 P.2d 521 (1996) and the scope of that review is “quite narrow.” Decisions may be reversed only if they are “arbitrary, capricious, or contrary to law.” Foss, 82 Wn. App at 362-63. In some cases, this standard of review is codified by the statute and the standard of review is easily ascertained. In Equitable Shipyards, Inc. v. State of Washington, 93 Wn.2d 465, 611 P.2d 396 (1980), a dispute over a bid for a ferry construction project, the Court could rely on a statute, RCW 47.60.650(6), which directed the Court to review for arbitrary and capricious decisions. But what if the statute implies a different standard? For example RCW 47.28.090, which governs public works on highways, states that a bid may only be rejected for “good cause.” It has been argued that this means the Court must review and determine if the public agency complied with the statute and had, in the Court’s view, “good cause.” This is effectively a “de novo” standard with no deference given to the agency’s decision.
The counter argument is that the standard of review, for courts, is not identified in this statute and thus the presumptive “arbitrary and capricious” standard applies. The statute simply says the public agency must have good cause; it does not say the court must independently find good cause. It is not for the Court to decide if the agency had good cause, as the Court weighs the facts and circumstances, but rather to determine if the agency’s judgment that good cause existed was manifestly unreasonable, arbitrary, or capricious. Washington courts have not decided this question directly, but the better argument is the latter.