IN THE COURT OF APPEALS OF IOWA
No. 4-212 / 03-1067
Filed June 9, 2004
CITY OF FAIRFIELD, IOWA,
HARPER DRILLING COMPANY and
NATIONAL FIRE INSURANCE
COMPANY OF HARTFORD,
Appeal from the Iowa District Court for Jefferson County, Daniel P.
The City of Fairfield appeals from the district court's grant of
summary judgment in favor of Harper Drilling Company and National Fire
Insurance Company of Hartford in the city's suit against the defendant
contractor and the insurance company that provided a surety bond for the
contractor's bid on a drilling project for the city. REVERSED AND
Ivan T. Webber of Ahlers & Cooney, P.C., Des Moines, for appellant.
Benjamin B. Ullem and John F. Fatino of Whitfield & Eddy, P.L.C., Des
Moines, and G. Steven Ruprecht of Niewald, Waldeck & Brown, Kansas City,
Missouri, for appellees.
Heard by Sackett, C.J., and Huitink and Vaitheswaran, JJ.
The City of Fairfield (Fairfield) appeals from the district court's
grant of summary judgment in favor of Harper Drilling Company (Harper) and
National Fire Insurance Company of Hartford (National) in the city's suit
against the defendant contractor and the insurance company that provided a
surety bond for the contractor's bid on a drilling project for the city.
We reverse and remand.
Fairfield called for bids for a public works project, drilling a
well. The bid documents provided by the city required completion of a
Minority, Women's and Small Rural Area Business Enterprise (MBE/WBE/SRBE)
Utilizations Worksheet prior to contract award with documentation of
compliance with the affirmative steps for MBE/WBE/SRBE participation
because funding for the project was at least partly through the Iowa
Department of Natural Resources (DNR):
All bidders/offerers must be prepared to document the affirmative
steps taken to utilize minority, women's, and small rural area
businesses. The successful bidder must complete the Minority,
Women's, and Small Rural Area Business Enterprise Utilizations
Worksheet and submit it to [Fairfield] prior to contract award, with
documentation demonstrating compliance with the affirmative steps for
MBE/WBE/SRBE participation in order to be deemed responsible if an 8
percent fair share for Minority and Women's Business Enterprises is
The documents also required bidders to include a bond in the amount of ten
percent of the bid. Harper submitted a bid accompanied by a bond through
National. Harper was the low bidder on the project. The city council
passed a resolution stating, in relevant part:
NOW, THEREFORE BE IT RESOLVED that the City Council of the City of
Fairfield does hereby award a contract to Harper Drilling Co. of
Clinton, Missouri in the amount of $719,854.00 for the construction of
a Jordan Well.
BE IT FURTHER RESOLVED that said award of contract to Harper Drilling
Co. of Clinton, Missouri is conditionally awarded and is subject to
concurrence with the award of contract by the Iowa Department of
The Iowa DNR reviewed the worksheet submitted by Harper. It listed only
one subcontractor, who was not a minority, woman, or small rural business.
Harper provided none of the required documentation to show contacts with or
affirmative efforts to contact such subcontractors. The DNR notified
Fairfield it was requesting additional documentation. Fairfield forwarded
the DNR's letter to Harper with a cover letter noting, "Please respond as
soon as possible as the contract cannot be awarded until [the DNR] receives
this information." Harper received the request one day after the thirty-
day time limit for awarding the project. Harper replied that the award
period had expired and requested its bid bond be returned.
The city awarded the contract to the next lowest bidder, went ahead
with the project, and sued for recovery on the bond. After discovery, both
sides moved for summary judgment. Following a hearing on the motions, the
district court found, in pertinent part:
Fairfield's acceptance of Harper's bid was conditional upon IDNR
approval. That approval was never forthcoming. Had Fairfield
unconditionally accepted Harper's bid and awarded the contract to
Harper, Harper's subsequent inability to perform because of a lack of
IDNR approval would constitute a breach of contract by Harper. As it
is, Fairfield's conditional acceptance of Harper's bid did not
constitute a binding contract on either party. This is true because
Harper was unable to comply with the condition imposed (IDNR
The court granted Harper's motion for summary judgment, exonerated the bid
bond, and ordered Fairfield to return it.
A district court's grant of summary judgment is reviewed for
correction of errors at law. Iowa R. App. P. 6.4; Sons of the Union
Veterans of the Civil War v. Griswold Am. Legion Post 508, 641 N.W.2d 729,
731 (Iowa 2002). Normally, we examine the record before the district court
to determine whether "there are no genuine issues of material fact, and in
deciding that issue, we review the record in the light most favorable to
the party opposing the motion for summary judgment." Campbell v.
Delbridge, 670 N.W.2d 108, 110 (Iowa 2003). However, in the case before
us, the parties agree there are no genuine issues of material fact. They
only disagree on who is entitled to judgment as a matter of law.
On appeal, Fairfield characterizes its claim as an action on the bond
for Harper's failure to enter into the contract after being awarded the
bid. Because DNR approval was necessary and Harper's compliance with DNR
requirements was necessary to obtain DNR approval, Fairfield argues Harper
did not act in good faith to comply with DNR requirements. Harper contends
the suit was on the contract, the bid award was only conditional, and
Fairfield has not preserved its good-faith claim for our review because it
was not raised in district court. Harper also contends the Iowa Code does
not provide for a cause of action on the bond.
Iowa Code section 384.97(5) (2001) provides, in part:
That each bidder shall accompany the bid with a bid security as
defined in this subsection and as specified by the governing body, as
security that the successful bidder will enter into a contract for the
work bid upon . . . .
Fairfield argues Harper did not enter into a contract for the work bid
upon, so it is entitled to the bid bond. Harper responds that Fairfield
never sent it written notice it was the successful bidder, never sent it a
contract to sign, and never sent it a notice to proceed.
Fairfield contends it is entitled to the bid bond because Harper
failed to enter into the contract after being named the lowest bidder.
Harper responds the district court found there never was a contract because
the bid award was conditional. The condition in the bid award was approval
from the DNR. That approval was based on Harper's documentation of
"affirmative steps" taken to utilize minority businesses. Satisfaction of
the condition was entirely in Harper's hands. Harper's documentation did
not reveal any affirmative steps to contact or hire minority
Harper relies on Istari Constr., Inc. v. City of Muscatine, 330
N.W.2d 798 (Iowa 1983). Harper's reliance on the Istari case is misplaced
because the circumstances are not analogous and the issues to be resolved
differ. In Istari, the city selected the lowest bidder, "subject to
approval by HUD." Id. at 800. Before HUD acted, the city determined the
lowest bidder was not "responsible" and selected the next lowest bidder.
Id. HUD disagreed that the lowest bidder was not responsible and refused
to approve the next lowest bidder. Id. The city exercised its discretion
to reject all bids and resubmit the project for new bids. Id. The supreme
court upheld the city's exercise of its discretion. Id.
In the case before us the only reason DNR approval was not given
within the thirty-day contract period was because Harper was either
unwilling or unable to demonstrate affirmative steps taken to utilize
minority businesses, a requirement Harper knew it had to meet when it
submitted its bid. The letter from the DNR outlines Harper's apparent
failure to take affirmative steps:
Harper Drilling Company indicated they received no bids from MBE/WBE
contractors but what efforts did they make to contact them? The
MBE/WBE Utilization Worksheet identifies only one subcontractor, who
is not MBE/WBE. Were any MBE/WBE firms contacted but did not respond,
were not interested or were not competitive? Were there telephone
contacts or direct mailings? Is this the only work to be
subcontracted? If not, were other MBE/WBE subcontractors sought?
The purpose of the bid bond is to provide liquidated damages if the
successful bidder fails to enter into a contract for the project. Harper
argues Fairfield never offered it a contract and the bid documents allow a
bidder to withdraw its bid if a contract is not entered into within thirty
days. Fairfield did not send Harper a contract because Harper did not
fulfill its pre-contract responsibilities to seek minority participation as
set forth in the bid documents. Harper's failure to fulfill pre-contract
responsibilities, thus giving rise to a failure to enter into a contract,
damaged Fairfield. Its proper remedy was to retain the bond as liquidated
damages. This was not a breach of contract or a failure of Fairfield to
offer a contract within the thirty-day contract period as the district
court reasoned. Rather, Harper's actions prevented satisfaction of the pre-
contract condition. We conclude, therefore, Fairfield was entitled to
summary judgment as a matter of law.
We have carefully considered the arguments of the parties. Those not
specifically addressed in this decision are either unnecessary to our
resolution of the appeal or without merit. We reverse the district court's
grant of summary judgment in favor of Harper and remand for entry of
summary judgment in favor of Fairfield.
REVERSED AND REMANDED.