Matter of Arcon Constr. & Mgt. Servs. Inc. v Saratoga County Off. of Gen. Servs.
Annotate this CaseDecided on June 13, 2007
Supreme Court, Saratoga County
In the Matter of the Application of Arcon Construction & Management Services, Inc., Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice law and Rules Compelling the Award of the Public Improvement Contract Known as SARATOGA COUNTY WATER TREATMENT AND TRANSMISSION FACILITIES PROJECT, Contract No. 06-WTTFP-2 to Petitioner
against
Saratoga County Office of General Services, COUNTY OF SARATOGA, SARATOGA COUNTY WATER AUTHORITY and GROSS ELECTRIC, INC., Respondents.
2007-0988
LAW OFFICES OF MASTROPIETRO & ASSOCIATES
Attorneys for Petitioner
63 Franklin Street
Saratoga Springs, New York 12866
MARK M. RIDER
Saratoga County Attorney
Attorney for Respondents
Saratoga County Office of General Services,
County of Saratoga and Saratoga County Water Authority
Saratoga County Municipal Center
40 McMaster Street
Ballston Spa, New York 12020
COUCH DALE, P.C.
Attorneys for Respondent Gross Electric, Inc.
29 British American Boulevard
Latham, New York 12110
Thomas D. Nolan, J.
In this proceeding under CPLR Article 78, petitioner seeks, inter alia, a judgment annulling the award by the municipal respondents, the County of Saratoga and the Saratoga County Water District (collectively County), of a contract to respondent, Gross Electric, Inc. (Gross), for the electrical construction component of a water supply project.
The issues are whether the County or its consulting engineer, Malcolm Pirnie, Inc., ran afoul the competitive bidding statute and its decisional progeny between the opening of bids and the acceptance of Gross's bid, and then, even if so or not, whether the County improperly awarded the contract to Gross.
A preprinted bid form in the County's bid package calls for a bidder to insert an amount on each of seven lines which reflects the bidder's estimate for seven separate aspects of the electrical contract. The eighth line contains a preprinted amount required for contingencies, and the bid form then requires that the eight entries be totalled and the resultant sum entered as the base bid.
According to Gross, it sent its unnamed representative to the bid opening with a bid form only partially completed; that is, with entries on lines 1, 2, 4, 5, 6, and 7 but with line 3 left blank and, of course, the amount of the total base bid left blank. Thereafter, Gross, again through someone not specifically identified, communicated in some manner with the unnamed representative at the bid opening and instructed him or her to complete the bid form by filling in an amount on line 3 and an amount of the total base bid. After entering those two amounts on the bid form, that person submitted Gross's bid before the deadline. The amount of $1,533,000 in words and numbers was entered on item 3 and the amount of $3,974,000 in words and numbers was entered as the total base bid.[FN1] However, the amount of Gross's total base bid was the sum of the entries on lines 1 through 7 inclusively and did not include the $300,000 contingency amount preprinted on line 8. At least, the contingency amount was not included in the undisputable mathematical sum of the entries 1 through 7 made on the bid form.
It is safe to say someone from the County's consulting engineer, Malcolm Pirnie, upon reviewing Gross's bid, recognized that the sum of the first seven entries equaled Gross's base bid, and that person concluded that Gross had mistakenly failed to add the fixed contingency amount, which, if it had been added to the sum of the entries 1 through 7, would have made Gross's bid the apparent second low bid. Although the County's bid package included a provision that it would not accept a bid with discrepancies,[FN2] it did not reject it outright because of this discrepancy. Rather, Malcolm Pirnie treated Gross's bid as if its amount were the sum of the base bid entered and the contingency entry omitted. In effect, the County's representative recalculated Gross's bid based on what appeared to be an obvious mathematical error on Gross's part.
Following the bid opening, Malcolm Pirnie prepared a report of all the bids on this contract (as well as several others which were part of the project) which stated that petitioner's [*2]was the apparent low bid at $4,249,300. What then transpired is not entirely clear from this record. In any event, Paul Bassette, Malcolm Pirnie's manager for this project, relates in an affidavit submitted in support of the County's answer to the amended petition, that his firm received from Joseph P. Gross, Gross's president, a letter addressed to Mr. Rob Ostapczak dated November 27, 2006 first stating that the entry of $1,533,000 for item 3 on the bid form was incorrect because it included the $300,000 contingency of item 8 and that the correct entry for line 3 should have been $1,233,000 and asserting that Gross's total base bid remained $3,974,000 and that it intended to honor that $3,974,000 bid. The letter also states the Gross was not aware of the discrepancy "prior to your phone call earlier this afternoon."[FN3] The Gross letter went on to "respectfully request that the Item 3 price is [sic] considered a Bid Informality and that the price stated is [sic] recognized as the correct Total Price". Accepting at face value Gross's representation and explanation and apparently without any effort to verify their truthfulness, the County eventually decided that Gross, not petitioner, was the lowest bidder and awarded it the electrical contract.
It is axiomatic that a municipality ought to abide by the contents of its own bid package and bidding requirements. While "a municipality may decline bids which fail to comply with the literal requirements of the bid specifications", it "may waive a technical noncompliance with bid specifications if the defect is a mere irregularity and it is the best interests of the municipality to do so". Le Cesse Bros. Contr., Inc. v Town Bd. of Town of Williamson, 62 AD2d 28, 31-32 (4th Dept 1978), affd on op below 46 NY2d 960 (1979). "Noncompliance is considered material only when it would impair the interests of the contracting public authority or place some of the bidders at a competitive disadvantage." Matter of Hungerford & Terry, Inc. v Suffolk County Water Auth., 12 AD3d 675, 676 (2nd Dept 2004); Matter of Varsity Transit, Inc. v Board of Educ. of City of New York, 130 AD2d 581 (2nd Dept 1987), lv denied 70 NY2d 605 (1987). Moreover, "[T]he governmental agency has the right to determine whether a variance from the bid specifications is material or whether to waive it as a mere irregularity and that determination must be upheld by the courts if supported by any rational basis". Matter of Hungerford & Terry, Inc., supra at 676.
As an initial passing matter, if Gross had indeed actually made a significant mathematical error in its bid, and if the County would have been inclined to accept it and then try to enforce the contract, General Municipal Law § 103 (11) would have offered Gross an escape. To "avoid unconscionable hardship from befalling the party who incorrectly submits a mistaken bid", Matter of Picone/McCullagh v Miele, 283 AD2d 501, 503 (2nd Dept 2001), General Municipal Law § 103 (11) affords relief provided the bidder disclosed the error or mistake before the contract was awarded or within three days of the bid opening, whichever period is shorter; that enforcement of the bid would be unconscionable; that the bidder by credible evidence shows the bid had been submitted in good faith and that the mistake was clerical rather than judgmental; that, as relevant here, the error in the bid resulted from an unintentional and substantial arithmetic error; and lastly, that the municipality can be possibly placed in "status quo ante", if the bid were withdrawn. [*3]
Far from seeking to avail itself of General Municipal Law § 103 (11), Gross insisted that its base bid included the contingency amount and was the lowest, and that it was thus entitled to the contract which the County later awarded it over petitioner.
After the bid opening, although as noted earlier it is not entirely clear from this record who from Gross communicated with whom from Malcolm Pirnie or what the sequence of or the entire content of the communications was, it is clear that Gross was allowed, both verbally and by its letter of November 27, 2006, to "explain" its now opened bid - this despite a provision in the County's bid package providing that "permission will not be given to modify, explain, withdraw or cancel any bid or part thereof after the time designated in the Bidding and contract Documents for the opening of the bids".[FN4]
Also, at a minimum, Malcolm Pirnie engaged, at least, in a "discussion" with what then appeared to Malcolm Pirnie to be the apparent second low bidder - this despite a line of decisional law restricting a municipality from negotiating with any bidder other than the apparent low bidder once the bids have been opened. Although a municipality may engage in post bid, pre-award negotiations with the lowest bidder to gain further cost concessions, Matter of Acme Bus Corp. v Board of Educ. of Roosevelt Union Free School Dist., 91 NY2d 51, 55 (1997), it "may not engage in post bid negotiations through which a contractor other than the low bidder may become the low bidder". Matter of Fischbach & Moore, Inc. v New York City Tr. Auth., 79 AD2d 14, 20 (1st Dept 1981), lv denied 53 NY2d 604; Matter of Eldor Contr. Corp. v East Meadow Union Free School Dist., 278 AD2d 492 (2nd Dept 2000). Also, after the bid opening, private discussions should not be held to permit a bid to be corrected or to allow "key information which is missing from a bid to be supplied", or to "allow an individual bidder to modify its bid in a way that would affect the competitive character of the bidding and give [the bidder] a substantial advantage or benefit not enjoyed by the other bidders'". Sinram -Marnis Oil Co. v City of New York, 74 NY2d 13, 18 (1989), quoting Le Cesse Bros. Contr., Inc. v Town Bd., supra at 32; Matter of Fratello Constr. Corp. v Tuxedo Union Free School Dist., 284 AD2d 461 (2nd Dept 2001), lv denied 97 NY2d 606 (2001); Matter of Le Cesse Contr., Inc. v Town Bd. of Town of Williamson, supra at 32.
These guidelines flow from and promote the overall purposes of the competitive bidding statutes in Article 5-A of the General Municipal Law to "evince a strong public policy of fostering honest competition in order to obtain the best work or supplies at the lowest possible price...[and] to guard against corruption". Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187, 192-193 (1968). "To achieve these ends, the heart of this process must be public competition, not private negotiation. Competitive bidding, by its nature, does not contemplate the continuous bargaining that is the hallmark of negotiated contracts. Instead, a bidder is expected to submit its best offer and either stand by it or, after the firm offer period has expired, withdraw the bid and withdraw itself from competition." Sinram-Marnis Oil Co. v City of New York, supra at 18.
In this proceeding, petitioner has the burden of proving that the County improperly awarded the contract to Gross, I. Janvey & Sons, Inc. v County of Nassau, 60 NY2d 887 (1983); specifically, it must "demonstrate actual' impropriety, unfair dealing or some other violation of [*4]statutory requirements...". Matter of Acme Bus. Corp. v Board of Educ., supra at 55; Matter of Eldor Contr. Corp. v East Meadow Union Free School Dist., supra.
Here, no one doubts that the County is seeking to guard the public purse and to complete the water project's electrical component at the lowest price it can obtain. No one claims any fraud or collusion by the County or its consultant. However, the petitioner suggests that Gross, at best, was opportunistic and disingenuous in its after-the-fact explanation that the amount of the mandatory contingency fee was included in its line 3 entry, and at worst, intentionally designed its bid to give it an unfair advantage over other bidders.
Petitioner suggests that Gross structured its bid to create an escape option under General Municipal Law § 103 (11). Petitioner also suggests that Gross structured the bid to create an option to insist on the award if the sum of its base bid and the contingency was still the lowest amount bid. Petitioner correctly points out that Gross's assertion regarding the contingency is unsubstantiated by any written document made contemporaneously with the bid, such as estimator's worksheet showing the contingency's presence in the amount entered in Item No. 3 or anywhere else for that matter, and that the assertion was premised solely on Gross's statements, both oral and in its November 27, 2006 letter. Yet, the petitioner, on whom rests the burden to prove actual impropriety, unfair dealing, or a statutory violation, has offered no proof that Gross designed its bid in such a way as to actually gain an unfair advantage over other bidders. Suspicion is not proof. In a word, there is not enough proof to justify the conclusions that Gross engaged in a subterfuge to gain an unfair advantage over other bidders or that the County acquiesced in that subterfuge.
Nor was there any proof that the consultant's post bid contact with Gross, under these circumstances inevitable and unavoidable, constituted a post bid, pre-award negotiation which tainted the bidding process to an extent that would warrant setting aside the award to Gross. Here, permitting Gross to explain its bid did not accord Gross an unfair competitive advantage over petitioner. Gross was the low bidder even though Malcolm Pirnie initially did not think so. As it turned out, once Gross's explanation was accepted, Malcolm Pirnie concluded it was the low bidder. see Matter of Terraferma Elec. Constr. Co. v City of New York, 30 AD3d 607 (2nd Dept 2006) [Low bidder used an incorrect bid sheet which contained a $400,000 contingency line item, the effect being that its bid, even though the lowest by $620,000, was unnecessarily increased by $400,000. City allowed a correct bid sheet to be submitted after rejecting the initial bid as "non-responsive", the net effect being that the bid now was $1,020,000 less than second low bidder]. Lastly, the County's decision to award the contract to Gross, premised on Gross's post bid explanation to Malcolm Pirnie, even though unsubstantiated by documentary evidence, was not irrational as a matter of law. see Matter of Terraferma Elec. Constr. Co. v City of New York, supra [City acted rationally to waive an error of a technical nature which saved it money]. The County has the right to waive nonmaterial deviations, and it is the County which is the initial arbiter of what is material and nonmaterial, and so long as there is a rational basis for the assessment of materiality, particularly when made to save taxpayer money, it is the final arbiter, and the court will not second guess it under those circumstances.
The petition is dismissed, without costs.
This memorandum shall constitute the decision, order, and judgment of the court. All papers, including this decision, order, and judgment, are being returned to the County's counsel. [*5]The signing of this decision, order and judgment shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of that section relating to filing, entry and notice of entry.
So Ordered and Adjudged.
DATED: June 13, 2007
Ballston Spa, New York
HON. THOMAS D. NOLAN, JR.
Supreme Court Justice
Footnotes
Footnote 1:The source of this information is the November 27, 2006 letter from Joseph P. Gross to Malcolm Pirnie, Inc. annexed as Exhibit 1 to the County's answer to petitioner's initial petition.
Footnote 2:Minutes of Pre-Bid Meeting held October 26, 2006. (Exhibit C to petition).
Footnote 3:The salutation in the letter was "Dear Rob". The minutes of a pre-bid meeting (Exhibit C to verified petition) identify Robert Ostapczak as a Malcolm Pirnie project manager.
Footnote 4:Information to Bid 2 (F). (Exhibit A to notice of petition).
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