Massachusetts Public Bidding: SJC Rules That Awarding Authority May Conduct Independent Investigation Into Apparent Low Bidder’s Responsibility to Perform

The Massachusetts public bidding statutes
require projects to be awarded to the lowest eligible and responsible
bidder.  The Massachusetts Supreme
Judicial Court (SJC) recently scrutinized the evaluation of a bidder’s
responsibility to perform and considered the issue of whether an awarding authority
is prohibited by law from going outside a bidder’s certification file and
annual update statement to conduct such an independent investigation.  In the case of Barr Incorporated v. Town
of Holliston, ____ Mass. ____ (May 3, 2012) slip op SJC-10899, Barr was the
apparent low bidder for the Town’s $4.9 million police station project (project). 

Rather than rely solely on Barr’s
certification file maintained by the Division of Capital Asset Management
(“DCAM”) and its annual update statement as a reference to determine whether
Barr was a “responsible” bidder, the town instead performed its own
investigation which involved Internet research and contacting eight
municipalities Barr had previously worked for to obtain references.  Of the eight towns contacted, six reported an
overall “negative impression” of Barr’s work. 
As a result, Holliston concluded that Barr was not a responsible bidder
and selected the second low bidder for the project.  Barr sued in superior court seeking
injunctive and declaratory relief which was denied.  The case was reported to the appeals court
and then transferred directly to the SJC.

The crux of Barr’s argument was that the town
went outside its DCAM file and performed a more detailed and extensive
investigation into its background than it did with respect to the other bidders
on the project.  Barr claimed that this conduct
was arbitrary, capricious, and unfair, arguing that if awarding authorities are
permitted to perform their own independent background checks (rather than being
required to rely upon the DCAM file) they can elect to vigorously investigate
disfavored bidders while investigating preferred bidders less aggressively.

The SJC disagreed, holding that the public
bidding laws provide a protective framework to prevent such an abuse of the review
process.  This includes the requirement
that an awarding authority notify DCAM in the event that it concludes that a
low bidder is not “responsible and eligible” which process, the disappointed
bidder can then challenge either through a bid protest filed with the attorney general
or by a complaint filed in the superior court. 
The SJC went on to find that where an awarding authority performs an
investigation outside of a bidder’s certification file/update statement, and determines
that the bidder is not responsible, that decision must be fully justified by
the record maintained by the authority. 
In other words, the awarding authority must be able to present
documentary and other evidence which supports both its initial decision to
perform a further, more in depth investigation of a particular bidder, and
thereafter, the basis for rejection of that bidder on the grounds that it is
not responsible.

The Barr decision confirms that an awarding
authority may look outside of a bidder’s certification file to make a
determination as to its responsibility to perform.  As long as the awarding authority has proper
justification to conduct such an investigation and does so in good faith, its
findings and decision will be upheld.

Hugh
Gorman is Chair of Prince Lobel’s Construction Law Practice Group, which
regularly represents owners, developers, contractors, subcontractors and suppliers
in all aspects of private and public construction law. You can reach Hugh at
hgorman@princelobel.com or 617 456 8093.