Sixth Circuit Affirms "Disappointed Bidder" Rule, Upholds Dismissal of Bid Protest

On May 22, 2008, the 6th Circuit Court of Appeals upheld the grant of summary disposition in favor of the City of Detroit, and against the low bidder on a DWSD project, and affirmed the "disappointed bidder" rule in Michigan.

"We reviewed the law surrounding standing and disappointed bidders in Club Italia Soccer & Sports Org., Inc. v. Charter Twp. of Shelby, 470 F.3d 286 (6th Cir. 2006). Club Italia held that absent a statutory exception, "a disappointed bidder does not have standing before this court." Id. at 293. Cases prior to Club Italia consistently refused to allow disappointed bidders to bring claims for violations of the bidding procedures. [citations omitted] A bidder who, in addition to seeing his bid rejected, is disqualified from bidding on future projects may have standing, [citations omitted] but EBI cannot obtain standing this way because EBI was not disqualified from bidding on future projects.

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"United of Omaha [v. Solomon, 960 F.2d 31, 34 (6th Cir. 1992)] is particularly fatal to EBI's claims because it held that a disappointed bidder must show that "it was actually awarded the contract at any procedural stage or that local rules limited the discretion of state officials as to whom the contract should be awarded." United of Omaha, 960 F.2d at 34. EBI cannot meet this test because it was never awarded the contract and because [Detroit Mayor] Kilpatrick has unlimited discretion in awarding contracts in order to comply with the EPA consent decree. Like the bidder in United of Omaha, EBI was "obviously disadvantaged" by the government's actions, id. at 35, but it nevertheless "retained only a unilateral hope of being awarded the contract, not a right to it." Ibid. A "unilateral hope" does not create standing."

See, EBI-Detroit, Inc. v. City of Detroit, 2008 U.S. App. LEXIS 11043, *18-21 (6th Cir. Mich. 2008). The trial court's ruling was reported in an earlier post.

[Update: The official cite for this case is EBI-Detroit, Inc. v. City of Detroit, 279 Fed. Appx. 340 (6th Cir. 2008) ]

Michigan Construction Law, Contractor's Guide Available from AGC of Michigan

In 2005, the AGC Legal Advisory Committee published an updated "Contractor's Guide to Michigan Construction Law," which is now available on the AGC of Michigan's website in the Legal Resources section.

The Guide was written by members of the AGC Legal Advisory Committee, and is is divided into 17 Chapters --

1. The Contract for Construction: Standard Forms and Common Risk Transferring Provisions
   
2. Bids, Bidders, and Bid Protests (by Thomas Keranen and Peter Cavanaugh)
   
3. Defective Plans/Specifications
4. Contract Changes/Differing Site Conditions (by Peter Cavanaugh)
   
5. Delay in Contract Performance
6. Remedies for Payment Disputes
7. Dispute Resolution Mechanisms
8. Overview of State and Federal Prevailing Wage Law
9. Michigan Occupational Safety and Health Act (MIOSHA)
10. Hiring and Terminating Employees in Michigan
11. Environmental Law: A Brief Overview for the Construction Contractor
12. Bankruptcy in a Construction Setting
13. Dealing With the Media and Press in Corporate Crisis Situations
14. Bonding and Insurance
15. Subcontractors, Rights and Remedies
16. Michigan Construction Defect and Mold Litigation
17. Information Technology and Construction Law

"Disappointed Bidder" Rule Proves Fatal (Again) in DWSD Bid Protest

On July 10, 2007, for the second time in less than 6 months, the U.S. District Court for the Eastern District of Michigan has dismissed a bid protest of a DWSD contract on grounds that the low bidder lacked legal standing to challenge the award. As he did earlier this year, Judge John Feikens made short work of the contractor's claims:

Plaintiffs do not have standing to bring this matter before this Court. Plaintiffs argue that they are Detroit taxpayers and DWSD fee-paying customers and as such have standing to legally challenge the DWSD award in this matter, regardless of whether they have bid on the PC-755 contract or not. I previously wrote that retail water customers of DWSD or rate payers do not have standing to join in disputes involving the awarding of public contracts.

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Allowing Plaintiffs to have standing in this matter would essentially permit any individual in the region to become a party to any case regarding a contract awarded by DWSD, and would have the further consequence of allowing any disappointed bidder to circumvent the disappointed bidder doctrine merely because they also are retail customers of the DWSD.

Walbridge Aldinger Co. v. City of Detroit, 495 F. Supp. 2d 642, 645 ( E.D. Mich. 2007)

Bid Protests: Federal Court Dismisses Protest by "Disappointed Bidder"

The U.S. District Court for the Eastern District of Michigan recently dismissed a challenge by the low bidder on a Detroit Water and Sewerage Department (DWSD) contract and affirmed long- standing Michigan law concerning "disappointed bidders."

The Court dismissed a challenge by the low bidder for a contract that was awarded to the third bidder finding that the disappointed (low) bidder lacked the necessary legal standing. EBI-Detroit, Inc v City of Detroit, 476 F. Supp. 2d 651; 2007 U.S. Dist. LEXIS 12102 (E.D. Mich 2007).

In granting summary disposition for the City of Detroit, Judge John Feikens noted:

"The Michigan Supreme Court has long found a lack of standing to bring claims by disappointed bidders. In 1896, that court took up the question of "whether the lowest bidder, under a contract proposed to be let by a municipal corporation, whose bid has been rejected, has a right of action at law to recover profits which he might have made had his bid been accepted," and said bidders generally did not have such a right under law. Talbot Pav. Co. v. Detroit, 109 Mich. 657, 660, 67 N.W. 979 (Mich. 1896), cited for this proposition by Detroit v. Wayne Circuit Judges, 128 Mich. 438, 87 N.W. 376 (Mich. 1901). Federal courts have noted that a property interest in a publicly bid contract is demonstrated in one of two ways: either the bidder can show it was actually awarded the contract and then deprived of it, or the bidder can show that the governmental body limit the discretion to reject low bidders. E.g. Leo J. Brielmaier Co. v. Newport Hous. Auth., Case No. 98-5245, 1999 U.S. App. LEXIS 7496, 15-16 (6th Cir., 1999). The court in Brielmaier specifically noted that if a body has discretion to reject bidders by finding them non-responsible, then a finding that the bidder is not responsible will generally not be sufficient to show standing. Id. The court in Brielmaier also addressed disappointed bidder standing for defamation claims when declared not responsible, and noted a disappointed bidder had no legally-cognizable interest absent a resulting prohibition in bidding for future government contracts. Id."

"Since Plaintiff cannot establish either an award of the contract, a lack of discretion to determine responsible bidders, or even a prohibition on future contract possibilities, it fails to show standing. Thus, its claim must be dismissed in its entirety."

Note: Under federal law, bid protests against the award of public contracts is governed by statute and the Federal Acquisition Regulations.