Challenging Public Bid Awards in Missouri Just Got Easier, Depending on Your Perspective

United States Supreme Court Building in Washington DC, USA.As reported in this blog in October, 2015 in the post “The Making of a Supreme Court Case,” we predicted that the Missouri Supreme Court would take the case of Byrne and Jones Enterprises, Inc. v. Monroe City R-1 School District. That case involved a contractor, Byrne and Jones Enterprises (“B&J”), which was convinced that a school district had improperly rejected its bid to construct a new athletic stadium. The bid was awarded to the high bidder with whom the school district had worked very closely in the pre-construction phase. B&J asked the Supreme Court to overturn the decisions of the trial court and Missouri Court of Appeals for the Eastern District of Missouri which had ruled against it. Those courts found that contractors, as a rule, have no vested interest or private property right in a contract award and, therefore, possess no standing to challenge the award to a competing bidder. The courts reasoned that since the bidding statute was enacted for the sole benefit of the public, taxpayers were the only parties with a right to challenge a bid award.

As anticipated, the Supreme Court did, in fact, take the case and issued its opinion on July 26, 2016. Thanks to the zealous contractor, B&J, the Supreme Court overturned previous Missouri cases in deciding that unsuccessful bidders do have standing to challenge a bid award. In doing so, the Supreme Court made an important distinction. A spurned contractor does have the right to contest a bid award on the grounds that it was not afforded a fair and equal opportunity to compete in the bidding process but does not have the right to a court order compelling a school district to award the contract to it.

Although B&J won the battle, it ultimately lost the war. The court found that even though B&J was wrongfully deprived of the right to challenge the fairness of the bidding process by the trial court, the decision of the trial court dismissing B&J’s case must stand, because the case is now moot. According to the Supreme Court, even though B&J asked the trial court to enjoin the school district’s bid award to its competitor, it didn’t actually seek a temporary restraining order or a preliminary injunction hearing. While the case made its way through the court system and ultimately to the Supreme Court, construction on the stadium was completed. The Supreme Court also agreed with the trial court that the bid statute does not allow a contractor to obtain a judgment for its bid preparation costs or other damages. Therefore, B&J ended up with nothing in the end.

B&J’s dedication to its cause has opened the door for contractors to dispute bid awards in Missouri. Contractors and their attorneys must operate expeditiously. Any contractor challenging a contract award must do so promptly and must seek an injunction preventing the construction process from moving forward or risk the case becoming moot. The most that a successful challenge will accomplish is a court order requiring the school district to alter its bid process to assure that all contractors, not just the complaining contractor, have a fair and equal opportunity to compete. The complaining contractor will not be entitled to a money judgment for its bid preparation costs or attorneys’ fees.


The Making of a Supreme Court Case

Gavel isolated on white backgroundIt’s not easy to get an audience with a state’s Supreme Court. By the time a case gets to a state’s highest court, the parties have spent significant resources and are on a collision course with destiny. They will either live or die at the hands of those who live mostly behind closed doors.

The fact is that a very small percentage of cases are actually accepted for review by a state’s Supreme Court. However, diametrically opposite opinions issued by different Courts of Appeal in the same state will almost always justify the Supreme Court stepping from behind the curtain and resolving a dispute once and for all. Here’s an example of a case that has the chance to make it onto the docket of the Missouri Supreme Court:

On November 12, 2014, the Missouri Court of Appeals for the Eastern District addressed the right of an unsuccessful bidder on a state public-works project to challenge a contract award. In Byrne and Jones Enterprises, Inc. v. Monroe City R-1 School District, the School District accepted bids for the design and construction of a new athletic stadium at a high school. Design-build firms Byrne and Jones (“B & J”) and ATG Sports, Inc. (“ATG”) submitted bids for the project, and the contract was awarded to ATG. B & J promptly filed suit alleging the bid procedures used by the School District were unfair and did not allow bidders to compete on equal terms with ATG. B & J also contended the School District acted in bad faith and colluded with ATG in violation of the competitive bid process established by law.

The court analyzed Missouri’s public bidding statute and held the statute gave the School District’s board an absolute right to reject any and all bids. It also held that the unsuccessful bidder had no vested interest or private property rights in the award of a contract and, therefore, possessed no standing to challenge the award to a competing bidder. In so doing, the court determined that the bidding statute was enacted for the sole benefit of the public, not those bidding under it.

Therefore, the court reasoned that although a rejected contractor has no private right to seek damages against a state agency for its bid preparation expenses or lost profit, taxpayers do have a right to challenge the award of contracts, and officials do have a duty to the public to exercise discretion responsibly and in good faith and cannot reject bids “fraudulently, corruptly, capriciously or without reason.”

The decision limits standing to seek review of a contract award to a contractor by a state public body to taxpayers. But, what taxpayer wants to use his or her hard-earned dollars to fight a contract award? Most taxpayers don’t have the time or expertise to debate a contract award and are only interested in seeing the end result of the construction. The contractors are the ones with an interest in the award and who can keep governmental officials on the straight and narrow. After all, they have spent countless hours and resources putting together a bid only to see the contract get awarded to some other Tom, Dick, or Harry.

This is an important issue of public interest. But, what will likely land this case in front of the Missouri Supreme Court isn’t necessarily the public interest at stake, but the fact that the Eastern District Court of Appeals rejected a 2013 holding by the Western District Court of Appeals in Public Communication Services v. Simmons that an unsuccessful bidder has standing to challenge the fairness and lawfulness of an award. This means that there are different opinions among Missouri’s Courts of Appeals on how to interpret the law in matters such as those that arise in our example.

So, stay tuned! B & J has already asked for a transfer to the Missouri Supreme Court. We’ll have more information about this case as it develops.