Bid Protest Decision: “Past Performance” as a Basis to Reject Bid

Back in April of 2024, the Bid Unit of the Massachusetts Office of the Attorney General (“Bid Unit”) issued a bid protest decision addressing the “blacklisting of disfavored bidders.” The Bid Unit cautioned against any “single individual” within an awarding authority exerting an “outsized influence” on the bidding process and made clear that the “blacklisting of disfavored bidders is repugnant to the spirit of the public construction bid laws.” The decision underscored the fact that, while awarding authorities have discretion when it comes to determining bidder responsibility, that discretion is not unfettered. If an awarding authority does not conduct a fair and reasonable investigation of bidder responsibility – such as where the outcome of the investigation is predetermined based on the bias of a single individual – then the awarding authority’s determination may be subject to a valid challenge.

Similarly, as the Bid Unit concluded in a July 2024 bid protest decision, while an awarding authority has discretion to reject a bidder on the basis of negative prior experience, such negative prior experience must be “well-documented” and the awarding authority’s decision should be “justified on the record.” Although the decision arose out of a public building project, the Bid Unit’s analysis likely extends to bidder responsibility determinations on public works projects as well.

The case arose out of a project for the replacement of hot water boilers at a middle school (the “2024 Boiler Project”). The awarding authority rejected the apparent low bidder due to the awarding authority’s alleged “past experience” with the low bidder on a prior boiler project (the “Prior Boiler Project”). The awarding authority did not elaborate further and awarded the contract for the 2024 Boiler Project to the second-low bidder. The low-bidder filed a bid protest.

The low-bidder explained that it was not aware of any negative performance issues or complaints on the Prior Boiler Project, which it had completed on time, on budget, and without any warranty issues or service calls. The low-bidder also noted that the awarding authority had not submitted any mid-project or final evaluations on the Prior Boiler Project and that it had received positive project evaluations on various other projects.

In opposition to the protest, the awarding authority raised several alleged issues with respect to the Prior Boiler Project. The awarding authority contended that:

1. The low-bidder had made an error in its bid on the Prior Boiler Project which resulted in early project delays;
2. The low-bidder had proposed an “or-equal” substitution on the Prior Boiler Project which was not accepted;
3. The low-bidder submitted change order requests that the awarding authority either “reluctantly accepted . . . to get the project moving” or rejected;
4. The low-bidder attempted to forego performance of certain work, before ultimately agreeing to perform such work; and
5. The low-bidder’s communication and project management “were poor.”

There was no dispute that the awarding authority had never communicated these complaints to the low-bidder in writing or otherwise “documented them in a direct way” prior to the bid protest on the 2024 Boiler Project.

The Bid Unit acknowledged that an awarding authority “is permitted to rely on its own prior negative experiences with a bidder . . . .” However, the Bid Unit also stated that its decision “should be justified on the record” and that “importantly, any negative references upon which the awarding authority relies – including its own – must be ‘well documented.’” The awarding authority did not meet these standards.

The Bid Unit explained that “none” of the awarding authority’s complaints “were reduced to writing, were raised contemporaneously” or were “otherwise documented by email, letter, memorandum, DCAMM evaluation, or otherwise.” As a result, the awarding authority’s “previously-unstated grievances about [the low-bidder’s] work on the [Prior Boiler Project] necessarily do not meet the ‘well-documented’ requirement for finding a bidder irresponsible.” Therefore, the Bid Unit allowed the protest.

Notably, the Bid Unit went on to state that even if the awarding authority had documented the issues it was now seeking to raise, that still might not have been enough to justify rejecting the low-bidder. In this regard, the Bid Unit observed that “most” of the issues raised “stem from [the low-bidder] exercising its rights under contract or statute, and do not bear on whether [the low-bidder] has ‘the skill, ability, and integrity necessary to faithfully perform the work called for [in the] contract.’” The Bid Unit added that change orders “are generally permissible” and if an awarding authority is “offput” by a proposed change order, “the remedy is to reject the change order, not to reject from a future project on irresponsibility grounds the contractor who proposed the change order.” The Bid Unit concluded by stating that it is “axiomatic that exercising a lawful right should not support a finding of irresponsibility.”

Bidder responsibility protests are among the most difficult to win, largely due to the breadth of an awarding authority’s discretion. However, as noted above, that discretion is not unlimited. While each case rises and falls on the particular facts at issue, there may be opportunities to challenge a bidder responsibility determination if it is not “well-documented” or “justified on the record” or where an awarding authority attempts to reject a bidder because it lawfully attempted to exercise its contractual or statutory rights in good faith.

UCANE Construction Outlook, August 2024  |  Legal Corner