Public Entities Have To Play Fair Category: Legal Services
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PUBLIC ENTITIES HAVE TO PLAY FAIR
By Sam K. Abdulaziz
This is a case that deals with a public work bid withdrawal. The court interpreted a doctrine called "estoppel" against a public entity in this bid withdrawal situation. Estoppel is rarely allowed against public entities. In this case, however, the actions of the school district were so bad that the court could do nothing but invoke the estoppel argument.
Estoppel is a doctrine that is based on fairness. Simply stated, "Estoppel" can prevent or stop someone from knowingly misleading or taking advantage of another.
The dispute dealt with bid withdrawal. The procedure for withdrawing a bid is set out in the California Public Contract Code. The Code sets out how relief from a bid can be obtained.
You can get relief from your bid if you can show a mistake was made and that you gave the public entity a written notice within five (5) days after the opening of the bids of the mistake, specifying, in detail, how the mistake occurred. The mistake made the bid materially different than was intended by you and the mistake was made in filling out the bid and not due to an error in judgment or carelessness in inspecting the site of the work or in reading the plans and specifications.
Emma Corp. (EMMA) submitted the low bid on a construction project to the Inglewood Unified School District (DISTRICT). Sometime later, EMMA discovered a mistake in the bid and timely sent the DISTRICT a letter withdrawing its bid. However, the letter did not technically comply with the bid withdrawal requirements. The DISTRICT realized this but did not inform EMMA of this fact. The letter clearly set out the request to withdraw the bid. Later, after the time within which one must file a bid withdrawal, the DISTRICT stated that EMMA failed to comply with the withdrawal requirements and awarded EMMA the contract at its original bid price. EMMA sued.
In coming up with its decision against the DISTRICT, the California Court of Appeal looked with disfavor at the DISTRICT's actions. The court found that the DISTRICT deliberately engineered an attempt to enforce a contract the DISTRICT knew contained a mistake. The Court also looked at the interests to be protected by the law. The general public contracting law is intended to protect taxpayers, not bidders. However, the bid withdrawal statutes are designed to permit bidders to withdraw mistaken low bids. This law is intended to protect bidders. The Court held that estoppel is available against public entities only in narrow circumstances. But in this case, the DISTRICT, but not EMMA, realized that the letter did not provide all of the information required or otherwise did not satisfy the bid withdrawal statutes. However, as part of a deliberate strategy, the DISTRICT told EMMA it would contact EMMA if it needed more information. The DISTRICT did not do so. Only after the bid withdrawal period had ended did the DISTRICT claim that EMMA failed to comply with the bid withdrawal requirements and awarded EMMA the contract. At a time just after the bid opening, the DISTRICT's agents, including its attorney, knew that the technical requirements for a bid withdrawal were complex and that a bidding contractor might fail to comply with the technical requirements. The court held that the DISTRICT's agents set out a plan of action aimed at maximizing the likelihood that EMMA would, in fact, fail to meet the technical requirements of the statutes. No agent or employee of the DISTRICT would assist EMMA. The DISTRICT's agents or employees would not answer or react to any questions by EMMA about the bid withdrawal process and instead referred all inquiries to outside legal counsel for the DISTRICT. The Court found that these acts were so egregious that the Court had to allow the bid withdrawal.
Attorney Sam Abdulaziz of Abdulaziz & Grossbart has been practicing construction law for 30 years. He has written a book called "California Construction Law" which is updated annually.
Sam Abdulaziz can be reached at Abdulaziz & Grossbart, P.O. Box 15458, North Hollywood, CA 91615-5458; (818) 760-2000, Facsimile (818) 760-3908 www.aglaw.net
Emma Corp. v. Inglewood Unified School District, C.A. 2nd, No. Bl63.469, Jan 6, 2004, by Ortega. 2004 djdar 195
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