Diede Construction, Inc. v. Monterey Mechanical Co.
125 Cal. App. 4th 380 (1st Dist. Dec. 28, 2004)

General contractor bidding on a public works project to remodel a city hall learned, after the bids were opened but before general contractor executed a contract with the city, that the proposal submitted by its HVAC subcontractor contained a $300,000 clerical error. General contractor executed the contract with the city, secured replacement contractors when subcontractor refused to honor its bid and sought to recover from subcontractor the additional costs incurred for the HVAC work.

The Court of Appeal held that statutory provisions for the relief of mistaken bidders do not apply to mistaken bids submitted by a subcontractor to a general contractor. Under Saliba-Kringlen Corp. v. Allen Engineering Co., 15 Cal. App. 3d 95 (1971), if general contractor can establish that it reasonably relied on subcontractor’s mistaken bid, general contractor is entitled to recover from subcontractor the additional costs paid to a substitute contractor.

Emma Corp. v. Inglewood Unified School District
114 Cal. App. 4th 1018 (2d Dist. Jan. 6, 2004)

Emma Corporation, a licensed building contractor, submitted the low bid on a school construction project proposed by the Inglewood School District. After submitting the bid, Emma discovered that a clerical error caused the bid to be nearly $800,000 too low. Emma timely submitted a letter to the District requesting withdrawal of its bid. The District realized that the letter did not comply with the bid withdrawal statutes (Pub. Contract Code § 100 et seq.), but did not inform Emma of this fact and “set out a plan of action aimed at maximizing the likelihood that [Emma] would, in fact, fail to meet the technical requirements” of the Public Contract Code. The District later awarded Emma the contract at its original price. Emma refused to perform and sued the District for rescission.

The trial court entered judgment for Emma, finding that the District’s response to Emma’s attempted bid withdrawal estopped the District from enforcing the contract. The Court of Appeal affirmed, finding that the doctrine of equitable estoppel will not be applied against the government only if to do so would nullify a strong rule of public policy adopted for the benefit of the public. Here, to allow the enforcement of Emma’s bid would discourage honest contractors from bidding for public projects, decrease competition for public projects and drive up the cost to taxpayers. Furthermore, taxpayers do not “have an interest in lowering the costs of public projects by unfairly cheating mistaken bidders out of a portion of a project’s true costs.” Thus, the District, which “deliberately induced Emma’s failure” in withdrawing its bid, was properly estopped from enforcing the contract.

Marshall v. Pasadena Unified School District
119 Cal. App. 4th 1241 (2d Dist. Jun. 29, 2004)

Definition of “emergency” in Public Contract Code section 1102 applies to the entire Public Contract Code, including section 20113 which in an emergency allows a school district to award a contract without inviting bids. School District’s termination of a construction contract for convenience was not an emergency, i.e., a “sudden, unexpected occurrence that poses a clear and imminent danger.” Because no emergency existed, the District’s subsequent award of negotiated contract to another contractor, Hayward, was invalid.

The District was required to pay Hayward for the work Hayward actually performed on the project because where no-bid contract award was approved by the District’s Board of Education and the Los Angeles County Superintendent of Schools, Hayward was entitled to believe the contract award was valid.

Pall Corporation v. Orange County Water District
2004 WL 2943822 (Cal. App. 4th Dist. Dec. 21, 2004)
(not certified for publication or ordered published)

The apparent lowest bidder, U.S. Filter (USF), on a project to supply microfiltration equipment for a water reclamation plant was allowed to delete provisions from its proposal which rendered the proposal nonresponsive. These provisions included warranty limitations which conflicted with the Invitation to Proposers’ statement that the water districts “will reject and will not consider any proposal that has any exceptions to the Contract Documents or requests for modifications to the Contract Documents.”

After the water districts allowed USF to delete the warranty provisions and awarded the contract to USF, the second lowest bidder, Pall Corp., filed a complaint against the districts. The Court of Appeal reversed the trial court’s grant of summary judgment in favor of defendant water districts because, the Court found, there existed a “triable issue of fact as to whether the exception to the warranty was a variance that affected the amount of USF’s bid or gave USF an advantage or benefit not allowed by other bidders.”

Such a variance or advantage could conflict with the basic rule of competitive bidding that “bids must conform to specifications, and that if a bid does not so conform, it may not be accepted . . .a bid which substantially conforms to a call for bids may, though it is not strictly responsive, be accepted if the variance cannot have affected the amount of the bid or given a bidder an advantage or benefit not allowed other bidders or, in other words, if the variance is inconsequential.”

Whether USF’s original warranty limitation was an inconsequential variance presented a triable issue of fact that could not be resolved as a matter of law on summary judgment.

Assembly Bill 2397 (Horton) – approved by the Governor on August 23, 2004

This bill increases, from six to 36 months, the period of ineligibility for bidding that the State Department of General Services may impose on contractors for a variety of violations of existing state contracting law.

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