To Save $8 Million-- Rules Can Be Bent
In Hill Brothers Construction & Engineering Company, Inc. v. Mississippi Transportation Commission, Download file , the Mississippi Supreme Court held cost savings could be considered by a state board in deciding whether to accept a bid that did not strictly comply with the bid specifications.
The Mississippi Major Economic Impact Authority(MMEIA) promised to build a new traffic interchange on I-55 North as part of the inducement package used to persuade Nissan North America to locate a plant near Canton, Mississippi. MMEIA contracted with the Mississippi Transportation Commission(MTC) to seek bidders for the project, but retained the right to sign off on the final selection.
The bid submitted by Angelo Iafrate Construction, a Michigan based contractor, was almost $8 million lower than the next lowest price submitted by Hill Brothers Construction & Engineering Company. But an examination of Iafrate’s bid revealed Iafrate had not signed a page in the bid addendum. After discovering this error, MTC decided to waive the signing error and award the contract to Iafrate; MMEIA concurred with MTC’s decision. Iafrate was allowed to sign the addendum page after the award was announced.
MTC rejected the bid protest filed by Hill Brothers finding the absence of the signature an inadvertent technical error that prejudiced no other bidder, since all required information–other than the signature–had been included. After the contract was signed and work on the project started, Hill Brothers sued MTC seeking $4.5 million in damages.
The trial court granted MTC summary judgment, notwithstanding testimony by Mississippi Department of Transportation employees they considered the error material and that MTC had not waived a bid error in the previous 20 years.
In a 5-3 decision, the Mississippi Supreme Court affirmed summary judgment holding (i) the issue of materiality was a decision for MTB and the court to make not the employees responsible for reviewing the bids and (ii) MTB had the right to consider the cost savings that could be secured by waiving the mistake in judging whether Iafrate was the “lowest responsible” bidder. For good measure the Court added that Hill Brothers should have filed for injunctive relief before the project started and that Mississippi law provided no damage remedy for an aggrieved bidder.
The lengthy dissent raised the pertinent question of what the Court would hold if the issue was whether bidders like Iafrate could use similar errors to walk away from a low bid and that Hill Brothers was entitled to a trial on its damage claim under prior Mississippi law.
The lesson–MDT managed to persuade the court majority it was acting as the taxpayers champion and that Hill Brothers--a company based in Falkner, Mississippi--was attempting to use technicalities to wrongfully grab taxpayer funds. In a close case, the judges' perceptions of whose wearing a white hat and whose wearing a black hat will usually tip the outcome.