Unsuccessful bidders on a public works project may now be able to file suit against the public body. A July 26, 2016, decision by the Missouri Supreme Court held that an unsuccessful bidder has standing to challenge the award of a construction contract. This is a substantial change in Missouri law and allows unsuccessful bidders on a public works project to file suit if they believe that there has been an unfair and inequitable bidding process.

The Facts of the Case

Byrne & Jones Enterprises, Inc., brought suit against the Monroe City R-1 School District over the award of a contract to build a high school football stadium to ATG Sports, Inc. Byrne & Jones argued that the school district acted in “collusion” with ATG Sports, Inc. to design and execute the construction of the stadium. The lawsuit by Byrne & Jones stated that Monroe City school leaders met with ATG privately in 2013 to discuss a new stadium. Throughout 2013,  the school district and ATG emailed and had meetings to design the stadium. ATG drafted the request for proposals that the school district later used to solicit bids for the project. Only Byrne & Jones and ATG submitted bids.

The request for proposals, contained a base bid and bids on 13 “alternate” items that could be added to the project. Byrne & Jones was the low bidder on the base bid. Byrne & Jones was also the low bidder when adding all 13 alternate bids into the project. However, when the school district chose to only add 7 of the 13 alternates, ATG was the low bidder. The school district awarded the contract to ATG in January, 2014. Byrne & Jones filed suit, which was heard in the Circuit Court of Monroe County, Missouri. The trial court judge dismissed the lawsuit, holding that  Byrne & Jones lacked standing to file the lawsuit as an unsuccessful bidder.

What is Standing?

Proper standing is a prerequisite to filing a lawsuit in Missouri. To have standing, the party filing the lawsuit must have “a legally cognizable interest” and “a threatened or real injury.” Missouri courts have long held that an unsuccessful bidder on a public works project lacks standing because it has “no special pecuniary interest” in the award of the contract. This is true because a request for proposals is not an offer of a contract. This is also true because the statutory provisions requiring a public body to accept the lowest and best bid are for the protection of the public and not the bidder. Traditionally, to get around this fact, unsuccessful bidders partnered with a taxpayer to file suit.

Unsuccessful Bidders on a Public Works Project may now File Alone

On appeal, the Missouri Supreme Court justices disagreed with the trial court, holding  that Byrne & Jones had standing to challenge the awarding of the bid to ATG on the grounds of an unfair bidding process. However, because Byrne & Jones did not file an injunction to prevent the district from entering into a contract with ATG, the Court found that the issue was moot The stadium was already built by the time of the decision.

The Court’s decision signals a change in the law relating to the standing of unsuccessful bidders on a public works project who challenge allegedly improper awards of contract. The Supreme Court held that bidders “have a legally protectable interest in a fair and equal bidding process and are within the zone of interests that competitive bidding statutes seek to regulate.” As a result, an unsuccessful bidder does have standing to sue to challenge the award of a public contract on the basis that such bidder was denied a fair and equal opportunity to compete in the bidding.

Rural utilities and other public bodies must insure that their bid process is fair and equitable. They must make sure that all who wish to bid have a fair opportunity to compete for the project, without favoritism. Contact us for more information about the Byrne & Jones decision or to discuss ways in which Kennedy, Kennedy, Robbins & Yarbro, LC can assist you with a rural utility issue.