Public Contract Bids: Low Bid But No Award

Since it appears that public projects pose the greatest opportunity for area contractors under current economic conditions, a review of Colorado law on contractor's bids is appropriate. As of now that law, as it applies to contract awards to other than the lowest bidders, appears to be settled. However, a possibility of change may exist.

Under a 1993 Colorado Court of Appeals decision the low bidder on a City of Golden contract was denied the opportunity to contest the award. That bidder's qualifications were not disputed by the City. However, the court ruled that the contractor had no legal standing to obtain court relief. The case is L&M Enterprises, Inc. v. City of Golden, 852 P.2d 1337 (Colo. App. 1993).

That decision did, however, suggest that taxpayers residing in the geographic area of the public entity involved may have standing to contest an award in court because it would be their tax dollars that might be wasted if an award is made to a contractor other than the low bidder. That sounds okay, but let's look at that alternative.

For example, let's say that a water and sanitation district advertises for bids on a proposed waste treatment plant project. Contractor A, fully qualified, submits a low and responsive bid on the project. But politics and pressure from a local contractor persuades the district to award the bid to it, the second low bidder.

Under those circumstances and under current Colorado law, Contractor A's only remedy appears to be to get a taxpayer within the district to file suit to require the contract award to Contractor A. Since that case may take well over a year to get to trial, the court, at the district's insistence, may require the taxpayer to post a bond to compensate the district for any loss it may suffer on account of the delay should the taxpayer's suit fail. The premium cost of that bond to the taxpayer would probably be prohibitive.

Not a good result for Contractor A, who in good faith, spent time and money estimating and bidding on the job. He should have the award. At a bare minimum if the contractor was fully qualified to do the work and had timely submitted the low responsive bid, it should at least be awarded its bid preparation costs by the public entity. While that would not compensate the low bidder for the loss of profits it may have earned on the job, it would have an affect on the entity whose board would have to explain why it had refused to award the contract to the lowest responsible bidder and make payments to the low bidder.

While the majority of courts in other states appear to follow the Colorado rule discussed above, a few courts in other states have ruled otherwise. There may be a trend developed in those courts for allowing recovery of bid preparation costs to the lowest responsible bidder on a contract that was not awarded to it. Whether Colorado courts would be inclined to follow that trend remains to be seen. Unfortunately, the cost of a lawsuit to get the answer would likely be high relative to the dollars spent for bid preparation.

Otherwise, one of the Colorado contractors' associations might address the issues to the Colorado legislature in an effort to have it enact laws that would afford relief to disappointed low bidders.

Stay tuned!

(EDITOR'S NOTE: Albert B. Wolf is a principal in the Denver law firm of Wolf Slatkin & Madison P.C. This column was written with the intent of providing general legal information intended to be reasonably accurate although not comprehensive. Readers are therefore urged to consult their attorneys for any specific legal advice they may desire concerning the subject matter of this column.)