Advance Tank and Const. Co., Inc. v. Arab Works, 89-7443

Decision Date05 September 1990
Docket NumberNo. 89-7443,89-7443
Citation910 F.2d 761
PartiesADVANCE TANK AND CONSTRUCTION COMPANY, INC., Plaintiff-Appellee, v. ARAB WATER WORKS, a Board or Agency of The City of Arab, Alabama, Arnold McDaniel, as Chairman of the Arab Water Works Board, Arlon Wheeler and H.E. Barker, as members of the Arab Water Works Board, Defendants-Appellants.
CourtU.S. Court of Appeals — Eleventh Circuit

Mark W. Lee, Parsons, Lee & Juliano, P.C., Birmingham, Ala., Dave Beuoy, Burke & Beuoy, Arab, Ala., for defendants-appellants.

John Martin Galese, Galese & Moore, Birmingham, Ala., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before EDMONDSON, Circuit Judge, HILL * and HENDERSON, Senior Circuit Judges.

HILL, Senior Circuit Judge:

INTRODUCTION

On January 31, 1989, the Arab Water Works Board (hereinafter "Board") of Arab, Alabama, opened sealed bids for the construction of an addition to a water treatment plant. Appellee Advance Tank and Construction Company (hereinafter "Advance Tank") submitted the apparent low bid of $3,984,375.00. The firm of Brasfield & Gorrie, Inc., submitted the second lowest bid at $4,068,000.00. 1 The Board understood that the bids were firm for a period of sixty days. On March 29, 1989, the Board rejected Advance Tank's bid and thereafter awarded the contract to Brasfield & Gorrie.

On April 5, 1989, Advance Tank brought suit in the United States District Court for the Northern District of Alabama, seeking damages under 42 U.S.C. Sec. 1983, 2 and injunctive relief under the Alabama Competitive Bid Law, see Ala.Code Sec. 41-16-61 (1975). 3 See generally, sections 41-16-1 through 41-16-82. 4

After a three-day bench trial, the district court enjoined the execution of the contract between the Board and the second lowest bidder, Brasfield & Gorrie. The Board filed a timely appeal to this court and we reverse the district court's judgment.

The sole issue in this appeal is whether the district court erred in finding that the board violated Alabama Code Sec. 41-16-50(a). 5 The trial court made several

factual findings with regard to the Board's reasons for rejecting Advance Tank's bid; we review these findings under the clearly erroneous standard. Fed.R.Civ.P. 52(a); C. Wright & A. Miller, Federal Practice and Procedure Sec. 2585 (1971). We regard the question of whether the Board's decision to reject Advance Tank's bid violated the Alabama Competitive Law as a legal question subject to plenary review by this court. 6

DISCUSSION

" '[T]he legislative intent in passing the Competitive Bid Law was to get the best quality equipment [or public construction] at the lowest possible price.' " Mobile Dodge, Inc. v. Mobile County, 442 So.2d 56, 58 (Ala.1983) (quoting White v. McDonald Ford Tractor Co., 287 Ala. 77, 86, 248 So.2d 121, 129 (1971)) (hereinafter "McDonald "); Arrington v. Associated Gen. Contractors of Am., 403 So.2d 893, 898-99 (Ala.1981). See Carson Cadillac Corp. v. City of Birmingham, 232 Ala. 312, 316, 167 So. 794, 798 (1936) (hereinafter "Carson ") (construing predecessor competitive bidding statute).

Section 41-16-50(a) states that a "waterworks" board must submit expenditures "for labor, services, or work, [etc.]" in excess of $5,000.00 7 to an open competitive bidding process, and must award the contract to the "lowest responsible bidder." The Alabama Supreme Court has made clear that "[t]he Competitive Bid Law does not require that the lowest bid be accepted." Int'l Telecommunications Systems v. State, 359 So.2d 364, 366 (Ala.1978). See McDonald, 287 Ala. at 81, 248 So.2d at 124 ("being the lowest bidder does not automatically entitle the bidder to the award") (emphasis in original).

The particular statutory provision at issue in this case does not provide on its face a specific standard by which a court, or a governmental body for that matter, should determine whether a bidder is "responsible." With regard to the purchase of "commodities" through competitive bidding, section 41-16-57(a) states that "awards shall be made to the lowest responsible bidder taking into consideration the qualities of the commodities proposed to be supplied, their conformity with specifications, the purposes for which required, the terms of delivery, transportation charges and the dates of delivery." No such precise language illustrates the standard by which a state or municipal instrumentality should determine whether a bidder is "responsible" when the bid's subject matter is "labor, services or work" necessary for the construction of a public utility. 8 We conclude, however, that the Alabama legislature intended that public contracting authorities should adapt and apply the above considerations as general guidelines by which to determine whether a bid is "responsible" in light of the particular subject matter of any contract to which the statute applies.

With regard to the construction of an extension to an existing water treatment plant, section 41-16-57(a) suggests by analogy that a "waterworks" board should consider (1) the quality of a bidder's past work in connection with the same or similar type of construction as proposed in the invitation for bids, (2) the conformity of the bidding contractor to the particular specifications for bidders, (3) the purpose for which the construction services are required, and (4) any other considerations In a number of cases, the Alabama Supreme Court has reiterated that a court should not disturb a governmental body's determination of whether the apparent low bidder is "responsible" unless the decision was arbitrary and capricious. 10 Mobile Dodge, 442 So.2d at 58; Int'l Telecommunications Systems, 359 So.2d at 367; McDonald, 287 Ala. at 86, 248 So.2d at 127; Mitchell v. Walden Motor Co., 235 Ala. 34, 38, 177 So. 151, 154 (1937) (hereinafter "Walden "); Carson, 232 Ala. at 317, 167 So. at 798 (1936); Inge v. Board of Public Works, 135 Ala. 187, 33 So. 678, 681 (1903). 11 The Court has also expressed the threshold for proper "responsible bid" determinations as an "absence of fraud or gross abuse [of discretion]." Carson, 232 Ala. at 317, 167 So. at 798.

unique to the type of services sought. 9

The above decisions suggest that a court should make two distinct inquiries: it should determine whether the decision to reject the apparent low bidder resulted from (1) a decision process tainted by improper influence or fraud, or (2) gross negligence in arriving at the decision. The McDonald court further refined the arbitrary and capricious test into several sub-questions, stating that a court should not interfere with the discretion of public contracting authorities in determining who is the lowest "responsible bidder" unless the decision was (1) "based upon a misconception of the law," (2) a "result of improper influence," (3) made in "violation of law," or (4) based "upon ignorance through lack of inquiry." McDonald, 287 Ala. at 86, 248 So.2d at 129.

However, "[t]he single most important requirement of the Competitive Bid Law is the good faith of the officials charged in executing the requirements of the law." Id. See Mobile Dodge, 442 So.2d at 60, (courts of equity will not interfere with the exercise of discretion in the absence of fraud or gross abuse of discretion); Mitchell, 235 Ala. at 38, 177 So. at 154 (same); Carson, 232 Ala. at 317, 167 So. at 798 (same); Inge, 33 So. at 681 (same). The fact that a governmental authority declines to award a contract to the lowest bidder does not give rise to a presumption that the decision was somehow improper. McDonald, 287 Ala. at 84, 248 So.2d at 127; Mitchell, 235 Ala. at 38, 177 So. at 154. Thus, unless a plaintiff can demonstrate improper influence or a fraudulent scheme to eliminate fair competition, the honest exercise of discretion is presumed proper since, as Alabama courts have repeated, the Alabama legislature passed the Competitive Bid Law not for the benefit of an unsuccessful bidder, but for the protection of the public. Townsend v. McCall, 262 Ala. 554, 558, 80 So.2d 262, 265 (1955); Carson, 232 Ala. at 316, 167 So. at 798. See Urban Sanitation Corp. v. City of Pell City, 662 F.Supp. 1041, 1043 n. 3, 1044 (N.D.Ala.1986), aff'd without opinion 823 F.2d 556 (11th Cir.1987). 12

The district court specifically found that the Board's decision to reject Advance Tank's bid was not the result of fraud or Nevertheless, the district court found a gross abuse of discretion under the "ignorance through lack of inquiry" test articulated in McDonald. The court rejected each of the three reasons the Board offered to explain its determination that Advance Tank was not a "responsible bidder." 14

improper influence. Trial Transcript at 851. 13

In a letter to Advance Tank dated March 30, 1989, the Board explained that "we [the Board] would be derelict in our responsibilities to our customers if we awarded a contract of this complexity to a company which, to the best of the Board's knowledge[,] is not experienced in the construction of water treatment plants." The bidding documents specified that the "contractor must be experienced in constructing the work [specified in the bidding documents]," and stated that the contractor "must have experience in all phases of the work." Plaintiff's Exhibit 7, p 1.05. In addition, the Board reserved the right to reject any bid "because the bid is not responsive or the bidder is unqualified or of doubtful financial ability or fails to meet any other pertinent standard or criteria." Id. at p 16.1.

The record indicates that the Board was uncertain whether it could award the contract to any bidder since each of the bids was greater than the Board's projected budget for the project. The Board lacked a definite financing commitment for the larger-than-anticipated project budget until almost the last day of the sixty-day period in which the bids were held firm. F.W. Dougherty, the consulting engineer hired by the Board to...

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