Byrd v. Independent School Dist. No. 194
| Decision Date | 02 February 1993 |
| Docket Number | No. C7-92-1510,C7-92-1510 |
| Parties | 80 Ed. Law Rep. 984 Larry L. BYRD, et al., Appellants, v. INDEPENDENT SCHOOL DISTRICT NO. 194, Respondent. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. For purposes of standing, a union's abstract concern with a subject which may be affected by an adjudication does not substitute for the injury-in-fact requirement.
2. The school district's tolerance of the general contractor's circumvention of the district's announced bidding procedures is, as a matter of law, a material variance.
Stephen D. Gordon, A. Ray McCoy, Gordon-Miller-O'Brien, Minneapolis, for appellants.
James R. Andreen, Paul C. Ratwik, Ratwik, Roszak, Bergstrom & Maloney, P.A., Minneapolis, for respondent.
Considered and decided by PETERSON, P.J., and PARKER and SHORT, JJ.
Appellants Larry Byrd, James Hoiness, and the International Brotherhood of Electrical Workers (IBEW) argue the trial court erred in determining the IBEW lacked standing to pursue its claims. Appellants also argue Independent School District No. 194 violated the bid specifications, causing a material variance. In addition, they challenge the trial court's determination that their claims are barred by the doctrine of laches. Respondent Independent School District 194 (ISD 194) contends the court erred in determining appellants Byrd and Hoiness have standing as taxpayers. We affirm in part, reverse in part, and remand.
ISD 194, which includes the Lakeville area, has experienced rapid population growth in recent years. Anticipating an increase in high school enrollment, the taxpayers of ISD 194, in 1990, approved a $41,280,000 bond issue to finance construction of a new senior high school. The school is scheduled to open in the fall of 1993.
After approval of the bond issue, ISD 194 retained Wold Architect to prepare plans and bidding instructions. The school board of ISD 194 then published a solicitation for bids to construct the new high school. The published or written solicitation provided that early "sub-bids" for mechanical and electrical work must be submitted by October 15, 1991. Subcontractors who submitted bids for electrical work were required to provide bid bonds.
These sub-bids were to be used by prime contract bidders in formulating their bids, which were due October 17, 1991. The bidding instructions to the prime contractors provided in part:
Single Prime Bidders are required to select from the posted list of mechanical and electrical subcontractor bids. Any subcontractor on the list can be selected. Failure to use mechanical or electrical subcontractors from the posted list in accordance with these procedures will be cause for rejection of bid.
Penn-Co Construction Company had been negotiating with Wright Electric to use Wright for the electrical work if Penn-Co were selected as the prime contractor. On October 15, 1991, Wright Electric notified Penn-Co that it would perform the electrical work on the Lakeville high school project for $2,453,520. Wright Electric, however, was unable to provide a bid bond and consequently could not bid for the electrical work in accordance with the bidding instructions. Despite the fact that Penn-Co was not a licensed electrical contractor, Penn-Co, using Wright's price quotation to formulate its bid, submitted a $2,907,600 bid to perform the electrical work on the Lakeville High School project. Electrical bids submitted to the school district included:
SECO $ 2,610,999
Gephart $ 2,799,500
ERC $ 2,696,000
Bloomington Electric $ 3,499,000
Premier $ 2,679,000
Penn"Co $ 2,907,600
Bids received from prime contractors included:
PCL Construction $21,373,000
Kraus"Anderson Construction $21,299,000
Knutson Construction $21,176,000
M.A. Mortenson $20,845,000
Penn"Co Construction $20,477,547
Penn-Co's prime bid had listed itself as the intended electrical subcontractor. After the prime bids were opened and after a review of Penn-Co's credentials, the architect determined that Penn-Co was not qualified to provide services as an electrical subcontractor. The project architect, Kevin Sullivan, notified Penn-Co of this determination.
Section 6.3.3 of the instructions to bidders provided:
Prior to the award of the Contract, the Architect will notify the Bidder in writing if either the Owner or Architect, after due investigation, has reasonable objection to a person or entity proposed by the Bidder. If the Owner or Architect has reasonable objection to a proposed person or entity, the Bidder may, at the Bidder's option, (1) withdraw the Bid, or (2) submit an acceptable substitute person or entity with an adjustment in the Base Bid or Alternate Bid to cover the difference in cost occasioned by such substitution. The Owner may accept the adjusted bid price or disqualify the Bidder.
Pursuant to the above provision, Penn-Co decided to withdraw its name as the electrical subcontractor on its prime bid and instead listed SECO as its electrical subcontractor. Penn-Co noted its use of SECO was necessarily "contingent upon agreement to a subcontract" with SECO. SECO was the lowest electrical subcontractor on the list, at $2,610,999 ($296,601 lower than Penn-Co's bid). Penn-Co, however, did not adjust its base bid to reflect the $296,601 savings resulting from substituting SECO for itself as the designated electrical contractor.
On October 22, 1991, ISD 194 awarded the prime contract to Penn-Co, the lowest bidder. Notice to proceed was given October 24, 1991, and Penn-Co immediately began constructing the new high school.
Penn-Co subsequently began negotiating with SECO Electric regarding the terms of an electrical subcontract for the project. While these negotiations were in progress, Penn-Co contracted with Wright Electric to provide temporary electrical work for the Lakeville project. During negotiations, Penn-Co insisted that SECO provide a performance bond. SECO also maintained its bid did not include temporary power and lighting requirements and requested an additional $107,000 to provide such services. On January 17, 1992, SECO withdrew its bid.
The architect then advised Penn-Co to offer the contract to three other bidders on the subcontract list: ERC, Inc.; Gephart Electric; and Premier Electric. 1 Penn-Co offered the electrical work to these companies, but insisted they perform all the work for $3,109,309. 2 Gephardt and Premier were willing to do the work, but only at the price specified in their respective bids. 3 They were not willing to perform the electrical work at SECO's bid price, which did not factor in a price for temporary electrical power.
At a special school board meeting on February 20, 1992, the school board granted Penn-Co's request to use an electrical subcontractor who had not previously submitted a bid, subject only to the project architect's approval. On February 24, 1992, Penn-Co entered into a subcontract agreement with Wright Electric. The total contract price was $3,005,520. The subcontract did not require Wright Electric to provide a performance bond.
During the course of the bidding process and negotiations, the project architect, Kevin Sullivan, and Penn-Co's area manager, Denis Gagnon, maintained a seemingly close relationship. The following excerpts from Gagnon's notes reveal the atypical assistance Sullivan provided Penn-Co. Gagnon's notes of October 22, 1991, illustrate the extraordinarily close relationship between Penn-Co and Sullivan. Gagnon wrote:
Regarding the School Board Meeting tonight to award the project, Kevin felt that it would be best if I were not there. I asked Kevin if he would protect me if union issue[s] came up. He replied by saying that he has so far. I thanked him for that.
On January 7, 1992, Gagnon described a conversation he had with Sullivan regarding Penn-Co's interest in going off the authorized subcontractor list. Gagnon wrote:
I told Kevin [Sullivan] that David confirmed that we could go off the list. Kevin totally disagreed with this. Kevin is trying to protect Wold [architect] & the School Board interest. He said that he needs to build up his file on this issue.
On January 16, 1992, Gagnon wrote:
Of recent Kevin [Sullivan] was more talkative about the electrical issue, stating that we would all be better off if Wright does the job.
On February 18, 1992, Gagnon wrote:
Kevin [Sullivan] asked if we had signed a contract with Wright. I told him no. He alluded to the fact that it would maybe be a blessing if the contract was in place.
On February 18, 1992, Gagnon also wrote that he contacted Tom of Wright Electric and gave him an update on ISD 194's willingness to have Wright Electric do the job, and "Tom agreed to keep it quiet."
On March 13, 1992, appellants served their summons and complaint. In response to complaints of improper service, appellants served their summons and complaint again on April 14, 1992. The complaint sought a declaration that the prime general contract was void due to violations of the bidding statutes and requested temporary and permanent injunctive relief halting work on the high school.
Appellants' request for a temporary injunction was denied. Respondent subsequently moved for dismissal, and a hearing was held on May 12, 1992. In an order dated May 15, 1992, the court granted respondent's motion. The trial court, however, expressed concern over the suspicious circumstances surrounding the bidding process and contract award. It noted:
The questionable practice of Penn-Co submitting a bid for the electrical work based upon a quotation received from Wright at $500,000.00 more than the quotation; the failure of ISD 194 to insist upon a reduction in Penn-Co's bid price when SECO was substituted as the electrical contractor; the apparent...
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