NORTHEAST MISS. COM. COL. D. v. VANDERHEYDEN CONST.

• Court: U.S. District Court — Northern District of Mississippi
• Writing for the Court: DAVIDSON
• Citation: NORTHEAST MISS. COM. COL. D. v. VANDERHEYDEN CONST., 800 F.Supp. 1400 (N.D. Miss. 1992)
• Decision Date: 08 January 1992
• Docket Number: Civ. A. No. EC 91-312-D-D.
• Parties: NORTHEAST MISSISSIPPI COMMUNITY COLLEGE DISTRICT, Plaintiff, v. VANDERHEYDEN CONSTRUCTION COMPANY, Defendant.

800 F. Supp. 1400

NORTHEAST MISSISSIPPI COMMUNITY COLLEGE DISTRICT, Plaintiff, v. VANDERHEYDEN CONSTRUCTION COMPANY, Defendant.

Civ. A. No. EC 91-312-D-D.

United States District Court, N.D. Mississippi, E.D.

January 8, 1992.

Lester F. Sumners, Sumners Carter & McMillin, New Albany, Miss., for plaintiff.

Nicholas B. Phillips, Iuka, Miss., Michael Malski, Amory, Miss., for defendant.

MEMORANDUM OPINION

DAVIDSON, District Judge.

This action involves a public entity's attempt to rescind an award of contract work to the lowest bidder, after the next to lowest bidder protested. The suit was originally brought in the Chancery Court of Prentiss County, Mississippi. At defendant Vanderheyden's behest, it was removed to this court pursuant to 28 U.S.C. § 1441 et seq. Thereupon, an expedited hearing was conducted on November 26, 1991. Following a court-ordered briefing period of twenty days, a final hearing in the matter was convened by this court on December 30, 1991. Having reviewed and considered the pleadings, briefs, exhibits and statements of the named and interested parties, the court now renders its opinion.

FACTS

The facts of the case are not in dispute and can be summarized as follows: Plaintiff Northeast Mississippi Community College District (Northeast) received a $2.5 million grant from the Mississippi Major Economic Impact Authority.¹ The money would be used by Northeast for construction of a new science and math building. On August 8, 1991, the college solicited sealed bids through public advertisement. The advertisement stated that "the Board of Trustees reserves the right to reject any and all bids."

A total of eight bids was received in response; each was opened and read publicly at the September 10, 1991 board meeting in the presence of representatives from each bidding company. According to the board's minutes, defendant Vanderheyden was the low bidder at $3,698,036.00, followed by AMCA International Construction Corp (AMCA), with a bid of $3,718,700.00. The minutes reflect that Vanderheyden's bid was accepted by the board subject to meeting all specifications.

After the board meeting had concluded, AMCA lodged a formal protest with Northeast over its award to Vanderheyden, claiming that Vanderheyden's bid had ignored Northeast's bidding instructions. Specifically, AMCA complained that Vanderheyden did not list certificate of responsibility numbers for its subcontractors.² AMCA also claimed that Vanderheyden's bid failed to provide for the minimum requisite minority small business participation in accordance with Mississippi law.³ On the basis of these objections, AMCA contended that it was the lowest responsive bidder; therefore, AMCA claimed the contract should have been awarded to it instead of Vanderheyden.

AMCA's registered protest of the Vanderheyden bid award prompted the board to conduct a special meeting on September 20, 1991. Representatives from AMCA and Vanderheyden also attended and participated in the board's discussion. At the end of the discussion, board member Thomas Keenum summarized the choices: the board could either "let stand the action taken at the September 10 meeting with regard to the bids or could rescind and readvertise." See plaintiff's exhibit 7, Minutes, Board of Trustees Meeting "SPECIAL," Northeast Mississippi Community College, September 20, 1991. On the advice of its attorney, the board, with some reluctance, chose to rescind the September 10 acceptance of the Vanderheyden bid, reject all bids, and readvertise.⁴ Minutes Board of Trustees Meeting "SPECIAL," September 20, 1991. Any other course of action, it feared, could expose the college trustees to legal liability.⁵

In the second round of bid advertising, plaintiff revised its bid instructions so that listing subcontractor certificate of responsibility numbers was no longer requested. Furthermore, plaintiff incorporated Mississippi statutory language into the revised bid instructions and specified that minority participation was a fifteen percent (15%) goal. See MISS.CODE ANN. § 57-75-21.⁶ These two revisions effectively removed the grounds which AMCA offered as a basis for asserting objections to the Vanderheyden bid.

Nine bids were received in the new round of solicitation; they were opened at the October 29, 1991 board meeting in the same manner as before. This time, however, AMCA was declared the low bidder while Vanderheyden was attributed with the next to lowest bid price. The board, as stated in the minutes of that meeting, accepted AMCA's bid.

CONCLUSIONS OF LAW

The major issue presently before the court is whether the Board of Trustees for Northeast Mississippi Community College could properly rescind its prior bid acceptance and in turn readvertise for bids on the project.⁷ In other words, once the board accepted Vanderheyden's bid on September 10, 1991, could it thereafter reject all bids and direct that the project be readvertised? Guided by the holding of the Louisiana Supreme Court in Donahue v. Board of Levee Commissioners, 413 So.2d 488, 490 (La.1982), it is the opinion of this court that a public entity cannot reject all bids and readvertise the project after it has already accepted the lowest responsible bidder.

The court recognizes that the board reserved the right to reject any and all bids at its discretion. By the same token, however, the board did not have unlimited or infinite authority to reject bids. Canton Farm Equipment, Inc. v. Richardson, 501 So.2d 1098, 1104 (Miss.1987). A public body's option of rejecting any and all bids is available "only prior to the time that it accepts one of the bids it has received." Gurtler, Hebert & Co. v. Orleans Parish School Bd., 251 So.2d 51, 53 (La.App. 4th Cir.1971). Therefore, the court is of the opinion that once the board chose to accept Vanderheyden's bid, the reserved right to reject any and all bids had not been exercised and it was no longer operative. To hold otherwise would be contrary to the well-established principles of contract law and would permit the possibility of favoritism in public bidding, the very evil which the bidding process statutes were enacted to prevent. Donahue, 413 So.2d at 492. In Donahue, plaintiff submitted a bid to undertake a bridge demolition project. The levee board on July 16, 1980, accepted Donahue's bid as the lowest. However, at a later meeting held on August 20, 1980, "it adopted a resolution rejecting all bids and directing that the project be readvertised." Donahue, 413 So.2d at 492. The court concluded that "rejecting all bids ... on August 20, 1980 was improper and without legal effect." Id.

While Mississippi law does not statutorily impose an obligation upon the board to accept any bid, if it accepts any bid at all, the board should accept the lowest and best bid. Canton Farm Equipment, Inc. v. Richardson, 501 So.2d 1098, 1104 (Miss. 1987); see MISS.CODE ANN. § 31-7-13(d). Once the board accepted Vanderheyden's bid as the lowest during the September 10, 1991 meeting, the respective parties had entered a binding contract. Simply put, the board had communicated its acceptance of Vanderheyden's offer and revocation was not possible. When a bid has been accepted by the proper authorities, such acceptance cannot be revoked. 10 McQuillian, Municipal Corporations, § 29.71 at 343 (3rd ed. 1981).

While neither the Mississippi Supreme Court nor any federal court in this circuit has considered this question under precisely these facts, there is a well-established body of case law holding that upon award of a public contract a binding contract between the bidder and the awarding agency is established. For example, in City of Susanville v. Lee C. Hess Company, 45 Cal.2d 684, 290 P.2d 520 (1955), the Supreme Court of California stated,

It has long been decided in this and other states and in the courts of the United States that in the letting of contracts for the doing of public works where the legislative body or the administrative officer is required by statute to call for bids and must under competitive bidding conditions let the contract to the lowest responsible bidder, the making of the award gives rise to a contract between the public body or agent and the successful bidder....

City of Susanville, 290 P.2d at 526. In Gurtler, Hebert & Co., 251 So.2d at 53, 54, the Louisiana Court of Appeal stated,

Even where the right to reject any and all bids is properly reserved, the bidding laws should not be evaded under color of rejection. Although the court generally will not disturb an honest exercise of discretion, judicial intervention is entirely appropriate to prevent the arbitrary rejection of a bid when its effect is to defeat the object to be attained by competition. McQuillian, Municipal Corporations, Vol. 10, Sec. 29.77, pgs. 438 to 439. To allow the board to readvertise under the present facts would, in the court's opinion, sanction arbitrary rejection and hence have the effect of opening the door to the possibility of favoritism in future public bidding.

See In the Matter of Lord Electric Company, Inc. v. Litke, 122 Misc.2d 112, 469 N.Y.S.2d 846 (1983); Beckwith v. City of New York, 121 A.D. 462, 106 N.Y.S. 175 (1907); Mansfield Contr. Corp. v. Lindsay, 41 A.D.2d 925, 344 N.Y.S.2d 976 (N.Y.A.D. 1st Dept. 1973), aff'd. See also Lynch v. Mayor, 2 A.D. 213, 37 N.Y.S. 798 (N.Y.A.D. 1st Dept.1896) (proposal by plaintiff and acceptance thereof by commissioner constituted contract binding upon both; it was then too late to reject all bids; plaintiff entitled to judgment for his damages).⁸

AMCA, has incorrectly relied on Istari Constr., Inc. v. Muscatine, 330 N.W.2d 798, 800 (Iowa Sup.Ct.1983), to support its contention that Northeast properly rejected all of the bids because the September 10 acceptance was conditional. In Istari, approval was a two-step process; after the city council accepted a bid, the Department of Housing and Urban Development (HUD) had to give final contract approval....