School City of Gary v. Continental Elec. Co., 1270A276

• Decision Date: 20 September 1971
• Docket Number: No. 1270A276,No. 1,1270A276,1
• Citation: 273 N.E.2d 293,149 Ind.App. 416
• Parties: , 4 Empl. Prac. Dec. P 7511 SCHOOL CITY OF GARY, Indiana, a municipal school corporation et al., Defendants-Appellants, v. CONTINENTAL ELECTRIC COMPANY, Inc., an Indiana Corporation, Plaintiff-Appellee
• Court: Indiana Appellate Court

Page 293

273 N.E.2d 293

149 Ind.App. 416, 4 Empl. Prac. Dec. P 7511

SCHOOL CITY OF GARY, Indiana, a municipal school corporation

et al., Defendants-Appellants,

v.

CONTINENTAL ELECTRIC COMPANY, Inc., an Indiana Corporation,

Plaintiff-Appellee.

No. 1270A276.

Appellate Court of Indiana, Division No. 1.

Sept. 20, 1971.

Julian B. Allen, Clarence Borns, Gregory S. Reising, Gary, for defendants-appellants.

Bernard M. Mamet, Chicago, Ill., Robert L. McLaughlin, Wooden, Stark, McLaughlin & Sterner, Indianapolis, for plaintiffs-appellees.

ROBERTSON, Judge.

This is an appeal from the Lake Superior Court where the plaintiff-appellee (hereinafter referred to as Continental) brought an action to enjoin the defendant-appellant (hereinafter referred to as the school) from awarding an electrical construction contract to another company (Gibson Electric), and to mandate the school to award the contract to Continental.

The facts leading to this appeal may be summarized as follows: The school advertised for bids on the remodeling of the Pulaski Junior High School. Continental and Gibson submitted their bids for the electrical portion of the work in accordance with the pertinent specifications. The bids were opened revealing Continental bidding $472,543 and Gibson bidding at $482,861, the resulting spread being 2.8%. The bidders also submitted their bids in compliance with the school's Specification 3.3 which embodies the Indiana Civil Rights Act. ¹

In accordance with the custom of the school's past practices, their construction department and the architect examined the bids and recommended Continental for the work.

The school, at a meeting subsequent to the opening of the bids, expressed concern over the fact that there was not sufficient 'affirmative action' in the employment of minority groups on projects like the Pulaski school. The school wrote to Continental and Gibson requesting submission of their 'present policy or plan of affirmative action for the employment of minority groups.'

After receiving the responses of both companies, the school awarded the contract to Gibson based upon their expressed intent to enter into a joint venture with a Negro entrepeneur.

Suit was filed by Continental to enjoin the school from awarding the contract to Gibson, and to mandate award of the contract to itself as the lowest and best bidder. The trial court held the actions of the school to be a clear abuse of discretion, tantamount to constructive fraud, and granted the requested relief to Continental. On appeal the school alleges not only that the action of the trial court was contrary to law and not supported by the evidence, but also that there were numerous procedural errors.

Whenever public moneys are encumbered by a governmental agency, a solemn duty arises to protect these moneys. Competitive bidding requirements have been legislated to safeguard the public against fraud, favoritism, graft, extravagance, improvidence and corruption, and to insure honest competition for the best work or supplies at the lowest reasonable cost. Such safeguards provide that there be advertisements for bids and that public contracts be awarded to the lowest and best bidder. ²

IC 1971 5--16--1--1, being Ind.Ann.Stat. § 53--108 (Burns 1964), provides that:

'* * * it shall be the duty of the * * * trustee(s) * * * acting on behalf of the * * * city * * * school corporation * * * to adopt plans and specifications and award a contract for such public work or improvement to the lowest and best bidder who submits a bid for the performance thereof * * *.'

The awarding body is required to award the contract to the lowest bidder who is also the best bidder. Which bidder is lowest is purely an objective matter determined mathematically upon the date when the bids are publicly opened and the bids are read.

Which bidder is 'best' is primarily a subjective determination. IC 1971 5--16--1--2, being Ind.Ann.Stat. § 53--109 (Burns 1964), does provide guidelines to be considered in determining the best bidder:

'* * * for the purpose of enabling such * * * trustee(s) * * * to ascertain and determine which of the bidders submitting bids for the performance of any such public work is, in the judgment of such * * * trustee(s) * * *, the lowest and/or best bidder and to exercise intelligently the discretion hereby conferred on such * * * trustee(s) * * * each bidder shall be required to submit under oath with and as part of his bid a statement of his experience, his proposed plan for performing such work and the equipment which he has available for the performance of such work and a financial statement.'

In Lee v. Browning (1932), 96 Ind.App. 282, 182 N.E. 550, in which trustees of a school were required by law to award a school busing contract to the 'lowest or best responsible bidders', many other factors were felt to be significant:

'Aside from financial responsibility, it has been held that ability and capacity, capital, character, and reputation, competency and efficiency, energy, experience, facilities, faithfulness and fidelity, fraud or unfairness in previous conduct, honesty, judgment, promptness, quality of previous work, suitability to the particular task, are proper elements to be taken into consideration in determining the responsibility of a bidder on public contracts.' 182 N.E. 550, 551.

The decision of the school as to bid awards cannot be overturned by the trial court unless such decision is arbitrary corrupt or fraudulent. Budd v. Board of County Com'rs of St. Joseph County (1939), 216 Ind. 35, 22 N.E.2d 973. The general rule as adopted in Haywood Publishing Co. v. West (1942), 110 Ind.App. 568, 573--574, 39 N.E.2d 785, is that:

'(I)n awarding contracts of this nature, public authorities are vested with discretion in determining who is the lowest and best bidder, and their decision will not be interfered with by the courts, even if erroneous, provided it is based on a sound and reasonable discretion founded on facts and exercised in good faith, in the interest of the public, without collusion or fraud, nor corruptly, nor from motives of personal favoritism or ill-will, and not abused.'

The facts relevant to the award of the electrical contract here were that Continental, at the time of the award, (1) was a local firm which had been located in Gary since 1952; (2) that it specialized in institutional electrical construction work and that 70--75% of its work was for public bodies; (3) that it had in the past performed 25 electrical contracts for the School City of Gary, and that no other electrical contractor had performed more contracts for the School City of Gary; (4) that all past work had been found satisfactory; (5) that it was currently engaged in other electrical construction projects in the locality and was therefore utilizing the labor force in the area at the time of the award; (6) that it was the lowest bidder; and (7) that after all of its qualifications had been examined Continental had been recommended by both the architects and the special bid-reviewing committee appointed by the Trustees of the School City as the lowest and best bidder. In contract was Gibson, which at the time of the award (1) was the highest bidder; (2) had no office in Indiana; (3) had previously performed only two small jobs in the area; (4) had never performed work for the School City of Gary; (5) had no employees; and (6) had never had its experience, business, financial and other qualifications examined by the Trustees of the School City, the special bid-reviewing committee, or the architects. Upon the basis of these facts alone, the legal duty to award the contract to Continental would appear evident. An additional factor was however, injected into the award determination.

The evidence indicates that the school's decision was based wholly upon responses to the written requests for 'affirmative action' plans for employment of minority workers, rather than on factors inclusive of, but not restricted to, racial hiring practices, which factors properly determine the 'best' bidder. The trial court's view of the factual background and effect of the school's interpretation of such affirmative action plan is set out in the Court's rather lengthy Conclusion of Law #6:

'Even assuming, in arguendo, that the defendants had the authority to request bidder by evaluating the affirmative acplans as regards the employment of employees from minority groups and even assuming, in arguendo, that the defendants had the statutory authority to exercise discretion in determining the 'best' bidder by evaluating the affirmative action plans so submitted, the defendants acted arbitrarily and capriciously and grossly abused whatever discretion may have been conferred upon them. The defendants favored Gibson Electric Company of Indiana, Inc. because Gibson stated that it 'intended' to engage in a joint venture with Solar-Ray Company, owned by a Negro entrepreneur. The affirmative action program submitted by Gibson was not an affirmative action program for the employment of minority employees engaged in electrical construction but was rather a program designed to give fifty percent of the business to an owner contractor who is black and whose qualifications to even bid were never passed upon. The past performance of plaintiff Continental in the area was measurable and determinable and as regards affirmative action programs, no electrical contractor had any better record. Continental had never even been charged with being guilty of an unfair employment practice and its affirmative action programs had specifically been approved by the State of Indiana and by the Federal Government. Continental's performance for the defendants, measured by 25 past jobs for the defendants, had proven satisfactory in all respects and the agents, representatives and architects of the defendants charged with the responsibility of making business and financial recommendations recommended that...