By Michael J. Maurer
The second-place bidder on a government contract has a cause of action for intentional interference with prospective economic advantage against the winning bidder if the contract was awarded as a result of -wrongful conduct. In the recent case of Roy Allan Slurry Seal v. American Asphalt South Inc., 2015 DJDAR 2014 (Feb. 20, 2015), the 2nd District Court of Appeal held that plaintiffs could state that cause of action if the winning bidder was able to submit a lower bid because it illegally paid its workers less than the prevailing wage.
Most public works contracts must be awarded to the lowest responsive bidder, provided the lowest bidder meets the minimum qualifications necessary to perform the work. Unlike private developers, public agencies usually have no discretion to choose a preferred contractor or to determine the contractor who is most qualified or provides the best value. Bids must be submitted under seal, with all of the bids opened at once. After the bid opening, a public agency only has two options: award to the lowest responsive, responsible bidder or reject all of the bids. There is no opportunity for further negotiations, and details of each bid, such as the budgeted costs and anticipated profits, are not revealed.
The purpose of this system is to create competition — to give every bidder an equal chance to perform public work, and therefore protect the public's financial interests. Of course, the system only works if everyone plays by the rules.
In Allan, the plaintiffs alleged that another contractor — the winning bidder on 23 separate public works projects — did not play by the rules. The defendant, American Asphalt South Inc., was awarded the 23 contracts, totaling more than $14.6 million, to apply slurry seal to public roads. The second lowest bidder on all 23 contracts was either Roy Allan Slurry Seal, Inc. or Doug Martin Contracting, Inc. The plaintiffs combined their cases and sued American Asphalt in five counties — Los Angeles, Riverside, San Bernardino, Orange and San Diego, yielding different results to various demurrers. The cases were all combined on appeal.
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