No. 12635 INTHE SUPREME COURT OF THE STATE OF MONTANA

STATE OF MONTANA, EX REL. SLETTEN CONSTRUCTION COMPANY, a Montana Corporation, Petitioner,

CITY OF GREAT FALLS, STATE OF MONTANA, CURTIS A. AMMONDSON, DONALD L. OSTREM, JOHNH

# . SHEFFELS

## ,WILLIAM E. SAMSON and WILLIAM M. SCOTT, as Commissioners thereof, and DEPARTMENT OF REVENUE, STATE OF MONTANA, and KEITH L. COLBO, as Director thereof, Defendants.

ORIGINAL PROCEEDING: Counsel of Record: For Petitioner: Jardine, Stephenson, Blewett & Weaver, Great Falls,

Montana Alex Blewett argued, Great Falls, Montana For Defendants: John Yuenning and Paul Miller, Great Falls, Montana John Kuenning argued, Great Falls, Montana Smith, Emmons and Baillie, Great Falls, Montana James R. Walsh argued, Great Falls, Montana Terence B. Cosgrove argued, Helena, Montana Robert W. Corcoran appeared, Helena, Montana R. Bruce McGinnis appeared, Helena, Montana

Submitted: November 16, 1973 Decided :

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Filed:

### PER CURIAM: This is an original application for a writ ofmandate or other appropriatewrit to compel the City of Great Falls,Montana to award a public works construction contract to petitioner Sletten Construction Company, a Montana corporation. The essence of petitioner's contention is that it is entitled to the contract award under the provisions of ~ontana'sresident contractorpreference law. An order to show causewas issued setting the matter for hearing on November 16, 1973; servicewas accomplished on defendants: the City of Great Falls and its Commissioners; the Department of Revenue, State of Montana, and its Director;and upon the successfulbidder, Acton Construction Company, Inc. of Hugo,Minnesota. Leave to intervenewas granted to Acton; a motion to quashwas filed by the Department of Revenue; answers

were filed by all defendants and intervenor;briefs were filed by all parties;and oral argumentwas heard at the hearing. Thereafter this Court by judgment dated November 21, 1973, accepted jurisdiction;held Acton1saffidavit of residency insufficient to support the certificate of residency issuedby the Department of Revenue and annulled the same;ruled that the parties

were free to proceed thereafter in accordance with law;and indicated a written opinion would follow. Subsequently,the City of Great Falls revoked its original award and awarded the contract to petitioner Sletten Construction Company. The relevant facts indicate the City of Great Falls invited bids on a public works construction contract on improvements to itswater treatment plant which wasdenominated "Contract 2,Water Works Improvements1'. It received severalbids, the two lowest being that of Acton Construction Company, Inc., a foreign corporation of Hugo, Minnesota, in the amount of $1,752,240, and the Sletten Construction Company, a Montana corporation,of Great Falls in the amount of $1,775,000. It is to be noted that 

### lett ten's bid is less than 3% higher thanActon1s.At allmaterial times in 1973Acton had a Montana contractor's license, but had not initially qualified as a resident contractor under ~ontana's resident contractorpreference law. However in October 1973,Acton filedwith the Department of Revenue, State Montana, an affidavit seeking resident contractor status stating in pertinent part: "Affiant states that at all times during 1973 allmaterials, suppliesand equipment offered by Acton Construction Co., Inc. on any Public Works Contracts are produced in Montana by industries located in Montana insofar as such materials, suppliesand equipment are available.

1'Withthe exception of selected supervisory personnel Montana labor is exclusively employed on all Public Works Contracts involvingActon Construction Co., Inc. in the State ofMontana." On thebasis of this affidavit Acton requested recognitionas a resident bidder as of January 9, 1973. The Department of Revenue thereupon issued its certificationof Acton as a resident contractor under section 84-1925,R.C.M. 1947. On November 6,1973, the City Commission of Great Falls acting on the basis of this certificationpassed a resolution accepting the bid of Acton and authorized the City Manager to execute the necessary contracts. Petitioner brought the instant originalproceeding in this Court thereafter. Defendants and intervenor raise the following issues which

we will summarize: 

### (1) The standing of petitioner to maintain this action. (2) The appropriateness of an originalproceeding for writ ofmandate as a remedy. (3) The legality of the actions of the Department of Revenue and the City of Great Falls under ~ontana'sresident contractor preference law. The Department of Revenue and Acton take the position that Slettenhas no standing to challenge the validity of the ~epartment's actionby a proceeding seeking judicial review. They cite insupport: State ex rel. Stuewe v. Hindson, 

### 44Mont. 429, 120 P. 485; Koich v. Cvar, 111Mont. 463, 110 P.2d 964;Ruidoso State Bank v. Brumlow, 81N.M. 379, 467 P.2d 395; Baltimore Retail Liquor Package Stores Association v. Kerngood, 171Md. 426, 189A. 209, 109A.L. R. 1253; State ex rel. Rouveyrolv. Donnelly, 365Mo. 686, 285 S.W.2d 669. In our view all these cases are clearly distinguishable and do not support the proposition that Sletten has no standing in the instant proceeding. We recognize the broad proposition that an unsuccessful bidder has no standing in mandamus or otherwise to control the discretion of the city council in awarding a contract to the lowest responsiblebidder. The relief granted in the instant case does not do this. On the contrary, this Court's judgment ofNovember 21 simply annulled the certificate of residency the Department of Revenue granted Acton, leaving the parties free to proceed in accordancewith law. A resident contractor such as Slettenwho, in effect,had been denied its statutory preference is an aggrieved party entitled to judicial review. For an example of cases involving judicial reviewunder resident contractorpreference statutesat the instance of unsuccessful bidders, see Stebbins & Roberts, Inc., v. Pulaski Glass & Mirror Co., 233Ark. 449, 345 S.W.2d 912; Schrey v. Allison SteelMfg. Co., 75 Ariz. 282, 255 P.2d 604. The Department of Revenue and intervenornext contend that

a writ ofmandate is not proper in the instant case because itwill not lie to control discretionary acts; the contract award has already been made; and administrative remedies within the Department of Revenue have not been exhausted. In this case the judgment of November 21 did not attempt to control any discretionary acts of public agenciesbut simply cancelled and annulled a certificate of residency granted a Minnesota contractor by the Department of Revenue uponwhich the city relied inmaking the contract award. As this certificate of residencywas invalid,we simply annulled it and left the parties in their original position.We recognize the generalprinciple that ordinarily administrative remediesmust be exhausted before applying for judicial review. However, this principle has no application to the instant

case. Slettenwas not a party to the administrative proceedings awarding the certificate of residency to Acton, had no notice thereof, and could hardly be said to have an administrative remedy under such circumstances. The principal issue is the legality of the certificate of residency issued by the Department of Revenue to Acton upon which the City relied in its original contract award. Section 82-1924,R.C.M. 1947, grants a preference to resident contractors over non-resident contractors inbidding on public contracts,providing in relevant part:

IIIn order to provide for an orderly administration of the business of the state of Montana in awarding contracts for materials, supplies, equipment, construction, repair and public works of all kinds, it shall be the duty of each board, commission, officer or individual charged by lawwith the responsibility for the execution of the contract on behalf of the state,board, commission,political subdivision, agency, school district or a public corporation of the state of Montana, to award such contract to the lowest responsible bidder who is a resident of the state of Montana and whose bid is not more than three per cent (3%) higher than that of the lowest responsible bidder who is a nonresident of this state. In awarding contracts for purchase of products, materials, supplies or equipment such board, commission, officer or individual shall award the contract to any such residentwhose offered materials, supplies or equipment are manufactured or produced in this state by Montana industry and labor and whose bid is not more than three per cent (3%) higher than that of the lowest responsible resident bidder whose offered materials, supplies or equipment are not so manufactured or produced, provided that such products, materials, supplies and equipment are comparable in quality and performance.

## * * *I1 Section 82-1925,R.C.M. 1947,provides who shall be deemed resident contractors, the pertinent part of which provides:

I IFor the purpose of this act the word 'resident' shall include

# *** any individual,partnership or corporation, foreign or domestic and regardless of ownership thereof, whose offered materials, supplies or equipment aremanufactured or produced in this state by industry located in Montana and Montana labor shallbe deemed to be a resident for the purpose of this act.IISection 82-1925.1, R.C.M. 1947,grants authority to the Department of Revenue to make the initial determination of resident contractor status: "1t shall be the duty of the state department of revenue of the state of Montana, at the time that a public contractormakes application for a license under the provisions of chapter 35, Title 84 of this code, to determinewhether or not such 1 contractor is a resident' of the state ofMontana within the meaning of sections 82-1924and 82-1925. The department shall endorseupon the contractor's license whether or not such contractor is a 'resident' as aforesaid. If a contractor isnot a 'resident' at the time such license is issued, but thereafter qualifies as such,he may apply to the department of revenue for a redeterminationof his residency,and, if found to qualify as a 'resident,' the department shall endorse such fact upon his license,together with the date of such qualification. It shallbe the duty of the state department of revenue,upon written request of any board, commission, officer or individual charged by lawwith the responsibility for the execution of any contract subject to the provisions of section 82-1924 onbehalf of the state, board, commission,political subdivision,agency, school district or public corporation of the state of Montana, to furnish a list of contractorswho 1 have qualified as 'residents, as aforesaid, to such requestingbody. The determination of the department of revenue that a public contractor is 1 or is not a resident' within the meaning of sections 82-1924and 82-1925 shallbe prima facie evidence of such fact.1t 

### On January 9, 1973, the Department of Revenue issued a public contractor's license to Acton. No determinationof residency

was made until October 23, 1973,when the Department of Revenue issued a certificate of residency based upon the affidavit of Acton, heretofore quoted, to the effect that itwould use Montana products and materials insofar as they are available and would use Montana labor except for selected supervisorypersonnel. All other questions aside, the affidavit of Acton simply does not conform to the statutory criteria authorizing the Department of Revenue to certifyActon as a resident contractor. Acton is a foreign corporation. The onlyway it can qualify as a resident contractor is to offer materials, supplies or equipment "manufactured or produced in this state by industry located in Montana and Montana labor". Its affidavit falls far short of establishing this. Acton states it will use Montana products andIt materials insofar as they are available". Who determines their availability3 What does availablemean" Acton states that itwill

II use Montana labor except for selected supervisorypersonnel". What supervisorypersonnel? FJho selects those to be exempted' 

### Howmany employees are involved in the exception? Although the affidavitmust be interpreted reasonably, there are too many loopholes to insure that the purpose of the resident contractor preference lawwill be fulfilled. If the affidavit here was sufficient to clotheActon with resident contractor status, any foreign corporation or non-resident contractor could qualify for the preference and the law would be meaningless. For these reasons, our judgment ofNovember 21 annulling and setting aside the certificate of residency and freeing the parties to proceed thereafter in accordancewith lawwas issued. Thereafter a petition for rehearingwas filed by Acton and objections thereto filed by Sletten. After considerationof same, the petition for rehearing is denied.

Mr. JusticeWesley Castles took no part in the foregoing Opinion.