Case Name: TELEPHONE ASSOCIATES, INC., et al., Appellants, v. ST. LOUIS COUNTY BOARD, et al., Respondents
Court: Minnesota Court of Appeals
Jurisdiction: Minnesota
Decision Date: 1984-06-19
Citations: 350 N.W.2d 398
Docket Number: No. C6-83-1295
Parties: TELEPHONE ASSOCIATES, INC., et al., Appellants, v. ST. LOUIS COUNTY BOARD, et al., Respondents.
Judges: Heard, considered and decided by POPO-VICH, C.J., and FORSBERG and RANDALL, JJ.
Reporter: North Western Reporter 2d
Volume: 350
Pages: 398–403

Head Matter:
TELEPHONE ASSOCIATES, INC., et al., Appellants, v. ST. LOUIS COUNTY BOARD, et al., Respondents.
No. C6-83-1295.
Court of Appeals of Minnesota.
June 19, 1984.
Review Granted Sept. 12, 1984.
Harry L. Munger, MacDonald, Munger & Downs, Duluth, for appellants.
Clay W. Odden, Asst. County Atty., Duluth, for respondents.
Heard, considered and decided by POPO-VICH, C.J., and FORSBERG and RANDALL, JJ.

Opinion:
OPINION
POPOVICH, Chief Judge.
This is an appeal from denial of appellant's request for a permanent injunction. The trial court determined the St. Louis County competitive bidding procedures had been properly complied with and refused to enjoin the County's award of a telephone system contract to a third party. We find the competitive bidding procedures were not properly complied with and the awarded bid was improperly modified, not responsive and therefore invalid and should have been rejected. Reversed and remanded.
FACTS
In January, 1982 the St. Louis County Board determined it would be necessary to seek bids for the installation of a telephone system in a new State Office Building in Duluth, Minnesota. The county purchasing agent prepared a Request for Proposals (bid request), which was approved by the County Board and advertised in the local newspaper.
Several bids were submitted to the County, including a proposal by appellant, Telephone Associates, Inc. After the bids were opened, meetings were held by the appointed bid evaluator, members of a consulting firm hired by the County and other interested parties to determine which bid proposal provided the best value to the County. During the course of those meetings, modifications were made to a bid offer by Norstan Communications Systems, Inc.
On May 3, 1982, as a result of the meetings, the purchasing agent presented a resolution to the County Board recommending the telephone system contract be awarded to Norstan Communications Systems, Inc. A summary of the evaluation process was attached to the resolution although the full evaluation procedures and documents were not presented to the Board.
Appellant challenged the proposed award, claiming the process following the bid-opening was improper. Nonetheless, the County Board awarded the contract to Norstan and the appellant sought injunc- tive relief, requesting that it be awarded the contract. A motion for a temporary restraining order, later changed by agreement of the parties to a motion for a temporary injunction, and a formal complaint requesting a permanent injunction were filed with the district court. After hearing two days of testimony on appellant's temporary injunction motion, the trial court denied the motion by its order of June 16, 1982, which indicated the County Board had followed the appropriate competitive bidding procedures and appellant had not demonstrated irreparable harm warranting injunctive relief.
On August 19, 1983, pursuant to the parties' stipulation that no further testimony be offered, the trial court entered its final order denying appellant's request for a permanent injunction for the same reasons it had previously expressed for denying the temporary injunction. This appeal followed.
ISSUES
1. Whether it was proper for the County Board to modify Norstan's bid, after it was opened, to bring it in conformity with the requirements of the bid request.
2. Whether the trial court's denial of injunctive relief was proper.
ANALYSIS
I.
The County's Request for Proposals stated the bid contract would be awarded "to the Vendor providing best value to the County." One factor to be used in determining best valqe, and which was assigned a weight of 50%, was the "net present value cost calculations of the telecommunications equipment/services proposed, over a five year period." An element used in determining "net present value" was the proposed monthly maintenance cost submitted by each bidder. Norstan Communications, Inc. did not submit monthly maintenance costs including both labor and materials, but responded to the request by listing two options: (1) an annual charge not taking labor charges into consideration, and (2) a time and materials option, whereby charges would be "portal to portal at existing rates per hour, plus the materials cost."
Proposals submitted by appellant and other bidders did contain the requested monthly maintenance information. Appellant submitted an estimate of approximately $1,005.00 per month and a third bidder, Continental Telephone, submitted a monthly maintenance estimate of approximately $1,900.00. When the bids were opened and it was discovered that Norstan had not submitted a total monthly maintenance charge, the County Board simply added appellant's and Continental's estimates together and divided the total by two. That average cost was then inserted in Nor-stan's bid in the section requesting monthly maintenance costs.
Appellant argues this action by the County was unfair and prejudicial and that Norstan's bid should have been rejected for failure to comply with the bid request. The law governing changes in bids is expressed in Cotter v. City of St. Paul, 223 Minn. 376, 26 N.W.2d 835 (1947), which states: "a bid must conform substantially to the advertised-plans and specifications, and that where there is a substantial variance between the bid and the plans and specifications it is the plain duty of the public authority to reject the bid." Id. at 385, 26 N.W.2d at 840. "The test of whether a variance is material is whether it gives a bidder a substantial advantage or benefit not enjoyed by other bidders." Duffy v. Village of Princeton, 240 Minn. 9, 12, 60 N.W.2d 27, 29 (1953).
The award of a municipal contract is an "administrative [act] of discretion which will be enjoined only if done illegally, arbitrarily, capriciously, or unreasonably." Bud Johnson Const. Co., Inc. v. Metropolitan Transit Commission, 272 N.W.2d 31, 33 (Minn.1978). On appeal, the burden is on the appellant "to show that there is no substantial evidence reasonably tending to sustain the trial court's findings." Nielsen v. City of St. Paul, 252 Minn. 12, 29, 88 N.W.2d 853, 864 (1958).
The County was wrong in changing Norstan's bid. By inserting an estimated monthly maintenance cost in Norstan's bid where none had been supplied, the County allowed Norstan a substantial advantage not enjoyed by the other bidders who had honestly attempted to estimate a maintenance cost. Had the County properly rejected Norstan's bid, the evidence indicates that appellant's bid would have been the lowest in the net present value category.
In addition, appellant claims that other errors were made in the bidding process after the bids were opened. In view of our decision that the County should have rejected Norstan's bid, we need not consider these additional claims.
II.
This appeal was taken from the final order of the trial court denying appellant's request for a permanent injunction. During the time lapse between denial of the temporary and permanent injunctions, the County proceeded with installation of the Norstan system. Both the County and Norstan were parties to the litigation and both knew the final ruling was pending. By installing the system prior to conclusion of the litigation, these parties proceeded at their own risk.
This conclusion is supported by City of St. Paul v. Dual Parking Meter Co., 229 Minn. 217, 39 N.W.2d 174 (1949). There, Dual was one of three contractors bidding for a contract for sale and installation of the City's parking meters. The City selected Dual's bid, but prior to execution of the written contract, a suit was commenced to annul the award as a violation of the City's competitive bidding requirements. The district court decided the contract was validly awarded and dismissed the action. The City and Dual then executed a written agreement and began performance. The day after this agreement was signed, an appeal of the district court's decision was filed. On appeal, the trial court was reversed and was ordered to enter a new judgment nullifying the contract awarded and enjoining performance of the contract. Coller v. City of St. Paul, 223 Minn. 376, 390, 26 N.W.2d 835, 843 (1947). The Coller court had not been informed the meters had been installed and were in operation.
Subsequent to the court's decision in Col-ler, a dispute arose between the City and Dual over enforcement of the performed, albeit invalid, contract. The specific issue was whether Dual was entitled to compensation in quasi-contract to the extent of the benefits received by the City from the use of the meters. In resolving the issue, the court said:
It might be argued by both parties that, inasmuch as the contractor obtained a judgment in district court dismissing the action and adjudging the contract validly awarded, the parties were justified in entering into the contract of August 20, 1946. With this position we shall not disagree. However, when Coller appealed to this court on August 21, 1946, both the city and the contractor, who were defendants in that action, took their own chances that the district court judgment might be reversed, that the award might be nullified, and that they might be restrained from entering into and performing the contract, which is exactly what happened. It would appear that under those circumstances it was inequitable conduct on the part of both parties to proceed with or attempt to permit the performance of the contract by installing the meters prior to the time the Coller appeal was determined by this court.
City of St. Paul v. Dual Parking Meter Co., 229 Minn, at 226-27, 39 N.W.2d at 179.
Although the posture of this matter is different than Dual Parking Meter Co., the same principles apply. The County and Norstan were parties to pending litigation. Both proceeded at their own risk by installing the system prior to conclusion of the litigation and now must bear that risk.
DECISION
The County's failure to follow the competitive bidding requirement rendered the contract award invalid. The case is reversed and remanded to the district court for such relief as might be proper and appropriate.