Opinion ID: 2613977
Heading Depth: 2
Heading Rank: 4

Heading: pds entitled to monetary damages

Text: All parties acknowledge that no formal contract was concluded between the City and PDS. A request for bids is not an offer but a request for offers and bidders are making offers when they submit bids. Restatement (Second) of Contracts § 28 cmt. c (1979); see also id. § 26. No contract occurs until acceptance by the party that solicited bids. S.S.I. Investors Ltd. v. Korea Tungsten Mining Co., 80 A.D.2d 155, 438 N.Y.S.2d 96, 99 (1981), aff'd, 55 N.Y.2d 934, 449 N.Y.S.2d 173, 434 N.E.2d 242 (1982). The fact that no formal contract was concluded between PDS and the City, however, does not foreclose consideration of whether the City is liable to PDS for its costs in preparing the bid.
Under the Code, the City has a duty to treat all bids fairly and equitably. Section 13-1-29(C); see also Heyer Prods. Co. v. United States, 147 Ct.Cl. 256, 177 F.Supp. 251, 252 (1959) ( Heyer II ). In fact, by requesting proposals, the City entered into an implied or informal contract that it would fairly consider each bid in accordance with all applicable statutes. Nielsen & Co. v. Cassia and Twin Falls County Joint Class A Sch. Dist. 151, 103 Idaho 317, 319, 647 P.2d 773, 775 (Ct.App.1982); see also Swinerton & Walberg Co. v. City of Inglewood, 40 Cal.App.3d 98, 114 Cal.Rptr. 834, 837 (Ct.App.1974)(allowing recovery if the municipal authority breached an informal contract (requiring neither assent nor consideration) ... to award the public works contract to ... `the lowest responsible bidder' ); Paul Sardella Constr. Co. v. Braintree Hous. Auth., 3 Mass.App.Ct. 326, 329 N.E.2d 762, 767 (1975) (Many courts have held that it is an implied condition of every invitation for bids issued by a public contracting authority that each bid submitted pursuant to the invitation will be fairly considered in accordance with all applicable statutes.), aff'd, 371 Mass. 235, 356 N.E.2d 249 (1976); School Bldg. Comm. v. Commercial Union Ins. Co., 37 Mass.App.Ct. 911, 638 N.E.2d 499, 500 (1994) (invitation to bid upon certain conditions creates implied contract limiting bid solicitor to those conditions). As with any contract, this implied contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. Restatement (Second) of Contracts § 205 (1979); see also Watson Truck & Supply Co. v. Males, 111 N.M. 57, 60, 801 P.2d 639, 642 (1990). The concept of the implied covenant of good faith and fair dealing requires that neither party do anything that will injure the rights of the other to receive the benefit of their agreement. Denying a party its rights to those benefits will breach the duty of good faith implicit in the contract. Bourgeous v. Horizon Healthcare Corp., 117 N.M. 434, 438, 872 P.2d 852, 856 (1994) (citation omitted). The duty of good faith and fair dealing in the bidding process required that the City abide by the strictures of the Code and the Purchasing Manual. Specifically, the criteria provided by the City were an implied contract that if any bids were accepted, the acceptance would be based on those criteria and no others. PDS had every reason to believe that the City would not violate its own rules. The City, on the other hand, could not have been unaware that preparation of a bid on a multi-million dollar project would involve numerous foreseeable expenditures on the part of the bidder including travel, graphic and textual reproduction, labor, shipping and mailing, electronic communication, consulting services, secretarial services, and other professional services. PDS relied on a guarantee that any award would be based only on the four criteria published in the Request. It changed its position by incurring expenses in preparing to perform, in performing, or in foregoing opportunities to make other contracts. Restatement (Second) of Contracts § 344 cmt. a (1979). Had the city made a different guaranteethat locality would be a criterion for examplePDS's expenditures would have been different. It might have chosen not to bid at all. By unlawfully introducing, considering, and relying on a criterion not listed in the Request, the City breached an informal contract that it would follow the Code and the Purchasing Manual in considering each bid. See Sardella, 329 N.E.2d at 767. Thus, though no formal contract was ever concluded between the parties, the City's conduct was a breach of an implied contract for which damages will lie. [2] Cf. 10 McQuillin, supra, § 29.123.10, at 162 (The municipality may also be held liable in damages for misrepresenting specifications in its advertisement for bids.).
Judicial relief is available to the disappointed bidder when a municipality acts in an arbitrary and capricious manner and violates the integrity of the Code. Spiniello, 456 A.2d at 1202; 10 McQuillin, supra, § 29.86, at 549; see also Educational Assessments, 115 N.M. at 200-01, 848 P.2d at 1127-28 (discussing federal laws that provide remedies for disappointed bidders). It is not reasonable at this point to enforce the City's promise to award the contract to the top-ranked bidder. See Swinerton, 114 Cal.Rptr. at 838. Also, under the circumstances, injunctive relief is pointless. Nielsen, 103 Idaho at 319, 647 P.2d at 775. We believe the appropriate remedy is reliance damages. These damages compensate the bidder's interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made. Restatement (Second) of Contracts § 344(b) (1981). We therefore join other jurisdictions that in similar situations have awarded to the disappointed bidder the expenses incurred in preparing and submitting a bid. Nielsen, 103 Idaho at 319-20, 647 P.2d at 775-76 (allowing damages for time expended, overhead, and attorney fees on trial, but denying lost profit damages and attorney fees on appeal); State Mechanical Contractors, Inc. v. Village of Pleasant Hill, 132 Ill.App.3d 1027, 87 Ill.Dec. 532, 536, 477 N.E.2d 509, 513 (denying lowest responsive bidder damages for lost profits but permitting recovery of expenses incurred in preparing proposal when contract was awarded to nonresponsive bidder), appeal denied, 108 Ill.2d 590, 91 Ill.Dec. 401, 483 N.E.2d 887 (1985); Swinerton, 114 Cal.Rptr. at 838 (limiting bidder's damages to the expenses it incurred in its fruitless participation in the competitive bidding process); Sardella, 329 N.E.2d at 767 (proper measure of recovery is the reasonable cost of preparing the bid). The public has both economic and moral interests in assuring that government entities strictly adhere to the Code as well as their own published regulations. Swinerton, 114 Cal.Rptr. at 838. An award of money damages serves these interests. Future misconduct will be deterred by holding public entities accountable for their violations. Id.; see also Sardella, 329 N.E.2d at 767. Also, if bidders sense that the procurement process is inherently unfairthat the cards are stacked against themthey might forgo the bidding process and look to other sources of business. This would reduce the number of quality bidders and limit the choices available to the government entity. Sardella, 329 N.E.2d at 767-68 (quoting Heyer Products Co. v. United States, 135 Ct.Cl. 63, 140 F.Supp. 409, 412 (1956) ( Heyer I ), modified, 177 F.Supp. at 251 (1959)); See also Richard E. Speidel, Judicial and Administrative Review of Government Contract Awards, 37 Law & Contemp. Probs. 63, 67-68 (1972) ([I]f a pattern of award decisions exists which seem to deviate from the `rules of the game' and there is no effective way to improve or reverse the pattern, a realistic cost-benefit analysis might induce many firms to stop or cut back competition for government business and reallocate resources to other commercial markets.). Strict enforcement of procurement laws and penalties for their violation will serve the public interest in the widest competition among the greatest number of responsible bidders. Sardella, 329 N.E.2d at 767 (bidder whose award was rescinded in violation of statutory requirements).