Opinion ID: 2366553
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Heading Rank: 9

Heading: Whether a contract obtained through competitive bidding is void if it materially differs from the invitation to bid

Text: The second certified question asks this court to determine whether a contract obtained through competitive bidding is void when it materially differs from the contents of the invitation to bid. [4] UMC asserts that a local government has no discretion in awarding a contract if the bid varies materially from the invitation requirements, and that a contract that materially differs from the invitation to bid is void. Orion contends that the terms of the advertisement and the terms of the bid or contract do not need to be identical. While Nevada has never directly addressed whether a contract obtained through competitive bidding is void when it materially differs from the contents of the invitation to bid, in Faust v. Donrey Media Group, 95 Nev. 235, 237, 591 P.2d 1152, 1154 (1979), this court addressed a similar question when it held that [a]n awarding board has a duty to reject any bid materially varying from bid specifications. In explaining its decision, the court stated that [t]he rationale of this rule is to preserve the competitive nature of bidding by preventing unfair advantage to any bidder, or other conditions undermining the necessary common standard of competition. Id. at 238 n. 1, 591 P.2d at 1154 n. 1. This court has also held that [t]he purpose of bidding is to `save public funds' and guard against `favoritism, improvidence and corruption.' Richardson Constr. v. Clark Cty. Sch. Dist. 123 Nev. 61, 66, 156 P.3d 21, 24 (2007) (quoting Gulf Oil Corp. v. Clark County, 94 Nev. 116, 118, 575 P.2d 1332, 1333 (1978)). Other jurisdictions have taken the Faust rule a step further and determined that the resulting contract must also be in substantial accordance with the terms of the advertisement for bids. See Pascoe v. Barium, 247 Mich. 343, 225 N.W. 506, 507 (1929) (holding that the bid must conform to the specifications, and the contract to both, but to destroy the competitive character of the bid..., the variation must be substantial) (citing Andrews v. City of Detroit, 233 Mich. 79, 206 N.W. 514 (1925)); National Engineering & Cont. Co. v. City of Cleveland, 146 N.E.2d 340, 345 (Ohio Ct.Com.Pl.1957) (citing Pascoe, 247 Mich. 343, 225 N.W. 506, and Andrews, 233 Mich. 79, 206 N.W. 514); Wantland v. Anderson, 203 S.W.2d 787, 790 (Tex. Civ.App.1947) (holding that a variation between the contract as advertised and the one actually entered into ... must be substantial [in order to] render such contract void and illegal) (citing Pascoe, 247 Mich. 343, 225 N.W. 506); Platt Elec. Sup., Inc. v. City of Seattle, Div. of Pur., 16 Wash.App. 265, 555 P.2d 421, 430 (1976) (A public contract awarded pursuant to competitive bidding procedures must be substantially in accordance with the terms of the invitation to bid.); 64 Am.Jur.2d. Public Works and Contracts § 65 (2001 & Supp.2010). We conclude that a contract is void if it materially differs from the contents of the invitation to bid. The court's reasoning in Faust, and the cases the court relied upon in Faust, indicate that this court has already moved in this direction. See also Inge v. Board of Public Works, 135 Ala. 187, 33 So. 678, 682 (1903) (The basis of the bidding and the contract entered into should be the same, for otherwise the very object and purpose of the law in calling for competitive bidding might be thwarted.); Hillside Twp. v. Sternin, 25 N.J. 317, 136 A.2d 265, 268 (1957) ([A]ll bids must comply with the terms imposed, and any material departure therefrom invalidates a nonconforming bid as well as any contract based upon it.); Smith Tug & Barge Co. v. Columbia-Pacific Towing Corp., 250 Or. 612, 443 P.2d 205, 218 (1968) (We find that the variation was substantial and rendered the bid and the consequent lease invalid.). However, we note that it is well-established that the terms of the advertisement and the terms of the bid or contract do not need to be identical. Bud Mahas Const, v. Clark County School Dist., 767 F.Supp. 1045, 1048 (D.Nev.1991) ([M]inor variations from the specifications are not a basis to reject the bid....). Only where a contract contains substantial variations from bidding specifications is the contract void. 64 Am. Jur.2d Public Works & Contracts § 65 (2001 & Supp.2010); 13 Eugene McQuillin, The Law of Municipal Corporations § 37:107 (3d ed.2008). We agree that the terms of the advertisement and the terms of the bid or contract do not need to be identical. Nevertheless, the question of whether any variations between the invitation to bid and the contract in this case are material is a mixed question of law and fact not before this court, and we make no ruling regarding the facts of this case. So. Foods Group v. State, Dept. of Educ., 89 Hawai'i 443, 974 P.2d 1033, 1042 (1999). If the invitation to bid and the contract differ materially, then the contract is void. It is void, not voidable, because the local government exceeded its authority and was not authorized to make such a contract. 13 McQuillin, supra. § 37:107; 10A McQuillin, supra. § 29.104.20 (3d ed.2009). The Arizona Supreme Court has held that the County, in its contracts must act not only within the limits of the power granted it by the legislature, but must also comply with the statutory requirements prescribed by the legislature. Failure to do so precludes enforcement of the contract according to its terms. Mohave County v. Mohave-Kingman Estates, 120 Ariz. 417, 586 P.2d 978, 981 (1978). We agree with Arizona's reasoning. The local government must act within the limits of its power when forming contracts, and contracts whose terms materially differ from the terms of the invitation to bid exceed the local government's authority and are void. [5]