Opinion ID: 2613977
Heading Depth: 2
Heading Rank: 3

Heading: the city violated the procurement code and its own purchasing manual

Text: Purchasing by public entities in New Mexico is governed by the Procurement Code, NMSA 1978, §§ 13-1-28 to -199 (Repl. Pamp.1992 & Cum.Supp.1994) [hereinafter Code]. As required by Section 13-1-117.1, the City of Santa Fe has also adopted its own procurement regulations which are published in the Purchasing Manual. The Code applies to all nonfederal expenditures by state agencies and local public bodies for the procurement of items of tangible personal property, services and construction. Section 13-1-30. In resolving this matter we must compare the City's conduct with the strictures of the Code and the Purchasing Manual. The purposes of the Procurement Code are to provide for the fair and equitable treatment of all persons involved in public procurement, to maximize the purchasing value of public funds and to provide safeguards for maintaining a procurement system of quality and integrity. Section 13-1-29(C). Of all the interests involved in competitive bidding, the public interest is the most important. State ex rel. Educational Assessments Sys., Inc. v. Cooperative Educ. Servs. of N.M., Inc., 115 N.M. 196, 201, 848 P.2d 1123, 1128 (Ct.App.1993). An economical and efficient system of procurement directly benefits taxpayers. See Id. at 201, 848 P.2d at 1128. Through competitive bidding the municipality hopes to obtain the best product at the best price. See John J. Brennan Constr. Corp. v. City of Shelton, 187 Conn. 695, 448 A.2d 180, 184 (1982). Thus the Code protects against the evils of favoritism, nepotism, patronage, collusion, fraud, and corruption in the award of public contracts. Id. It is certainly in the public interest that the City abide by the procurement rules it has set for itself. Through the initial stages of the procurement process the City complied with the requirements of the Code and the Purchasing Manual. The City's Request was issued in accordance with Section 13-1-112(A) of the Code: Competitive sealed proposals, including competitive qualifications-based proposals, shall be solicited through a request for proposals which shall be issued and shall include the specifications for the services or items of tangible personal property to be procured, all contractual terms and conditions applicable to the procurement, the location where proposals are to be received and the date, time and place where proposals are to be received and reviewed. As mentioned above, the Request listed the relative weight to be given to the factors in evaluating proposals. Section 13-1-114. Locality is a criterion which the City may legitimately consider when evaluating proposals: The selection committee shall select, ranked in the order of their qualifications, no less than three businesses deemed to be the most highly qualified to perform the required services, after considering the following criteria together with any criteria, except price, established by the using agency authorizing the project: .... (4) proximity to or familiarity with the area in which the project is located; [and] (5) the amount of design work that will be produced by a New Mexico business within this state.... Section 13-1-120(B)(4) & (5). But locality was not one of the four weighted factors listed by the Request. See Request 20. PDS claims to have specifically inquired whether local firms would receive preference and was verbally informed they would not. Based on the four factors and other requirements in the Request, PDS submitted a responsive bid which conformed in all material respects to the requirements set forth in the invitation for bids. Section 13-1-84. The bids were ranked by a selection committee appointed to evaluate this specific project. See Request 4. Many procurement codes in other jurisdictions require that a contract award be made to the lowest responsible bidder who complies with the advertised proposals. See 10 McQuillin, supra, § 29.73, at 496. The City, however, may award a contract to the responsible offeror or offerors whose proposal is most advantageous to the City, taking into consideration the evaluation factors set forth in the request for proposal. Purchasing Manual § 23.14.1 (emphasis added). After considering the criteria in the Request, the selection committee ranked PDS's bid as the one most advantageous to the City. A contract was negotiated between PDS and the designee of [the] local public bodythe purchasing agent of the City. See § 13-1-122; Purchasing Manual § 23.14.2. The recommended contract was submitted to and unanimously approved by the Santa Fe Finance Committee. See Minutes of the City of Santa Fe Finance Committee 16-19 (June 29, 1992); Purchasing Manual § 23.14.3. Finally, the proposals submitted and the recommendation of award were brought before the Santa Fe City Council for final consideration. See Purchasing Manual § 23.14.4. Up to this point, the City adhered to the requirements of the Code and the Purchasing Manual.
In considering the contract with PDS, the City Council, as prescribed by the Purchasing Manual, could have responded to the recommended contract in one of six different ways: the Council could have approved it, tabled it, appointed a new selection committee, renegotiated the contract, disqualified the top-ranked bidder based on new information, or rejected all bids and readvertised for proposals. Purchasing Manual § 23.14.4. However, at its July 8, 1992 meeting the City Council did none of these things. Rather it committed two unlawful acts: it introduced a new factorlocalityin evaluating the proposals, and it awarded the contract to Mazria, the fourth-ranked bidder. The Code indicates that, in evaluating the eleven proposals, the City was required to apply the factors listed in the Request and no others. The award shall be made to the responsible offeror or offerors whose proposal is most advantageous to the local public body or legislative agency respectively, taking into consideration the evaluation factors set forth in the request for proposals. Section 13-1-117.1(B). The City's own regulations restrict its consideration of proposals even more explicitly: No criteria may be used in proposal evaluations that are not set forth in the request for proposal. Purchasing Manual § 23.14.1. Despite this clear rule, the City Council introduced the locality requirement. Its express concern was that the City should make the expertise we have at home work for this project. Council Minutes 8-9 (statement of Councilor Deborah Jaramillo). The award of the contract to Mazria was unlawful. The City was required to accept the bid most advantageous to the City, and it was forbidden from rejecting that bid and accepting another. See 10 McQuillin, supra, § 29.77, at 521; see also id. § 29.73, at 496-97 ([A]n award to other than the lowest bidder is prima facie erroneous and illegal.). The Purchasing Manual does state that, rather than approving the recommended contract, the City may [m]ake known information not available or not considered by the selection committee which would disqualify the top-rated firm. But the [a]ward may then be to the next rated firm, in descending order. Purchasing Manual § 23.14.4(d). This provision probably contemplates a situation like that of Conway Corporation v. Construction Engineers, Inc., 300 Ark. 225, 782 S.W.2d 36, 40 (1989) (city rejected low bid in good faith where previous experiences with low bidder were termed a fiasco), cert. denied, 494 U.S. 1080, 110 S.Ct. 1809, 108 L.Ed.2d 939 (1990). Nothing authorized the City to skip from the first to the fourth-ranked bidder. The City correctly argues that it may adopt new criteria after receiving bids. But it must do so properly. The Purchasing Manual provides that after the City has rejected all proposals it may order the request for proposal be re-advertized and order a [c]hange in the evaluation criteria that will be incorporated into the request for proposal. Purchasing Manual § 23.14.4(e)(2). The City did not follow this orderly progression. The City changed the rules in the middle of the game. PDS was misled because the City did not reveal the true weight it intended for the locality factor. PDS claims it would have completely restructured its proposal had it known the locality factor would be so significant.
The City attempted to rectify the situation during the July 29, 1992 City Council meeting by rescinding the Mazria contract and rejecting all bids. This, however, did not cure its previous unlawful actions. As we have indicated, if it so chose, the City had the legal authority to reject all the bids, but not under the circumstances presented here. Purchasing Manual § 23.14.4(e); NMSA 1978, § 13-1-131 (An invitation for bids, a request for proposals or any other solicitation may be canceled or any or all bids or proposals may be rejected in whole or in part when it is in the best interest of the state agency or a local public body.); 10 McQuillin, supra, § 29.77, at 520 (If the authorities are so empowered, they may reject all bids.). But the City rejected all bids after accepting the Mazria bid. The City cites the Kentucky opinion Ohio River Conversions, Inc. v. City of Owensboro for the proposition that municipalities have wide discretion in the exercise of acceptance or rejection, and where they reserve the right to reject, the courts will not disturb their actions based on mere technicality, even if made unwisely or under mistake. 663 S.W.2d 759, 761 (Ky.Ct.App.1984). In that case the municipality solicited bids for the purchase of a city-owned boat dock. Upon learning that the highest bidder intended to remove the boat dock to another city leaving some of the Owensboro boating public without space to harbor their craft, the municipality accepted the bid of the second-highest bidder. The highest bidder sued for specific performance. The court found that the municipality did not violate the procurement code. There is nothing in Ohio River that excuses the conduct of the City in the case before us. While it is true that a municipality has wide discretion to accept or reject offers, that discretion does not include unlawful departure from its own rules and state procurement statutes. The City also offers Weber v. City of Philadelphia, 437 Pa. 179, 262 A.2d 297 (1970), as support for its rejection of all the bids. In Weber the City of Philadelphia solicited bids for a General Concession contract for a proposed sports stadium. Sealed bids were received and opened. Upon the recommendation of Philadelphia's Stadium Committee, all bids were rejected and new specifications were drawn up. Id. at 298-99. The Philadelphia Home Rule Charter, § 8-200(2)(b), permits the rejection of all bids if it is in the interest of the City so to do. 262 A.2d at 300. The highest bidder brought suit to rescind the rejection and enjoin further solicitation for bids. Id. at 299. The Pennsylvania Supreme Court stated that it would uphold the rejection of the bids in the absence of fraud, collusion, bad faith or arbitrary action on the part of the City. Id. The court found these factors absent. Id. at 302. The facts indicated that the City's conduct was sensible and in good faith. For example, the original solicitation did not include a proposal to join the operation of general concession stands with the operation of the more prestigious Stadium Club. Id. at 300. The situation in Weber would have been quite different had Philadelphia acted like the City of Santa Fe by considering bids, introducing a new evaluation factor, accepting the fourth-ranked bid, and then rejecting all bids. No one disputes that the City has authority to reject all bids. But it must do so in a fair manner as specified by the Code and the Purchasing Manual. In Weber there was no suggestion that Philadelphia failed to follow its own rules in rejecting all the bids it had received. The cases cited by the City do not support its arguments.
The City's conduct in this matter was arbitrary and capricious. It could not evade the Code and the Purchasing Manual under the color of a rejection. 10 McQuillin, supra, § 29.77, at 521. As defined by various courts the words arbitrary and capricious are used synonymously. Cf. Webb v. Dameron, 219 S.W.2d 581, 584 (Tex.Civ.App.1949). In New Mexico they are frequently combined into a single term arbitrary and capricious. See, e.g., Behles v. New Mexico Pub. Serv. Comm'n (In re Timberon Water Co.), 114 N.M. 154, 156, 836 P.2d 73, 75 (1992); Snyder Ranches, Inc. v. Oil Conservation Comm'n, 110 N.M. 637, 639, 798 P.2d 587, 589 (1990). An arbitrary and capricious act is a willful and unreasonable action, without consideration and in disregard of facts or circumstances. McDaniel v. New Mexico Bd. of Medical Examiners, 86 N.M. 447, 449, 525 P.2d 374, 376 (1974) (quoting Smith v. Hollenbeck, 48 Wash.2d 461, 294 P.2d 921, 293 (1956)); it is one lacking a standard or norm, Webster's Third New International Dictionary of the English Language Unabridged 333 (3d ed. 1976) [hereinafter Webster's Third ]. Because the City departed from the explicit statutory standards of the Code and the Procurement Manual and was not governed by any fixed rules, City of Dayton ex rel. Scandrick v. McGee, 67 Ohio St.2d 356, 423 N.E.2d 1095, 1097 (1981) (quoting Black's Law Dictionary 96 (5th ed. 1979)), it acted without an adequate determining principle, United States v. Carmack, 329 U.S. 230, 246 n. 14, 67 S.Ct. 252, 259 n. 14, 91 L.Ed. 209 (1946) (quoting Funk & Wagnalls New Standard Dictionary of the English Language ___ (1944)). Introducing the locality requirement in the last stage of the bidding process was an unrestrained volitional act on the part of the City Council. See City of Little Rock v. Parker, 241 Ark. 381, 407 S.W.2d 921, 924-25 (1966); Webb, 219 S.W.2d at 584 (stating that an arbitrary act is one depending on the will alone). In short, the City's conduct when viewed in light of the whole record did not have a rational basis. Perkins v. Department of Human Servs., 106 N.M. 651, 655, 748 P.2d 24, 28 (Ct.App.1987); see Webster's Third 110 (based on random or convenient selection or choice rather than on reason or nature.). We hold that all the acts in question by the Cityintroducing a locality requirement after the bids were opened, awarding the contract to the fourth-ranked bidder, and rejecting the proposals after making a contract awardwere arbitrary and capricious. Had the City simply rejected all proposals at any point before making an award, this matter would not be before us. In the abstract it may seem inconsequential that the City didn't follow the procurement rules in the right order: it should have rejected all the bids and then introduced the locality requirement instead of the other way around. But the City's conduct has very serious implications. The Code and the Procurement Manual are designed to preclude even the appearance of impropriety. By its actions the City defeated the object and integrity of the competitive bidding process. Spiniello Constr. Co. v. Town of Manchester, 189 Conn. 539, 456 A.2d 1199, 1201 (1983); cf. 10 McQuillin, supra, § 29.77, at 521 (In exercising the power to reject any or all bids, and proceeding anew with the awarding of the contract, the officers cannot act arbitrarily and capriciously.). The conduct of the City warrants our review of this matter. See Spiniello, 456 A.2d at 1201; 10 McQuillin, supra, § 29.123, at 160. We now consider the question of damages.