Opinion ID: 3153634
Heading Depth: 2
Heading Rank: 1

Heading: West Virginia Public Procurement Laws

Text: The Purchasing Division within the Department of Administration oversees and provides purchasing services to the various State agencies. W.Va. Code § 5A-3-1 (2015). The goal is to “ensure the fair and equitable treatment of all persons” who deal with the procurement system of the State of West Virginia. W.Va. Code § 5A­ 3-1(a)(6). Public procurement laws protect the citizens and businesses of this State by safeguarding the purchasing system to “obtain in a cost-effective and responsive manner the commodities and services required[.]” W.Va. Code § 5A-3-1(a)(10). These laws were enacted to ensure that tax dollars for public works are spent wisely and to guard against public officials entering into contracts because of favoritism. See generally SE/Z Constr., L.L.C. v. Idaho State Univ., 89 P.3d 848, 853 (Idaho 2004) (holding purpose of competitive bidding statutes is to safeguard public funds and prevent favoritism, fraud and extravagance in their expenditure). One of the overriding purposes of our procurement laws is “to maximize to the fullest extent practicable the purchasing value of public funds[.]” W.Va. Code § 5A-3-1(a)(7). The essential safeguard of competitive 8 bidding is to maintain quality and integrity in the procurement system. W.Va. Code § 5A­ 3-1(a)(9). With respect to government construction contracts, the Legislature has specifically prescribed the conditions upon which it will permit such work to be done in the West Virginia Fairness In Competitive Bidding Act. W.Va. Code §§ 5-22-1 to -2 (2015). The State must solicit competitive bids for every construction project exceeding $25,000 in total cost. Id. § 5-22-1(c). 6 All bids shall be open in accordance with the provisions set forth in West Virginia Code § 5-22-2, except design-build projects which are governed by West Virginia Code § 5-22A-1 to -16.7 “Following the solicitation of 6 West Virginia Code § 5-22-1 provides four exceptions not applicable here. 7 The Design-Build Procurement Act, West Virginia Code 5-22A-2, provides the following definitions: (3) “Design-build” is defined as providing responsibility within a single contract for design, construction or alteration of a building or buildings, together with incidental approaches, structures and facilities to be constructed, in which services within the scope of the practice of professional engineering or architecture, as defined by the laws of the State of West Virginia, are performed by an engineer or architect duly licensed in the State of West Virginia and in which services within the scope of construction contracting, as defined by the laws of the State of West Virginia, are performed by a contractor qualified and licensed under the applicable statutes. The design-build method of construction may not be used for any other construction projects, such as highway, water or sewer projects. 9 bids, the construction contract shall be awarded to the lowest qualified responsible bidder who shall furnish a sufficient performance and payment bond.” W.Va. Code § 5­ 22-1(d) (emphasis added). However, the State “may reject all bids and solicit new bids on the project.” Id. Under the plain language of the statute, an agency has two options following the solicitation of bids; it may reject all bids and solicit new bids on the project or award the construction contract to the lowest qualified responsible bidder. The “lowest qualified responsible bidder” is the bidder that bids the lowest price and meets the requirements in connection with the bid solicitation. W.Va. Code § 5-22-1(b)(1).8 When awarding the contract, the Director of Purchasing may “[w]aive minor irregularities in bids or specifications” when he or she “determines such action to be appropriate[.]” W. Va. Code R. § 148-1-4.6. In this case, the Agency elected to award the contract based on the bids submitted even after it learned of the defect in the bid form because it wanted to move 8 West Virginia Code § 5-22-1(b)(1) further provides that: The bidder must certify that it: (A) Is ready, able and willing to timely furnish the labor and materials required to complete the contract; (B) Is in compliance with all applicable laws of the State of West Virginia; and (C) Has supplied a valid bid bond or other surety authorized or approved by the contracting public entity. 10 forward with the renovation project. Therefore, the pivotal question before it was whether MCS was the lowest qualified responsible bidder. Had the bid form contained a section for the contractors to list appropriate references, the Agency would have considerable leeway to determine whether a bidder was the best contractor for the job. The Agency had the prerogative to establish objective prequalification standards premised upon a contractor’s technical competence and experience constructing similar facilities in order to determine if the bidder was qualified and responsible. We therefore reject MCS’s argument that when specified construction services are sought from licensed, bonded contractors, an agency must make the award to the low cost bidder pursuant to West Virginia Code § 5-22-1(d). We agree that a bidder holding the requisite contractors’ license is “qualified.” However, the statute has the phrase “lowest qualified responsible bidder.” Id. If MCS’s argument were adopted, then the word “responsible” would be read out of the statute. 9 See Syl. Pt. 4, Osborne v. United States, 211 W. Va. 667, 668, 567 S.E.2d 677, 678 (2002) (stating each word of statute should be given some effect and undefined words will be given their common, ordinary and accepted meaning). Given the common meaning of the word, “responsible” relates to more than a showing that the bidder holds the requisite license. A “responsible 9 MCS questions the efficacy of any reference requirement because it could tilt the playing field against startup construction companies even when they are properly licensed and bonded. We do not question the wisdom of this legislative enactment especially when both contractors in this case are experienced. This Court does not issue advisory opinions. See State ex rel. Morrisey v. W.Va. Office of Disciplinary Counsel, 234 W. Va. 238, 246, 764 S.E.2d 769, 777 (2014). 11 bidder” is a contractor “who possesses the requisite skill, judgment, and integrity necessary to perform the contract requested, and who has the financial resources and ability to carry the task to completion.” Black’s Law Dictionary 1506 (10th ed. 2014). We now return to the Agency’s decision to award the contract to Wiseman. The witnesses stated they had no choice but to disqualify MCS because they could not waive the qualification statement because it was a material requirement in their eyes. However, the Agency’s behavior contradicts this position; it did not rely upon the qualification statement at all. Furthermore, the Agency offers no legal support for its argument that it could not waive this irregularity. As discussed above, the Director of Purchasing may waive minor irregularities in bids or specifications pursuant to West Virginia Code of State Rules § 148-1-4 (2015) as part of the decision to award a government construction contract to the “lowest qualified responsible bidder,” as defined by West Virginia Code § 5-22-1(b)(1) (2015), so that the purchasing value of public funds is maximized to the fullest extent practicable. However, he or she may not treat substantive requirements of the public procurement laws, the advertisement for bids, or the bid forms as mere informalities in order to justify the decision to waive a deviation in a bid.10 10 It is well settled that an agency cannot waive substantive requirements and is required to reject bids which vary materially from the specifications set forth in the published request for proposal. W.Va. Code §§ 5-22-1(g) and 5-22-2(b); see e.g., Entech (continued . . .) 12 In the present case, the irregularity in the bids was caused by the Agency’s error. The bid documents mistakenly provided that the form included a section in which the qualification statement should be listed. Technically, no bidder could meet that requirement without going outside the bid form. In fact, the bid solicitation was so flawed that half of the contractors who responded ignored the instruction as an obvious mistake. We therefore find that the Agency had the discretion to waive the bid requirement of a qualification statement. Importantly, Wiseman does not assert its bid would be any different or that MCS could not provide a list of references. Therefore, MCS would not gain any competitive advantage if the requirement was waived. Moreover, any such waiver would work no prejudice to the rights of the public for whom the Agency serves. B. Judicial Review of an Agency’s Decision to Award a Contract Corp. v. City of Newark, 798 A.2d 681, 691 (N.J. Super.Ct. Ch. Div. 2002) (“To be accepted, bid proposals must not materially deviate from the specifications set forth by the contracting agency.”); accord Gunderson v. Univ. of Alaska, Fairbanks, 922 P.2d 229, 235 (Alaska 1996). “A variance is material if it gives the bidder a substantial advantage over other bidders and thereby restricts or stifles competition.” Chris Berg, Inc. v. State, Dep’t of Transp. & Pub. Facilities, 680 P.2d 93, 94 (Alaska 1984). In a bid for a construction project, not every variation from the instructions or specifications will destroy the competitive character of the bid. . . . To have that effect, the variation from the instructions or specifications must be substantial, and to be substantial, it must affect the amount of the bid and must give the bidder an advantage or benefit not allowed to other bidders. Wilson Bennett, Inc. v. Greater Cleveland Reg’l Transit Auth., 588 N.E.2d 920, 925 (Ohio Ct.App. 1990). 13 In Ginsberg, we discussed the breadth of discretion that courts should give an agency when awarding a government contract to the lowest qualified responsible bidder. See Syl. Pt. 3, Ginsberg, 163 W.Va. at 647, 259 S.E.2d at 620 (“A State agency which awards a public contract upon criteria other than price is clothed with a heavy presumption that the contracting agency has properly discharged its duties and exercised discretionary powers in a proper and lawful manner; accordingly, the burden of proof in any action challenging the award of a contract by an unsuccessful bidder or a taxpayer is upon the challenger who must show fraud, collusion, or such an abuse of discretion that it is shocking to the conscience.”). We are cognizant that Ginsberg involved the challenge of an unsuccessful bidder to an agency’s decision to award a design-build contract for a new computer system.11 In Ginsberg, we declined to second guess the agency’s decision considering the complexity and subjective nature of that assessment. Important to our analysis herein, this Court distinguished between court intervention into the substantive, as opposed to the 11 West Virginia Code 5-22A-2, provides: (4) “Design-build contract” means the contract between an agency and a design-builder to furnish the architecture, engineering, and related services as required, for a given public project, and to furnish the labor, materials and other construction of services for the same public project. A design-build contract may be conditional upon subsequent refinements in scope and price, and may permit the agency to make changes in the scope of the project without invalidating the design-build contract. 14 procedural, parts of a government body’s decision making process. As recognized by the United States District Court in Mid Atlantic Storage System, Inc. v. City of Milton, 903 F.Supp. 995 (S.D. W.Va. 1995), Ginsberg admonishes courts to “not substitute their judgment” for that of the agency in cases in which subjective factors beyond price come into play.” Id. at 997 (emphasis added). Therefore, when evaluating bids on design-build contracts, agencies “are not required to accept the lowest price where service, delivery dates, continuity in supply, and other factors not directly related to cost are involved, particularly where these elements have a far greater impact upon the efficiency of State government than minor differences in price.” Ginsberg, 163 W.Va. at 659, 259 S.E.2d at 626. The Lottery building renovation at issue in this case was not a design-build project. Rather, the Lottery hired its own architect to design and specify the renovation. Contractors submitted fixed-price bids to complete the work after reviewing the 700-page project manual prepared by the architect and the 70-page bid solicitation documents. MCS did not file suit to challenge the substantive aspect of the Agency’s decision making process; the parties agree that both contractors are well respected in the construction industry and could do the work required for the project. MCS challenged the rationality of the Agency’s bid process and alleged its low bid was disqualified for an inconsequential reason. 15 Therefore, in this appeal we are asked to review the Agency’s decisionmaking process that lead to the disqualification of MCS’s bid when the Agency acknowledged procedural defects in the bid solicitation. In Ginsberg, we emphasized that an agency’s process of making decisions should be rational. “There is no question that a bidder who goes to the expense of preparing a complex proposal has the right to rely upon both the contracting authority’s integrity and intelligent use of discretion.” Id. at 657, 259 S.E.2d at 625. It is clear from Ginsberg that West Virginia follows the general rule of vesting an agency with discretion subject to judicial review and this tenet applies to fixed-price government construction contracts. See generally, Rochester City Lines, Co. v. City of Rochester, 868 N.W.2d 655, 660 (Minn. 2015) (applying unreasonable, arbitrary, or capricious standard of review to competitive bidding process requires courts to examine bidding procedures to ensure they provide fair process and incorporate sufficient controls to safeguard against abuses”); Chris Berg, Inc., 680 P.2d at 94 (stating determination by public agency of responsiveness of bid is within agency’s discretion, subject, on judicial review, to ascertainment there was reasonable basis for decision). In the area of government contracts, federal courts have developed standards to guide the exercise of judicial review over procurement decisions by federal agencies. See, e.g., Impresa Construzioni Geom. Domenico Garufi v. U.S., 238 F.3d 1324, 1332-33 (Fed. Cir. 2001) (recognizing bid award may be set aside if procurement official’s decision lacked rational basis; reviewing courts must determine whether contracting agency provided coherent and reasonable explanation of its exercise of 16 discretion and disappointed bidder bears heavy burden of showing award decision had no rational basis). Because the federal standards have the same basic objectives of eliminating favoritism and fraud in procurement decisions and ensuring the good-faith conduct of agency officials in securing public contracts, they are instructive in determining whether the decision of an agency was unreasonable, arbitrary, or capricious. We hereby hold that a state agency which awards a public contract to the lowest qualified responsible bidder under the West Virginia Fairness In Competitive Bidding Act, West Virginia Code §§ 5-22-1 to -2 (2015), is clothed with the presumption that it has properly discharged its duties. Accordingly, the burden of proof in an action challenging the award of a contract by an unsuccessful bidder or a taxpayer is upon the challenger, who must show the agency’s actions were arbitrary, capricious, or an abuse of discretion. In conducting a review of the competitive bidding process, courts should consider whether there is a rational basis for the administrative decision. This standard requires courts to examine the bidding procedures utilized to ensure they provided a fair process and incorporated sufficient controls to safeguard against abuses. To properly analyze whether there was a rational basis for an agency’s determination, courts should weigh two important principles. When an agency acts in a fair and legal manner and within the reasonable exercise of a sound discretion, then courts should not interfere with its decision to award a contract. “Public administration would be hamstrung if courts were free to second-guess reasonable administrative 17 decisions.” Hous. Auth. of City of Opelousas, La. v. Pittman Const. Co., 264 F.2d 695, 697-98 (5th Cir. 1959). On the other hand, and no less important, “is the public interest of the state in securing honest competition and in protecting taxpayers from the evils of favoritism and high prices in the letting of contracts for public works.” Id. Our decision depends on accommodating these two principles. On the unique facts presented in this case, we find the public interest of ensuring that tax dollars for public works are spent wisely predominates over the Agency’s stringent adherence to faulty bid specifications. See Boh Bros. Const. Co. v. Dep’t of Transp. & Dev., 698 So.2d 675, 678 (La. Ct. App. 1997) (“To deny a public entity the power to waive insignificant deviations in order to select a low bid on every public works project is contrary to the interests of the taxpaying citizens of this state.”). It is difficult for this Court to avoid the conclusion that the Agency showed a complete lack of intelligent use of its discretion. Employing the agency’s analysis, MCS’s failure to attach a separate sheet of references to the bid form was fatally dispositive yet, at the same time, utterly meaningless; this factor was the sole basis to disqualify MCS’s bid even though the Agency readily admitted that it would not have contacted those references because the architect knew the contractors. Not only was the Agency’s decision nonsensical, it was contrary to the underlying policy of the public procurement laws. By any reasonable standards, such action offends one’s sense of fair play and was an arbitrary abuse of discretion inconsistent with the letter and the spirit of our public procurement laws. Therefore, this Court rejects the argument that the Agency 18 appropriately exercised its discretion when it awarded the construction contract to Wiseman.