Opinion ID: 2691679
Heading Depth: 1
Heading Rank: 4

Heading: Exercise-of-Discretion Analysis

Text: {¶ 21} Although we reject appellants’ characterization of this issue as a matter of preemption, appellants’ position is supported by an alternate rationale. On the record, we find that the board failed to exercise sound discretion with respect to the manner in which it applied its evaluation criteria to the bid submitted by The Painting Company. Not only did the board misapply one of its evaluation criteria to determine that The Painting Company was not the lowest and best bidder for the Huntington Park contract, but it relied on its misapplication of that criterion to exclude consideration of all other evaluation criteria contained in its policy, thereby improperly disqualifying The Painting Company’s bid from consideration for the Huntington Park contract. {¶ 22} In determining the best bidder for a local public works contract, a public authority has considerable latitude in making its decision. Cedar Bay Constr., Inc. v. Fremont (1990), 50 Ohio St.3d 19, 21-22, 552 N.E.2d 202. As a part of this broad discretion, a public authority may consider all relevant factors in its evaluation of which submitted bid is best. See R.C. 9.312(A); Rein Constr. Co. v. Trumbull Cty. Bd. of Commrs. (2000), 138 Ohio App.3d 622, 629, 741 N.E.2d 979; Prime Contrs., Inc. v. Girard (1995), 101 Ohio App.3d 249, 258, 655 N.E.2d 411. This discretion is not vested in the courts, and the courts cannot interfere unless it clearly appears that the public authority is abusing the discretion so vested in it. Cedar Bay, 50 Ohio St.3d at 21, 552 N.E.2d 202. {¶ 23} To aid in the evaluation process, a public authority may establish evaluation criteria that supplement the statutory criteria for reviewing a bid. A 8 January Term, 2010 bidder’s history of compliance with prevailing-wage laws could be among the criteria for a public authority to consider. In fact, to the extent a public authority is required to comply with the prevailing-wage laws, it may be error for a public authority to fail to consider a bidder’s record in this regard. See, e.g., R.C. 4115.133(C) (no public authority shall award a public works contract to a contractor whose name appears on the secretary of state’s list of contractors who have violated certain prevailing-wage laws). {¶ 24} Nevertheless, once a public authority has adopted supplemental evaluation criteria, it is then obligated to follow and apply those criteria within its permitted zone of discretion. The presumption in contract-bidding litigation is that the public authority performed its duties in a regular and lawful manner. Cedar Bay, 50 Ohio St.3d at 21, 552 N.E.2d 202. The wide discretion vested in the public authority is not abused when the public authority exercises will, judgment, or reason in its award of a contract to a bidder, but this discretion is neither “unlimited nor unbridled.” Dayton ex rel. Scandrick v. McGee (1981), 67 Ohio St.2d 356, 360, 21 O.O.3d 225, 423 N.E.2d 1095. Accordingly, a disappointed bidder must present clear and convincing evidence to demonstrate that the public authority abused its discretion in awarding a contract. State ex rel. Shafer v. Ohio Turnpike Comm. (1953), 159 Ohio St. 581, 590, 50 O.O. 465, 113 N.E.2d 14; Cleveland Constr., Inc. v. Ohio Dept. of Adm. Servs., Gen. Servs. Adm. (1997), 121 Ohio App.3d 372, 384, 700 N.E.2d 54. {¶ 25} In this case, The Painting Company has demonstrated with clear and convincing evidence that the board abused its discretion by misapplying one of its evaluation criteria, Section 8.2.4.15, to determine that the bid submitted by The Painting Company was not the lowest and best bid for the Huntington Park contract. Section 8.2.4.15 requires the lowest responsive bidder to provide all information that “the Project Representative deems appropriate to the 9 SUPREME COURT OF OHIO consideration of factors showing that such Bidder’s bid is best, including without limitation the following: {¶ 26} “   {¶ 27} “8.2.4.15. Information that the Bidder has not been debarred from public contracts or found by the state (after all appeals) to have violated prevailing wage laws more than three times in a two-year period in the last ten years.” {¶ 28} The question is whether The Painting Company has been “debarred from public contracts or found by the state (after all appeals) to have violated prevailing wage laws” within the specified time period. {¶ 29} Our analysis begins with the observation that the term “violated” as contained in Section 8.2.4.15 is imprecise. Neither the board’s contractingstandards criteria nor the Project Manual provides a definition of “violation.” Nor is there a definition of “violation” in the prevailing-wage statutes of R.C. Chapter 4115, or any indication of whether “violation” refers only to intentional violations or to any violation no matter how unintended or inconsequential. Even the chief of the Wage and Hour Bureau opined that the “quest for a definition of ‘violation’ cannot be secured through a review of [R.C. Chapter 4115] in and of itself. Some would argue that the mere fact that back wages are owed constitutes a violation. However, under Section 4115.13(C), that is not necessarily accurate.” Although there is no formal definition of the term “violation” in either the county policy or state statutes, we conclude that the plain sense of the term “violat[ion],” as used in Section 8.2.4.15, refers to the situation in which the director makes a formal finding that a contractor or subcontractor intentionally violated the prevailingwage laws, and all appeals are exhausted. {¶ 30} The process for ascertaining whether a contractor or subcontractor has violated prevailing-wage laws supports this meaning of the term. For instance, when the director completes an investigation, a recommendation is 10 January Term, 2010 issued. R.C. 4115.13(B). This recommendation is the first step in prosecuting potential violations; a recommendation alone does not give rise to penalties or equate to a finding of intentional misconduct. That recommendation may lead, in various ways, to a decision by the director that a violation has occurred, either intentional or unintentional. R.C. 4115.13(B), (C), (D), and (G). The director will then determine whether a sanction is appropriate. R.C. 4115.13(D) and 4115.133. A finding that a wage underpayment has occurred does not automatically equate to a finding of an intentional prevailing-wage violation. For instance, the wage underpayment could be excused upon restitution under R.C. 4115.13(C). {¶ 31} Nor do settlement agreements that resolve prevailing-wage disputes between a contractor and the director constitute evidence of a violation. The settlement agreement represents a negotiated conclusion to a dispute. Because the dispute was resolved through negotiation and consequently removed from the statutory decision-making process, no administrative or judicial authority ever made a final determination that any prevailing-wage laws were violated, as contemplated in Section 8.2.4.15 by the phrase “found by the state (after all appeals).” Cf. State ex rel. Dillard Dept. Stores v. Ryan, 122 Ohio St.3d 241, 2009-Ohio-2683, 910 N.E.2d 438, syllabus (a voluntary dismissal with prejudice is not a judicial determination that workers’ compensation payments were made to an employee in error, when no court has entered a judgment to that effect). {¶ 32} In this case, the board applied Section 8.2.4.15 to mean that any noncompliance with prevailing-wage laws by the bidder during the applicable time period was the equivalent of a prevailing-wage violation. The board never considered that under R.C. 4115.13(C), wage underpayments resulting from mere mistake are excused from prosecution as a violation. {¶ 33} The board’s rejection of The Painting Company’s bid is not consistent with the term “violated” as used in Section 8.2.4.15. Section 8.2.4.15, 11 SUPREME COURT OF OHIO for instance, does not require disclosure of information pertaining to instances of noncompliance with the prevailing-wage laws. Rather, it requires disclosure of information when the bidder “violated” those laws. Moreover, the disclosure requirement is further limited to violations found by the state “after all appeals.” There is no evidence that The Painting Company has violated the prevailing-wage laws within the meaning of Section 8.2.4.15 or the prevailing-wage statutes because after all appeals, the director never found under R.C. 4115.13 that The Painting Company violated the prevailing-wage laws. The Painting Company is not included on the secretary of state’s listing of contractors and subcontractors who are debarred from public works projects, as set forth in R.C. 4115.13 and 4115.133. {¶ 34} Moreover, in the settlement agreement, The Painting Company was permitted to expressly disclaim, without any contradiction by the department, any liability or wrongdoing in connection with wage underpayments.3 This situation is analogous to that in Dillard, because without debarment or a finding by the state (after all appeals) of a prevailing-wage violation, the settlement agreement cannot evidence any such violations within the meaning of the 3. { ¶ a} The settlement agreement provides: { ¶ b} “WHEREAS, The Painting Company disputes any liability for the underpayment of prevailing wages   ; and { ¶ c} “ { ¶ d} “WHEREAS, [the Department of] Commerce and The Painting Company have successfully negotiated a settlement of the dispute without any acknowledgement of liability by The Painting Company; { ¶ e} “NOW THEREFORE,    the Department of Commerce, on behalf of the State of Ohio, hereby releases and forever discharges The Painting Company    from any and all    penalties    arising out of or in any way concerning, directly or indirectly, claims against The Painting Company for the alleged underpayment of prevailing wages by The Painting Company [on specified projects]. { ¶ f} “ { ¶ g} “It is understood and agreed by [the Department of] Commerce that this release constitutes a compromise settlement of the disputed claim or claims, and that payment by The Painting Company of the above-stated settlement is not to be construed as and does not constitute an admission of liability or wrongdoing on the part of The Painting Company.” 12 January Term, 2010 prevailing-wage statutes for purposes of Section 8.2.4.15. See id., 122 Ohio St.3d 241, 2009-Ohio-2683, 910 N.E.2d 438. {¶ 35} Based on the foregoing, the board misapplied Section 8.2.4.15 of the evaluation criteria to the bid submitted by The Painting Company. {¶ 36} The Painting Company has also demonstrated with clear and convincing evidence that the board failed to exercise sound discretion because in erroneously disqualifying The Painting Company’s bid, it relied on a mistaken application of a single criterion without considering any of the remaining criteria. {¶ 37} The Painting Company was the lowest bidder on the project by a significant amount. The Painting Company also has a record of successful performance in projects similar to the Huntington Park project. And the Huntington Park construction manager and the board’s own representative recommended that The Painting Company receive the contract. {¶ 38} Nevertheless, these recommendations were apparently dismissed by the board in determining that The Painting Company was ineligible to bid on the Huntington Park project. There is no indication that the board relied on any of the other evaluation criteria to find that The Painting Company was not the best bidder for the Huntington Park project. The trial court also found it notable that the board failed to provide any evidence justifying its decision to reject the recommendations of its own construction manager and representative. {¶ 39} From all appearances, the board relied on its misapplication of Section 8.2.4.15 as a sole gate-keeping criterion rather than considering its evaluation criteria as a whole when it disqualified the bid submitted by The Painting Company for the Huntington Park project. This departure constituted an abuse of discretion.