A ruling by the Ohio Supreme Court Wednesday adds a new dimension to the dispute between the Ohio Inspector General’s Office and the Ohio Department of Transportation (ODOT) over bid preparation costs, and puts the Ohio solicitor general’s office on the losing side of the private contractor debate.
In April 2008, the University of Akron (UA) solicited bids for construction on its new InfoCision football stadium. Meccon Inc. submitted a bid for the heating, ventilation and air conditioning (HVAC) work, but the university awarded the contract and other portions of the project to a second bidder, S.A. Communale. Meccon filed suit in the Ohio Court of Claims and alleged UA had violated the state’s competitive bidding law as well as its own project proposal. The company sought a temporary restraining order and temporary and permanent injunctions to halt construction, also requesting monetary damages to cover bid preparation costs and other alleged damages resulting the university’s failure to award the HVAC contract to Meccon.
UA argued that the Court of Claims lacked jurisdiction to hear the case, and the court granted its motion to dismiss, finding a disappointed bidder on a public improvement contract may only obtain injunctive relief, as opposed to monetary damages, and that the Court of Claims may only hear monetary claims against the state.
On appeal, the 10th District Court of Appeals reversed and remanded the case to the Court of Claims, saying a disappointed bidder can recover bid preparation costs from the state, and that because such costs are monetary damages, the Court of Claims does have jurisdiction to hear the type of claims Meccon asserted.
Solicitor General Benjamin Mizer appealed UA’s case to the Supreme Court, which heard oral arguments in January.
In Wednesday’s unanimous 6-0 decision, the Court affirmed the judgment of the appeals court and ruled that when a rejected bidder establishes that a public authority violated competitive-bidding laws, the contractor may recover reasonable bid-preparation costs if it promptly sought and was denied an injunction pending a resolution of the dispute, and if it is later determined the bidder was wrongfully rejected and injunctive relief is no longer available.
Writing for the Court, Justice Robert Cupp rejected UA’s claim that the Court’s 2006 decision in Cementech Inc. v. Fairlawn had precludes disappointed bidders on public improvement projects from recovering monetary damages. He said when the Court found a bidder cannot recover lost profits after an unlawful bid process, it did not address the kind of grievance advanced by Meccon.
“We decline to extend the holding in Cementech to this circumstance,” he said. “We reach this conclusion because the reasons articulated in Cementech for denying recovery of lost profits as damages do not carry over to the circumstances in which bid-preparation costs are sought after denial of a timely application for injunctive relief. A significant distinguishing factor in those circumstances is the lack of any other remedy for a public authority’s wrongful conduct….
“We hold that when a rejected bidder establishes that a public authority violated state competitive-bidding laws in awarding a public-improvement contract, that bidder may recover reasonable bid-preparation costs as damages if that bidder promptly sought, but was denied, injunctive relief and it is later determined that the bidder was wrongfully rejected and injunctive relief is no longer available.”
Cupp noted, however, that the 10th District never reached the question of whether the company’s request for injunctive relief was timely, which would determine its eligibility for bid preparation costs. The Court therefore remanded the case for further proceedings on the timeliness of Meccon’s claims.
Cupp was joined by Justices Paul Pfeifer, Evelyn Lundberg Stratton, Maureen O’Connor, Terrence O’Donnell and Judith Ann Lanzinger. Chief Justice Eric Brown did not participate in the case.
The full opinion can be found at www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-3297.pdf.