Janet Werkman, Esq., and Lisa Price, Esq.,
Office of the Inspector General
This article was originally prepared for and appeared in a Massachusetts Continuing Legal Education, Inc. publication, Public Procurement Contracts, 1996. All rights reserved.
The purpose of this article is to guide procurement officials and local counsel in the assessment of bid protests under M.G.L. c. 30B.1 Following a discussion of the role of the Office of the Inspector General (OIG) and the legal framework for a civil action challenging a contract award, the article presents an analysis of Massachusetts court decisions interpreting public procurement law. This analysis sets out the principles applied by Massachusetts courts to two of the major issues that lead to bid protests: the adequacy of the specifications used to solicit competition and the discretion of the awarding authority to reject some or all of the bids received.
M.G.L. c. 30B and the Role of the Office of the Inspector General
M.G.L. c. 30B, the Uniform Procurement Act, prescribes the procedures to be used by local governmental bodies, including cities, towns, counties, local authorities, and districts, to solicit competition for contracts for supplies and services, to dispose of surplus supplies, and to acquire or dispose of real property.2 Enacted in 1990, M.G.L. c. 30B was modeled on the American Bar Association's Model Procurement Code. The statute was drafted by the OIG in collaboration with the Massachusetts Association of Public Purchasing Officials, the Massachusetts Association of School Business Officials, the City Solicitors and Town Counsel Association, and others.
M.G.L. c. 30B is based on the premise that fair and open competition for public contracts promotes honesty and accountability in government and protects the taxpayers' interest in securing contracts with qualified vendors on favorable terms. The purpose of the statute is to establish a framework that ensures fair competition with all competitors on an equal footing.
Since the enactment of M.G.L. c. 30B, the OIG has provided extensive training and technical assistance to local governments, and continues to offer regular training programs. The OIG published a manual in 1990, revised in a 1995 edition, entitled Municipal, County, District, and Local Authority Procurement of Supplies, Services and Real Property. This manual provides practical advice and step-by-step guidance in following the statutory procedures and is available from the State Bookstore. The OIG also publishes a quarterly newsletter, the Procurement Bulletin, which reaches a circulation of more than 2,000 public officials. The OIG fields thousands of inquiries, requests for assistance, and bid protests annually from public officials, concerned citizens, and vendors. Under its enabling statute, M.G.L. c. 12A, the OIG is required to act to prevent and detect fraud, waste, and abuse in the expenditure of public funds; accordingly, a complaint from any source -- such as a vendor, a concerned citizen, or a public official -- can provide the impetus for a review of the procurement process. The OIG handles all complaints without regard for the standing of the complainant.
The OIG continually assesses its contribution to the integrity of, and public confidence in, state and local government. The OIG is vigilant in detecting fraud, waste, and abuse, but the Office's principal objective is to prevent fraud, waste, and abuse before they occur. The OIG has set an aggressive, proactive prevention agenda reflected in a three-part prevention strategy:
- Capacity building -- providing training and technical assistance to public officials.
- Timely intervention -- intervening in transactions before fraud, waste, or abuse occurs.
- Dissemination of lessons learned -- widely distributing information to public officials to prevent the recurrence of problems we have identified in other agencies and jurisdictions.
Bid Protests to the OIG
There are no statutory provisions or regulations establishing an administrative procedure for bid protests under M.G.L. c. 30B.3 However, in keeping with the Office's prevention agenda, the OIG has developed an informal process to help resolve disputes efficiently and ensure compliance with the law. A protest can be initiated by a phone call or letter from any individual alleging a violation of M.G.L. c. 30B. Upon receiving a bid protest or other complaint, the OIG will contact the public officials responsible for the procurement to request documents or information. M.G.L. c. 12A, §9 authorizes the OIG to request the assistance of any public official in obtaining documents and information relating to a procurement, and requires every public official to cooperate with such a request.
M.G.L. c. 12A, §14, and the regulations governing OIG procedures found at 945 CMR 1.04, contain whistleblower protections that require OIG staff to maintain the confidentiality of informants and complainants. For this reason, OIG staff are not permitted to disclose the identity of the person lodging the bid protest or complaint without that person's permission.
OIG staff contact the awarding authority after receiving a bid protest or complaint to discuss the basis for the complaint and all of the relevant facts and issues with the public officials responsible for the procurement. After obtaining all of the relevant documents and information, including any explanation or clarification offered by the public officials, the OIG provides these public officials with an informal opinion as to whether the procurement process complied with M.G.L. c. 30B. To expedite this informal review, the OIG typically handles the inquiry via telephone and fax machine; the OIG does not conduct a hearing. The opinion offered by the OIG at the conclusion of the fact-finding review is advisory and does not have the force of law.
Notwithstanding the fact that the outcome of the OIG's expeditious dispute resolution process is a non-binding opinion, the great majority of bid protests are effectively resolved in this manner. In general, awarding authorities regard the OIG as a useful arbiter and choose to heed the OIG's advice. If, in the opinion of the OIG, the procurement process failed to comply with the statutory requirements, the OIG may advise canceling the procurement and starting over. If, on the other hand, the problems are flagged at an earlier stage in the process -- before bids have been opened -- it may be possible to preserve the process through the issuance of an addendum. Most protesters also accept the OIG's finding that the procurement process complied with M.G.L. c. 30B and drop the matter rather than pursue the costly avenue of litigation.
Since there is no formal administrative procedure for bid protests, any protester with standing to bring a complaint to Superior Court may do so in the first instance, without resort to the OIG. By the same token, if a disputed award is not resolved by the issuance of an OIG opinion, the protestor may bring the complaint to Superior Court, where the matter will proceed de novo.
M.G.L. c. 30B expressly incorporates a rule previously established in a series of Massachusetts decisions interpreting other bidding statutes: any contract entered into in violation of the statute is invalid and payment to the vendor under such an invalid contract is prohibited. M.G.L. c. 30B, §17. See also Majestic Radiator Enclosure Company, Inc., v. County Commissioners of Middlesex, 397 Mass 1002, 1986. A civil action to enjoin the award and performance of a contract is the primary enforcement mechanism for M.G.L. c. 30B and other public bidding statutes. Under Massachusetts law, any aggrieved bidder has standing to bring a civil action challenging the award of a contract in violation of a public procurement law.4 The protesting bidder need not show that "but for" the awarding authority's failure to comply with the statute, the bidder would have been awarded the contract; the challenging party need only show that it possessed the potential to obtain the contract by virtue of having submitted a bid. Quincy Ornamental Iron Works, Inc. v. Findlen, 353 Mass. 85, 87-88 (1967).
An aggrieved bidder will generally attempt to enjoin the contract award. The grant or denial of an injunction is critical to the posture of the litigation, since in most cases the only remedy available to a bidder after the contract has been awarded is recovery of bid preparation costs.5 The inadequacy of the remedy available at law to an aggrieved bidder has been deemed to constitute "irreparable harm" for purposes of determining that injunctive relief is warranted. The Supreme Judicial Court has opined that once a contract has been awarded, the aggrieved bidder's opportunity for consideration as a bidder is forever lost, and the right to recoup its costs for bid preparation falls far short of being the equivalent of the potential to win the contract in a fair bidding process. Modern Continental Construction Co., Inc. v. Lowell, 391 Mass. 829, 837 (1984).
In addition to the liberal standing afforded to an aggrieved bidder, Massachusetts law offers standing to any ten taxable inhabitants of a city, town, regional school district, or district to challenge the award of a contract in violation of a bidding law. Under M.G.L. c. 40, §53, taxpayers may petition a court to enforce laws relating to the expenditure of their tax money by local officials. Massachusetts courts have determined that the violation of a statute designed to prevent abuse of public funds is, by itself, sufficient harm to justify an injunction in a taxpayer suit. Edwards v. City of Boston, 408 Mass. 643, 646-47 (1990). To enjoin a contract award, a court need only find a likely violation of the bidding law. Id.
Assessing the Merits of a Bid Protest
The manual published by the OIG and the OIG training programs offer advice to help procurement officials to avoid bid protests. This advice is largely based on common-sense rules such as:
- Provide vendors with an adequate description of the supplies or services you need.
- Follow the advertising rules.Use clear, objective evaluation criteria that let vendors know what standards you will use to judge their qualifications and their responses.Play by your own rules; don't change the specifications after the bids have been opened.
Adhering to these basic rules can help awarding authorities steer clear of disputes with vendors. Nonetheless, a bid protest can arise despite the best efforts of procurement officials. An awarding authority faced with a protest must assess the merits of the complaint and respond in a way that is both legally defensible and serves the awarding authority's best interests.
The remainder of this article discusses Massachusetts case law as it applies to problems that frequently give rise to bid protests. The purpose of this discussion is to help procurement officials and local counsel analyze a procurement problem and apply the appropriate legal principle. Much of the case law deals with two major issues that may result in disputes over a contract award: the adequacy of the specifications used to solicit competition for the contract and the awarding authority's discretion to reject some or all of the bids received. The discussion that follows analyzes these two issues and presents the principles expressed by the Massachusetts courts.