The previous discussion focused on circumstances in which an awarding authority may or must reject one or more bids. In some situations, however, the question is whether to reject all bids.
An awarding authority must reject all bids when the process for soliciting competition with statutory requirements in matters of substance.
A clear example of the application of this principle is an awarding authority's failure to comply with bid law provisions that require public notice. In a case involving another public bidding statute, Phipps Products Corp. v. Massachusetts Bay Transp. Auth., 387 Mass. 687 (1982), the court required strict adherence to the advertising rules in the bid process. In Phipps, the Massachusetts Bay Transportation Authority (MBTA) sought bids on property it wished to sell. The only bid received was rejected when the MBTA decided to continue to market the property. More than one year after the original deadline for receipt of bids, the MBTA received an offer to purchase from the plaintiff. No further advertisement of the sale had been made, nor had further bids been solicited. A purchase and sale agreement was executed; however, prior to the closing, the MBTA sought to reverse its decision on the basis that it had not strictly adhered to the public bidding laws. The plaintiff brought suit seeking specific performance of the purchase and sale agreement. The court held that the MBTA had not fully complied with the statutory requirement that any sale of real property be advertised for three consecutive weeks. In so holding, the court rejected the argument that the MBTA's continued marketing of the property gave continuing validity to the initial advertisement, and made further advertising unnecessary. The court also rejected the argument that untimely advertising could be characterized as a minor deviation that could be waived by the awarding authority.
In Five Star Transp., Inc. v. Town of Longmeadow, Civil Action No. 94-1036 (August 22, 1994), the trial court reached a similar result in a case concerning M.G.L. c. 30B's public notice requirements. In Five Star, the Town of Longmeadow School Department solicited bids for school bus transportation service. The plaintiff was the lowest bidder. After the bid opening, but before the contract was executed, the School Department became aware that the invitation for bids had not been posted in accordance with M.G.L. c. 30B, §5(c). The School Department then cancelled the process and rebid the contract. The plaintiff bid a second time, but was no longer the lowest bidder. The plaintiff then brought suit seeking a declaration that the first bids must be honored. The court held that the awarding authority had properly rejected the first bids and that the statutory requirement of posting notice could not be waived by the awarding authority as a minor informality.
An awarding authority may reject all bids when it is in the best interests of the awarding authority.
In the absence of a statutorily flawed bid process, the limits on an awarding authority's discretion to reject all bids are not as clearly defined. M.G.L. c. 30B gives awarding authorities the right to reject any and all bids when rejection "serves the best interests of the governmental body." M.G.L. c. 30B, §9. However, awarding authorities are also obligated to award contracts that are properly bid, if the contracts are awarded at all, to the lowest responsible and responsive bidders. M.G.L. c. 30B, §5(g). In some instances, these statutory provisions may appear to be in direct conflict, as, for example, when an awarding authority wishes to reject all bids and readvertise a contract in an attempt to obtain a better price. A recent Supreme Judicial Court opinion, Vining Disposal Service, Inc. v. Board of Selectmen of Westford, 416 Mass. 35 (1993) defines the rule to be applied in this situation.
In Vining, the Town of Westford simultaneously solicited separate bids for a recycling contract and a refuse collection contract. The Town received four bids for the recycling contract. The lowest bidder was rejected as not responsive, leaving the plaintiff as the lowest responsive and responsible bidder. The plaintiff's bid was approximately $5,000 more than the lowest bid. The Town also received five bids for the refuse collection contract. The three lowest bids were rejected as not responsive, and the plaintiff was again the lowest responsive and responsible bidder. The plaintiff's bid was approximately $89,500 more than the lowest bid. The Town decided to reject all bids, and rebid the contract. The Town's stated reasons for its decision were twofold: 1) the price differential between the lowest bids and the plaintiff's, and 2) the principles of fair competitive bidding advanced by M.G.L. c. 30B. In response, the plaintiff brought suit arguing that the Town must demonstrate a factual basis for its decision that rejection of all bids was in the best interest of the Town. Additionally, the plaintiff maintained that the discretion to reject bids on the basis of public interest did not extend to situations where the bids were reasonably priced, and that the Town's apparent intent was simply to try to get a better price for the same work.
The court rejected both of these arguments, stating that the plaintiff was attempting to add language to the statute that the Legislature did not see fit to use. Id. at 39. The statute does not require that the procurement officer demonstrate a factual basis for the decision, nor does it limit the authority to reject to situations where bids are unreasonably priced. Id. The court stated that legislative intent was to be ascertained from viewing the statute as a whole. Id. at 38. The court held that:
General laws c. 30B "constitute[s] a consistent and harmonious whole, capable of producing a rational result consonant with common sense and sound judgment,". . . if §5(g) is construed in light of §9 as requiring that a municipal contract subject to the statute must be awarded to the lowest responsive and responsible bidder if it is awarded to anyone, but if the procurement officer concludes in good faith that municipal interests are best served by not awarding the contract to anyone, that is, by rejecting all the bids, the officer may do so and must state his reasons in writing.
Id. at 38 (alteration in original) (citation omitted). This decision gives awarding authorities wide latitude to define what action is in the best interest of the governmental body.
A recent opinion of the Massachusetts Appeals Court, Petricca Construction Co. v. Commonwealth, 37 Mass. App. Ct. 392 (1994), provides a warning that in certain factual situations, a court may look more closely at an awarding authority's reasons for rejection to determine whether they comport with the facts. In Petricca, the Massachusetts Highway Department (MHD) solicited bids for reconstruction of a road and bridge. MHD received five bids, and the plaintiff submitted the third lowest bid. The two lowest bids were rejected, leaving the plaintiff as the lowest responsible and eligible bidder. MHD decided to reject all bids "on account of purported concerns over potential delay of the project and the threat of litigation by all bidders," and to readvertise the contract. The plaintiff brought suit seeking injunctive relief. In a discussion of the merits of the case, the court stated that MHD's decision to rebid "was not based on any abuse of the process, or violation of any of the accepted rationales for rejecting bids, i.e. insufficient funds, ambiguous bid specifications, or new specifications on rebid." Id. at 397. Rather, MHD's stated reason for rebidding was the desire to avoid delay and litigation. Id. The court noted that MHD's rationale appeared contrary to the realities of the situation, since awarding the contract to the plaintiff would have caused no delay, and litigation was imminent regardless of whether the contract was awarded or rebid.
In another section of the Petricca decision, the court offered an interpretation of the bidding statute's provision allowing rejection of bids in the public interest. The court opined that, when interpreting a public bidding statute, equal weight should be given to the statutes' two stated objectives: 1) to create an open and honest competition among all bidders on an equal footing, and 2) to obtain the lowest price. Id. at 392. However, the court appeared to focus its discussion on the former objective. The court stated that if there were no restrictions on rejecting bids, "an awarding authority would be free to rebid a contract until a preferred bidder submitted the lowest price, and thwart one of the important legislative goals." Id. Regarding the latter objective, the court favorably cited decisions from other jurisdictions, which held that awarding authorities may not reject bids simply to obtain a lower price. Id. The court expressed its concern that municipal officials could use the power of rejection to steer contracts to persons of their choice.
The OIG does not read Petricca as altering the basic rule articulated by the Supreme Judicial Court in Vining: if public officials conclude in good faith that the awarding authority's interests are best served by rejecting all bids, they may lawfully do so. Petricca is perhaps most helpful in its indication that the court may examine the determination of "best interests" if the court finds circumstances that lead it to question whether public officials have improper motives. While the court in Petricca did not expressly find that the MHD acted arbitrarily or in bad faith, the language of the opinion hints at this suspicion. In a short concurrence, Justice Brown's words were less guarded. Justice Brown strongly rebuked the MHD for its decision to rebid the contract when the contract could have been awarded to the plaintiff at less than the MHD's own estimate. He stated that "[i]nstances such as this serve to decrease the public's confidence in governmental agencies and our public servants." Id. at 401. The lesson to be drawn from Petricca is not that an awarding authority may not reject all bids and readvertise a contract in order to obtain a better price. Rather, Petricca is a warning that if the stated reasons for rejection are sufficiently suspect, a court may determine that the awarding authority has overstepped the bounds of its discretion and acted arbitrarily.