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Beware of the Unsuccessful Bidder Competing for a Government Contract

| Oct 14, 2016 | contract, government, News |

Byrne & Jones Enter., Inc. v. Monroe City R-1 School Dist., —S.W.3d.—, 2016 WL 4036760 (Mo. banc July 26, 2016).

The Missouri Supreme Court now provides a mechanism whereby an unsuccessful bidder competing for a government contract may challenge the bidding procedures of the public entity on the grounds that it was denied a fair and equal opportunity to compete in the bidding process.

Section 177.086, RSMo sets out the competitive bidding procedures for all school districts regarding facility construction expenditures. Under this competitive bidding scheme, the public entity reserves the right to reject any and all bids, including the lowest bid submitted. Thus, a long and well-established line of Missouri cases holds that an unsuccessful bidder competing for a government contract has no special pecuniary interest in the award of a contract and, therefore, may not challenge the award of a contract to another bidder.

Nevertheless, the Supreme Court recognized that one purpose of competitive bidding statutes in Missouri is to ensure “that all who may wish to bid shall have a fair opportunity to compete in a field where no favoritism is shown or may be shown to other contestants.” (Emphasis added). Thus, the Supreme Court found that all bidders have a legally protectable interest in a fair and equal bidding process and are within the “zone of interest” that the public entity’s competitive bidding statutes seek to regulate. Accordingly, an unsuccessful bidder—such as Byrne & Jones—may assert a challenge to the award of a contract to another bidder on the grounds that it was denied a fair and equal opportunity to compete in the bidding process.

Although Byrne & Jones won the battle before the Supreme Court, it ultimately lost the war. The Supreme Court found that even though Byrne & Jones was wrongfully deprived of the right to challenge the fairness of the bidding process by the trial court, the Court affirmed the decision dismissing Byrne & Jones’s case. According to the Supreme Court, the relief requested by Byrne & Jones—injunctive relief to enjoin the school district’s award to the competitor—was no longer available as the school district awarded the contract to the competitor and construction on the projected was completed. The Supreme Court also agreed with the trial court that section 177.086.2 does not permit a contractor to recover its bid preparation costs or other damages. As such, Byrne & Jones was denied the opportunity to recover any damages.

The Supreme Court’s decision in Byrne & Jones nevertheless serves as a reminder to all public entities that state bidding statutes—including section 177.086—are enacted to ensure that all bidders have a fair opportunity to compete in the bidding process on public contracts.

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