Public Bidding Projects: Awarding Authorities Are Permitted To Conduct Their Own Background Check On Eligible Bidders

Contractors who bid on public building projects under the Massachusetts competitive bidding statute (M.G.L. c. 149, § § 44A, 44B-D, 44E, 44F-44H) need to understand the consequences of the Massachusetts Supreme Judicial Court’s decision in Barr, Inc. v. Town of Holliston, 462 Mass. 112 (2012).

In its May 2012 decision, the SJC held that an “awarding authority” (the Commonwealth or a municipality) is permitted to conduct background searches of eligible bidders independent of the information compiled by the Department of Capital Asset Management (DCAM) contractor certification process. As a result, depending on the nature of the information unearthed by the awarding authority in its search, contractors can be potentially rejected despite being the lowest bidder.

Under M.G.L. c. 149, § 44A(2)(D), a contract for the construction of a public building estimated to cost more than $100,000 “shall be awarded to the lowest responsible and eligible bidder.” DCAM’s contractor certification process goes hand in hand with the bidding procedure, whereby DCAM compiles and provides information about each bidder to allow the awarding authority to determine whether the bidder is “responsible” under the statute.

Specifically, DCAM grants each bidder a certificate of eligibility based on assessments received on the bidder’s performance on past and current projects. Although public entities are required to submit assessments to DCAM about contractors used in public projects, private clients of contractors have no similar obligation to submit assessments to DCAM. Although DCAM will review private project assessments if they are submitted, it is possible that information about private projects may not necessarily be included as part of the certification process.   In addition to the certificate of eligibility, each bidder submits a self-prepared “update statement” with his bid, stating the public projects that they have completed since its certificate of eligibility was issued.

The competitive bidding statute is silent about whether awarding authorities can independently gather extraneous information about particular bidders. In fact, until the Barr, Inc. decision, it had not been decided whether awarding authorities like cities and towns are permitted to look outside of the certificate of eligibility and update statement to determine whether a particular bidder–even the lowest bidder–is qualified for the project at hand.

In Barr, Inc., the town solicited bids for a public project. After looking at the information compiled by DCAM about the lowest bidder (Barr), the town decided to conduct its own Internet search to gather more information. The results of that research eventually led the town administrator to request that a more thorough investigation be undertaken by a police department detective. The detective contacted eight other municipalities that had previously used the lowest bidder as a contractor; six of them had responded with an “‘overall negative impression” of the bidder’s work. Using the information in the DCAM file, as well as the results of their independent research, the town ultimately concluded that the lowest bidder was not “responsible” under the M.G.L. c. 149, § 44D, and instead awarded the contract to the next lowest bidder.

Not surprisingly, the lowest bidder sued the town, claiming, inter alia, that the town’s separate investigation was unlawful and that the town exceeded its statutory authority.  The trial court and SJC did not agree.

In affirming the trial court’s decision that the town was not limited to the information contained in the DCAM materials during its decision making, the SJC looked at the legislative intent behind and function of the statutory bidding requirements. The SJC determined that “nothing in either the statute or DCAM’s regulations expressly precludes the awarding authority from conducting an independent investigation into the past performance of potential bidders.” The SJC also noted that such independent investigations may reveal more current and relevant information than the DCAM certification of eligibility and update statement, particularly for those contractors who have “extensive [project] experience, or with experience primarily in private sector construction projects.” Collectively, all available information allows the awarding authority to assemble a more complete picture of each bidder

Notably, neither the trial court nor the SJC specifically addressed the plaintiff’s other pending claim: whether the town acted arbitrarily and capriciously in its determination that the bidder was not “responsible”. However, the SJC did note that the plaintiff’s concerns about the potential for abuse, fraud or bias in such independent investigations was largely misplaced, given that such risk is dealt with by other provisions of the competitive bidding statute, including those authorizing complaints filed in Superior Court or with the Attorney General.

Given the holding in Barr, Inc., contractors who submit bids for public projects should understand that their entire project history–both public and private–is fair game for consideration, particularly in this day and age of Internet research. Whether a municipality or the Commonwealth properly uses the information collected is a separate matter, but at minimum, contractors should take precautions to protect their favorability and track record with all of their past clients.

If you or someone you know have any questions about this any other construction law  matter, the attorneys at Mirageas & Avery, LLC are here to assist you.

Written by Peter M. Mirageas, Esq. (with the assistance of Kristen M. Ploetz, Esq. of Green Lodestar Communications & Consulting, LLC)