by E. Kenneth Friker and James W. Fessler

Boards of library trustees of local libraries and library districts get precious little guidance from their governing statutes when it comes to seeking bids and then letting contracts for capital improvement projects. Library boards are only directed to “advertise for bids” when the estimated cost for the project is in excess of $20,000.00. The contract is then to be let to the “lowest responsible bidder” as the library board shall determine. (75 ILCS 5/5-5 and 75 ILCS 16/40-45) Typically, the board’s architect, engineer, consultant or other professional prepares the project specifications and such bid requirements as are customarily used for similar projects, but it falls upon the library board to determine if the bids received are responsive to the bid advertisement. The larger the project, the more complex are the bid requirements and even though it is customary for boards to include in the advertisement a reservation of the right to “waive any technicalities and/or irregularities in the bid,” when is the library board on firm legal ground when it rejects a bid as “nonresponsive” - meaning the bidder has failed to follow bidding instructions?

The recent case of Walsh/II One Joint Venture III, et al. vs. Metropolitan Water Reclamation District of Greater Chicago, et al. (389 Ill.App.3rd (1st Dist. 2009)) is instructive on the issue of the failure of a bidder to meet material bidding requirements. In this case the Metropolitan Water Reclamation District of Greater Chicago (“MWRD”) advertised for bids on a water reclamation plant improvement project having an estimated cost of over $244 million. In accordance with the MWRD’s Affirmative Action Ordinance, the bid packet provided to each prospective bidder required that bidders were to submit with their bids a “completed and signed Utilization Plan” specifying subcontractors, including minority subcontractors, to be used on the project. The bid advertisement and bid package clearly set forth the requirement of a completed and signed Utilization Plan for the bid to be considered responsive, and this requirement was highlighted by a representative of the MWRD at a mandatory pre-bid conference of prospective bidders.

Walsh/II One Joint Venture III (“Walsh”) was the lowest of four bids received by approximately $10 million. Walsh’s bid was rejected by the MWRD as non-responsive for failure to submit with its bid the required signed Utilization Plan. The other three bids all conformed to the bidding requirements. Walsh filed suit against the MWRD seeking to compel the MWRD to accept its bid, claiming that the failure to include the required signed document was an immaterial variance since the identities of, and commitments from, all subcontractors were included with the bid. The trial court denied Walsh’s claim, and an appeal was taken to the Appellate Court. The Illinois Appellate Court from the First District (Cook County) held that, although variances from bid requirements which are “minor” do not require rejection of a bid, a “material” variance is a non-responsive bid and is properly rejected. The test as to whether a variance is “material” is, according to the Court, “. . . whether it gives a bidder a substantial advantage or benefit not enjoyed by other bidders.” The Court conceded that public bodies advertising for bids have discretion in determining which bidder is the lowest responsible bidder, absent evidence of fraud, unfair dealing, favoritism or other arbitrary conduct on the part of the public body. Here, the Court held that Walsh, in failing to submit a signed commitment to use specified subcontractors, gave Walsh an opportunity to substitute its subcontractors, and this was an advantage not enjoyed by the other bidders.

In some but very few instances, Illinois statutes make clear what would constitute a “material variance” from bid requirements. For example, Section 33E-11 of the Illinois Criminal Code (720 ILCS 5/33E-11) requires that every bid received and resulting contract executed by a unit of local government must contain a certification by the prime contractor that it is not barred from contracting with a unit of local government as a result of a violation of the bid rigging (Section 33E-3) or bid rotating (Section 33E-4) prohibitions of the Criminal Code. Clearly, the failure of a bidder to include this certification would be “material” requiring rejection of the bid.

Looking back at the Walsh case, the failure of the bidder to follow the bidding instructions caused Walsh to lose a $244 million contract, substantial legal fees in fighting the MWRD’s rejection of its bid through the trial and appellate courts but, most importantly, it cost the MWRD’s taxpayers $10 million by not being able to benefit from the lowest bid.

E. Kenneth Friker and James W. Fessler are partners with Klein, Thorpe and Jenkins, Ltd., a law firm with offices in the Civic Opera Building at 20 North Wacker Drive in Chicago and at 15010 S. Ravinia in Orland Park. The firm concentrates in the representation of local libraries, Library Districts and Library Systems, as well as other local governmental units.

Published January 24, 2008 in vol. 2, iss. 1 [View]