There is a conflict among the Circuit Courts of Appeal in Louisiana concerning waiver of bidding irregularities. There are five appellate courts having jurisdiction in various parts of Louisiana. Contractors need to be aware which circuits allow waiver and which do not.
The Public Bid Law, section 2212A(1)(a), requires that a public work exceeding the contract limit be awarded to the low responsible bidder who bids according to the plans and specifications as advertized.
Prior to 1986, it was generally accepted that a bid should only be rejected for a substantial deviation from the bidding requirements or bidding specifications, but that informalities could be waived. The First Circuit Court of Appeals in Sullivan v. City of Baton Rouge said: "The law is settled that it is only where there is 'a substantial variance between a bid specification and a bid' that the bid must be rejected." Nevertheless, what constituted a "substantial variance" was often litigated, and there were instances where waiver was used to favor one contractor or another.
In 1986 and 1987 the legislature amended section 2212 and added 2212A(1)(b):
The five appellate courts having jurisdiction in Louisiana do not agree on the proper interpretation of section 2212A(1)(b). So much so that the same dispute in one part of the state would probably be resolved differently if it arose in another part of the state.
In the case of V.C. Nora, Jr. Building & Remodeling, Inc. v. State, through the Department of Transportation and Development, the Third Circuit Court of Appeal required strict adherence to bidding requirements and applied La. R.S. 38:2212A(1)(b) to prohibit the Department of Transportation and Development from waiving bidding irregularities. The Third Circuit is concerned that allowing bidding irregularities to be waived could "open up a 'Pandoras box' to the favoritism and corruption that the public bid laws were established to prevent." The Third Circuit has jurisdiction in the western and central parishes of the state, including most significantly Rapides and Calcasieu.
Similarly, the Fifth Circuit, which has jurisdiction in the parishes just up river from New Orleans, i.e., St. Charles, St. John the Baptist and Jefferson Parishes, has steadfastly applied 2212A(1)(b) to prevent waiver. For instance, that court in Donald M. Clement Contractor, Inc. v. St. Charles Parish found that the bidder's failure to provide a bid bond from an "A" or better rated company as required by the advertisement could not be waived. In upholding the rejection of the bid in that case, the court said: "Clement has argued the lack of an "A" rated bond is a mere formality which the Parish could have waived. However, the revisions of LSA-R.S. 38: 2212A(1)(b)... does not support this position. ... We hold that Clement failed to follow the advertised plans and specifications, as reasonably interpreted by the Parish; that the Parish was neither an arbitrary nor unreasonable in awarding the sewage contract to Resor...".
Furthermore, the Fifth Circuit in the case of Thigpen Construction Company, Inc. v. Parish of Jefferson, quoting from Superior Oil Company v. Udall, a federal case, said: "The requirement of steadfast compliance with competitive bidding procedures comports best with the needs to promote the integrity of the bidding process. Although such a stance may entail some limitation on the [awarding authority's] discretion, it seems clear that this is an indispensable ingredient to the maintenance of competitive bidding processes which will engender public confidence and that of persons dealing with the Government."
But, the First Circuit, having jurisdiction from West Feliciana south to Terrebonne Parish, has consistently applied the 'substance versus form' distinction despite 38:2212A(1)(b) as quoted above. Most recently in the case of Hebert Brothers Engineers, Inc. v. Department of Transportation and Development, the First Circuit, citing the 1997 case of Boh Bros. Construction Co., L.L.C. v. Department of Transportation and Development, allowed waiver of a requirement of the advertisement. In Hebert Brothers, Jack B. Harper Contractor, Inc. was awarded the contract for the project. The advertisement required a proposal guaranty in an amount not less than $41,250.00. Harper submitted a proposal guaranty with the amount of $41,250.00 in numerals, but with the incorrect written amount of "forty[-]one thousand two hundred and no/100" in words. Despite the language of La. R.S. 38:2212A(1)(b) not allowing waiver of the provisions and requirements stated in the advertisement, the First Circuit found that the bid bond was sufficient and the award was properly made to Harper. In Boh Bros., the court found a similar $1,000.00 discrepancy to be waivable.
In those cases, the First Circuit said: "[W]e construe La. R.S. 38:2212A(1)(b) to preclude a public entity from waiving substantive provisions and requirements of the Public Bid Law, the advertisement for bids and the bid forms. The public entity may waive deviations that are not substantive in nature. However, it may not treat substantive requirements of the Bid Law, the advertisement for bids and the bid forms as mere informalities in order to justify its decision to waive a deviation in a bid. Whether a public entity permissibly waived a bid requirement is reviewable by the courts, and the issue should be determined by using the substance/form analysis." [Emphasis added.] The Hebert Brothers case is still subject to further review by the Louisiana Supreme Court. But, the Supreme Court declined to grant writs in the Boh Bros. case.
The Fourth Circuit, covering the New Orleans area, appears to agree with the First Circuit, but has not squarely addressed the issue. The applicability of La. R.S. 38:2212A(1)(b) has been addressed in dissenting opinions, suggesting disagreement among the judges of the court on this issue.
D'Arbonne Construction Co., Inc. v. Union Parish Police Jury involves this same issue, and is currently pending in the Second Circuit Court of Appeal. The Second Circuit has jurisdiction from Tensas Parish, west to De Soto and north to the state line.
In D'Arbonne, the specifications at issue required each bidder to submit its unit prices on the bid form in both numerals and words. The low bidder failed to write its bid prices in words for all 59 bid items. Notwithstanding the low bidder's failure to comply with the bid form requirements, Union Parish accepted the low bid. Relying on Boh Bros., the Third Judicial District Court found that the defect in the low bid was a matter of form and waivable by Union Parish. The case is on appeal to the Second Circuit Court of Appeal.
In summary, the First and Fourth Circuits allow the public entity to waive "mere informalities" to accept the low bid despite the 1987 changes in the law. The Third and Fifth Circuits strictly construe the statute to forbid waiver. They believe that any requirement of the advertisement or bid form is a substantive requirement not susceptible to waiver. The Second Circuit is currently dealing with the issue. What can or can not be waived will continue to be litigated until the Louisiana Supreme Court grants writs and again settles this area of the law.
W. P. Wray, Jr. is of counsel to the firm of Wray & Kracht, L.L.P., in Baton Rouge, Louisiana, and general counsel to LAGC. Questions or comments can be directed to Mr. Wray at P. O. Box 80239, Baton Rouge, Louisiana 70898, telephone (225) 928-3200, fax 504/928-3266, e-mail, [email protected]
Russel W. Wray is a partner with Wray & Kracht, L.L.P., practicing in the field of construction law and civil litigation. Mr. Wray may be reached at Wray & Kracht, L.L.P., 5643 Corporate Boulevard, Post Office Box 80239, Baton Rouge, Louisiana 70898, (225) 928-3200, fax (225) 928-3266 or by e-mail [email protected] for any comments or questions you may have.