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Can a Municipality Reject a Low Bid?

Jun 22, 2011

Not if the municipality failed to include the criteria used to disapprove the low bid in the specifications.  So said the New York Court of Appeals in a decision handed down on June 9, 2011.  Over the strong dissent of two judges, the highest court in the state clarified the circumstances when a municipality may reject the lowest bid in favor of another bidder. 

In the matter of AAA Carting and Rubbish Removal, Inc. v. Town of Southeast, the town board rejected the lowest bidder for a residential refuse removal services contract in favor of a higher-priced bidder pursuant to a resolution stating that safety and reliability were determinative factors in the board’s selection of the higher bidder.  What the town did, according to the Court, was to award the contract to a vendor the town believed to be more responsible.  However, the Court held that absent a finding of lack of responsibility by the low bidder, there is no authority to support the town board’s rejection of the low bid for one that is considered more responsible.

The Court reviewed the central purposes of New York’s competitive bidding statutes, which are the “(1) protection of the public fisc by obtaining the best work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts.”  The Court then reiterated that “the bidding statutes are to be construed strictly in order to achieve those purposes” and noted that “rejection of the lowest bid carries with it the inevitable implication of nonresponsibility for the rejected bidder.”

While a municipality may still consider a bidder’s “skill, judgment and integrity” in determining whether good reason exists to reject a low bidder, the disapproval in this case “was based on criteria not contained in the bidding proposal.”  Significantly, none of the qualitative factors identified by the town board in rejecting the low bid here were in the bid request.  Therefore, the Court concluded it was improper for the town board to rely on those factors in rejecting the bid. 

According to the Court, “accepting a higher bid based on subjective assessment of criteria not specified in the bid request gives rise to speculation that favoritism, improvidence, extravagance, fraud or corruption may have played a role in the decision.”  However, that is not to say that the additional criteria that the town board considered in making its decision do not reflect legitimate concerns.  The Court indicated that if the town wishes to have those qualitative factors considered, “the proper remedy is not to reject the lowest responsible bid, but to reject all the bids submitted and begin the process anew, incorporating whatever reasonable and nonrestrictive requirements it wishes to consider into the bid solicitation.”

Therefore, even though this decision may seem to constrain a municipality’s flexibility and discretion, a municipality may still be able to reject a low bidder in favor of higher bidder in certain limited circumstances.  In rejecting a low bidder, however, the criteria used to make the rejection should be contained in the bid solicitation documents to ensure that all bidders have notice of the criteria used to judge the bids.  Of course, the decision to reject a low bidder is one that should not be taken lightly, and should not be made without consulting with counsel.

If you have any questions about this case or other public bidding issues, please feel free to contact Peter Weishaar at pweishaar@mccmlaw.com or (585) 512-3542. Mr. Weishaar represents several fire districts in Monroe and Wayne Counties. His municipal practice also includes the ongoing representation of planning and zoning boards, and he also represents municipalities as special counsel in litigation matters.

This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.