No. 85-11
I N THE SUPREME COURT OF THE STATE O F MONTANA
1985
JOHN R. BAKER, d/b/a J.R.
BAKER CONSTRUCTION,
P l a i n t i f f and A p p e l l a n t ,
STATE O F MONTANA, MONTANA STATE BOARD
OF EXAMINERS, GOVERNOR TED SCHWINDEN,
SECRETARY OF STATE J I M WALTERMIRE, and
ATTORNEY GENERAL MICHAEL T . GREELY, a s
m e m b e r s t h e r e o f , and MORRIS BRUSETT,
D i r e c t o r of t h e D e p a r t m e n t of A d m i n i s -
tration,
D e f e n d a n t s and R e s p o n d e n t s .
APPEAL FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of L e w i s & C l a r k ,
T h e H o n o r a b l e G o r d o n B e n n e t t , Judge p r e s i d i n g .
COUNSEL OF RECORD:
For Appellant:
L a r r y W. Moran, Bozeman, Montana
For R e s p o n d e n t s :
Allen Chronister, Asst. Attorney General, Helena,
Montana
S u b m i t t e d on B r i e f s : April 4, 1985
Decided: O c t o b e r 9 , 1385
Filed:
OCT 9 1985
- - -
-
Clerk
M r . J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f t h e
Court.
T h i s i s an a p p e a l f r o m a n o r d e r e n t e r e d i n t h e D i s t r i c t
Court o f t h e F i r s t J u d i c i a l District, i n and f o r t h e County
o f Lewis and C l a r k , d i s m i s s i n g t h e a p p e l l a n t ' s c o m p l a i n t f o r
failure to state a claim. The s u i t was d i s m i s s e d on the
ground t h a t p l a i n t i f f lacked standing t o sue. This appeal
raises important questions concerning standing, and the
statutes regulating acceptance o f b i d s and award o f public
works c o n t r a c t s .
The t r a n s a c t i o n i n v o l v e d r e s u l t e d from t h e i s s u a n c e by
the State of Montana, Division of Architecture and
E n g i n e e r i n g o f an i n v i t a t i o n f o r b i d s f o r t h e c o n s t r u c t i o n o f
t h e N a t i o n a l Guard Armory i n H a r l o w t o n , Montana. B i d s were
received on January 18, 1984. J. R. Baker Construction,
h e r e i n a f t e r Baker, submitted a bid f o r $420,740 and E d s a l l
C o n s t r u c t i o n Company, h e r e i n a f t e r E d s a l l , submitted a b i d f o r
$420,300, a d i f f e r e n c e o f $440. Raker p r o t e s t e d E d s a l l ' s b i d
o n t h e a l l e g a t i o n t h a t E d s a l l was w o r k i n g b e y o n d t h e c o n t r a c t
time on another public works project and was therefore
ineligible t o bid on a p u b l i c p r o j e c t b y v i r t u e o f section
18-2-311, M A and s e c t i o n 37-71-203,
C MCA. A h e a r i n g was h e l d
b e f o r e t h e B o a r d o f E x a m i n e r s on March 1 3 , 1 9 8 4 . The B o a r d
o f Examiners d e n i e d t h e p r o t e s t and awarded t h e b i d t o E d s a l l
a s t h e low b i d d e r .
I n D i s t r i c t Court Baker s o u g h t t o h a v e t h e a c t i o n of
t h e S t a t e i n granting t h e bid t o Edsall declared i l l e g a l a s a
violation of section 18-2-311, MA
C and section 37-71-203,
MCA . Baker further requested that the District Court
d e t e r m i n e t h a t Baker was the lowest responsible bidder and
was entitled to the award of the contract. Baker sought
recovery for lost profits, bidding costs, litigation costs
and a t t o r n e y ' s fees. D e f e n d a n t s f i l e d a motion t o dismiss
for failure to state a claim upon which relief can be
granted. The D i s t r i c t C o u r t g r a n t e d t h e m o t i o n . I t i s from
t h a t o r d e r t h a t Baker a p p e a l s .
The decisive issue in this appeal i s whether Baker
lacked standing t o b r i n g t h i s a c t i o n .
The statute governing the award of construction
contracts provides:
" (1) F o r t h e c o n s t r u c t i o n o f a b u i l d i n g
c o s t i n g more t h a n $25,000, t h e d e p a r t m e n t
of administration shall:
"(c) ... u n d e r t h e s u p e r v i s i o n and w i t h
t h e approval o f t h e board o f examiners,
s o l i c i t , a c c e p t , and r e j e c t b i d s and
award all contracts to t h e lowest
q u a l i f i e d b i d d e r considerTng conformity
with specifications and terms and
r e a s o n a b l e n e s s o f b i d amount. I' Section
18-2-103 ( c ) , MCA. (Emphasis added. )
The s t a t u t e s f u r t h e r s t a t e t h a t :
". . .
37-71-101,
A public contractor, a s defined i n
who has been awarded a
c o n t r a c t by t h e s t a t e o f Montana o r any
b o a r d , commission, o r d e p a r t m e n t t h e r e o f
o r by a n y b o a r d o f c o u n t y c o m m i s s i o n e r s
o r by a n y c i t y o r town c o u n c i l o r agency
thereof for the construction or
r e c o n s t r u c t i o n o f a p u b l i c work and i s
working beyond the contract time
(including any authorized time
extensions) shall not submit any
additional bids o r proposals o r e n t e r
i n t o a n y a d d i t i o n a l c o n t r a c t w i t h any
p u b l i c a g e n c y o f t h e s t a t e o f Montana,
county, o r c i t y t h e r e o f u n t i l he h a s
c o m p l e t e l y e x e c u t e d t h e c o n t r a c t upon
which h e i s w o r k i n g beyond c o n t r a c t t i m e
and a l l s u p p l e m e n t a l a g r e e m e n t s t h e r e t o .
". . . A p u b l i c c o n t r a c t o r s h a l l n o t be
c o n s i d e r e d t o b e w o r k i n g beyond c o n t r a c t
time if t h e d e l a y i s c a u s e d by a n
a c c i d e n t o r c a s u a l t y produced by p h y s i c a l
c a u s e which i s n o t p r e v e n t a b l e b y human
f o r e s i g h t , i . e . , any o f t h e m i s a d v e n t u r e s
termed an 'act of God. '" Sections
18-2-311 and 18-2-312, MCA.
S e c t i o n 37-71-203, MCA p r o v i d e s :
". . . A l l b i d s and p r o p o s a l s f o r t h e
construction of any public contract
project subject t o the provisions of t h i s
c h a p t e r s h a l l c o n t a i n a s t a t e m e n t showing
t h a t t h e b i d d e r o r c o n t r a c t o r i s d u l y and
r e g u l a r l y l i c e n s e d hereunder and i s n o t
p r e s e n t l y w o r k i n g beyond t h e c o n t r a c t
time, including authorized time
e x t e n s i o n s , on any p r e v i o u s l y awarded
public contract project. The number and
c l a s s o f s u c h l i c e n s e t h e n h e l d by s u c h
p u b l i c c o n t r a c t o r s h a l l a p p e a r upon s u c h
b i d o r p r o p o s a l , and no c o n t r a c t s h a l l b e
awarded t o any c o n t r a c t o r u n l e s s h e i s
the holder of a license i n t h e c l a s s
w i t h i n which t h e v a l u e o f t h e p r o j e c t
s h a l l f a l l a s h e r e i n p r o v i d e d and u n l e s s
the public contractor has completely
e x e c u t e d any p r e v i o u s c o n t r a c t upon which
h e h a s worked beyond c o n t r a c t t i m e . "
Baker asserts that government agencies must abide by the
bidding statutes and where a violation of a statute or
r e g u l a t i o n g i v e s an advantage t o one b i d d e r t h e c o u r t s should
allow the aggrieved bidder a right of recovery. Baker
f u r t h e r m a i n t a i n s t h a t by i n v i t i n g o f f e r s , and r e p r e s e n t i n g
that they will be considered pursuant to the competitive
bidding statutes, an implied contract exists between the
government and t h e b i d d e r s t h a t t h e government w i l l c o n s i d e r
bids fairly and honestly within the s t a t u t o r y procedures.
Baker cannot base his plea for relief on contract
theory. I t i s a w e l l founded p r i n c i p l e o f c o n t r a c t law t h a t
a c o n t r a c t d o e s n o t e x i s t p r i o r t o t h e a c c e p t a n c e o f a b i d by
a n agency:
" [A]n o r d i n a r y a d v e r t i s e m e n t for bids o r
tenders i s not i t s e l f an o f f e r but t h e
b i d o r t e n d e r i s a n o f f e r which c r e a t e s
no r i g h t u n t i l a c c e p t e d . Even t h o u g h t h e
charter of a municipality expressly
r e q u i r e s t h a t a c o n t r a c t s h a l l b e awarded
t o the lowest responsible b i d d e r , a
c o n t r a c t i s n o t formed u n t i l t h e l o w e s t
bid is in fact accepted." 1 Williston -
on
Contracts, S 3 1 (3rd. Ed. 1957).
Courts from our sister jurisdictions have likewise
held:
.
". . in Alaska, as elsewhere, an
agency's solicitation of bids is not an
offer, but rather a request for offers;
no contractual rights based on the
content of a bid arise prior to its
acceptance by the agency. Beirne v.
Alaska State Housing Authority, 454 P.2d
262, 264 (Alaska 1969) .I1 King v. Alaska
State Housing Authority (Alaska 1981) 633
P.2d 256 at 261.
See also Gulf Oil Corp. v. Clark Cty. (Nev. 1978), 575 P.2d
This authority is most persuasive when read in
conjunction with the language of this state's bidding
statutes. The department was under a statutory obligation to
accept the lowest responsible bidder. The Department's
solicitation of bids was not an offer. Nor was Baker's
response to the solicitation an offer. Because the
Department rejected Baker's bid, no contract ever came into
existence. As a result, recovery based upon contract theory
cannot be had.
The policy behind the bidding statute also precludes
any finding of standing for Baker to bring the action. The
statute's primary function is to benefit the citizens. This
premise is stated in 72 C.J.S., supplement, Public Contracts
"Competitive bidding statutes are
primarily intended for the benefit of the
public rather than for the benefit or
enrichment of bidders, and consideration
of advantages or disadvantages to bidders
must be secondary to the general welfare
of the public " ...
There are two views expressed as to whether such a person or
entity has standing to request the judicial award of the
c o n t r a c t o r s e e k damages from t h e d e p a r t m e n t . In t h e f e d e r a l
arena, the Circuit Court of Appeals has held that a
disappointed bidder has standing under the Administration
Procedures Act, 5 U.S.C. S702, which provides, "A person
s u f f e r i n g l e g a l wrong b e c a u s e o f a g e n c y a c t i o n , o r a d v e r s e l y
a f f e c t e d o r a g g r i e v e d by a g e n c y a c t i o n w i t h i n t h e meaning o f
a relevant statute, i s e n t i t l e d t o j u d i c i a l review t h e r e o f . "
Scanwell L a b o r a t o r i e s , Inc. v. Shaffer (D.C.Cir. 1 9 7 0 ) , 424
F.2d 859. T h i s j u r i s d i c t i o n h a s adopted t h e view t h a t t h e r e
i s no such s t a n d i n g and it was s o e x p r e s s e d i n Stuewe v.
Hindson ( 1 9 1 2 ) , 4 4 Mont. 429, 120 P. 485, i n r u l i n g t h a t no
mandamus remedy is available to the unsuccessfu1 bidder.
" T h e r e was n o t a n y c o n t r a c t u a l r e l a t i o n
e x i s t i n g b e t w e e n him and t h e b o a r d , and
h i s s t a t u s a s an unsuccessful bidder does
not make him a party beneficially
interested ... The advertisement for
b i d s i s n o t an o f f e r w h i c h by a c c e p t a n c e
constitutes a contract. I t i s m e r e l y an
i n v i t a t i o n t o e v e r y b i d d e r t o make an
o f f e r , which t h e b o a r d may a c c e p t , and a
c o n t r a c t r e s u l t ; b u t a p a r t y whose o f f e r
i s n o t a c c e p t e d c a n n o t complain o r invoke
t h e a i d o f t h e c o u r t s t o compel t h e b o a r d
t o accept h i s o f f e r . ..t h e provision
o f law f o r l e t t i n g c o n t r a c t s - -i s of t h
is fo -
c h a r a c t e r t o t h e l o w e s t b i d d e r - -r t h e
b e n e f i t -f the p u b l i c , - - -t
o - and d o e s n o
c o n f e r a n y r i g h t upon t h e l o w e s t b i d d e r
- -c h . " (Emphasis a d d e d . )
a s su
The c o u r t noted t h e only s t a n d i n g which Stuewe had i n the
c o u r t s was a s a t a x p a y e r , and n o t a s a n u n s u c c e s s f u l b i d d e r .
In the present matter, Baker failed to allege i n D i s t r i c t
C o u r t and on a p p e a l s t a n d i n g a s a t a x p a y e r .
The t r i a l c o u r t found a p p e l l a n t d i d n o t h a v e s t a n d i n g
under either of the statutes cited in his complaint
(S 18-2-311, MCA o r S 37-71-203, MCA) . H e noted t h a t t h e s e
two s t a t u t e s w e r e n o t made f o r t h e b e n e f i t o f competing o r
losing contractors. They w e r e made f o r t h e p u b l i c and d o n o t
provide the losing bidder with standing. As previously
noted, a t a x p a y e r may have s t a n d i n g i f h e c a n show h e h a s
b e e n h u r t , b u t i n t h i s c a s e a p p e l l a n t f a i l e d t o a l l e g e h e was
a taxpayer. Stuewe v . Hindson ( 1 9 1 2 ) , 4 4 Mont. 429, 120 P.
485.
Baker a r g u e s t h a t t h e l a n g u a g e o f t h e Montana Adminis-
t r a t i v e Procedure A c t i s s i m i l a r t o t h e f e d e r a l Administra-
t i v e Procedure A c t . Our A c t i s n o t t h e e q u i v a l e n t o f the
federal A c t . S e c t i o n 2-4-702, MCA, r e q u i r e s a person t o have
exhausted a l l a d m i n i s t r a t i v e remedies b e f o r e being e n t i t l e d
t o judicial review. Here, Baker d i d n o t a t t e m p t t o a l l e g e
the requirements for judicial review. Most i m p o r t a n t , the
c o m p l a i n t was n o t f i l e d w i t h i n 30 d a y s o f t h e d e c i s i o n o f t h e
agency a s r e q u i r e d under S 2-4-702 ( 2 ) , MCA. The c o m p l a i n t
h e r e was f i l e d t h r e e months a f t e r t h e f i n a l d e c i s i o n . Ac-
c o r d i n g l y , Baker i s n o t e n t i t l e d t o j u d i c i a l r e v i e w u n d e r t h e
Montana A d m i n i s t r a t i v e P r o c e d u r e A c t .
I n a d d i t i o n , w e have h e l d t h a t t h e d i s c r e t i o n o f the
agency t o award p u b l i c work c o n t r a c t s t o t h e l o w e s t b i d d e r i s
not subject t o judicial review u n d e r normal c i r c u m s t a n c e s .
S l e t t e n C o n s t r u c t i o n Co. v. City of Great F a l l s ( 1 9 7 3 ) , 1.63
Mont. 307, 516 P.2d 1149; Koich v . Cvar ( 1 9 4 1 ) , 111 Mont.
463, 110 P.2d 964. we w i l l n o t make a contract for the
parties. Nor i s t h i s C o u r t p r e p a r e d t o v e n t u r e t h a t Baker
would h a v e been awarded t h e c o n t r a c t i f E d s a l l was n o t t h e
successful bidder. In the absence of any showing o f bad
faith, fraud, o r c o r r u p t i o n o f t h e Department, the exercise
of discretion will not be disturbed. See, Koich, supra.
B a k e r ' s b i d was n o t a c c e p t e d by t h e Department. As a
result, no contractua 1 relationship arose. Baker has
p r e s e n t e d no argument upon which a bad f a i t h c l a i m c o u l d b e
based. Nor was there any proof that the Department was
a c t i n g i n bad faith. The Department o n l y s e c u r e d t h e b e s t
product a t t h e lowest p r i c e f o r t h e b e n e f i t of the taxpayers,
not the bidder. While a p p e l l a n t h a s standing, his laches
p r e v e n t h i s b e i n g awarded t h e c o n t r a c t .
Accordingly, the judgment of the District Court is
affirmed.
Mr. Justice Frank B. Morrison, Jr., s p e c i a l l y concurring:
I agree with t h e r e s u l t i n t h i s case. Plaintiff has not
stated a claim for relief entitling plaintiff to damages.
P l a i n t i f f should have s o u g h t j u d i c i a l review p u r s u a n t t o
t h e p r o v i s i o n s o f t h e Administrative Procedure A c t . Having
f a i l e d t o d o s o , p l a i n t i f f i s w i t h o u t a remedy.