No. 83-254
I N THE SUPREME COURT O F THE S T A T E O F XONTANA
1983
MARTEL COL\ISTRUCTION, I?JC. ,
AND W I L L I A M MARTEL,
P l a i n t i f f s and R e s p o n d e n $ s ,
MONTANA S T A T E BOARD O F EXAMINERS, GOVERNOR
TED SCHWII\JDEP.J, SECRETARY O F STATE J I M F?ALTElV4IRE,
AJSD ATTORNEY GENERAL MICHAEL T . GREELY, a s m e m b e r s
t h e r e o f , a n d MORRIS BRUSETT, D i r e c t o r of t h e D e p t .
of A d m i n i s t r a t i o n ,
D e f e n d a n t s and A p p e l l a n t s ,
and
VOLK CONSTRUCTIONl I N C . ,
Intervenor and A p p e l l a n t .
A P P E A L FXOI'I: 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 o f L e w i s & C l a r k ,
T h e H o n o r a b l e H e n r y L o b l e , Judge p r e s i d i n g .
COUNSEL O F RECORD:
For A p p e l l a n t s :
Hon. M i k e G r e e l y , A t t o r n e y G e n e r a l , H e l e n a , M o n t a n a
V a l e n c i a L a n e , D e p t . of A d m i n i s t r a t i o n , H e l e n a , M o n t a n a
Alexander C Baucus, G r e a t Falls, Montana
For R e s p o n d e n t s :
Scully, L i l l y & Andriolo, Bozeman, Montana
For A m i c u s C u r i a e :
Tom Johnson, H e l e n a , M o n t a n a ( M o n t a n a C o n t r a c t a r s )
A n d e r s o n , Brown, G e r b a s e , C e b u l l & Jones, B i l l i n g s ,
Iblontana (Billings Contrators' Council)
-- - -
-- ----
S u b m i t t e d on B r i e f s : June 3 0 , 1 9 8 3
Decided: August 12, 1983
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
The members of the State Board of Examiners, the
director of the state Department of Administration, and Volk
Construction, Inc., appeal from an order of the District
Court, First Judicial District, Lewis and Clark County,
granting a writ of mandamus to compel the Montana Board of
Examiners to reject the bid of Volk Construction, as
unresponsive to the solicitation for bids for the Montana
Children's Treatment Unit Project.
We reverse the District Court and quash the writs of
mandamus and certiorari.
Martel Construction, Inc., a Montana corporation, is a
regularly licensed contractor with its office in Bozeman,
Montana. William Martel is an officer of Martel. Volk
Construction, Inc., a Montana corporation, is also a
regularly licensed contractor with its office in Great Falls,
Montana.
Governor Ted Schwinden, Secretary of State Jim
Waltermire, and Attorney General Mike Greely comprise the
Montana State Board of Examiners. Morris Brusett is the
director of the state Department of Administration. These
appellants will be referred to hereafter as "the state
officers." Collectively they are responsible for, among
other things, the solicitation of competitive bids for public
works, determining successful bidders and awarding contracts
for such works.
In late 1982, the state officers issued a solicitation
for competitive bids for the construction of the Montana
Children's Treatment Unit to be built in Billings, Montana.
The bid opening was to be held on February 9, 1983. Prior to
the bid opening date, the solicitation for bids was amended
by the state officers by addendum 1, dated January 18, 1983,
addendum 2, dated February 2, 1983, and addendum 3, dated
February 4, 1983.
The solicitation for bids contained a section entitled
"Instructions to Bidders," which provided in Section E,
Proposals, paragraph 2 as follows:
"2. Proposals shall be in a sealed envelope and
addressed to:
"Department of Administration & Board of Examiners
State of Montana.
Architecture & Engineering Division, 1500 East
Sixth Avenue, Helena, Montana 59620.
"The envelope shall also contain the following
information:
"Name of Project
Mont A/E Number
Name of Contractor
Montana Public Contractor's License No.
11
Acknowledge receipt of Addendum No. " ' *
(Emphasis added.)
Paragraph E.3 provides:
"3. Proposals entitled to consideration shall be
made in accordance with the following instructions:
"a. made upon form provided,
"b. all blank spaces properly filled,
"c. all numbers stated in both writing and in
figures,
"d. shall contain no additions, conditional or
alternate bids, erasures, or other irregularities.
"e. shall acknowledge receipt of all addenda
issued. " (Emphasis added. )
The work to be performed under the original bid
solicitation was substantially increased by the requirements
of addenda 2 and 3. These changes resulted in a material
increase in the cost of the work of approximately $55,280,
which would not have been required under the original
solicitation.
The bid form had on it a place for the acknowledgment of
each addendum, with the date of each addendum. The bid
submitted by Volk failed to acknowledge, on the envelope or
on the bid form, receipt of addenda 2 and 3 as required by
the "Instructions to Bidders."
When bids were opened on February 9, 1983, Volk had the
low general contractor's bid of $1,698,000. The next bid,
for the same options, was $174,600 higher. That bid was
submitted by Martel.
Because addendum 3 was sent late, that is, close to the
February opening date, the architect employed by the state
for this project telephoned each contractor on February 8,
1983, to confirm that each was aware of addendum 3.
Martel protested Volk's bid. The architect again got in
touch with Volk to inquire whether Volk received addenda nos.
2 and 3 and reported, "I was assured that Volk received and
considered all addenda."
The Board of Examiners first considered Martel's bid
protest at its regular meeting on February 22, 1983. Since
all bids exceeded the appropriation ava.ilable, the Board
decided to approach the Legislature for supplemental funding
before making any decision. Subsequently, the 1983 Montana
Legislature approved. an additional $350,000 for the Montana
Children's Treatment Unit. There was still only enough money
to award the general contract to Volk. The other bidders had
submitted bids which would not meet the available monies even
after the 1983 supplemental appropriation.
The Board of Examiners met a second time on March 24,
1983, to consider Martel's bid protest. Martel and his
attorney urged the Board to reject Volk's bid as unresponsive
and threatened suit if the Board did not do so. The Attorney
General noted that there had been a prior oral acknowledgment
by Volk of the addenda and that Volk would be bound to a
contract, and that in his opinion Volk had no advantage over
other bidders. Nevertheless, the Board postponed its
decision to allow for more research.
The Board met a third time on April 5, 1983. All
parties were present. Volk and his attorney addressed the
Board, and exhibited worksheets which Volk claimed showed
addenda 2 and 3 were used in preparing his bid. Again the
Board adjourned to allow for more research.
In the meantime, the Board of Examiners received
memoranda from its counsel advising them not to accept Volk's
bid and to set out the project for rebidding. Nevertheless,
the Board met for a fourth time on April 7, 1983. They
concluded that Volk was aware of addenda 2 and 3, could be
bound to a contract including all the addenda, and that the
contract should be a.warded to Volk as the lowest bidder.
Martel commenced an action for writ of review, writ of
mandate, or other appropriate writ in the District Court,
First Judicial District, Lewis and Clark County, for the
purpose of contesting the action of the Board of Examiners in
accepting Volk's bid. After hearing and argument the
District Court entered findings of fact, conclusions of law,
and issued an order providing for a writ of mandamus to
compel the Board of Examiners to reject Volk's bid as
unresponsive to the specifications for the Montana Children's
Treatment Unit Project. The state officers and Volk have
appealed that decision to this Court. We have had the
benefit of briefs from the Montana. Contractor's Association,
Inc., and Billings Contractors Council, Inc., as amici
curiae, each in support of Martel1s position in this case.
The state officers and Volk raise four issues on appeal:
1. Does Martel, an unsuccessful bidder, have standing
to procure mandamus?
2. Does certiorari lie in this case?
3. Can certiorari be considered in this case as
ancillary to a writ of mandamus?
4. Does mandamus lie in this case?
IS MANDAMUS APPROPRIATE?
We will first discuss the last issue raised by the state
officers. The District Court determined that a writ of
mandamus should issue because the District Court found that
Volkls bid was not responsive to the bid solicitation.
The statutory authority for the state officers to act in
this cause is found in section 18-2-103(1) (c) as follows:
" (1) For the construction of a building costing
more than $25,000 the department of administration
shall:
"(c) under the supervision and with the approval of
the board of examiners, solicit, accept, and reject
bids and award all contracts to the lowest
qualified bidder considering conformity with
specifications and terms and reasonableness of bid
amount;. . ."
In considering the legal effect of those statutory
provisions, the District Court determined that the duty of
the state officers to award the contract to the "lowest
qualified bidder" gave the state officers discretion to
determine whether the bidder was responsible, so interpreting
Koich v. Cvar (1941), 111 Mont. 463, 110 ~ . 2 d964. The
District Court further determined that the statutory language
requiring the state officers to consider conformity with
specifications and terms and reasonableness of bid amount
meant a determination as to the responsiveness of the bidder
to the bid itself. The District Court concluded that the
Board of Examiners in determining "conformity with
specifications" was determining responsiveness to the bid,
which was ministerial in nature. The District Court relied
on State ex rel. Lee v. Montana Livestock Sanitary Board
(1959), 135 Mont. 202, 206, 339 P.2d 487, 490, defining a
ministerial act as follows:
"A ministerial act may perhaps be defined to be one
which a person performs in a given state of facts,
in a prescribed manner, in obedience to the mandate
of legal authority, without regard to or the
exercise of his own judgment upon the propriety of
the act done."
Having concluded that in determining responsiveness the
Board of Examiners was performing only a ministerial duty,
the District Court then concluded that mandamus would lie.
State ex rel. Brink v. McCracken (1931), 91 Mont. 157, 6 P.2d
The briefs of amici in support of the District Court
emphasized the importance of protecting the competitive
bidding process for the construction of public works. They
contend that in this case Volk, after the bid opening, knew
that it had the lowest bid, because he could disclaim
knowledge of the addenda, and could accept or reject the
contract, that thus Volk in effect was qiven, to use Martel's
expression, "two bites at the apple."
Amici fea.r that the integrity of the bidding process is
endangered by recognition of oral acknowledgments of addenda
because (1) there is then no assurance that there is a clear
meeting-of-the-minds between the public body calling for the
bids and the low bidder; (2) there is then no assurance that
all bidders are bidding on the same thing, and (3) that the
action of the State Board of Examiners opens the door to the
nightmare of oral acceptances if it gives Volk the benefit of
its bid under its oral acknowledgment of addenda 2 and 3.
The state officers, in opposition, contend that Volk was
bound to perform all of the addenda under its bid because
Volk was aware of and considered the addenda in making its
bid. The state points to the fact Volk had obtained a
supplier's written price bid for material required only on
addenda 2; and that the architect had called Volk on February
8, 1983, to discuss the addenda. The state officers rely on
Boger Contracting Corp. v. Board of Commissioners of Stark
County (Ohio App. 1978), 396 N.E.2d 1059, for authority that
it could separately determine whether Volk could be bound,
and whether Volk had actual knowledge of the addenda.
The District Court opted to follow the holding of the
Comptroller General of the United States in Matter of MET
Electrical Testing, Inc., B-201146 (March 17, 1981).
Therein, the Comptroller rejected MET Electrical's bid as
nonresponsive for failure to acknowledge a material addendum.
The Comptroller General held:
"Permitting oral acknowledgment of a material
amendment is detrimental to the competitive bidding
process in two ways. First, it allows a bidder
'two bites at the apple' by giving it the sole
discretion to accept or reject the contract after
bid opening, by affirming or denying that it
intended to be bound by the amendment, and hence,
the agreement. See National Investigation Bureau,
Inc. B-191759 (July 18, 1978), 78-2 CPD 44.
Second, because of the bidder's failure to timely
acknowledge the amendment in writing, the terms of
the resulting contract are not clear since the
written bid acknowledges the terms of the
solicitation but not relevant amendments, 42 Comp.
Gen., supra.
"Under these circumstances, we believe MET'S bid
was properly rejected as nonresponsive for failure
to timely acknowledge a material amendment in
writing."
The District Court also noted the holding in Charles N.
White Construction Co., Inc. v. The Department of Labor
(N.D. Miss. 1979), 476 F.Supp. 862, where the Federal
District Court denied injunctive relief against the
Comptroller General because he had rejected a bid where the
bidder had not made written acknowledgment of all addenda,
but a representative of the company did orally acknowledge
receipt of such addenda. The thrust of the holding in White,
however, was that the Comptroller General denied the bidder
protest because there was no independent evidence, aside from
the bidder, that he had received the addenda and considered
the same in making his bid. The facts of that case differ
from this case. The record here shows that Volk confirmed
the receipt of the addenda through telephone conversation
with the architect having charge of the project, and shows
that his bids had included material prices which could have
only come from consideration of the addenda.
The decision of the Federal District Court in White was
governed by the agency's procurement regulations, which
provided that "after bids have been opened, award must be
made to that responsible bidder who submitted the lowest
responsive bid." 41 C.F.R., 1-2.404-1(a), (1978). A
further regulation provides that " [a]ny bid which fails to
conform to the essential requirements of the invitation for
bids, such as specifications, delivery schedule, or
permissible alternates thereto shall be rejected as
nonresponsive." 41 C .F .R. , section 1-2.404-2 (a), (1978) .
It will be noted that there is a difference, though
perhaps not material, between the state statute governing the
state officers in this case, and the federal regulations
governing the Comptroller General in the cases he had
decided.
The fulcrum on which the decision here of the District
Court is balanced is its determination that whether Volk's
bid was responsive is ministerial only, and not an exercise
of discretion by the state officers. It is essentially on
this point that we disagree with the District Court. The
state statute empowers the state officers to "award all
contracts to the lowest qualified bidder considering
conformity with specifications and terms . . . " It is our
holding that the state officers, in determining whether
bidders are qualified, and whether they will perform the
contract in conformity with the specifications and terms of
the solicitation are acting in a discretionary manner. It
goes without citation to say that mandamus does not lie to
control the discretion of public officers.
We regard the concerns in this case of amici with a good
deal of respect. We agree that the bidding process for
public contracts should be impartial, with equal opportunity
given to all those participating in the public bidding, to
avoid corruption, and that the process should at the same
time procure for the state quality materials and workmanship
for the most reasonable cost. We, therefore, look to the
facts of this case to determine (1) whether there was a
meeting of minds between the state and Volk under its bid,
and (2) whether Volk could be held by the state to perform
all of the addenda under its bid.
The evidence that Volk was contacted by telephone
regarding the last two addenda and that Volk had begun
preparation for fulfilling the obligations of addenda nos. 2
and 3, is adequate to show that Volk had actual knowledge of
the addenda and that there was a meeting of the minds as to
their existence and the respective requirements for
fulfillment of the terms of those addenda.
Pertinent to the examination of whether Volk could be
held by the state to perform the addenda is other language in
the solicitation for bids.
Paragraph H.5 of the solicitation provided:
"A1l written addenda issued by the
Architect/Engineer will become part of the Contract
Documents and all Bidders shall be bound by such
addenda, whether received or not by the Bidder. No
oral or telephonic modifications of the Contract
Documents will be considered."
Again, Paragraph 1.2 of the solicitation for bids
provided :
"2. The Owner reserves the right to reject all bids
and to waive any informality or irregularity in any
bid received."
These provisions of the solicitation for bids issued by
the state officers make it clear that a bidder could not get
"two bites at the apple," and decide to reject a bid if
pleased, because the language of this solicitation binds the
bidder to full performance of the contract documents,
including all of the addenda, received by the bidder or not.
In making its bid, Volk agreed to that provision. Both
Martel and Volk and all other bidders agreed that the state
had the right to reject all bids or to waive any informality
or irregularity in any bid received.
Thus, Volk, in submitting the bid here by the contract
documents, bound itself to the full performance of the
contract documents, including the addenda.
Moreover, we hold that the state officers properly have
the power to waive irregularities in any bid offered. The
state officers reserved that right in the solicitation for
bids, and properly have that right in awarding public
contracts. Of course, such waiver should only apply if the
irregularity is immaterial. We hold the failure of Volk to
make written acknowledgment of receipt of addenda in this
case is immaterial for this principal reason: The changes in
work required by addendum 2, amounted to approximately
$37,355, and those by addendum 3 to approximately $17,925,
for a total combined cost increase resulting from addenda 2
and 3 of $55,280. This amount is less than the spread
between the first and second bidder, which was $174,000. If
the spread in this case between the lowest and the second
lowest bidder had been less than $55,280, so as to affect the
bidding, then the failure of Volk to acknowledge receipt of
the addenda in written form, would have changed from an
immaterial to a material defect, an irregularity that the
state officers could not then waive. See Charles - White
N.
Construction Co., supra, 476 F.Supp. at 867.
Deviations in bid submissions which do not go to the
substance of the bid (here Volk acknowledges his full
responsiblity for the addenda as well as the contract), and
irregularities which do not give one bidder a substantial
advantage over other bidders, are types of irregularities
that can be waived by public officers in awarding contracts.
A.A.B. Electric, Inc. v. Stevenson Public School District
(Wash. App. 1971), 491 P.2d 684; Prestex, Inc. v. United
States (Ct. C1. 1963), 320 F.2d 367, 372.
We, therefore, determine that in this case mandamus
interferes with the discretion of the state officers in
awarding the contract to the qualified bidder conforming to
specifications and terms of the bid solicitation, and in
considering the reasonableness of the amount bid. Our
determination in effect disposes of all of the other issues
in the case, because each other issue rises or falls with our
determination of the right to mandamus here.
We have expedited our decision on this appeal, because
of the importance of the question presented, and because the
fate of the construction project is hanging in the balance.
We reverse the District Court, quash any writ of mandamus and
certiorari issued in this cause and order that the
proceedings be dismissed in the District Court on remittitur.
Let remittitur issue forthwith.
Justices
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