LEGAL ISSUES


Big Decision Favors Low Bidders on Public Works Projects


By Mary A. Salamone and Dan J. Bulfer, Atkinson, Andelson, Loya, Ruud & Romo


C


ompetitive bidding laws generally require public entities to award contracts to


the lowest responsible and responsive bidder on California public works of improvement. In recent years, however, low


bidders have been increasingly targeted by expensive and sometimes meritless litigation brought by unsuccessful bidders. As part of these actions, the unsuccessful bidder will allege a claim for interference with economic relations — that the low bidder inter- fered with its pre-existing relationship with the awarding agency by engaging in unlawful conduct, which changed


Bevy of Laws Continued from page 10


political affiliation or willingness to work on a project proposed by those on the other side of the political aisle. Such laws may also raise important Constitu- tional questions. As laws are enacted, we can expect


that these questions and issues will be addressed in courts, challenged and defended by lawyers on both sides. In the meantime, however, as the political climate remains heated in 2017, so too it appears lawmakers in California may continue their opposition efforts against the new administration through laws that affect contractors and the industry. In this way, regardless of personal or political beliefs regarding such laws, California contractors now find themselves directly involved in the


12 May/June 2017


the outcome of the competitive bidding process. Depending on various factors, such as the risk-averseness of the awarding entity, such litigation has the potential to derail the project entirely for the low bidder. On February 16, 2017, the


California Supreme Court held that such claims were improper in Roy Allan Slurry Seal, Inc. et al v. American Asphalt South, Inc. American Asphalt South, Inc. (American) outbid its compet- itors on six public works contracts in Riverside County. Te competitors sued American Asphalt for interference with economic advantage, alleging that American had improperly deflated its bids to obtain the contracts by failing to pay prevailing wages and overtime compensation.


national political discourse. Not all lawyers will agree, that is


certain. But as lawyers, we continue to advocate for our clients’ best interests, as well as for fair and just laws that promote the continued growth and health of the construction industry. Hopefully, as we continue through 2017, lawmakers also will focus on the industry, growth and jobs, by creating and funding desperately needed public works projects in California, and avoiding controversial legislation that may affect contractors. 


Chris A. McCandless, Esq., is a partner at Diepenbrock Elkin Gleason LLP, Sacra- mento (www.diepenbrock.com). He can be reached at 916-492-5068, or by email at cam@diepenbrock.com.


Te trial court sustained Ameri-


can’s pleading challenge and dismissed the case. Te Court of Appeal reversed the dismissal in a split decision. On review, the California Supreme Court held that the trial court’s dismissal was proper.


Economic Relationship Not Shown


Te Supreme Court noted that a


claim of interference with economic advantage requires an economic relationship with a third party with a probability of future economic benefit to the plaintiff. It held that a disappointed bidder on a public works project cannot demonstrate this relationship, observing that “public contract law forbids” recognizing such a relationship when public entities are required by statute to award contracts to the lowest responsible bidder. Further, because the purpose of


competitive bidding laws is to guard against “favoritism, improvidence, extravagance, and corruption,” the law requires that every bidder be treated as a stranger to the awarding entity. Moreover, the competitors could


not demonstrate any probability of future economic benefit, given that the awarding entity’s solicitation for bids is merely a request for offers from interested parties. Te Court noted that awarding entities retained the discretion to reject all bids under California law, and that all bids were sealed and received without negoti-


California Constructor


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