Business Workshop : No bid waiver when mandatory

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The Commonwealth Court of Pennsylvania recently ruled that a small Montgomery County town could not waive a mandatory requirement in a bid for a government contract.

In the case in question, Dragani v. Borough of Ambler, each bidder was required to provide proof that a surety company with at least $20 million in underwriting authority would issue a bond guaranteeing the contractor's performance. The winning bidder, however, provided evidence it was backed by a surety with only $16 million in underwriting authority.

After one of the other bidders filed a protest, the municipality argued that it was entitled to waive this defect in the bid. In its decision, the Commonwealth Court recognized that bid "defects" may be waived only when three conditions are met:

1. The requirement is not statutory and the bid documents specifically reserve the right to waive defects.

2. The waiver will not deprive the municipality of its assurance that the contract will be performed according to its requirements.

3. The waiver will not adversely affect competitive bidding by placing one bidder in a position of advantage over others.

In this instance, however, the bid documents stated that no bids would be considered unless accompanied by the required insurance. Although the bid documents expressly reserved the municipality's right to waive bid defects, the court held that this particular defect could not be waived because the municipality had chosen to make it mandatory.

This case illustrates the importance of strict compliance with all mandatory bid requirements, and the risk contractors take when they assume that minor bid defects can be waived.

-- Chad Michaelson
Meyer, Unkovic & Scott
cim@muslaw.com

legalnews

Business workshop is a weekly feature from local experts offering tidbits on matters affecting business. To contribute, contact Business Editor Brian Hyslop at bhyslop@post-gazette.com.


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