California’s economic downturn means that public works projects are fewer in number and smaller in scale as local and state agencies grapple with reduced funding. As a result, public works bidding is more fiercely contested than ever. A recent decision provides a good example. (Schram Construction Inc. v. The Regents of the University of California (2010) 187 Cal.App.4th 1040.)

In Schram, the University sought bids for the design and construction of the mechanical, electrical and plumbing work for UCSF Medical Center at Mission Bay. The bidding was structured around multiple packages and trades. The University used the “best value” method, a modified approach awarding the bid to the bidder with the best ratio between bid price and best-value-questionnaire score. (See Public Contracts Code § 10506.5(g).) The idea is that this method incorporates and weighs factors other than the bid price, resulting in the best contractor being selected from among the lowest bidders.

After the first set of bids were received and reviewed, the University decided that the bidding should be redone. In addition to the original six bid packages, the University invited bids on three alternative packages. It also changed the weights given to various factors used to calculate the best value scores. Schram Construction Inc. (SCI) initially bid on just two independent bid packages. Later, SCI did not bid on any of the new, alternative packages, choosing instead to bid on three of the separate bid packages. Two of its separate bids, if combined, covered one of the alternative bid packages: the HVAC (heating, ventilating and air conditioning) and plumbing for the Energy Center and Outpatient Building. But the University awarded that work to another bidder on the grounds that SCI did not bid the alternative package. As a result, SCI was not even considered for that work.

SCI filed a protest. After losing it, SCI filed a petition for a writ of mandamus. After losing again, SCI appealed. The Court of Appeal reversed. The University’s ability to pick and choose among various bid packages rests on the assumption that the bidding process is transparent, fair and affords the bidding parties the requisite knowledge of how the bids will be evaluated. SCI contended that the University awarded the bids based on undisclosed criteria and in a manner allowing it to predetermine the outcomes. The Court of Appeal agreed.

The law requires disclosure to prospective bidders as to how the best value bid will be selected including the bid selection procedure and the determinative factors in that decision. (Public Contracts Code Section 10506.4(c).) “[T]he publication requirement serves this objective, not only by informing prospective bidders of how the bid selection will be made, but also by establishing a clear, public selection standard that prevents manipulation of the outcome and after-the-fact justifications.” Specifically, although the University had the laudable goal of limiting the number of different contractors performing the mechanical, electrical and plumbing trades, it did not inform the bidders that this was the overriding criteria for bid selection. Moreover, the University failed to explain how the alternative bid packages would be compared to the individual bid packages.

As a result, the University failed to meet the statutory mandate of ensuring “that all selections are conducted in a fair and impartial manner.” (Section 10506.4(c).) This was particularly true where, as here, the agency wished to award as much of the work as possible to a single contractor, but the bidders were unaware of this key factor. As the court noted, this single factor was decisive in deciding the “best value contractor” and ultimately, the best value bid. But the failure to disclose this information left the bidders guessing as to what would satisfy the agency’s needs. And guessing wrong came with a high price; exclusion of individual bid packages from consideration. The appellate court directed the trial court to issue a writ of mandate setting aside the contract awarded on the alternative bid package.

The Public Contract Code places a premium on transparency. But the various statutes and agency implementation can be opaque. To navigate the maze and overcome the obstacles, SCI had to make repeated requests for information, exhaust administrative remedies, petition for a writ of mandate, and ultimately, perfect and brief the appeal. As this case demonstrates, in the increasingly competitive and hotly contested public works world, the demand for able counsel is also at a premium.