The City of San Leandro (City) issued a call for bids for its BART-Downtown Pedestrian Interface project (Project). The City provided prospective bidders with a "Contract Book" that contained information and forms for bid submissions, including a required two-page form of bid bond. (A bid bond provides a surety's guarantee that the bidder will enter into the contract if the owner awards the contract to the bidder, or pay the owner 10% of the amount of the bid if the bidder refuses to enter into the contract.)
Gallagher & Burke (G&B) submitted the lowest bid ($4,846,700). Bay Cities Paving & Grading (Bay Cities) submitted the second lowest bid ($5,359,752).
G&B's bid omitted page one of the two-page bid bond form. However, page two, which G&B did submit, contained the signatures of the surety's attorney-in-fact and G&B's president, as well as notary certificates for both signatures. It also identified the Project, the City's project number, the name of the principal (G&B), and the name and contact information for the surety.
Bay Cities filed a bid protest with the City; it argued: (1) that G&B's bid bond was unenforceable because the omitted page one contained material terms of the surety's obligation; (2) that G&B's bid was nonresponsive because its bid bond was unenforceable; and (3) therefore the City must reject G&B's bid. G&B's surety submitted to the City a letter confirming that the bid bond was fully enforceable against the surety.
The City Engineer notified Bay Cities of his determination that G&B's bid was accompanied by an enforceable bid bond. On his recommendation, the City Council unanimously adopted a resolution waiving any irregularities with G&B's bid and awarding the contract to G&B.
Bay Cities filed a challenge to the City's determination asking the trial court to invalidate the City's award of the contract to G&B. The trial court denied the challenge, and Bay Cities filed an appeal. The Court of Appeal reviewed Bay Cities' appeal under the basic rule of competitive bidding that a public entity may waive a defect in a bid if it cannot have affected the amount of the bid, given a bidder an advantage not allowed other bidders or, in other words, if the variance is inconsequential. G&B argued that the defect was material and could not be waived.
The Court found that the City correctly determined that G&B had used the City's standard bid bond form. The omitted first page contained only three blank places for the insertion of additional information: (1) the name of the principal; (2) the name of the surety; and (3) the date of the submission of the bid. G&B filled in the blanks on the second page of the bid bond form, which provided all of the information required on the first page. The court found that substantial evidence supported the City's finding that G&B substantially complied with the requirement to submit a bid bond, and the City did not abuse its discretion in determining that G&B's bid bond was enforceable. The Court ruled that the City's decision to waive G&B's bid irregularity was not an abuse of the City's discretion and denied Bay Cities' appeal.
Bay Cities Paving & Grading (2014) 223 Cal.App.4th 1181.