This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its September 1990 decision in City of Cape Coral v. Water Services of America, Inc., the Florida Third District Court of Appeal awarded Water Services America, Inc. (WSA) compensation for bidding costs due to the improper rejection of its bid, but rejected WSA’s $1 million lost profit damages claim.
The Court agreed that WSA’s bid was improperly rejected and that consequently, WSA should be entitled to compensation for its bidding costs:
Under the circumstances of this case, we conclude that it was proper to award WSA its bid preparation costs and prejudgment interest thereon. WSA was clearly induced to incur the costs to submit its bid on the City’s proposed project by the City’s representation that the bid would not be rejected because WSA was not licensed pursuant to chapter 489. The City failed to adhere to that representation, and WSA suffered the loss of its bid preparation costs in reliance upon that promise. If WSA had not relied upon the City’s promise that WSA need not be licensed under chapter 489 to be a qualified bidder, WSA would have had two alternatives. First, it could have consciously decided to continue not to be licensed under chapter 489, not submit a bid and thereby save the bid preparation costs it incurred in reliance on the City’s promise. Second, it could have elected to become licensed, submit its bid and, under the circumstances that subsequently developed, if Envirogenics was otherwise disqualified, possibly be awarded the bid as the low, responsive and responsible bidder. The trial judge was, therefore, correct in awarding WSA its bid preparation costs and prejudgment interest thereon. Royal American Development, Inc. v. City of Jacksonville, 508 So.2d 528 (Fla. 1st DCA 1987); State Mechanical Contractors, Inc. v. Village of Pleasant Hill, 132 Ill. App.3d 1027, 87 Ill. Dec. 532, 477 N.E.2d 509 (4th Dist. 1985); Owen of Georgia, Inc. v. Shelby County, 648 F.2d 1084 (6th Cir.1981).
However, the Court rejected the WSA’s claim of entitlement to lost profit damages as compensation for the improper rejection. Citing a prior 1960 decision in William A. Berbusse, Jr., Inc. v. North Broward Hospital District, in which the court rejected a lost profit claim that was based on an alleged bidding process contract, the Court ruled that lost profits were not available to losing bidders under either a promissory estoppel or bidding process contract theory:
While WSA attempts to distinguish this court’s decision in William A. Berbusse, Jr., Inc. v. North Broward Hospital District, 117 So.2d 550 (Fla. 2d DCA 1960), we find those attempts unpersuasive. WSA first argues that Berbusse is a case involving a cause of action for breach of contract and, therefore, is not applicable to this case based upon WSA’s theory of promissory estoppel. Even though the plaintiff in Berbusse grounded his complaint on a breach of contract theory, we find that case and this case indistinguishable in theory. Berbusse had alleged that it was the lowest responsible bidder on an invitation to bid which provided that the contract would be awarded to the lowest responsible bidder. Berbusse sought damages for loss of profits and bid preparation costs after the contract was awarded to a higher bidder. Berbusse’s theory was that the invitation to bid containing the statement that the contract would be awarded to the lowest responsible bidder was an offer that it would enter into a contract with the lowest bidder. Berbusse argued that its acceptance of that offer by submitting the lowest responsible bid caused a contractual relationship to exist that would support a cause of action for breach of that contract when the award was made to a higher bidder.
We can perceive no distinction except semantics between Berbusse’s offer and acceptance contractual theory and WSA’s promissory estoppel theory. Regardless of the name of the theory, we hold now, as we did in Berbusse, that a cause of action against a public entity by an unsuccessful bidder for lost profits by reason of its failure to become the successful bidder is not available in Florida, particularly in the absence of arbitrary, capricious, dishonest, illegal, fraudulent or oppressive misconduct. WSA also argues that Berbusse was repudiated by this court in Harry Pepper & Associates, Inc. v. City of Cape Coral, 429 So.2d 97 (Fla. 2d DCA 1983), when we stated in the conclusion of that opinion that “appellants are entitled in their separate action to seek damages in addition to the costs of Pepper’s bid preparation.” Id. at 99. That statement, whatever may have been its intention, is pure dicta and we adhere to our holding in Berbusse.
Other jurisdictions have held that disappointed bidders on public works contracts cannot recover lost profits resulting from an award of the bid contract to another less responsive bidder. One of the better-reasoned of such decisions from other jurisdictions is State Mechanical Contractors v. Village of Pleasant Hill. We agree with the result and reasoning of the Illinois Appellate Court in that decision. We likewise reject the reasoning and contrary result reached by cases such as Swinerton & Walberg Co. v. City of Inglewood — Los Angeles County Civic Center Authority, 40 Cal. App.3d 98, 114 Cal. Rptr. 834 (2d Dist. 1974).
As this decision illustrates, while improperly rejected bidders may challenge the legal validity of an award decision to void that decision and potentially receive financial compensation for their bidding costs, lost profit damages are not readily available as a bid protest remedy against government bodies in Florida. This reflects a significant distinction between Commonwealth jurisdictions, where the Contract A process contract has been recognized and gives rise to bidder lost profit claims, and US case law, which allows for the calling of a bid security against bidders but does not recognize the corresponding right of losing bidders to bring lost profit claims.
