This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 1982 decision in Aurora Pump v. Goulds Pumps, Inc., the Florida First District Court of Appeal invalidated a tendering process because the rules relating to the final price submissions were not sufficiently clear. The case dealt with an Invitation for Bids (IFB) issued by the Jacksonville Electric Authority (JEA) for the manufacture and supply of power station pumps. The solicitation contemplated a two-stage, two-envelope process, wherein the contents of the technical proposals would be negotiated first with the bidders while the price envelopes remained sealed, and then bidders would be allowed to amend their initial pricing to make any required adjustments that may flow from the first-stage technical negotiations.
The Court found that instead of providing clear written instructions to the bidders, the JEA ran the competition based on unwritten procedures and failed to disclose the deadline for the submission of the best-and-final-offer (BAFO) prices:
The only published procedures and guidelines available to the bidders governing the manner by which bids were to be submitted, received, evaluated, or modified were contained in the Invitation for Bids and Instructions to Bidders, as supplemented by Ordinance 80-113-169 of the City of Jacksonville and JEA Procedure No. MD311. Although the invitation specified the date by which the initial technical and cost proposals were to be submitted, which as amended was September 29, 1981, neither it, the instructions, nor any other published material set forth the actual procedures utilized by JEA for conduct of the negotiations regarding bidders’ exceptions; methods by which the bidders could submit plus or minus price adjustments occasioned by those negotiations; or, most important, as we finally conclude, any deadline after which price adjustments could no longer be submitted. According to John Cole, JEA’s project administrator responsible for the contract, the submission of price adjustments was governed by unwritten procedures based only on the customary practices of JEA.
Given this failure to properly delineate the process rules, the Court determined that JEA’s decision to reject the complainant’s final price offer was arbitrary.
The Court also found that the complainant was placed at a disadvantage against competing bidders who had participated in prior JEA procurements and already knew the unwritten process rules regarding final price submissions:
The record supports the lower court’s finding that both the invitation and the instructions were silent as to a specific procedure for conduct of the negotiations and as to a deadline by which cost proposal modifications resulting from the negotiations could be submitted…[T]he other companies’ operating their negotiations from a vantage obtained through prior dealings with JEA, worked to create the appearance of favoritism and impropriety.
The Court therefore agreed that the JEA’s decision to reject the complainant’s bid was invalid.
As this case illustrates, public institutions should disclose their process rules so that all bidders, including new bidders, are on an equal procedural footing when competing for contract awards.
