This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its June 1982 decision in E.M. Watkins & Company, Inc. v. Board of Regents, the Florida First District Court of Appeal upheld the decision to reject a low bidder for failing to name its subcontractors as required in the solicitation instructions. The case dealt with a tendering process for the construction of a building at Florida State University. The low bidder brought a legal action after its bid was rejected as non-compliant, challenging, among other things, whether the failure to name subcontractors was a material irregularity and whether the requirement was legally valid in the first place.
The Court of Appeal found that the failure to name the subcontractors was a material irregularity since it gave the bidder a potential advantage over its competitors:
The unfair bidding advantage one contractor derives from the failure to list required subcontractors is generally threefold: (1) it provides the precious few minutes which may be saved by failing to provide a name for the appropriate blank on form D-1 and matching the name with the price used in the bid computation, (2) it allows the potential for speculation, by use of a phantom price and efforts to shop that item or trade until a subcontractor can be found at the speculative contract price, and (3) it permits a successful bidder to accept additional subcontractor bids after the bid opening, giving the opportunity for undercutting the low subcontractor on whom he relied in formulating his bid.
The Court of Appeal also found that the requirement was valid and legally enforceable:
By its second issue Watkins urges that this policy and practice of requiring a list of major subcontractors constitutes an invalid rule and, as such, is unenforceable against Watkins. Again, we disagree. To the extent an agency may intend in its final order to rely upon or refer to policy not recorded in rules for discoverable precedents, that policy must be established by expert testimony, documentary opinion, or other evidence appropriate to the nature of the issues involved and the agency must expose and elucidate its reasons for its discretionary action. Florida Cities Water Co. v. Public Service Commission, 384 So.2d 1280 (Fla. 1980); Anheuser-Busch, Inc. v. Dept. of Business Regulation, 393 So.2d 1177 (Fla. 1st DCA 1981); McDonald v. Dept. of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977). We find that BOR has followed these principles in both the evidentiary support for and explanation of its reasons for requiring a list of subcontractors. This practice is supported by a showing, among other things, of 20 years of consistent state policy regarding public contracts, the legislative history of Section 255.0515 (discussed above), and the factors underlying such a policy: the prevention of bid shopping, protection of subcontractors, insuring future competitive practices, eliminating the advantage of late submission, insuring the integrity of the subcontractors’ work, etc.
Given the above, the Court of Appeal upheld the decision to reject the low bidder as non-compliant for failing to name its subcontractors, as required in the solicitation instructions.
