This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its November 1988 decision in U.S. Foodservice, Inc. v. School Board of Hillsborough County, the Florida Division of Administrative Hearings issued a cancel and re-tender order after finding significant irregularities in the School Board of Hillsborough County’s price evaluations. The case dealt with a tendering process for a school catering contract that featured, among other things, a $1 million pricing error in the cost of chicken wings. The Court found that the School Board failed in its attempts to rectify the rampant pricing errors and ordered that the process be cancelled and that the contract be re-tendered.
The Court noted that the School Board attempted to deal with errors in the price submissions by removing all category items in which one or more bidders has submitted pricing errors from the price evaluations:
In the draft memorandum, Ms. Ebner recalculated the bottom-line costs of the bids of Petitioner and Mutual after discarding all costs for items that either bidder had misbid. She determined that Petitioner had the lowest snack foods and beverages bid. She also determined that Petitioner had the lower total bid for the main-line food and snack foods and beverages contracts. Still preferring an award of both contracts to a single bidder, Ms. Ebner concluded in the draft memorandum that Respondent should award both contracts to Petitioner, and Ms. Harrison concurred with Ms. Ebner’s recommendation.
The Court found this method of evaluating price to be arbitrary and invalid since it prejudiced those bidders that had submitted valid pricing in the eliminated categories:
As already noted, Respondent’s tabulation method potentially penalizes compliant bidders by eliminating their compliant items from the tabulation when a noncompliant bidder misbids the same item. The anti-competitive, arbitrary effect of this tabulation method may be ameliorated somewhat by the fact that the ITB is for a cost-plus contract. However, the ITB fails to impose any minimum requirement or threshold for compliant items, in terms of number or dollar volume–e.g., if a bid contains noncompliant items totaling more than one percent of the total cost bid, then the entire bid is rejected. This means that Respondent’s tabulation method can destroy the competitiveness of the procurement by allowing a bidder purposefully or unintentionally to misbid a large number of items, resulting in the effective elimination of these items from the tabulation of bids submitted by bidders with superior access to these items. Under these circumstances, Respondent’s selection of this tabulation method was clearly erroneous, contrary to competition, and arbitrary.
Furthermore, while the Court found that some of the complainant’s price irregularities were immaterial, it also concluded that other pricing errors were material and undermined the validity of the complainant’s bid. Accordingly, the complainant’s bid was not eligible for a contract award. Given these price irregularities, the Court ordered that the tendering process be terminated and the contract be re-tendered.
As this case illustrates, running a competitive bidding process for contracts involving hundreds of pricing items significantly increases the risk of price irregularities. For these situations, purchasing institutions should develop better strategies for dealing with the risk of errors in bid submissions.
