This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its August 2018 decision in Depaul Industries v. City of Eugene, the United States District Court of the District of Oregon rejected the city’s attempt to dismiss a legal challenge and ruled that the bias allegations should proceed to trial. The case dealt with the procurement of security guard services. The complainant claimed that the city unnecessarily added the requirement of armed guards to the prior non-armed security requirements in a deliberate attempt to exclude it from the competition.
By way of background, the Court noted that the plaintiff, DePaul Industries, is an Oregon non-profit corporation recognized as a Qualified Non-Profit Agency for Individuals with Disabilities (QRF) as defined under Oregon statute, and that local governments and agencies are mandated to contract with QRFs that provide certain services before considering a contract with for-profit entities. The Court also noted that DePaul Industries is the only QRF listed in Lane County to provide unarmed security services and that the City of Eugene had contracted with DePaul Industries for those services for a 12-year period before deciding, in May 2016, not to renew the contracts and to instead proceed to open tender for the provision of armed security services.
DePaul Industries alleged that the city’s newly identified need for armed services was a “sham” pretext for removing the incumbent as a retaliation for negative public comments made against the city by one of the DePaul’s employees who “was a vocal critic of the mayor and the city’s practices.” As the Court summarized:
Plaintiff alleges that Defendants created a pretext of wanting armed security services so that the City could cancel the contracts with DePaul Industries in order to retaliate and punish DePaul Industries for the conduct of one of its employees. This employee, in his capacity as a private citizen, was a vocal critic of the City Council. As alleged, had the City placed a bid for unarmed security services, then the City would have been obligated by law to award the bid to DePaul Industries. As a result of the City’s deceptive conduct, DePaul Industries lost their contracts.
In its defence, the city argued that it had a legitimate need for armed security guards and that the claim should therefore be summarily dismissed. The Court denied the request and ordered that the matter proceed to trial so that relevant evidence could be considered.
As this case illustrates, while government institutions may be free to set their contractual specifications to address their needs, suppliers often have the right to challenge the fairness of those specifications in formal legal proceedings.
