Bid protests on statewide and local public procurements in Arizona are allowed, in one form or another, if an unsuccessful offeror has both “standing” and a basis for protest. Protestors can seek to be awarded the contract or to have the solicitation thrown out and reissued, which in many cases is itself a success.

But winning a bid protest in Arizona is not easy. The process is designed to move quickly to promote efficient contracting and to limit protests. Failure to meet any of the strict procedural requirements can lead to outright dismissal or waiver of an argument. Even when a protester properly follows the procedure, the applicable legal standard is a high one. To win a protest in Arizona, a protestor needs to demonstrate that an award decision was “clearly erroneous, arbitrary and capricious or an abuse of discretion.”

The question is what does it take to win an Arizona protest? Here are four steps that can maximize a protester’s chance of success.

Arbitration is often seen as a way of getting a more predictable result in complex construction disputes. The subject matter expertise available with experienced arbitrators and the finality of the arbitration process itself are certainly important considerations. But resolving disputes in arbitration can sometimes lead to surprising results, even ones that might be inconsistent with the underlying contract or with applicable state law.

The Eighth Circuit’s recent decision in Beumer Corp. v. ProEnergy Services, LLC, No. 17-2862 (8th Cir. Aug. 9, 2018), is an example of such a case. The arbitrator in this case awarded attorney’s fee of nearly a million dollars more than the liability cap in the contract. Despite the possibility that this result was inconsistent with state law, the Eighth Circuit let the award stand.

In Joe Tex’s song about unrequited love, the Southern Soul singer belts out, “I gotcha, never shoulda promised to me.” Joe Tex may have thought this approach is the right one for romantic disappointment, but parties to a contract have a different set of obligations.

A lawsuit by Washington State contractor Nova Contracting should serve as an alert to owners dealing with the assessment of a contractor’s performance. Nova’s lawsuit came about because of the owner’s termination of the contract. Nova claimed the owner was using a “gotcha” review process for its submittals that was designed to prevent performance. The trial court agreed with the owner.

Nova appealed and the court of appeals found sufficient questions of fact to send the dispute back to the trial court. The opinion offers insight into fair dealing and good faith in the performance of construction contracts. Nova Contracting, Inc. v. City of Olympia, No. 48644-0-II (Wash Ct. App. Apr. 18, 2017).

Claims for personal injuries that can be connected in some way to construction work often include allegations that the contractor was negligent. Even if the injured party sues only the property owner, the owner will often seek to pass this liability through to the contractor. In many states, such negligence claims are barred by the acceptance doctrine, which limits contractor liability to third parties for injuries that occur after the owner has accepted the work.

A recent decision by the Missouri Court of Appeals illustrates and applies this rule. In Wilson v Dura-Seal and Stripe, Inc., No. ED 104570 (Mo. Ct. App. Mar 21, 2017), the plaintiff alleged that she tripped in an area paved by Dura-Seal and Stripe, Inc. Dura-Seal paved a drive lane, but the paving did not extend all the way to the curb. The result was a gutter area and a resulting height differential. Ms. Wilson claimed she tripped on and because of the height differential.  Ms. Wilson sued the school district for which Dura-Seal did the work. The school district then sued Dura-Seal.

The trial court granted summary judgment for Dura-Seal because the work had been accepted. The court of appeals affirmed. Under Missouri law, a contractor is not liable for third party personal injuries after the owner accepts the work. The acceptance doctrine is founded on the assumption that the owner has made a reasonably careful inspection of the work of the contractor and the owner knows of the defects, if any. The owner then “accepts the defects and negligence that caused them as his own.”

The Missouri Court of Appeals decision in Penzel Constr. Co. v. Jackson R-2 School District, No. ED103878 (Mo. Ct. App. Feb. 14, 2017), is an important development for public construction contracting in Missouri. The decision adopts the Spearin Doctrine and approves the use of the Modified Total Cost method for proving damages. While these concepts have been used widely in federal construction contracting, the Penzel decision is the first published decision recognizing them in Missouri.

The Penzel case involved additions to a public high school. The School District hired an architect. The architect retained an electrical engineering sub-consultant. When the project went to bid, the School District furnished bidders with the architect’s plans and specifications. Penzel Construction Company submitted a bid as the general contractor.

Penzel’s electrical subcontractor was Total Electric. Total’s bid was $1,040,444. Neither Penzel nor Total “noticed” any errors, omissions, or other problems with the plans and specifications during the bidding process.

Total encountered delays totaling 16 months, which Total attributed to “defects and inadequacies” in the electrical design. Under a liquidating agreement between Penzel and Total, Penzel sued the District. Penzel alleged that the District impliedly warranted the design. Penzel claimed the design was not adequate for completing the project.

In addition to proving liability, Penzel needed to prove the damages associated with its loss of productivity claim. To do so, Penzel sought to use the Modified Total Cost Method. The claimed damages were comprised of additional project management and supervision costs, wage escalation, unpaid change order work, and consultant’s fees.

In a Presidential Memorandum issued January 24, 2017, President Trump directed the Secretary of Commerce to develop a plan within 180 days to require that pipelines in the United States use materials and equipment produced in the United States “to the maximum extent possible and to the extent permitted by law.” The plan will extend to newly constructed pipelines as well as to those that are “retrofitted, repaired and expanded . . . inside the borders of the United States.”

With respect to iron or steel products, the Memorandum makes it clear that all stages of the manufacturing process must occur in the United States. The Memorandum states:

“Produced in the United States” shall mean:

(i)        With regard to iron or steel products, that all manufacturing processes for such iron or steel products, from the initial melting stage through the application of coatings, occurred in the United States.

(ii)       Steel or iron material or products manufactured abroad from semi-finished steel or iron from the United States are not “produced in the United States” for purposes of this memorandum.

(iii)      Steel or iron material or products manufactured in the United States from semi-finished steel or iron of foreign origin are not “produced in the United States” for purposes of this memorandum.

The notions that iron and steel products must be manufactured in the United States and that all of the manufacturing processes must occur in the United States are not new. Substantially similar requirements are used in the “Buy America” provision of the Surface Transportation Assistance Act of 1982. See 49 U.S.C. § 5323(j)The Federal Transit Administration and the Federal Highway Administration have used this approach for state and local highway and transit projects funded wholly or partially with federal funds. See, e.g., 49 C.F.R. § 661.5.

Contracts with Virginia agencies, counties, municipal governments, and school boards are governed by the Virginia Public Procurement Act. The Act requires the use of competitive procedures in the solicitation and award of public contracts. It also establishes a procedure for the submission and resolution of bid protests. See Va. Code Ann. § 2.2-4360(A).

How and when to protest a contract award decision

An actual or prospective bidder seeking to challenge the award of a Virginia government contract must submit a protest to the procuring agency or to an official designated by the agency. The protest must be submitted in writing. It must include the basis for the protest and the relief sought. A bid protest must be submitted no later than ten days after the award or the announcement of the decision to award, whichever occurs first. This deadline is extended if the protest depends on obtaining access to documents. In those situations, the protest must be submitted within ten days after the records are made available. The VPPA does not specifically allow for the submission of a pre-award protest that challenges the terms and conditions of a solicitation.

If a protest is timely filed, the award and performance of the contract is automatically stayed unless the agency determines in writing that “proceeding without delay is necessary to protect the public interest or unless that bid or offer would expire.”  Va. Code Ann. § 2.2-4362.

The Colorado Procurement Code grants the right to submit a protest to “[a]ny actual or prospective bidder, offeror, or contractor who is aggrieved in connection with the solicitation or award of a contract.” Colo. Rev. Stat. § 24-109-102(1).

A protest must be submitted in writing within seven working days after the protester knew or should have known of the grounds for the protest, usually directly after the contract award decision by the agency issuing the solicitation or bid request. The protest must be submitted to the head of the agency or his designee, who is usually the purchasing agent for the agency.

The purchasing agent for the agency may settle and resolve protests concerning the solicitation and contract award. Absent a settlement, a written decision is required within seven working days after the protest is filed. This decision is to be based on and limited to the issues raised in the protest. It must explain each of the factors taken into account in reaching the determination and must advise the protester of its appeal rights. Colo. Rev. Stat. § 24-109-107. The protest decision must be mailed or otherwise furnished immediately to the protester and is final and conclusive unless the protester files a timely appeal or initiates a court proceeding to challenge the decision.

Public procurement in Missouri is conducted according to statutes and the rules published by the Division of Purchasing and Materials Management within the Missouri Office of Administration. See Chapter 34, Revised Statutes of Missouri; Missouri Code of State Regulations, Title 1, Division 40, Chapter 1—Procurement [pdf]. Although many protesters opt to bring their protest actions directly in court, there are voluntary procedures for the submission and resolution of bid protests involving purchases by Missouri state government agencies in 1 Mo. CSR 40-1.050(9).

Tennessee law explicitly provides interested parties the right to protest the terms of a solicitation for a contract with a state agency or the award or intended award of a state government contract. In each case, Tennessee’s procurement code and procurement regulations require the submission of a protest letter directed to the “Chief Procurement Officer” located in Nashville.

What is required to file a protest?

Bid protests be submitted in writing and identify all of the reasons for the protest. They should be presented in the form of a letter that identifies the solicitation and the interested parties and summarizes the grounds for the protest. The specific grounds of protest that are available under Tennessee law are listed at Tenn. Comp. R. & Regs. 0690-03-01-.12(2)(a).