February 2002
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
Section 103 of New York's General Municipal Law requires municipalities to award public construction contracts to the lowest responsible bidder. A municipality may determine that the lowest bidder is not responsible or that the lowest bid is materially defective, and award the contract to the next lowest bidder. The lowest bidder may challenge the award to the next lowest bidder by instituting an Article 78 proceeding in the New York Supreme Court. A municipality may not, however, retaliate against a contractor for threatening to challenge the award to another contractor, as the recent case of Glenview Construction, Inc. v. Bucci illustrates.
Background
The Town of Newburgh contracted with J. Robert Folchetti & Associates, LLC to serve as project engineer on a water main installation project on Stanton Road and Dix Ave. As project engineer, Folchetti was responsible for performing project design and administrative services, including reviewing contractors' bids and making recommendations to the Town Board for the award of the contract. Glenview Construction, Inc., submitted the lowest bid for the project, followed by Noble Excavating and Alexandra Development Corporation. After evaluating the bids, Folchetti concluded that Glenview's bid was in proper form, but expressed reservations about its experience with ductile iron on municipal projects.
Although there are differing versions of what occurred, it appears that the Town Engineer, Town Attorney and Town Supervisor met with Folchetti to discuss the possibility of bypassing the two lowest bidders and awarding the contract to Alexandra. They apparently discussed the legal risks of not awarding the contract to Glenview, the lowest bidder. Subsequently, Folchetti issued a "final" report recommending an award of the contract to Glenview. The Town Board, however, wanting to award the contract to Alexandra, requested that Folchetti create a second report recommending Alexandra as the "lowest responsible bidder," in order to protect the town in the event that Glenview challenged the award. Folchetti complied and the contract was awarded to Alexandra.
When Glenview learned of the award to Alexandra, it contacted the town to find out why it had not received the award as lowest bidder. The town responded that the decision was based upon Folchetti's recommendation. When Glenview threatened to file an Article 78 proceeding to challenge the award, the Town Board rescinded the contract with Alexandra and awarded it to Glenview. Shortly thereafter, the Town Board awarded Alexandra a separate water main extension project, the Country Meadow project, which had an almost identical construction budget and completion schedule as the contract for the Stanton Road project awarded to Glenview.
According to Glenview, the town officials immediately delayed the Stanton Road project by repeatedly rejecting submittal documents, although they ultimately approved documents that were essentially identical to the rejected documents. Glenview also claimed that Alexandra's submittals on the Country Meadow project were approved without delay although they were less complete than Glenview's. Additionally, Glenview was prohibited from using plating to temporarily cover excavations, even though the contract contained provisions allowing plating. Glenview, therefore, had to backfill any open trench at the end of each day. Alexandra, however, was permitted to use plating, at a much reduced cost and time savings.
The town thereafter asserted a claim for liquidated damages against Glenview for failure to complete the work by the scheduled completion date, but it did not follow any of the normal administrative procedures before assessing liquidated damages. Glenview claimed that the town itself was responsible for the delays. The town did not claim liquidated damages against Alexandra even though the Country Meadow project took twice as long to complete and incurred greater construction and engineering costs. Additionally, Glenview contended that it substantially completed the Stanton Road project as of April 17, 1998 but Folchetti did not issue a Certificate of Substantial Completion until May 27, 1998, thereby increasing the liquidated damages and preventing Glenview from being paid. Alexandra, according to Glenview, received a Certificate of Substantial Completion several months before it actually completed the Country Meadow project.
Glenview commenced an action in the Federal District Court alleging that the town, the Town Supervisor, the Town Board, certain Board members, and Folchetti retaliated against Glenview for threatening to challenge the award of the Stanton Road project to Alexandra, in violation of its constitutional civil rights. The defendants moved to dismiss the action.
Decision
The court held that Glenview was entitled to assert a claim against the town, the Town Supervisor and the Town Board for a violation of its civil rights, based upon the acts of the supervisor and Board. The Board unlawfully attempted to give the award to Alexandra. When Glenview threatened to invoke its right to sue, the Town Board awarded Glenview the contract, but then proceeded to delay the project, withhold payment, and invoke liquidated damages. Viewed in a light most favorable to Glenview, the court said that the Town Board may have acted out of "simple vindictiveness."
The court also held that Glenview could assert its claims against individual Board members. Although a contract clause prohibited claims against officials or employees in their individual capacities, such a provision did not bar claims arising under the federal civil rights laws. Additionally, the Board members could not claim immunity because they were alleged to have violated federal law, and a jury might find that they did not act "objectively, legally and reasonably." However, the court found that two of the individual Board members were not sufficiently involved, and dismissed the claims against them.
The court also dismissed the claims asserted against Folchetti, finding that there was insufficient evidence that the project engineer had any motive for retaliating against Glenview and that its actions were at the direction of the town officials.
Conclusions
A contractor has the right to challenge the award of a public construction contract. A municipality may not take retaliatory measures against a contractor who exercises or merely threatens to exercise that right. In this case, the threat of the lawsuit by Glenview caused the town to rescind its award of the contract to Alexandra and to award it to Glenview, the lowest bidder. However, Glenview has alleged that in retaliation, the town treated it unfairly in the administration of the contract. If the allegations are proven at trial, the Town, the Town Board and certain of its officials may be liable for damages to Glenview.
About the author: Mr. Miuccio is a partner in the New York City-based law firm Altieri, Kushner, Miuccio & Frind, P.C. and legal counsel to the Construction Industry Council of Westchester and the Hudson Valley, Inc.