Wiseman Construction Co. v. Maynard C. Smith Construction Co.

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

September 2015 Term

FILED

November 10, 2015

released at 3:00 p.m.

RORY L. PERRY II, CLERK

SUPREME COURT OF APPEALS

No. 15-0635 OF WEST VIRGINIA

WISEMAN CONSTRUCTION COMPANY, INC.,

Defendant Below, Petitioner

v.

MAYNARD C. SMITH CONSTRUCTION COMPANY, INC.,

Plaintiff Below, Respondent,

DAVID TINCHER, DIRECTOR OF THE PURCHASING

DIVISION OF THE DEPARTMENT OF ADMINISTRATION;

THE WEST VIRGINIA LOTTERY COMMISSION;

JOHN C. MUSGRAVE, DIRECTOR OF THE WEST VIRGINIA

LOTTERY; JASON PIZATELLA, CABINET SECRETARY

OF THE DEPARTMENT OF ADMINISTRATION;

AND ROBERT S. KISS, CABINET SECRETARY

OF THE DEPARTMENT OF REVENUE,

Defendants Below, Respondents

Appeal from the Circuit Court of Kanawha County

The Honorable Jennifer F. Bailey, Judge

Civil Action No. 15-P-157

AFFIRMED

Submitted: October 14, 2015

Filed: November 10, 2015

James M. Cagle, Esq. John Philip Melick, Esq.

Charleston, West Virginia Nicklaus A. Presley, Esq.

Attorney for Petitioner JACKSON KELLY PLLC

Wiseman Construction Company, Inc. Charleston, West Virginia

Attorneys for Respondent

Patrick Morrisey, Esq. Maynard C. Smith Construction

Attorney General Company, Inc.

Kelli D. Talbott, Esq.

Senior Deputy Attorney General

Greg S. Foster, Esq.

Assistant Attorney General

Charleston, West Virginia

Attorneys for State Respondents

CHIEF JUSTICE WORKMAN delivered the Opinion of the Court.

JUSTICE DAVIS, deeming herself disqualified, did not participate in the decision in this

case.

JUDGE JAMES H. YOUNG, JR., sitting by temporary assignment.

SYLLABUS BY THE COURT

1. “An unsuccessful bidder, who has been unlawfully deprived of a

contract by agency action under the State purchasing statutes, W.Va. Code, 5A-3-1 et

seq., has standing to prosecute an action in mandamus to require that the contract be

awarded to him or for an injunction to enjoin violation of the requirement that contracts

be awarded to the lowest responsible bidder. Syllabus pt. 2 of Pioneer Co. v. Hutchinson,

[159] W.Va. [276], 220 S.E.2d 894 (1975) is overruled.” Syl. Pt. 1, State ex rel. E. D. S.

Fed. Corp. v. Ginsberg, 163 W. Va. 647, 259 S.E.2d 618 (1979).

2. “A de novo standard of review applies to a circuit court’s decision to

grant or deny a writ of mandamus.” Syl. Pt. 1, Harrison Cty. Comm’n v. Harrison Cty.

Assessor, 222 W. Va. 25, 658 S.E.2d 555 (2008).

3. “‘“Mandamus lies to require the discharge by a public officer of a

nondiscretionary duty.” Point 3 Syllabus, State ex rel. Greenbrier County Airport

Authority v. Hanna, 151 W.Va. 479[, 153 S.E.2d 284 (1967)].’ Syllabus point 1, State ex

rel. West Virginia Housing Development Fund v. Copenhaver, 153 W.Va. 636, 171

S.E.2d 545 (1969).” Syl. Pt. 1, State ex rel. Williams v. Dep’t of Military Affairs, 212

W.Va. 407, 573 S.E.2d 1 (2002).

4. The Director of Purchasing may waive minor irregularities in bids or

specifications pursuant to West Virginia Code of State Rules § 148-1-4 (2015) as part of

i

the decision to award a government construction contract to the “lowest qualified

responsible bidder,” as defined by West Virginia Code § 5-22-1(b)(1) (2015), so that the

purchasing value of public funds is maximized to the fullest extent practicable. However,

he or she may not treat substantive requirements of the public procurement laws, the

advertisement for bids, or the bid forms as mere informalities in order to justify the

decision to waive a deviation in a bid.

5. A state agency which awards a public contract to the lowest

qualified responsible bidder under the West Virginia Fairness In Competitive Bidding

Act, West Virginia Code §§ 5-22-1 to -2 (2015), is clothed with the presumption that it

has properly discharged its duties. Accordingly, the burden of proof in an action

challenging the award of a contract by an unsuccessful bidder or a taxpayer is upon the

challenger, who must show the agency’s actions were arbitrary, capricious, or an abuse of

discretion. In conducting a review of the competitive bidding process, courts should

consider whether there is a rational basis for the administrative decision. This standard

requires courts to examine the bidding procedures utilized to ensure they provided a fair

process and incorporated sufficient controls to safeguard against abuses.

ii

Workman, Chief Justice:

Respondent Maynard C. Smith Construction Company, Inc. (hereinafter

“MCS”), the low bidder on a government construction contract, filed suit to rescind the

contract awarded to the next low bidder, Petitioner Wiseman Construction Company, Inc.

(hereinafter “Wiseman”). Following an evidentiary hearing, the Circuit Court of

Kanawha County, West Virginia, made detailed findings of fact and conclusions of law

finding that the determination to disqualify MCS “was not rational” and “was based upon

an ambiguous ‘requirement’ set forth in the bid documents that was of no consequence”

to the goal of the State to ensure the work was performed by the lowest qualified

responsible bidder. The circuit court granted MCS’s petition for writ of mandamus and

ordered that the contract be awarded to MCS. Wiseman appealed.

The question before this Court is whether the public officials with the

Purchasing Division of the Department of Administration and the Lottery Commission

(hereinafter collectively the “Agency”)1 exercised reasonable discretion in determining

Wiseman was the lowest qualified responsible bidder on the project. For the reasons that

follow, we find the Agency did not, and we affirm the judgment of the circuit court.

1

Respondents David Tincher, Director of the Purchasing Division of the

Department of Administration, the West Virginia Lottery Commission, John C.

Musgrave, Director of the West Virginia Lottery, Jason Pizatella, Cabinet Secretary of

the Department of Administration, and Robert S. Kiss, Cabinet Secretary of the

Department of Revenue, filed a joint summary response.

1

I. FACTUAL AND PROCEDURAL HISTORY

The Agency initiated the competitive bidding process to procure

construction work on the Lottery’s existing headquarters in Charleston, West Virginia.

The Agency’s instructions to bidders stated that “Bidders shall use complete sets of

Bidding documents in preparing Bids.” Six companies submitted bids on the approved

bid form. MCS submitted the lowest bid at $7,630,800. Wiseman’s bid was second-

lowest at $7,786,000. The Agency initially recommended that the project be awarded to

MCS; by letter dated March 10, 2015, the Agency informed MCS that it was “the

apparent successful bidder” on the contract.2

On March 19, 2015, Wiseman e-mailed the Agency and requested that

MCS’s bid be disqualified because MCS did not submit a “qualification statement” as set

forth in the bid documents; bidders were directed to include at least three references from

other projects consisting of door replacement and other related construction operations

similar to those required on the project.3 The bid documents erroneously provided that

2

In this letter, the Agency requested MCS provide performance, maintenance, and

payment bonds, insurances, and a current contractor’s license. MCS submitted all of the

items requested by the Agency.

3

Specifically, the instructions to bidders provided:

1.07 Qualification Statement

A. The qualified Contractor shall have completed a minimum

of three (3) projects consisting in part or in whole of

building entrance and door replacement including

(continued . . .)

2

“[t]he Proposal Form includes a section in which the references should be listed.”

However, neither “Section I” nor “Section II” of the Agency’s bid form included a

section in which the references could be listed. Furthermore, no information concerning

references was among the specified “Required Documents” or was otherwise addressed

in the Agency’s published requests for bids. Nevertheless, three of the six bidders

(including Wiseman) submitted references on documents which were not part of the

mandatory bid form.4 The three other bidders (including MCS) submitted their proposals

on the bid form without attaching any documentation concerning references.

After receiving Wiseman’s protest, employees of the Lottery Commission

reviewed the bidding documents and consulted with employees of the Purchasing

Division. The employees believed they did not have the discretion to waive the

qualification statement; they determined it was a mandatory requirement because the

selective demolition, carpentry, installation of replacement

door frames, door and door hardware, remedial room

finishing, and other related construction operations similar

to those required on this project. All bidders shall include

at least three (3) references indicating their having

completed the three projects as detailed above. References

should include the name, location, ownership, and use of

the building in addition to the name, address and

telephone number of a contact person with the building’s

owner familiar with the work completed by the

Contractor. The Proposal Form includes a section in

which the references should be listed.

4

Wiseman included a list of references on a form not familiar to the Director of

Purchasing but apparently taken from “page 6” of some other bid package. The other two

contractors provided references on their own stationery.

3

directions provided that bidders “shall include” a list of references on the proposal form.

Ultimately, Respondent David Tincher, the Director of Purchasing, awarded the contract

to Wiseman after disqualifying MCS for failure to include the references. MCS protested

this decision and Mr. Tincher denied the protest without a hearing on April 21, 2015.

On April 22, 2015, MCS filed a petition for writ of mandamus and

complaint for declaratory and injunctive relief. At the April 30, 2015, hearing before the

circuit court, the Agency called two witnesses, Mr. Tincher and Danielle Boyd, the

Lottery’s general counsel. Mr. Tincher testified that the Agency did not believe it had the

authority to waive the qualification statement: “We felt like our hands were tied.” Ms.

Boyd testified that the Agency never contacted the references provided by Wiseman. She

stated the architect on the project had experience working with both MCS and Wiseman

and felt they were qualified bidders. The witnesses could not explain who specifically

requested that the bidders list references or why references were requested for this

project.

By order entered June 22, 2015, the circuit court granted MCS’s petition for

writ of mandamus and ordered the Agency to award the contract to MCS. The circuit

court found that the Agency’s decision to disqualify MCS’s bid was not “rational”

because the requirement that bidders submit references was ambiguous and served no

purpose. The circuit court cited West Virginia Code of State Rules § 148-1-4.6 (2015),

which permits the Purchasing Director to “[w]aive minor irregularities in bids or

4

specifications when the Director determines such action to be appropriate[.]” The circuit

court concluded, in part, that

[i]t is fundamentally unfair for State agencies to pit qualified,

sophisticated well-established businesses against one another

to argue about the purpose of language in bid documents that

no one in charge can explain where the language came from

or why it was there or how vendors were supposed to furnish

it, and even upon review of the bids, was never utilized or

relied upon. It is indeed this conduct that is shocking to the

conscience of the [c]ourt.

Wiseman timely appealed this order.

II. STANDARD OF REVIEW

We are asked to review the circuit court’s order granting MCS’s petition for

writ of mandamus. As a preliminary matter, we note that a disappointed bidder has

standing to judicially challenge the award of a public contract to another bidder. In

syllabus point one of State ex rel. E. D. S. Fed. Corp. v. Ginsberg, 163 W. Va. 647, 259

S.E.2d 618 (1979), this Court held:

An unsuccessful bidder, who has been unlawfully

deprived of a contract by agency action under the State

purchasing statutes, W.Va. Code, 5A-3-1 et seq., has standing

to prosecute an action in mandamus to require that the

contract be awarded to him or for an injunction to enjoin

violation of the requirement that contracts be awarded to the

lowest responsible bidder. Syllabus pt. 2 of Pioneer Co. v.

Hutchinson, W.Va., 220 S.E.2d 894 (1975) is overruled.

On appeal, our standard of review is de novo. In syllabus point one of

Harrison County Commission v. Harrison County Assessor, 222 W. Va. 25, 658 S.E.2d

5

555 (2008), this Court held: “A de novo standard of review applies to a circuit court’s

decision to grant or deny a writ of mandamus.” Under this standard, “‘we consider de

novo whether the legal prerequisites for mandamus relief are present.’” McComas v. Bd.

of Educ. of Fayette Cty., 197 W.Va. 188, 193, 475 S.E.2d 280, 285 (1996) (quoting State

ex rel. Cooper v. Caperton, 196 W.Va. 208, 214, 470 S.E.2d 162, 168 (1996)). Therefore,

we take note that

“‘[m]andamus lies to require the discharge by a public officer

of a nondiscretionary duty.’ Point 3 Syllabus, State ex rel.

Greenbrier County Airport Authority v. Hanna, 151 W.Va.

479[, 153 S.E.2d 284 (1967)].” Syllabus point 1, State ex rel.

West Virginia Housing Development Fund v. Copenhaver,

153 W.Va. 636, 171 S.E.2d 545 (1969).

Syl. Pt. 1, State ex rel. Williams v. Dep’t of Military Affairs, 212 W.Va. 407, 573 S.E.2d 1

(2002). With these principles in mind, we consider the merits of the parties’ arguments.

III. DISCUSSION

Wiseman seeks our reversal of the circuit court’s order granting MCS’s

petition for writ of mandamus and directing the Agency to award the contract to MCS.

Wiseman argues that the circuit court misapplied the standard of review articulated in

Ginsberg and instead substituted its judgment for that of the Agency’s. MCS responds

that the circuit court exercised its proper authority to correct the “irrational”

disqualification of MCS and saved more than a hundred thousand dollars of scarce public

funds.

6

The Agency filed a summary response and conceded that the request for

proposals used to solicit bids for the project contained a number of errors and those errors

created confusion among the bidders. Although it argued below that it had no discretion

to waive the qualification statement, the Agency has retreated from that position; it stated

in its brief before this Court that it exercised appropriate discretion by not waiving that

requirement. During oral argument, the Agency explained that it did not appeal the circuit

court’s ruling, not because it agreed with the ruling, but because it needed to commence

the renovation project immediately. The Agency acknowledged “the taxpayers of the

State of West Virginia are best served” by allowing the circuit court’s order to stand.5

5

Although it filed no motion to dismiss Wiseman’s appeal as moot, the Agency

contends that the relief requested by Wiseman (to be awarded the contract) has been

rendered moot considering MCS’s substantial completion of the construction project.

Given the resolution of this case, it is not necessary for this Court to address what remedy

would be available to Wiseman had it prevailed on appeal. Nonetheless, we address the

legal issues raised by the parties herein consistent with the principles set forth in syllabus

point one of Israel by Israel v. West Virginia Secondary School Activities Commission,

182 W. Va. 454, 455, 388 S.E.2d 480, 481 (1989):

Three factors to be considered in deciding whether to

address technically moot issues are as follows: first, the court

will determine whether sufficient collateral consequences will

result from determination of the questions presented so as to

justify relief; second, while technically moot in the immediate

context, questions of great public interest may nevertheless be

addressed for the future guidance of the bar and of the public;

and third, issues which may be repeatedly presented to the

trial court, yet escape review at the appellate level because of

their fleeting and determinate nature, may appropriately be

decided.

7

This case involves two questions. We first address whether the Agency had

the discretion to waive the qualification statement set forth in the bid specifications. We

then address the appropriate standard of review courts should employ when examining

challenges to an agency’s process in selecting the lowest qualified responsible bidder.

Our analysis begins with a brief overview of our public procurement laws.

A. West Virginia Public Procurement Laws

The Purchasing Division within the Department of Administration

oversees and provides purchasing services to the various State agencies. W.Va. Code §

5A-3-1 (2015). The goal is to “ensure the fair and equitable treatment of all persons”

who deal with the procurement system of the State of West Virginia. W.Va. Code § 5A­

3-1(a)(6). Public procurement laws protect the citizens and businesses of this State by

safeguarding the purchasing system to “obtain in a cost-effective and responsive manner

the commodities and services required[.]” W.Va. Code § 5A-3-1(a)(10). These laws were

enacted to ensure that tax dollars for public works are spent wisely and to guard against

public officials entering into contracts because of favoritism. See generally SE/Z Constr.,

L.L.C. v. Idaho State Univ., 89 P.3d 848, 853 (Idaho 2004) (holding purpose of

competitive bidding statutes is to safeguard public funds and prevent favoritism, fraud

and extravagance in their expenditure). One of the overriding purposes of our

procurement laws is “to maximize to the fullest extent practicable the purchasing value of

public funds[.]” W.Va. Code § 5A-3-1(a)(7). The essential safeguard of competitive

8

bidding is to maintain quality and integrity in the procurement system. W.Va. Code § 5A­

3-1(a)(9).

With respect to government construction contracts, the Legislature has

specifically prescribed the conditions upon which it will permit such work to be done in

the West Virginia Fairness In Competitive Bidding Act. W.Va. Code §§ 5-22-1 to -2

(2015). The State must solicit competitive bids for every construction project exceeding

$25,000 in total cost. Id. § 5-22-1(c). 6 All bids shall be open in accordance with the

provisions set forth in West Virginia Code § 5-22-2, except design-build projects which

are governed by West Virginia Code § 5-22A-1 to -16.7 “Following the solicitation of

6

West Virginia Code § 5-22-1 provides four exceptions not applicable here.

7

The Design-Build Procurement Act, West Virginia Code 5-22A-2, provides the

following definitions:

(3) “Design-build” is defined as providing

responsibility within a single contract for design, construction

or alteration of a building or buildings, together with

incidental approaches, structures and facilities to be

constructed, in which services within the scope of the practice

of professional engineering or architecture, as defined by the

laws of the State of West Virginia, are performed by an

engineer or architect duly licensed in the State of West

Virginia and in which services within the scope of

construction contracting, as defined by the laws of the State

of West Virginia, are performed by a contractor qualified and

licensed under the applicable statutes. The design-build

method of construction may not be used for any other

construction projects, such as highway, water or sewer

projects.

9

bids, the construction contract shall be awarded to the lowest qualified responsible

bidder who shall furnish a sufficient performance and payment bond.” W.Va. Code § 5­

22-1(d) (emphasis added). However, the State “may reject all bids and solicit new bids on

the project.” Id.

Under the plain language of the statute, an agency has two options

following the solicitation of bids; it may reject all bids and solicit new bids on the project

or award the construction contract to the lowest qualified responsible bidder. The “lowest

qualified responsible bidder” is the bidder that bids the lowest price and meets the

requirements in connection with the bid solicitation. W.Va. Code § 5-22-1(b)(1).8 When

awarding the contract, the Director of Purchasing may “[w]aive minor irregularities in

bids or specifications” when he or she “determines such action to be appropriate[.]” W.

Va. Code R. § 148-1-4.6.

In this case, the Agency elected to award the contract based on the bids

submitted even after it learned of the defect in the bid form because it wanted to move

8

West Virginia Code § 5-22-1(b)(1) further provides that:

The bidder must certify that it:

(A) Is ready, able and willing to timely furnish the

labor and materials required to complete the contract;

(B) Is in compliance with all applicable laws of the

State of West Virginia; and

(C) Has supplied a valid bid bond or other surety

authorized or approved by the contracting public entity.

10

forward with the renovation project. Therefore, the pivotal question before it was whether

MCS was the lowest qualified responsible bidder. Had the bid form contained a section

for the contractors to list appropriate references, the Agency would have considerable

leeway to determine whether a bidder was the best contractor for the job. The Agency

had the prerogative to establish objective prequalification standards premised upon a

contractor’s technical competence and experience constructing similar facilities in order

to determine if the bidder was qualified and responsible.

We therefore reject MCS’s argument that when specified construction

services are sought from licensed, bonded contractors, an agency must make the award to

the low cost bidder pursuant to West Virginia Code § 5-22-1(d). We agree that a bidder

holding the requisite contractors’ license is “qualified.” However, the statute has the

phrase “lowest qualified responsible bidder.” Id. If MCS’s argument were adopted, then

the word “responsible” would be read out of the statute. 9 See Syl. Pt. 4, Osborne v.

United States, 211 W. Va. 667, 668, 567 S.E.2d 677, 678 (2002) (stating each word of

statute should be given some effect and undefined words will be given their common,

ordinary and accepted meaning). Given the common meaning of the word, “responsible”

relates to more than a showing that the bidder holds the requisite license. A “responsible

9

MCS questions the efficacy of any reference requirement because it could tilt the

playing field against startup construction companies even when they are properly

licensed and bonded. We do not question the wisdom of this legislative enactment

especially when both contractors in this case are experienced. This Court does not issue

advisory opinions. See State ex rel. Morrisey v. W.Va. Office of Disciplinary Counsel,

234 W. Va. 238, 246, 764 S.E.2d 769, 777 (2014).

11

bidder” is a contractor “who possesses the requisite skill, judgment, and integrity

necessary to perform the contract requested, and who has the financial resources and

ability to carry the task to completion.” Black’s Law Dictionary 1506 (10th ed. 2014).

We now return to the Agency’s decision to award the contract to Wiseman.

The witnesses stated they had no choice but to disqualify MCS because they could not

waive the qualification statement because it was a material requirement in their eyes.

However, the Agency’s behavior contradicts this position; it did not rely upon the

qualification statement at all. Furthermore, the Agency offers no legal support for its

argument that it could not waive this irregularity. As discussed above, the Director of

Purchasing may waive minor irregularities in bids or specifications pursuant to West

Virginia Code of State Rules § 148-1-4 (2015) as part of the decision to award a

government construction contract to the “lowest qualified responsible bidder,” as defined

by West Virginia Code § 5-22-1(b)(1) (2015), so that the purchasing value of public

funds is maximized to the fullest extent practicable. However, he or she may not treat

substantive requirements of the public procurement laws, the advertisement for bids, or

the bid forms as mere informalities in order to justify the decision to waive a deviation in

a bid.10

10

It is well settled that an agency cannot waive substantive requirements and is

required to reject bids which vary materially from the specifications set forth in the

published request for proposal. W.Va. Code §§ 5-22-1(g) and 5-22-2(b); see e.g., Entech

(continued . . .)

12

In the present case, the irregularity in the bids was caused by the Agency’s

error. The bid documents mistakenly provided that the form included a section in which

the qualification statement should be listed. Technically, no bidder could meet that

requirement without going outside the bid form. In fact, the bid solicitation was so flawed

that half of the contractors who responded ignored the instruction as an obvious mistake.

We therefore find that the Agency had the discretion to waive the bid requirement of a

qualification statement. Importantly, Wiseman does not assert its bid would be any

different or that MCS could not provide a list of references. Therefore, MCS would not

gain any competitive advantage if the requirement was waived. Moreover, any such

waiver would work no prejudice to the rights of the public for whom the Agency serves.

B. Judicial Review of an Agency’s Decision to Award a Contract

Corp. v. City of Newark, 798 A.2d 681, 691 (N.J. Super.Ct. Ch. Div. 2002) (“To be

accepted, bid proposals must not materially deviate from the specifications set forth by

the contracting agency.”); accord Gunderson v. Univ. of Alaska, Fairbanks, 922 P.2d

229, 235 (Alaska 1996). “A variance is material if it gives the bidder a substantial

advantage over other bidders and thereby restricts or stifles competition.” Chris Berg, Inc.

v. State, Dep’t of Transp. & Pub. Facilities, 680 P.2d 93, 94 (Alaska 1984).

In a bid for a construction project, not every variation

from the instructions or specifications will destroy the

competitive character of the bid. . . . To have that effect, the

variation from the instructions or specifications must be

substantial, and to be substantial, it must affect the amount of

the bid and must give the bidder an advantage or benefit not

allowed to other bidders.

Wilson Bennett, Inc. v. Greater Cleveland Reg’l Transit Auth., 588 N.E.2d 920, 925

(Ohio Ct.App. 1990).

13

In Ginsberg, we discussed the breadth of discretion that courts should give

an agency when awarding a government contract to the lowest qualified responsible

bidder. See Syl. Pt. 3, Ginsberg, 163 W.Va. at 647, 259 S.E.2d at 620 (“A State agency

which awards a public contract upon criteria other than price is clothed with a heavy

presumption that the contracting agency has properly discharged its duties and exercised

discretionary powers in a proper and lawful manner; accordingly, the burden of proof in

any action challenging the award of a contract by an unsuccessful bidder or a taxpayer is

upon the challenger who must show fraud, collusion, or such an abuse of discretion that it

is shocking to the conscience.”).

We are cognizant that Ginsberg involved the challenge of an unsuccessful

bidder to an agency’s decision to award a design-build contract for a new computer

system.11 In Ginsberg, we declined to second guess the agency’s decision considering the

complexity and subjective nature of that assessment. Important to our analysis herein, this

Court distinguished between court intervention into the substantive, as opposed to the

11

West Virginia Code 5-22A-2, provides:

(4) “Design-build contract” means the contract

between an agency and a design-builder to furnish the

architecture, engineering, and related services as required, for

a given public project, and to furnish the labor, materials and

other construction of services for the same public project. A

design-build contract may be conditional upon subsequent

refinements in scope and price, and may permit the agency to

make changes in the scope of the project without invalidating

the design-build contract.

14

procedural, parts of a government body’s decision making process. As recognized by the

United States District Court in Mid Atlantic Storage System, Inc. v. City of Milton, 903

F.Supp. 995 (S.D. W.Va. 1995), Ginsberg admonishes courts to “not substitute their

judgment” for that of the agency in cases in which subjective factors beyond price come

into play.” Id. at 997 (emphasis added). Therefore, when evaluating bids on design-build

contracts, agencies “are not required to accept the lowest price where service, delivery

dates, continuity in supply, and other factors not directly related to cost are involved,

particularly where these elements have a far greater impact upon the efficiency of State

government than minor differences in price.” Ginsberg, 163 W.Va. at 659, 259 S.E.2d at

626.

The Lottery building renovation at issue in this case was not a design-build

project. Rather, the Lottery hired its own architect to design and specify the renovation.

Contractors submitted fixed-price bids to complete the work after reviewing the 700-page

project manual prepared by the architect and the 70-page bid solicitation documents.

MCS did not file suit to challenge the substantive aspect of the Agency’s decision making

process; the parties agree that both contractors are well respected in the construction

industry and could do the work required for the project. MCS challenged the rationality

of the Agency’s bid process and alleged its low bid was disqualified for an

inconsequential reason.

15

Therefore, in this appeal we are asked to review the Agency’s decision-

making process that lead to the disqualification of MCS’s bid when the Agency

acknowledged procedural defects in the bid solicitation. In Ginsberg, we emphasized that

an agency’s process of making decisions should be rational. “There is no question that a

bidder who goes to the expense of preparing a complex proposal has the right to rely

upon both the contracting authority’s integrity and intelligent use of discretion.” Id. at

657, 259 S.E.2d at 625. It is clear from Ginsberg that West Virginia follows the general

rule of vesting an agency with discretion subject to judicial review and this tenet applies

to fixed-price government construction contracts. See generally, Rochester City Lines,

Co. v. City of Rochester, 868 N.W.2d 655, 660 (Minn. 2015) (applying unreasonable,

arbitrary, or capricious standard of review to competitive bidding process requires courts

to examine bidding procedures to ensure they provide fair process and incorporate

sufficient controls to safeguard against abuses”); Chris Berg, Inc., 680 P.2d at 94 (stating

determination by public agency of responsiveness of bid is within agency’s discretion,

subject, on judicial review, to ascertainment there was reasonable basis for decision).

In the area of government contracts, federal courts have developed

standards to guide the exercise of judicial review over procurement decisions by federal

agencies. See, e.g., Impresa Construzioni Geom. Domenico Garufi v. U.S., 238 F.3d

1324, 1332-33 (Fed. Cir. 2001) (recognizing bid award may be set aside if procurement

official’s decision lacked rational basis; reviewing courts must determine whether

contracting agency provided coherent and reasonable explanation of its exercise of

16

discretion and disappointed bidder bears heavy burden of showing award decision had no

rational basis). Because the federal standards have the same basic objectives of

eliminating favoritism and fraud in procurement decisions and ensuring the good-faith

conduct of agency officials in securing public contracts, they are instructive in

determining whether the decision of an agency was unreasonable, arbitrary, or capricious.

We hereby hold that a state agency which awards a public contract to the

lowest qualified responsible bidder under the West Virginia Fairness In Competitive

Bidding Act, West Virginia Code §§ 5-22-1 to -2 (2015), is clothed with the presumption

that it has properly discharged its duties. Accordingly, the burden of proof in an action

challenging the award of a contract by an unsuccessful bidder or a taxpayer is upon the

challenger, who must show the agency’s actions were arbitrary, capricious, or an abuse of

discretion. In conducting a review of the competitive bidding process, courts should

consider whether there is a rational basis for the administrative decision. This standard

requires courts to examine the bidding procedures utilized to ensure they provided a fair

process and incorporated sufficient controls to safeguard against abuses.

To properly analyze whether there was a rational basis for an agency’s

determination, courts should weigh two important principles. When an agency acts in a

fair and legal manner and within the reasonable exercise of a sound discretion, then

courts should not interfere with its decision to award a contract. “Public administration

would be hamstrung if courts were free to second-guess reasonable administrative

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decisions.” Hous. Auth. of City of Opelousas, La. v. Pittman Const. Co., 264 F.2d 695,

697-98 (5th Cir. 1959). On the other hand, and no less important, “is the public interest of

the state in securing honest competition and in protecting taxpayers from the evils of

favoritism and high prices in the letting of contracts for public works.” Id. Our decision

depends on accommodating these two principles.

On the unique facts presented in this case, we find the public interest of

ensuring that tax dollars for public works are spent wisely predominates over the

Agency’s stringent adherence to faulty bid specifications. See Boh Bros. Const. Co. v.

Dep’t of Transp. & Dev., 698 So.2d 675, 678 (La. Ct. App. 1997) (“To deny a public

entity the power to waive insignificant deviations in order to select a low bid on every

public works project is contrary to the interests of the taxpaying citizens of this state.”). It

is difficult for this Court to avoid the conclusion that the Agency showed a complete lack

of intelligent use of its discretion. Employing the agency’s analysis, MCS’s failure to

attach a separate sheet of references to the bid form was fatally dispositive yet, at the

same time, utterly meaningless; this factor was the sole basis to disqualify MCS’s bid

even though the Agency readily admitted that it would not have contacted those

references because the architect knew the contractors. Not only was the Agency’s

decision nonsensical, it was contrary to the underlying policy of the public procurement

laws. By any reasonable standards, such action offends one’s sense of fair play and was

an arbitrary abuse of discretion inconsistent with the letter and the spirit of our public

procurement laws. Therefore, this Court rejects the argument that the Agency

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appropriately exercised its discretion when it awarded the construction contract to

Wiseman.

IV. CONCLUSION

For the reasons explained above, we find no error in the June 22, 2015,

order of the Circuit Court of Kanawha County granting MCS’s petition for writ of

mandamus. Accordingly, we affirm that order.

Affirmed.

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