Rejection of All Bids for A Public Project in Maryland

A recent decision by the Maryland Board of Contract Appeals reaffirmed the state’s ability to reject all bids for a project, pursuant to the Code of Maryland Regulations (“COMAR”) 21.06.02C. A contractor submitted the apparent low bid for a construction project to repair erosion damage at the BWI Airport. After reviewing all of the bids, the Maryland Aviation Administration (“MAA”) decided to reject all bids and rebid the job. The MAA advised the contractor with the lowest bid of its decision and also notified that contractor that its bid contained several deficiencies. The contractor filed a timely bid protest, claiming that its bid was not deficient. The bid protest was rejected and the contractor appealed. The Maryland Board of Contract Appeals did not even consider whether the bid contained any deficiencies, but ruled that the MAA can reject all bids outright. The decision to reject all of the initial bids was the lone issue and the Maryland Board of Contract Appeals would not consider whether the contractor’s bid contained any deficiencies. For additional information on bid protests in Maryland, contact Michael W. Siri at siri@bowie-jensen.com.

The Supreme Court, Judicial Elections and Contract Solutions

The United States Supreme Court recently reversed a decision by the Supreme Court of West Virginia on the basis that campaign contributions by Massey Coal's CEO, Don Blackenship, to one of the Judges in the West Virginia majority created an appearance of impropriety or a "serious risk of actual bias." Unlike Maryland, West Virginia has contested elections for its appellate judges. Several years ago Bowie & Jensen, LLC represented a contractor in a residential construction dispute against one of the justices on the West Virginia Supreme Court and her husband a prominent Plaintiff's attorney. The local rumblings indicated that his money got her elected, and the pair had been the subject of a less than flattering article published in The Wall Street Journal. The Journal article suggested that rulings by Justice Robin Davis at the appellate level had paved the way for large jury awards and large settlements for her husband of which she was a direct beneficiary.

Davis and Segal filed suit against our client in a West Virginia State trial court. Because there was diversity of citizenship and the amount in controversy exceeded $75,000 we sought to remove the case to Federal Court. However, we ran into the first of several problems. We could not find local counsel. Many attorneys would not take the case out of concern for retribution against other clients and themselves should they find themselves in front of Davis. Eventually, we found local counsel, an attorney who had been involved in a locally publicized dispute over the postings by certain Justices on the West Virginia Supreme Court website. We successfully removed the case, but then ran into further problems, including reluctant witnesses, inability to access certain public records and an onslaught of discovery motions.

Ultimately, the Federal Judge (not subject to contest elections) assigned to the case recused himself out of a concern that his relationship with the Justice Davis may be perceived by either party as affecting the outcome of the case. He agreed to mediate the case and it eventually settled.

Now, Justice Davis is back in the news for authoring the majority opinion that reversed the jury verdict reached at the trial court. It is this decision that Justice Benjamin, the beneficiary of Blackenship's generosity, joined and then authored a concurring opinion to justify his refusal to recuse himself.

Back to Maryland. Several years ago, the wife of then Baltimore Mayor Martin O'Malley became a District Court Judge, another position that does not have contested elections. She recused herself from cases involving the City and the Baltimore City Police to prevent any perceived bias.

While the United State Supreme Court's recent decision represents significant progress and is a "shot across the bow" for contested judicial elections, there are still States and jurisdictions that are highly political or parochial. The lesson in all of this for contractors is to choose carefully when deciding to do business in a particular State or if there is a concern regarding the independence of the judiciary (who will ultimately decide any disputes) include a well-drafted forum selection clause or arbitration provision. The forum selection clause should designate a specific State or county in which disputes must be brought. Likewise, an arbitration provision should select the location of the arbitration, the number of arbitrators, and the governing law.

For further information, please contact Matt Hjortsberg at Hjortsberg@bowie-jensen.com or 410-583-2400.

Maryland's Implementation of the Virginia Graeme Baker Pool and Safety Act

As Memorial Day weekend approaches, public swimming pools throughout Maryland are preparing to open for the summer; however, all public swimming pools in Maryland must comply with the Virginia Graeme Baker Pool and Spa Safety Act (“Graeme Baker Act”), which was enacted on December 19, 2008. As mentioned in a previous blog, the Graeme Baker Act promotes the safe use of pools, spas, and hot tubs by requiring the following: 1) all manufactured safety drain covers must conform with the American National Standard ASME A112.19.8-2007 Suction Fittings for Use in Swimming Pools, Spas, and Hot Tubs published by the American Society of Mechanical Engineers (“ASME”); 2) all new and existing public pool drain covers must be equipped with the conforming drain covers; and 3) all new and existing public pool with a single main drain should be equipped with additional preventative suction entrapment devises meeting applicable ASME standards.

Effective January 1, 2009, the new design criteria was incorporated in the Maryland Public Swimming Pools and Spa Regulations, Code of Maryland Regulation §10.17.01 (“COMAR”). The State of Maryland Department of Health and Mental Hygiene requires all public swimming pools and spas in Maryland to submit the Aquatic Facility Review Form for Compliance with the Graeme Baker Act to the Department of Health and Mental Hygiene for approval. A separate form is required for each main drain system repaired. Further, a “pool professional” or “Registered Design Professional” must approve of any corrections make for compliance with the Graeme Baker Act. Failure to obtain this approval will prevent a facility from obtaining a pool permit. For further information, please contact Michael W. Siri at siri@bowie-jensen.com.

Bid Protest Rejected for Inadequate Bid Bond

The Federal Circuit upheld the rejection of the lowest bidder by the Department of Transportation where the bid bond supplied by the low bidder failed to comply with the Federal Acquisition Regulations (FAR). In Tip Top Construction v. United States, the general contractor submitted a bid bond from an individual surety backed by mined coal. The government rejected the bond because the asset securing the individual security was too speculative and hence did not comply with the FAR's requirements. The invitation to bid required a bid bond of three million or 20 % of the bid amount whichever was less.

In affirming the rejection of the bid, the court emphasized the purpose of the bid bond; namely to protect the government in case the bid is withdrawn. Thus, the assets securing the bond most be sufficiently liquid or marketable to cover the expenses of rebidding the project. The court noted that too many variables impact the pricing of the coal in order to adequately assess its value and liquidity. In short, the coal was a speculative asset and therefore insufficient collateral.

For further questions regarding bid protests, contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-jensen.com

Bid Protest Brought By Second Lowest Bidder

The Maryland Board of Contract Appeals (“MBCOA”) recently permitted the second lowest bidder for a project to submit a bid protest after the contractor’s bid was rejected by the procurement officer. In this case, the lowest bid was deemed non-responsive and was rejected after it failed to comply with MBE requirements. The lowest bidder did not submit a bid protest. The second lowest bid was subsequently deemed non-responsive and was rejected for the identical reasons as the lowest bid. The second lowest bidder submitted a bid protest; however, the procurement officer rejected the bid protest. The matter was then appealed to MBCOA, which held that the second lowest bidder would having standing to bring a bid protest because it would be in line for an award of the contract, after the rejection of the lowest responsive bidder. Therefore, even if a contractor is not the lowest bidder on a construction contract, they may still have the right to bring a bid protest. If you have additional questions, please contact Michael W. Siri at siri@bowie-jensen.com.

Priority of Remedies for Subcontractor Claims

Subcontractors beware. The Maryland Court of Special Appeals has recently ruled that a subcontractor on a federal project may have to avail itself of a pass-through claim against the government rather than pursue its remedies in a direct claim against the general contractor. In Skanska v. Smith Management Construction, the Court of Special Appeals held that where the general contractor claimed that a portion of the subcontractor's claim may be the result of actions by the government, the subcontractor was bound by the construction claims process under the Federal Acquisition Regulations. It could not proceed directly against the general contractor in court. The court reasoned that the contract language suggested that if the general contractor alleged that the government bore some responsibility for the subcontractor's claim for entitlement then the subcontractor had to pursue its remedies under the Contract Disputes Act set forth in FAR. Consequently, the subcontractor had to pass through its claim and certify it to the contracting officer. If the subcontractor was dissatisfied with the result, it could appeal to the appropriate board of contract appeals or proceed in the Federal Court of Claims.

Significantly, the court noted that the mere contention by the general contractor that the subcontractor's claim was a governmental dispute divested the state court of jurisdiction to consider the subcontractor's claim against the general contractor. Furthermore, the court noted that the nature of the claims, which were for increase to the gross maximum price and for time, were governmental issues, which also created a governmental dispute.

There are inherent risks for a subcontractor in proceeding with a pass through claim. First, the Severin doctrine may preclude a subcontractor's recovery where the owner can show that the subcontractor would have no right to recover against the general contractor. Furthermore, the subcontractor's claim may be presented with other claims and ultimately result in a global settlement irrespective of whether there exists more merit to the subcontractor's particular claim. Ultimately, a subcontractor must be aware of this risk before entering into a contract. For further information, contact Matt Hjortsberg at 410-583-2400

Economic Recovery Act

Government contractors that act quickly stand to benefit from the Economic Recovery Act. Click here to review a summary of the Act prepared by our friends at Patton Boggs, LLP. You may also visit their website at www.pattonboggs.com. Bowie & Jensen, LLC has also prepared a summary of important legal issues facing privately held companies in today's economy.