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HomeMy WebLinkAboutPipeline Replacement Legal LAW OFFICE OF PATRICK McNAMARA VIA EMAIL (gross@portersimon.com) March 4,2009 Steven Gross Porter Simon Graham et al. ./ 40200 Truckee Airport Rd. Truckee, CA 96161 Re: Wunschel & Sons, Inc. ("Wunschel") Truckee Donner Public Utility District("District") Pipeline Replacement,2009—Contract C("Project") Dear.Mr. Gross: This office represents Wunschel&Sons, Inc. ("Wunschel),the apparent low bidder on the Project. Although,to my client's knowledge, no bid protest pertaining to the Project has been submitted,we have been informed that the District is aware of an irregularity in Wunschel's bid: a missing notation that repeats the penal sum of the bid bond specified in the District's specifications.The points and authorities contained in this letter support my client's position that the District may legally waive Wunschel's bid bond form irregularity for the Project and, in fact, should award the contract to Wunschel. Public Entity Duty in Competitive Bid Process The statutes applicable to most public works, including the Project, require that public agencies award the contract to the responsible bidder with the lowest responsive bid. A bid is responsive if it promises to do what the bidding instructions require. Taylor Bus Service, Inc. v. San Diego Board of Education(1987), 195 Cal.App.3d 1331, 1341. In the Wunschel situation, there are no statements, facts,or figures contained in Wunschel's bid that promise to do something different than what is required in the bid instructions—there is merely omitted language in the bid security form which, as explained below, did not negate or lessen Wunschel's obligations to honor its bid,nor did it provide Wunschel with a competitive advantage. Public Entity Mgy Not Waive a Bid Irre lari if the Irregularity ives the Bidder an Unfair Competitive Advantage. A basic rule of competitive bidding is that bids must conform to the specifications and that if a bid does not so conform, it may not be accepted. However, it is further well established that a bid which substantially conforms to the call for bids may,though it is not strictly responsive,be accepted if the variance cannot have affected the amount of the bid or given the bidder an advantage or benefit not allowed other bidders or, in other words,if ) 916/941-7522 1107 INVESTMENT BLVD., SUITE 180 (FA(TEL.) 9161941-7522 ELDORADO HILLS,CA 95762 pm@patrickmcnamara.com LAW OFFICE OF PATRICK McNAMARA Steven Gross March 4,2009 Page 2 of 4 the variance is inconsequenti 8.'20Konica6 Cal Business 449achines USA Inc. v. Regents of University of California(198 ) PP In addressing the"unfair bidder advantage"term,the Court of Appeals, in Menefee v. County of Fresno (1985), 163 Ca1.App.3d 1175,reduced the rule of bid irregularity waivability to a simple test: "...the real issue in determining the validity of a bid is whether the bidder would be liable on its bond if it attempted to back out after it was accepted."Menefee court,quoting Williams v. Bergen(1900) 129 Cal. 461. The bid bond surety has informed me that Merchants Bonding Company, through its agent,issued Wunschel a fully valid bond with the 10%penal sum and, were Wunschel to default on its bid,the bond would be enforceable by the District. I have requested a letter from Merchants legal counsel addressing this situation;I will forward the letter to you when I receive it. WunscheI's Bid Irregularity is"Inconsequential" under Ghilotti Construction Co. v. City ofRichmond as it Afforded Wunschel No Unfair Competitive Advantage If the bid irregularity is found to have given the bidder no unfair competitive advantage over the other bidders,the public agency may properly waive the irregularity. In Ghilotti Construction Co. v. City of Richmond(1996),45 Cal.AppA 897, Ghilotti Brothers(the apparent low bidder) incorrectly stated in its bid that 55.44%of the contract work would be subcontracted. (The bid specifications required that the general contractor self perform at least 50% of the work.) When the irregularity was brought to Ghilotti's attention after bid opening, the contractor was able to provide evidence that it could readily meet the 50% self-performance bid requirement. In affirming the trial court's rejection of a bid protest brought by the second lowest bidder,the Court of Appeals held that the city had waived what the court identified as an"inconsequential irregularity."The Court relied on the fact that no evidence was resented b laintiff showing that Ghilotti would have submitted a higher bid if it had complied with the City's specifications. Therefore,reasoned the court,the irregularity did not result in an unfair competitive advantage and, as a result,was waivable by the public entity. Under the Ghilotti court ruling, if Wunschel is able to demonstrate that its bid sum and its commitment to the District are identical—with and without the ten percent notation in the bid security form—then the bid irregularity is inconsequential and may be properly waived by the District. (TEL.) 9161941-7522 1107 INVESTMENT BLVD., SUITE 180 (FAX) 9161941-7551 EL DORADO HILLS,CA 95762 pm@patrickmcnsmara.com LAW OFFICE OF PATRICK McNAMARA Steven Gross March 4,2009 Page 3 of 4 To this point, I spoke yesterday with Sandra Renee Black, Attorney-in-Fact for bid bond surety Merchants Bonding Company(916-481-8108). She informed me that,as is typical with all public works bid bond clients,Merchants' broker did not charge Wunschel a premium for the bid bond provided on the Project. Stating the transaction another way,Ms. Black informed me that there would have been no bid bond premium charged to Wunschel or any other bidder on the Project,regardless of the existence or lack of a written notation of the penal sum on the bid bond form. Please advise if the District wishes to receive an affidavit from Merchants' broker on this point. Based on Ms. Black's statements and my own understanding of the standard practices between sureties and contractors on public works bonds,the irregularity in Wunschel's bid security form has no significance,whatsoever, as the bidder's and surety's commitments to the District were identical in this instance as they would have been had the bond penal sum requirement been repeated on the District's form. Wunschel's Bid Irregularity does not meet the Criteria set out in Public Contract Code §5103 for Bidder Relief from its Bid In Valley Crest Landscape, Inc. v. City Council,41 Cal.App.4`h 1432 (1996),the City of Davis permitted the apparent low bidder to revise its bid, i.e. modify the cost figures contained in the bidder's bid form to conform with the City's self-performance requirements. Plaintiff, as second low bidder,protested the award. In reversing the City of Davis' waiver of low bidder North Bay Construction's bid irregularity,the Valley Crest court ruled that a bid irregularity may be waived only if the variance cannot have affected the amount of the bid or given the bidder an advantage not allowed to other bidders. The court applied Public Contract Code §5103 and, finding that North Bay's bid met the criteria set out for relief of the bid,ruled that North Bay had, in fact, obtained an unfair competitive advantage in that North Bay could have been relieved of its bid,had it wished. Under the Valley Crest court reasoning, a public agency may not waive a bid irregularity if it meets all the Public Contract Code §5103 criteria: (1) a mistake was made; (2) [procedural requirement; irrelevant here]; (3) the mistake made the bid materially different than the bidder intended it to be; and (4) the mistake was made in filling out the bid,not in reading the plans or specifications or due to an error in judgment or in its inspection of the site. (TEL.) 916/941-7522 1107 INVESTMENT BLVD., SUITE 180 (FAX) 9161941-7551 ELDORADO HILLS,CA 95762 pm@patrickmcnamara.com LAW OFFICE OF PATRICK McNAMARA Steven Gross March 4,2009 Page 4 of 4 Wunschel's bid irregularity, although a mistake,did not make the bid 'materially different than intended." Wunschel's commitments,burdens, and promises of performance contained in their bid were identical to those that would be in place had the entry been made.No figures pertaining to Wunschel's bid or Wunschel's use of subcontractors or suppliers on the Project were affected. In conclusion, it is my client's position that its bid is responsive and,as a result, the District should award the contract for the Project to Wunschel& Sons, Inc. Wunschel stands behind its bid and is ready,willing, and able to enter into a contract with the District for the Project. No Bid Protect has been Filed; in the Event a Protest is filed,the Protest is Likely to Fail. My client is informed that no bid protest has been filed, as of earlier this week. Although I am not informed of the protest time limit applicable to the Project, it is likely that the period for bringing a protest has passed. If a protest were brought and the protester were to seek mandamus,the standard of review would be limited to whether the District's awarding of the contract to Wunschel was arbitrary and capricious, lacking in evidentiary support, failed to follow proper procedures,or failed to give required notice. See Valley Crest; Ghilotti, supra. Assuming the District has followed its procedures in this matter, it appears that any protest brought against the District for awarding the contract to Wunschel would fail. Mr. Gross,thank you for giving this matter your thoughtful consideration. I am available to present my client's case at the District board meeting this evening. Feel free to contact me with any questions or information. Sincerely, 4LAW PATRICK MCNAMARA McNamara Cc: Sandra Renee Black, Lesron Insurance Agency,Inc. Client 2 1107 INVESTMENT BLVD., SUITE 180 (FAX)(TEL.) 916/941-75916/941-7521 ELDORADO HILLS,CA 95762 pm@patrickmcnamara.com MER_CHAh1TS BONDING COMPANY March 3, 2009 Neil Kaufman Water System Engineer Truckee Donner Public Utility District P.O. Box 309 Truckee, CA 96160 Re: Bid Bond Issue -Wunschel & Sons, Inc. Mr. Kaufman: We are writing in regard to the bid bond issued by our agent, Lesron Insurance Agency, Inc., for Wunschel & Sons, Inc. in relation to the District Pipeline Replacement—2009 — Contract C. It is our understanding that the Truckee Donner Public Utility District is considering rejecting Wunschel & Sons, Inc. bid due to irregularities in the bid bond, specifically that the penal sum stated with thebid requirements ements of the note nd. it is our posit' that the bond is valid and enforceable in accordance inviting bids, and that the irregularity can be waived by the district. Courts have held that when the bid bond is alleged to be defective, the determinative issue is whether the surety has sufficiently manifested its intention to be bound under the invitation to bid such that the bond would be enforceable by the owner in the event of a default by the contractor. (See -PCIIRCI, a Joint Venture v. United States 36 Fed. Cl. 761,773 (Cl. Ct.1996)). As indicated in Lesron's February 27, 2009 letter, this bond was issued by Merchants with full knowledge of the 10% requirement included in the bid specifications and it was our intent to provide a bond that met these specifications. Due to the clear requirement in the bid specifications that bid security equal 10% of the bid amount, it is our position that a submitted bid bond which fails to state an amount is defacto equal to 10% of the submitted bid amount. It is our position that the bid bond is valid and enforceable against us in the event of a default by our principal Wunschel & Sons, Inc., and as such is acceptable bid security in support of this bid. The secondary issue is whether this alleged deficiency in the bid bond is one which can be waived by the owner. In the notice to inviting bids for this project, the Truckee Donner PUD expressly reserves the right to waive any irregularities or informalities in the bidding. Courts have held that the public interest in obtaining the lowest available price for a project through the bidding process dictates that if the low bidder is responsible and has submitted an otherwise responsive bid, and if there is in fact adequate is not served by rejection of the bid due to a security for the bid, the public interest 2100 Fleur Drive•Des Moines,Iowa 50321-1158 515-243-8171 • 1-800-678-8171 •Fax 515-243-3854 www.merchantsbonding.com technical defect in the bid bond. We feel that these circumstances fall into this category, as the bond was submitted with the intent of complying with the 10% bid security requirement of the notice to bidders and would be enforceable if the contractor defaults upon its bid. As such it is our belief that the Truckee Donner PUD should exercise its right to waive irregularities and award the contract to Wunschel & Sons, Inc. We appreciate your consideration of this matter. If you have any questions or concerns, please do not hesitate to contact us. Sincerely, Michael Safris Counsel Merchants Bonding Company P. 001/003 FEB-23-2009(MON) 09: 42 THE SURETY SrECIALISTS Bid Date: 2124/2009 LESRON INS-AGENCY,INC Time: 2:00 PM 2391 El CA.MINO AVE,#A SACR.ANXNT%CA 958Z1 93.6-48I-8108 FAX 916481-2392 BID BONI)REQUEST FORM ,;; E.MAILED .:lam 23 contractor(principal): Wunschel &Sons, Inc. 3071 Newtown Road, Placerville CA 05667 Q 530-ti—8675 f f.-530-626-5956 Job owner(Obligee): Tahoe Donner Public Utility District Address(Obllgee): 11570 Donner Pass Road,Truckee CA 96160 .Job.Name&Description: District Pipeline Replacement.2009 Contract C Bid Bond Form Required; generic AIA Fed#24 _x_Attached Job Location/City: Truckee, CA Estimated Contract Amount: $ 750,000.00 Bid Bond 10% Time Frame: 210 Calendar Days Work pays Contract Bonds: Performance 100% Payment 100% Maintenance Liquidated Damages $500 per day Percentage to be Subcontracted put 0% Hazardous Waste Remediation7 Yes X No If yes advise of details: Maintenance I Warranty Period 1 YEAR Method of Payment? PROGRESS Retention:Design Responsibilities? Yes X No If yes advise of details: Cost Breakdown (Rough Estimate...Prefer a 10%cushion for increases) $ 405,000.00 Contractor's Labor Cost $ 27%000.00 Contractor's Material/Equipment Costs Major Subcontractor Costs (HVAC, Electrical, Roofing,5tc.) 1 2 3 4 Miscellaneous Sub-Contractor Costs(Provide Additional Pages if Needed) $ 75,000.00 Gross Profits $ 750,000.00 Totals Estimated Signed Contracts in Progress(Costs Remaining) $ 64,000.00 as of 2I212009 Other Probable Future Contracts(Low Bids or Negotiated Projects)? $ 130,000.00 Lesron Insurance Agency, Inc. THE SURETY SPECIALISTS 2381 El Camino Ave Sacramento CA 95821 (916) 481 -8108 Fax: (916) 481-2382 WUNSCHEL It SONS, INC. 3071 NEWTON ROAD PLACERVILLE, CA 95667 Dear Client: Your bid bond was approved based on the estimate you provided. If your bid bond exceeds the estimate, it must be re-approved. Please provide he bid Please callts to us as should youoon haves possible. Thi will any questionss Good us to keep your file current and avoid any probls Luck on your bid! Bid Date: 2/24/2009 (if postponed, please enter new date: ) Obligee: TRUCKEE DONNER PUBLIC UTILITY DIST. Job Description: DISTRICT PIPELINE REPLACEMENT-2009 CONTRACT C Bid Bond No: WSI-9 Estimate: $ 750,000.00 Bid Results: Bid Price Contractor Name o'U Low Bidder $ G`7 7 2nd $ Co 5 ly 2 yn,00 W y�,nttc�p SoKs �Th�. �59 ?3ao Cr LA xGCIIVJ-iAg - 3 rd ,,nn High Bid $ t�.s2}3�2 6o JrJe✓,�• �XCuy�-�y�,q Engineers Estimate: $ Your bid price (if not listed above:) Thanks for your assistance. It is appreciated.