Is the Award of a Public Contract a Contract? May 2014 Update
For those bidding on public work, there might be a perception that once the owner opens bids and accepts a particular prime or general contractor via resolution adopted at a public meeting, there is a binding contract.
The Commonwealth Court’s recent decision in Allan A. Myers, LP v. Montgomery County tells the successful bidder, “Not so fast!”
In this recent appellate decision, the county requested proposals for a roadwork project from 17 vendors. Seven bidders responded. Following a public opening of the bids, Myers’ $4.1 million bid was accepted and a resolution was adopted which also rejected a competitor’s bid due to non-compliance with specifications. The same resolution directed Myers to post all required surety bonds, and stated that the failure to do so would automatically render the contract void.
Following word of a challenge being brought by Myers’ rejected competitor, Myers’ counsel sent the county a letter confirming his client’s belief that following the public award and resolution, an enforceable contract existed for the work, and Myers was prepared to proceed with the project. In response, at the next county commissioners meeting, a resolution was adopted rescinding the award to Myers and giving the job to its competitor.
Myers sued the county, alleging violations of the Commonwealth Procurement Code and breach of contract. The trial court rejected the claims, holding that “the mere act of awarding a public contract normally creates no binding obligation on the awarding entity without the proper contracting authorities going further and formally ‘entering into’ and ‘executing’ the contract.” On appeal, the Commonwealth Court held that while the original resolution specifically referred to all of the writings which would constitute the contract, no official document had been physically executed or signed. Without signatures on a formal written contract, the appellate court determined that no contract existed. The only damages Myers could seek from the county were those related to costs of procuring the bonds it was directed to secure following the original resolution.
The Myers decision confirms the limitations of a public resolution awarding work to a successful bidder, and holds the door open to bid challengers. We will continue to monitor this matter and any potential appeals of the decision to the PA Supreme Court.
Since 2009 in PA, a contractor, sub or supplier may only be bound to an advance stipulation against liens on residential projects of 3 stories or less. Prior waivers are unenforceable for all commercial work unless the general contractor has posted a bond. If you are considering filing a mechanics’ lien claim and you don’t have a contract with the owner, you have 5 months from your last work on the project to provide the owner with notice of your intentions. Whether you have a contract with the owner or not, you must always file the lien claim before passage of your 6 month anniversary of last work.
In NJ, stipulations against liens are generally unenforceable, but you only have 90 days to proceed on a commercial project and file your lien claim. Residential projects have shorter deadlines to comply with.
Remember that your clock is ticking; and you don’t want to lose your right to lien the property when payment issues arise – even if you didn’t work directly for the owner.
Author: Robert R. Watson, Jr.