May 12, 2011 – If a town violates the state’s competitive bidding statute, an unsuccessful bidder can recover bid preparation expenses regardless of whether the bidder first seeks injunctive relief to stop the work, a Wisconsin appeals court recently concluded.
In 2008, the Town of Phelps, located within Vilas County, determined its town hall needed repairs. The town published one notice on April 2 seeking bids, and a second notice on April 9. Bids were due April 14, just five days after the final publication notice.
Wis. Stat. section 60.47(2)(b) requires town’s to publish at least two notices in consecutive weeks to notify bidders for public contracts of more than $25,000. Under section 985.07(2), the last notice must be published at least one week before the bids are due, unless otherwise specified by law.
During the notice period, the town changed the scope of the project and issued final specifications to bidders on April 12, just two days before the bids were due. One of the bidders, North Twin Builders LLC, was not able to incorporate changes to its bid based on the town’s changed specifications.
The bid submitted by North Twin Builders and another bid were rejected as incomplete. The town awarded the contract to the remaining bidder, and work commenced within a week.
In June, North Twin Builders filed suit. It asked for injunctive relief to stop the work based on a violation of the competitive bidding notice statute. The motion was withdrawn when the town informed North Twin Builders and the circuit court judge that the project was almost complete.
The town then filed a summary judgment motion and a motion to dismiss based on the argument that disappointed bidders must obtain injunction relief to halt a public project for violations of the competitive bidding statute before it can recover the cost of preparing an unsuccessful bid.
The Vilas County Circuit Court denied the motions and entered judgment for North Twin Builders, awarding $3,000 damages for preparation expenses. The town appealed.
In North Twin Builders, LLC v. Town of Phelps, 2009AP3036 (May 3, 2011), the District III Wisconsin Court of Appeals affirmed, holding that injunctive relief is not a prerequisite when a party seeks preparation expenses for violations of the competitive bidding statute.
The court made clear that lost profits is a different issue. Under D.M.K., Inc. v. Town of Pittsfield, 2006 WI App 40, 290 Wis.2d 474, 711 N.W.2d 672, the appeals court held that an unsuccessful bidder must seek an injunction for statute violations first, or its claim for lost profits will fail. But that is not the case with lost preparation expenses, explained Judge Edward Brunner.
“Accepting the rule proposed by the Town would foreclose judicial review in a case, like this one, where the municipality violates the competitive bidding statute but quickly signs a contract and directs the successful bidder to begin performance,” Brunner wrote in his opinion.