Superior Court County: King. Superior Court Cause No: 95-2-11054-1-SEA. Date filed in Superior Court: 5/11/95. Superior Court Judge Signing: Hon. James W. Bates JR.
Written by: William W. Baker, C.j. Concurred by: C. Kenneth Grosse, J., Susan R. Agid, J.
The opinion of the court was delivered by: Baker
BAKER, C.J. - King County awarded the construction contract for its new Regional Justice Center to the lowest bidder, Hensel Phelps Construction Co. The second lowest bidder, Dick/Cree Joint Venture, protested that Hensel Phelps's bid did not meet set-aside goals for minority and women business enterprises (MWBEs), and that the County knew about this flaw when it accepted the bid. Dick/Cree sued to enjoin the contract's performance, but the trial court dismissed its claim, citing the rule that a disappointed bidder may not sue for damages for violations of the competitive bidding process once a contract is awarded. We hold that the policy considerations behind this rule also apply when the bidder requests injunctive relief. Finding no merit in the remaining issues, we affirm.
Before the County awarded the contract, Dick/Cree formally protested Hensel Phelps's bid, arguing that it was nonresponsive because, among other things, it listed multiple MWBE subcontractors for the same work. The County rejected the protest, finding that the alleged errors did not render the bid nonresponsive. Dick/Cree moved to temporarily restrain the formation of a contract, but the trial court found temporary relief unwarranted. Dick/Cree did not immediately appeal the denial of the temporary restraining order, and the County and Hensel Phelps signed a contract the next day. At the preliminary injunction hearing, the trial court allowed Dick/Cree to amend its complaint to request an injunction against performance. The court later granted the County's motion to dismiss with prejudice, ruling that Dick/Cree lacked standing.
Competitive bidding statutes exist to protect the public purse from the high costs of official fraud or collusion. The bidder's interest in a fair forum is secondary. Therefore, even where the wrongful award of a contract violates a bidder's interest in a fair forum, the bidder may not sue for damages. To allow damages would violate the public interest by subjecting taxpayers to further penalties when they are already injured by paying too high a price under an illegal contract. *fn1 The aggrieved bidder may instead sue to enjoin the award of an illegal contract, because the public benefits from preventing a contract for an excessive amount. *fn2 A taxpayer may also sue to enjoin the execution or performance of a wrongful public contract that would increase the tax burden. *fn3 No case has addressed whether the policy of protecting the public treasury permits a bidder to sue to stop performance once a contract is signed. Bidder injunctions against performance of public contracts would adversely affect the public interest by increasing expense to the taxpayers. We therefore hold that the purposes of the competitive bidding laws are best carried out by restricting such suits to plaintiffs with taxpayer standing.
As a matter of public policy, the courts may refuse to recognize a cause of action where the lawsuit would work against the purposes of the underlying statute. *fn4 Dick/Cree argues that recognizing standing to protect a bidder's right to a fair forum does not undermine the financial policies behind the competitive bidding statutes because the assurance of a fair forum attracts nontaxpayer bidders, increasing competition and lowering prices. It also asserts that private bidders are inherently watchdogs of the public interest who are better equipped to combat inJustice in the bidding process than the average taxpayer. On the other hand, the costs of rebidding and delay would in many cases far outweigh the financial harm caused by a fraudulent or collusive agreement. This is especially true where, as here, the challenged contract has been awarded to a company whose bid was over one half million dollars lower than the next lowest bidder's.
Even where an illegal contract increases expense to the public, bidder injunctions against performance are not the proper way to vindicate public rights. Private suits are motivated by the bidder's desire to rebid and improve its chances to obtain an award. The best way to ensure that lawsuits are brought in the public interest is to restrict standing to those whose rights are at stake--the taxpayers.
Nor is the public interest in promoting MWBEs a legitimate basis for bidder standing in this case. We acknowledge the potential for harm to important public policies other than protection of the public purse when the bidding process is abused. Nevertheless, because the competitive bidding statutes are specifically designed to protect taxpayers from undue financial burden, the vindication of other public policies is not a proper reason to allow a bidder injunction when a contract allegedly violates those statutes. Nor are the rights of MWBEs an interest of the bidder for which it could pursue a cause of action. Protection of such rights are best left to the directly affected parties.
We further acknowledge that a fair forum for bidders is an important concern as it encourages larger numbers of competitors to bid and lowers costs to the public. A level playing field also protects companies' investments in preparing their bids. *fn5 Nevertheless, where public and private interests conflict under the competitive bidding laws, the public interest must prevail. While using contract formation as a bright-line cutoff point for bidder standing necessarily limits the protection of bidder rights, the bidder is not without a remedy: It may seek an injunction before contract formation. If the contractor fails to obtain a temporary restraining order and the parties threaten to enter into a contract, it can immediately appeal the trial court's decision.
We distinguish two cases seemingly supporting a bidder's standing to enjoin performance. First, the only case apparently allowing standing did not address the issue. In Platt Electric Supply, Inc. v. City of Seattle *fn6 the city improperly allowed a contractor to revise its bid amount and replace Platt as lowest bidder. After the award of the contract, Platt sued to enjoin performance. The trial court denied injunctive relief, finding that the city acted within its discretion. We disagreed and reversed. While the existence of standing was implicit in our Disposition on the merits, the issue was neither raised nor discussed. *fn7 Other Washington cases concerning injunctive relief either do not involve a request to enjoin performance, or are based on taxpayer standing. *fn8
Second, the Supreme Court suggested the possibility of a bidder suit to enjoin performance in Peerless Food Prods., Inc. v. State after resolving the case on different grounds: *fn9 Bidders who are mistakenly or wrongfully denied contracts have every incentive under our current rule to move quickly in seeking an injunction. If a protest is a prerequisite to court action, then bidders may seek temporary restraint on performance of the contract in question. . . . Bond requirements upon bidders seeking to enjoin performance of a contract by a third party are not an unfair burden upon a party with a meritorious claim. *fn10 While this dictum supports Dick/Cree's position, it does not refer to any other authority and is not precedent. In any event, the result in this case does not conflict with the overall policy goal announced in Peerless, "allowing relief to bidders that does not compete with the public interest and is consistent with a ...