July 8, 2011
By: Daniel Tartaglia
In a split decision, New York's Court of Appeals last month overruled the Appellate Division, Second Department and held that General Municipal Law Section 103 and Town Law Section 122 preclude a Town, in an open bidding process, from choosing a higher bid merely because it subjectively believes that a higher bidder is preferable and more responsible than a lower bidder based on criteria not specifically set forth in the bid proposal. (see: In the Matter of AAA Carting and Rubbish Removal, Inc. v. Town of Southeast, et al., 2011 NYSlipOp 04765).
The Court based its decision on a record that indicated the Town Board chose the second lowest bidder because in their opinion and business judgment it was "more responsible," than the lowest bidder. Using criteria not included in the bid specifications, the Town Board determined that it was in the best interests of the Town to choose the second lowest bidder over the lowest bidder.
In a sharply worded dissent, Justice Pigott argued that by holding "for the first time, that a contract subject to competitive bidding statutes must be awarded to the lowest bidder that meets the express bid specifications, regardless of whether the municipality, exercising discretion, considers it to be a responsible bidder," the majority's ruling was a "...mistake, defying precedent and good policy."
The lesson for Towns from now on, is to use carefully worded bid proposals and create a strong record before skipping over the lowest bidder.
