Recent court rulings impact school construction management

Recent court rulings have changed the landscape when it comes to school construction disclosures and bid management, according to recent reviews of cases by attorneys at Lozano Smith.

Consider first a ruling from the state Supreme Court that awarded costs and expenses to a contractor who showed a school district was aware of relevant site defects before work began and didn't disclose them.

The case, Los Angeles Unified School District v. Great American Insurance Company - found that a public agency can be made to pay damages if it failed - even unintentionally - to disclose information that made plans or specifications misleading and led to a contractor submitting a bid lower than otherwise might have otherwise offered or results in an increase in the cost of the job.

But the court also limited its ruling saying that a contractor cannot recover costs if:

- the information the public entity provided to the contractor did not mislead the contractor;

- that information put the contractor on notice to ask, or look, for further facts;

- a reasonable contractor should or would have discovered the information on its own.

- Furthermore, the public entity had to have had the information in its possession and to have known that the contractor had no knowledge of, nor reason to obtain the information, and the public entity still did not provide the information to the contractor.

The second case came from California's Fourth Appellate District, where the ruling said that contractors are entitled to a hearing prior to a determination that the bid response was false or misleading.

In Great West Contractors, Inc. v. Irvine Unified School District, school officials decided that some information provided by the contractor about their licensing history was incorrect or false.

The court ruled that the contractor answered all the questions required and therefore was responsive - even if some of the answers were incorrect or false. The distinction meant that the school district was obligated to give the contractor a hearing on the issues before rejecting their proposal.

The issue is especially critical in current market conditions where competition for public construction contracts is intense and incidents of bid protests increasingly likely.

Public agencies generally evaluate bid submissions using two tests: whether the bidder is responsive to the application requirements; and second, whether the bidder appears trustworthy, capable and qualified. As a matter of practice, when a bid is found to be non-responsive, a district can reject the proposal with minimal process. But when a bidder is found not to be responsible, a contractor has the right to a hearing.

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