August 2002

In This Issue

• Combination Bid Wins Out
• Landmark School Bidding Case Continues
• Do You Have Enough Liability Insurance?

Combination Bid Wins Out 

Donald W. Gregory, Construction Law Chair

A recent case out of Warren County, Ohio involving a sewer project for the County Commissioners has raised an interesting and novel issue concerning the recent 1995 amendments to the multi-prime contracting statute here in Ohio. At that time, amendments were made so that combination bids could be received and an award could go to the lowest combination bidder if the combination bid was lower than the collective multiple prime bids in the aggregate.

A County is permitted to award the contract to the "lowest and best" bidder and Warren County in this case determined that the "lowest and best" bidder would be the combination bid which was only about $7,000 or .24 percent higher than the multiple prime bids in the aggregate. The County found such a price difference advantageous (in its opinion) because it could potentially avoid "finger pointing" between multiple prime contractors and additional paperwork.

One of the multiple prime contractors sued the County and sought a restraining order against the award to the combination bidder with the higher price arguing that the combination can only be considered if it were lower than the multiple prime bids in the aggregate. The Magistrate hearing the matter struggled with the perceived inconsistencies between Revised Code 153.52(B) which states that as between a combination bid and an aggregate of individual prime bids the "lowest and best" wins the contract and 153.52(A) which states that no contract for the entire job shall be awarded unless the combination bid is lower than the separate bids in the aggregate. The Magistrate then went on to dodge that important issue and state that the disappointed multiple prime contractor had not proved that the actions of the Commissioners were "unreasonable, arbitrary or unconscionable." Therefore, at the moment, the decision of the County Commissioners stands, but it is likely that this matter will be appealed further.

Many groups, including those in favor of multiple prime contracting, are greatly concerned about the import of this decision if it is somehow construed to authorize awarding to a higher combination bid because the public authority thinks it is "best" to avoid the perceived costs or lack of coordination potentially involved in multiple prime contracts.

Landmark School Bidding Case Continues

In what ultimately became a highly publicized case, the Ohio School Facilities Commission ("OSFC") and a local school district accepted the recommendation of its construction manager and found the low bidder Monarch Construction non-responsible on that particular project. The contract was awarded instead to the second low bidder as the "lowest, responsible" bidder, who commenced work.

Monarch Construction sued and received an injunction stopping the work and ultimately there was a prolonged trial on the merits in the Franklin County Common Pleas Court. The trial court in a lengthy decision found numerous flaws in the responsibility investigation process and found that there should not have been an award to the second low bidder. In addition, the trial court declared that the Executive Director of OSFC who had authorized billions of dollars of construction work did not have valid signature authority to bind the OSFC and therefore threw open to question the validity of all OSFC contracts executed in recent years.

Subsequently, the Executive Director of the OSFC resigned and the voting members of the OSFC have met frequently to ratify all existing and new contracts. Hopefully, this action will cure any nervousness in the Ohio construction industry concerning the enforceability of these contracts and the viability of the State's ambitious building program.

The State sought a stay of the trial court's order and the Franklin County Court of Appeals by a 2-1 vote granted a stay of the decision meaning that construction could continue with the second low bidder pending resolution of the case on the merits.

While there are many interesting and novel issues to be decided on appeal in this case, perhaps the most important issue for public owners and construction companies will be whether there will be a "chilling effect" on future responsibility investigations where owners and their designees may be afraid to make tough judgment calls about "responsibility" and instead simply just go with the low bidder regardless, in an effort to avoid being "second-guessed" later in court.

Such an approach would likely not bode well for quality and timely construction at a fair price.

Do You Have Enough Liability Insurance?

While jury verdicts in the Central Ohio area are still fairly modest, at least when measured by national standards, a recent Florida case involving a poorly designed construction zone emphasizes the risk of a huge verdict if there are catastrophic injuries.

In March of 2001, a large contractor and a Florida county made a $57 million settlement payment to a young family where a six year old daughter was killed and three year old twin brothers were paralyzed as a result of a car crash caused by a poorly designed construction zone. A later jury trial awarded the same family $256 million in a verdict against a local police officer who plowed into the family while rushing to the accident scene.

The family sued several parties who allegedly contributed to the accident including the highway contractor who was in charge of road construction and maintaining a safe load of traffic through the intersection. The county had a significant risk of liability because it did not hire a contractor to develop the traffic plan but developed it "in house." Apparently the configuration of the temporary traffic lanes and barricades had been newly arranged on the day of the accident, but the timing of the traffic signals had not been adjusted to account for the increased turning time. In addition, the placement of barricades and construction equipment created blind spots and made it impossible for either driver to see the other until it was too late allegedly turning the intersection into a "death trap."

While jury verdicts of this size are still unusual, it points out the risk associated with catastrophic injuries that can occur on construction sites, particularly those involving construction zones on road building projects.