MALAN CONST. CORP. v. BOARD OF COUNTY ROAD COM'RS

LEVIN, Chief Judge.

The sole issue to be considered on this motion to dismiss the action is whether the lowest, but unsuccessful, bidder on a Wayne County, Michigan, public works project may maintain an action under Michigan law either to enjoin the successful bidder and the Board of County Road Commissioners from entering into a contract, or to obtain damages because of the Board's refusal to accept the plaintiffs' bid.

The plaintiffs, New York corporations operating as a joint venture, non-taxpayers of the county, allege that the individual defendants, comprising the Board of County Road Commissioners of the County of Wayne, conspired with defendant Barton-Malow Company, the successful bidder whose bid of $17,607,000 was $340,250 above the plaintiffs', to deprive the plaintiffs of the contract.

No statute or ordinance requires the Board of County Road Commissioners to accept the lowest bid. Furthermore, the advertisement for the project stated:

A court in an appropriate action may examine the facts surrounding the awarding of such a contract and hold that the officials acted arbitrarily and abused their discretion. Bolt v. Muskegon Board of County Road Commissioners, 1936, 277 Mich. 75, 268 N.W. 817. The court does not have such authority here.

Competitive bidding is not intended to benefit bidders. It is designed to protect the taxpaying public from fraud or favoritism in the expenditure of government funds for public works projects. The Michigan Supreme Court has held that the duty of public officials to consider honestly competitive bids runs directly to the community and that, therefore, only the public, through a taxpayer's suit, has standing to enjoin a proposed contract. The incidental benefit received by bidders from competitive bidding does not allow an unsuccessful bidder to bring a private action. Talbot Paving Co. v. City of Detroit, 1896, 109 Mich. 657, 67 N.W. 979; City of Detroit v. Wayne Circuit Judge, 1901, 128 Mich. 438, 87 N.W. 376, citing with approval Colorado Paving Co. v. Murphy, 8 Cir., 1897, 78 F. 28, 37 L.R.A. 630, appeal dismissed for want of jurisdiction 1897, 166 U.S. 719, 17 S.Ct. 997, 41 L.Ed. 1188. The plaintiffs assert support for their position in the language in Talbot Paving Co. v. City of Detroit, supra, 109 Mich. at page 662, 67 N.W. at page 981, that "* * * there is a remedy by injunction to prevent the making of a contract with the next higher bidder." The language quoted, however, in the context of the entire opinion, indeed emphasizes that only the public, not the bidder, could enjoin the awarding of a contract.

Nor may the plaintiffs bring an action against the Board of County Road Commissioners for damages for failure to award the contract to the lowest bidder, the invitation to bid being merely a solicitation of offers and not an offer itself. Talbot Paving Co. v. City of Detroit, supra; 10 McQuillan, "Municipal Corporations," (3rd Ed.) pp. 361-3, 374-5.

The plaintiffs also urge that Act 170 of the Public Acts of 1933, 4A M.S.A. § 5.2311 et seq.1 gives them the right to bring an action in their own name directly against the Board of County Road Commissioners. The plaintiffs contend that the Act establishes the only method of testing the qualifications of bidders and thus the failure of the Board to disqualify the plaintiffs more than five days prior to the opening of bids is a determination of the ability of the plaintiffs to perform the contract successfully. No reported Michigan court opinion has interpreted any provision of this statute.

The Act could have been written with greater clarity, but it seems to me that its only objective is to pre-qualify prospective bidders and remove the likelihood of receiving bids from firms or individuals later found to be unqualified to perform or complete the work. This view is consistent with the purposes of the Act as outlined by the State Highway Commissioner in his Fifteenth Biennial Report, submitted to the Governor of Michigan on June 30, 1934.

In addition, it should be noted that the statute is permissive in nature, not mandatory. The Act provides merely that the Board may require any person proposing to bid on a public works project to submit a sworn statement before bids are opened, setting forth his qualifications. The administrative agency then is to decide whether the proposed bidder will be allowed to bid on the project. The remedy given by sections 5 and 6,2 construed in the context of the entire statute, allows the proposed bidder the privilege of challenging the determination of the agency that he is not qualified even to bid on the proposal.

Instead of utilizing the mechanics of the Act, the Wayne County Board of Road Commissioners apparently investigates bidders after opening of the bids. This they have a right to do.

The actions of the plaintiffs negate their contention that they relied upon the qualification procedure of Act 170. In submitting the bid, they accepted the proviso that the Board reserved the right "to reject any or all bids" and to adopt the bid that was in the "best interests of the Board and of the County of Wayne, Michigan."

The action will be dismissed as to the Board of County Road Commissioners of the County of Wayne.

The plaintiffs' request to amend their complaint against the members of the Board in their individual capacity and the Barton-Malow Company is granted.