Mass Public Construction Ruling

The Massachusetts Supreme Court upheld a high school construction contract even though the successful bidder misrepresented its qualifications since there was no evidence of corruption in the bidding process.

In 2009 a town decided to go out to bid for the construction of a new high school. Where a public construction project has an estimated cost over ten million dollars, State law requires a contract to be awarded to the lowest responsible and eligible general bidder, which means the contractor must have a certificate of eligibility issued by the state. There is a second requirement that the contractor be prequalified to bid on the project by a fourmember town building committee which makes its determinations by evaluating responses to questions in a written request for qualifications. In this case, nine firms were prequalified by the committee to bid on the project. One of them was Callahan.

When bids were received, the town awarded the project to Callahan that was the low bidder with a base price of thirtyseven million dollars. The next lowest bidder was about one million dollars higher. Unsuccessful bidders filed bid protests with the Attorney General. The protesters claimed Callahan provided fraudulent information to the committee by misrepresenting its construction experience. They demanded Callahan be disqualified as an eligible bidder and the contract be awarded to another bidder. The Attorney General ruled for the protesters. The Attorney General found Callahan had knowingly misrepresented itself as the successor corporation to another general contracting company and had exaggerated its role in building a new high school in another town.

The town declined to terminate the contract and construction started. In response, ten taxpayers of the town sued. They asked for an injunction to stop construction and requested that the contract be rescinded. The Superior Court granted a preliminary injunction stopping work. The town appealed and the appeals court vacated the preliminary injunction because stopping construction would result in substantial cost for the town. On further appeal the Supreme Court heard the case.

The Supreme Court said the standard of review for the appeal was whether the Superior Court had abused its discretion in granting the injunction. The test for issuing a preliminary injunction is the likelihood of the plaintiffs prevailing at trial. In this regard, a critical issue which had to be resolved by the Supreme Court was whether the Superior Court had erred in concluding that Callahan s misrepresentations as to its work experience was fraud within the meaning of the law even though there was no evidence of detrimental reliance by the town committee in prequalifying Callahan as a bidder. In interpreting the statute the Court had to consider legislative intent. According to the Court, fraud in that law had to be given its common law meaning that requires detrimental reliance. The Court concluded fraud in this law meant more than an intentional misrepresentation by a general contractor.

Under the facts, the Court ruled there was no fraud committed by Callahan. Where affidavits by members of the committee saying they were not misled by Callahan s intentional misrepresentations and where there was no evidence of corrupt conduct or collusion by any member of the committee, the town was permitted, but not required, to terminate the contract on learning of the intentional misrepresentation. The Court rejected the Attorney General s interpretation that knowingly false or misleading statements automatically disqualified a bidder from entering into a contract with a municipality. The Court said any general contractor who makes material misrepresentations could be sanctioned with a debarment or suspension by DCAM that issues certificates of eligibility.