Second-place bidder on a public works contract stated a tort cause of action for intentional interference with prospective economic advantage against the winning bidder
Between 2009 and 2012, American Asphalt South, Inc. (American) outbid either Roy Allan Slurry Seal, Inc. (Allan) or Doug Martin Contracting, Inc. (Martin) on 23 public works contracts totaling more than $14.6 million to apply a slurry seal protective coating to various roadways throughout Los Angeles, San Bernardino, Riverside, Orange, and San Diego Counties.
Allan and Martin (plaintiffs) jointly sued American in those five counties for intentional interference with prospective economic advantage, as well as predatory pricing under the Unfair Practices Act and sought an injunction to enjoin American’s bidding practices under the Unfair Competition Law. Plaintiffs alleged that American had only been able to submit the lowest bid by paying its workers less than the statutorily required prevailing wage, and that plaintiffs would have obtained the contracts otherwise.
American argued that plaintiffs did not have the existing relationship and reasonable probability of being awarded the contracts required to show intentional interference with prospective economic advantage. Plaintiffs asserted their bid submissions created the required economic relationship. The Court of Appeal agreed, concluding that plaintiffs, as the alleged “lawful” lowest bidders, had a tangible economic expectancy the contracts would be theirs, an expectation that was thwarted only by American’s unlawful conduct and directed the trial court to overrule American’s demurrer to plaintiffs’ cause of action for intentional interference with prospective economic advantage. The Court of Appeal sustained the demurrers to plaintiffs’ other tort causes of action.
Disappointed bidders have traditionally sought relief through writs of mandate, to challenge a public agency’s actions and to void a contract awarded to a competitor. While a losing bidder may have the satisfaction of forcing a rebid or denying award to a competitor, the disappointed bidder cannot force the public agency to award the contract to it or any other bidder, and the challenger’s remedy against the public agency is limited to recovery of bid preparation costs. Disappointed bidders may now turn the focus of their bid protests to scrutinizing the actions and bids of successful bidders, in the hope of recovering lost profits, a more lucrative result than what traditional bid protest remedies offer.
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