Pennsylvania Court Holds That Non-Compliance with Requirements of Instructions to Bidders Does Not Automatically Render Bid Incapable of Acceptance

Gaeta v. Ridley School District
SUPREME COURT OF PENNSYLVANIA, 788 A.2d 363; 2002 Pa. LEXIS 132( January 25, 2002)

Ridley School District invited bids for various prime contracts for the construction of a new high school. IBE Contracting, Inc. submitted a bid for the “Aluminum Entrances and Storefronts Construction”. In its bid package, IBE submitted a bid bond from a surety with a Best Rating of “B”. The Instructions to Bidders, however, required that, with respect to the bid bond, the “Surety Company shall be licensed. . .with a minimum Best Rating of A- or better.” After it was determined that IBE was the lowest bidder, the School District contacted IBE and requested that IBE submit a bid bond from a surety with the required Best Rating. IBE submitted a compliant bid bond and the School District awarded IBE the contract.

Gaeta, a taxpayer in the school district, filed a complaint seeking a preliminary injunction against the award of the contract to IBE on the grounds that its bid was non-responsive because the Best Rating for the bid bond surety did not conform to the Instructions. The trial court denied the injunction but the Commonwealth Court reversed.
On appeal, the Pennsylvania Supreme Court denied the injunction, thereby allowing the School District to award the contract to IBE, because (1) the Best Rating requirement for the bid bond was not material and (2) IBE enjoyed no competitive advantage over its competitors.

First, the Court held that the defect was not material because a bid bond serves only a limited purpose—unlike a performance bond—and was not required by statute. The limited purpose, security until a contract can be executed, affords a greater degree of discretion to the School District in determining whether a bid is responsive.
Second, the Court held that IBE enjoyed no competitive advantage because both surety companies charged nothing for the bid bond and, therefore, the Best Rating of the bid bond surety had little or no bearing upon the amount of IBE’s bid, which was significantly less than the next lowest bidder’s bid.

Gaeta had argued that under the language of prior Pennsylvania cases, the failure of IBE to supply a bid bond conforming with the mandatory requirements of the Instructions to Bidders necessarily rendered a bid materially non-responsive. It is a widely accepted tenet of public procurement law that the responsiveness of a bid must be determined as of the time of the bid opening, while there may be an opportunity to resolve matters pertaining to responsibility after the bid opening, but prior to award.

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