Court of Appeals Holds that Deviation from Municipal Contract RFP Evaluation Criteria is Arbitrary and Capricious

In Matter of ACME Bus Corp. v Orange County (No. 182), the Court of Appeals was asked to address whether, during the municipal bidding required for the award of local government contracts under General Municipal Law 104-b, the municipality must adhere to the public bid evaluation criteria set out in the request for proposals (“RFP”) or can change the criteria after the bids are received. In ACME Bus Corp., Orange County put out to public bid three contracts for busing of special needs preschool students. In the RFP, the County set evaluation criteria that assigned a certain number of points in nine different categories. According to the RFP, the last, and most significant, category that would be evaluated was cost. As the RFP explained it, “‘[t]he Offeror submitting the lowest cost proposal will be awarded 20 points.  Awarding of points to the remaining Offerors will be based on percentage to points ratio.’  In the same sentence, the RFP explained by way of ‘example’ that ‘if the total cost [difference] between the lowest Offeror and the next lowest Offeror is 10% then Offeror two will have 2 points deducted from the maximum score of 20.” (Opn, at 2).

When the bids for the contracts were submitted, however, the County deviated from the cost evaluation criteria set in the RFP and changed the ratio to a reduction of 2 points per 4% cost difference. The County thus reduced ACME’s score based on cost by 12 points. As a result, the County awarded the contracts to other bidders, one of which AMCE’s proposal would have beat had the County reduced ACME’s cost score according to the percentage to point ratio set forth in the RFP. ACME thus commenced an Article 78 proceeding challenging the County’s bid award, particularly the deviation from the set RFP criteria, as arbitrary and capricious.

Supreme Court rejected the challenge, declining ACME’s “tacit invitation to redo the . . . scoring of the proposals” because it felt that County’s award had a rational basis. The Appellate Division, Second Department affirmed (126 AD3d 688 [2d Dept 2015]).

The Court of Appeals, however, reversed. To guard against favoritism and corruption, as General Municipal Law 104-b intends, the Court held, the County was required to adhere to the evaluation criteria exactly as it was specified in the RFP. The bids were submitted in reliance on the RFP guidelines, and it was arbitrary and capricious for the County to deviate from those criteria, first, because doing so violated the County’s own procurement policy and, second, because deviations lend credence to speculation that the bidding was rigged, the Court held. Thus, once the evaluation criteria is specified in the RFP, a municipality cannot deviate from the rules it set.

A copy of the Court of Appeals decision can be found here.

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