by Michael Sams
The Massachusetts Appeals Court has affirmed judgment against a public awarding authority for acting in bad faith in refusing to award Revoli Construction a large public works contract. The jury awarded, and the Appeals Court affirmed, Revoli’s $3 million lost profit award, which, with interest, totaled $5.2 million at the time of award and now totals well over $6 million.
Revoli established at trial that it was the lowest responsible bidder and that the awarding authority acted in bad faith by rejecting its bid. Specifically, Revoli established that the awarding authority predetermined to reject Revoli before conducting any review of Revoli’s responsibility and by then seemingly rigging the review process against Revoli. There are few cases on bad faith in the public construction/public works contract award process and this case provides insight both on what bad faith means and how to win these cases.
As such, the Revoli decision is important for the public construction (including public works) industry. In the public contract awards process, favorites cannot be chosen. Responsible bidders cannot be blacklisted. Low, responsible bidders must be awarded the contract. This decision affirms that when bad faith occurs, the contractor receives its lost profits, even though it did not actually perform.
In what often seems to be a judicial or agency related review process that weighs the review of awarding authority conduct greatly in the awarding authority’s favor, this is a reminder that bad faith exists in that process at times and that these cases can be won. Indeed, to assure the integrity of the public construction bidding processes, contractors should pick their battles wisely, but pursue cases where bad faith can be proven.
At the heart of what drove the awarding authority and its engineer to reject Revoli was Revoli’s willingness on prior non-awarding authority projects to pursue change orders. The awarding authority and its third-party engineer then concocted evaluations to be completed by awarding authorities concerning prior Revoli projects that were intended to reveal Revoli’s history of pursuing change order claims as a negative.
Revoli countered that it had a contractual, statutory and even constitutional right (to petition the government) to seek change orders and established that its change order history on the projects the awarding authority cited were not only in good faith but resulted in payments to Revoli. Moreover, the awarding authority was forced to admit that the pursuit of change orders alone is not wrong, that one had to know about the substance of the change order requests to assess the good faith nature of them. At the time it assessed Revoli as litigious, the awarding authority had no idea about the nature of Revoli’s change order history or that it had recovered close to $2 million on these claims.
Revoli established other pretextual issues the awarding authority created. It demonstrated that although the awarding authority purported to be concerned about safety, the bidder to whom it awarded the contract had a significant documented history of OSHA safety issues, higher than Revoli’s. Revoli also demonstrated that the awarding authority ignored all of the positive reviews submitted by awarding authorities that previously worked with Revoli and that even seemingly positive reviews the awarding authority did not ignore, were treated negatively. The evidence also demonstrated that awarding authority personnel had not disclosed much of this to the city manager at the time he approved Revoli’s rejection and award to the second low bidder. Contractors cannot give up the fight!
Michael Sams
Michael Sams is partner at Bowditch.
