Opinion
Nos. 31739 and 31740
Decided June 22, 1949.
Public contracts — Plans and specifications valid — Opportunity afforded for competition on alternatives for materials and construction methods — Charter of Cleveland — Requirement that contract be let to lowest responsible bidder, not violated — Contract awarded to such bidder on alternative, after all bids considered.
1. Plans and specifications for the construction of a public improvement, which provide in the alternative for different materials and methods of construction, are full, accurate and complete as to each alternative and afford opportunity for competitive bidding as to each alternative, are valid.
2. The requirement of the Charter of the City of Cleveland that contracts be let to the "lowest responsible bidder" is not violated by the award of a contract to the lowest responsible bidder on an alternative of material and method of construction adopted after all bids have been duly considered.
APPEALS from the Court of Appeals for Cuyahoga county.
The plaintiff and relator, respectively, in each of these cases and hereinafter called plaintiff, is The L. M. Properties Company, Inc., a corporation duly organized and existing under the laws of the state of Ohio and with its principal office in Cleveland, Ohio.
The defendants and respondents, respectively, in each action and hereinafter called defendants, are the mayor of the city of Cleveland, and the members of the Board of Control of the City of Cleveland.
Case No. 31739 originated in the Court of Common Pleas of Cuyahoga County on November 5, 1948, when the plaintiff, as a taxpayer, on behalf of the city of Cleveland and for the use and benefit of the taxpayers of the city, filed a petition seeking to enjoin the defendants from attempting to let, enforce and complete a contract for the construction of a runway at the municipal airport of the city. After allegations showing the authority of the plaintiff to bring the action, the petition alleges that on April 19, 1948, the city council duly adopted a certain emergency ordinance for the construction of a runway at the airport; and that the ordinance provides in part as follows:
"Section 1. That pursuant to Section 167 of the charter of the city of Cleveland it is hereby determined to make the public improvement of the construction of runway at Cleveland Municipal Airport (9L-27R-FAA Project No. 9-33-016-801), by contract duly let to the lowest responsible bidder after competitive bidding upon a unit basis for the improvement.
"Section 2. That the director of public properties be and he hereby is authorized and directed to enter into a contract for the making of the above public improvement; said contract to be entered into with the lowest responsible bidder after competitive bidding upon a unit basis for the improvement.
"Section 3. That the cost of said improvement hereby authorized shall be charged against Fund No. 230 Parks — $950,000 — Request No. 67-48."
The petition alleges that the division of engineering of the city of Cleveland duly prepared specifications for the improvement, providing in the alternative for construction of the runway with asphalt having a total thickness of 26 1/2 inches or for such construction with concrete having a total thickness of 18 inches, all of such specifications to be open to the public and prospective bidders for the carrying out of the work. The design and specifications were in complete detail, covering in excess of 200 pages, providing in the minutest particularity for the construction of the two types of runway set forth therein and providing for a runway, of a type constructed of either concrete or asphalt, which complied with the specifications of the Civil Aeronautics Authority of the United States Government and with a carrying capacity of at least 120,000 pounds gross load.
On September 23, 1948, the bids for the construction were opened. The Loesch Green Construction Company bid for construction with concrete was in the amount of $1,472,672 and the Lombardo Brothers Construction Company bid for construction with asphalt was in the amount of $1,404,627.50, the bid of Lombardo Brothers Construction Company being the lowest bid received. The bidders will hereinafter be referred to as Loesch and Lombardo.
Plaintiff further says that on or about October 14, 1948, the Board of Control of the City of Cleveland notified the Civil Aeronautics Authority of its approval of the bid of Loesch and requested its approval of the subsequent award of a contract for the construction of the runway to Loesch.
The plaintiff alleges further that the city charter, in Section 167, having to do with public improvements by contract or by direct labor, effective November 9, 1931, and now and at all times herein stated in full force and effect, provides as follows:
"Section 167. Public improvements of all kinds may be made by the appropriate department, either by direct employment of the necessary labor and the purchase of the necessary supplies and materials, with separate accounting as to each improvement so made, or by contract duly let to the lowest responsible bidder after competitive bidding, either for a gross price, or upon a unit basis for the improvement, or by contract containing a guaranteed maximum and stipulating that the city shall pay within such maximum the cost of labor and materials, plus a fixed percentage of profit to the contractor. The council shall by ordinance determine by which of the foregoing methods any improvement shall be made. Contracts may provide a bonus per day for completion of the contract prior to a specified date, and liquidated damages to the city to be exacted in like sum for every day of delay beyond a specified date."
Plaintiff then says that Lombardo was the lowest responsible bidder for the construction of the runway; that, if the contract were awarded to Loesch, such action would be an abuse of discretion, if any, of the board of control, in that the award of the contract would be to a bidder other than the lowest responsible bidder, as required by the terms of the charter of the city hereinabove set out; and in that the construction by Lombardo would complete a runway in full compliance with the design and specifications provided in the ordinance authorizing the improvement and the advertisement for bids, made pursuant to terms of the city charter, and $68,044.50 lower in cost than the cost of the contract proposed to be awarded to Loesch; further, in that the construction of a runway with asphalt as designed in the specifications would produce a runway of at least equal quality with the runway constructed with concrete; and, further, in that the runway constructed with asphalt as designed and specified would be as good in length of life, maintenance cost, safety and salvage value, as one would be constructed of concrete.
The prayer of the petition is for an injunction against the defendants from proceeding with the award of the contract to Loesch.
Case No. 31740 originated in the Court of Common Pleas on November 20, 1948, wherein plaintiff seeks a writ of mandamus to require the defendants as members of the board of control to approve the awarding of and to award the contract to Lombardo. No objection was made on the ground that the action was not brought in the name of the state on the relation of the plaintiff as required by Section 12286, General Code.
The petition in the mandamus case is very similar to that in the first action in which an injunction was sought. The mandamus petition, however, uses like language relative to the plans and specifications and does not include the language of the injunction petition in which it is alleged that the asphalt specifications would produce a runway of at least equal quality to the concrete runway, and that the asphalt runway would be as good in length of life, maintenance cost, safety and salvage value, as would be a runway constructed of concrete.
The mandamus petition does, however, plead Section 238 of the Municipal Code of Cleveland, which was not contained in the injunction petition and which is as follows:
"Sec. 238. Whenever any work or construction is to be done, or any improvement is to be made for the city which the department, division, or office concerned is not equipped or prepared to do or make, involving an expenditure in excess of five hundred dollars ($500), a contract for such work or construction shall first be authorized and directed by ordinance of council and when so authorized the commissioner of purchases and supplies shall advertise for bids once a week for two consecutive weeks in the City Record, for the doing of such work and/or furnishing of such material, and immediately report the bids received to the director of the department involved, who in turn shall transmit such bids with his recommendations thereon to the board of control for consideration at its next regular meeting. Any or all bids may be rejected. No contract shall be awarded without the approval of the board of control, and then only to the lowest responsible bidder. Contracts so approved shall be reduced to writing and signed on behalf of the city of Cleveland by the director of the department involved and no contract shall be made except it be reduced to writing and entered into pursuant to the ordinance of the city of Cleveland. Any such work, construction, or improvement which involves an expenditure of less than five hundred dollars ($500) may be made upon open order, given in the same manner as purchase orders of like amount."
The petition contains also the following:
"Plaintiff says that it is the duty of the defendants to award said contract to the Lombardo Brothers Construction Company which is the lowest responsible bidder for the construction of said runway at the Cleveland Municipal Airport; that the defendants have failed to so award said contract, although it is their clear duty to do so."
The petition concludes with a prayer for a writ of mandamus directing that the contract be let to Lombardo.
To the petition in each case the defendants filed a general demurrer. Shortly thereafter, upon application, Loesch was made a party defendant and filed a demurrer in the injunction suit. The cases were consolidated in the Court of Common Pleas and heard together. That court sustained the demurrers in each case, dismissed the petition and entered judgment for the defendants.
Upon appeal to the Court of Appeals upon questions of law the judgment of the Court of Common Pleas was affirmed in each case.
The cases are before this court upon the allowance of motions to certify the records of the Court of Appeals.
Messrs. Miller Hornbeck, Mr. Joseph M. Murphy and Mr. Robert Dow Hamilton, for appellant.
Mr. Lee C. Howley, director of law, Mr. Robert J. Selzer and Messrs. Green, Woods, Lausche Wilmot, for appellees.
The question presented to this court involves the interpretation of Section 167 of the Charter of the City of Cleveland, and also Section 238 of the Municipal Code of Cleveland, which latter provides that "no contract shall be awarded without the approval of the board of control, and then only to the lowest responsible bidder."
The records in these cases disclose that the parties entered into certain stipulations of fact which are applicable to each of the cases, but these stipulations do not enlarge or qualify the allegations of the petitions and the single question presented is whether either of the petitions of the plaintiff states a cause of action.
Each party admits that the defendants were authorized to advertise and receive bids on alternate construction of the runway (concrete or asphalt). The plaintiff concedes that alternative bidding as such was not illegal. The plaintiff states in its brief: "We heartily endorse the principle underlying this conclusion for it adds materially to the basic concept of competitive bidding when two or more materials, highly competitive and equal in all respects, are pitted against each other. No one suffers and the public benefits — unless the city officials can then choose the highest of the alternate, equal materials."
As we view the case the only question presented is whether an award of a contract is valid, where the plans and specifications provide in the alternative for different materials and methods of construction, are full, accurate and complete as to each alternative, afford the opportunity for full competition as to each alternative, and the award is made to the lowest bidder on an alternative adopted after the opening and consideration of the bids.
Since the plaintiff's first attack on the action of the defendants was by the action seeking an injunction, the first question presented is whether the demurrer to the petition in that case was properly sustained. It was stipulated (unnecessarily so, since the petition contains no such allegations) that there was no fraud or conspiracy on the part of the city or any of its officers or officials in recommending the letting of the contract to Loesch. There is no charge of fraudulent conduct on the part of any one. It is stipulated that Loesch is competent and financially responsible to carry out its contract, and that Lombardo, the low bidder for asphalt construction, is likewise financially responsible.
The claim of the plaintiff is that, although it concedes the right to solicit bids in the alternative, Section 167 of the Charter and Section 238 of the Municipal Code of Cleveland require the award of the contract to "the lowest responsible bidder"; that by virtue of these provisions the defendants were required to award the contract to the lowest responsible bidder and were limited to selecting the one who would do the work for the lowest price; that the defendants had no authority after the bids were received and opened to determine which of the alternative constructions they would adopt and then award the contract to the lowest bidder for the material selected.
The contention of the defendants is that they had full authority, after ascertaining the costs of the alternatives presented, to select the material to be used.
The plaintiff alleges in its petition for injunction that the construction of the runway with asphalt would produce a runway of at least equal quality with a concrete runway, and, relying on this allegation, claims that, the materials being highly competitive and equal in quality, the selection of concrete at a higher price constituted an abuse of discretion and was unlawful; and that the demurrer having admitted this to be true establishes the right of the plaintiff to an injunction.
The question, therefore, becomes very narrow and concise. Many cases are cited by each of the parties from other jurisdictions, but this question has been considered by this court in the case of State, ex rel. Waltz, v. Green, 13 O.L.R., 108, decided June 4, 1915. That case originated in the Superior Court of Cincinnati. There, the relator, as a taxpayer, sought to enjoin the award of a contract for the construction of a courthouse in the city of Cincinnati. His action was based upon the contention that the contract under which the construction of the courthouse was begun was invalid chiefly on the ground that the bids were called for upon alternative specifications. The relator contended that the building commission was obligated by law to award the contract to the lowest bidder and that inasmuch as the commission did not determine which alternative it would select until after the bids upon every possible alternative were opened and examined, it was impossible that there could be in the legal sense an award to the lowest bidder. The opinion of the Superior Court of Cincinnati is found in 18 N.P. (N.S.), 97, 28 O.D. (N.P.), 554, and contains a full discussion of the question presented. That court dismissed the petition of the relator who thereupon appealed to the Court of Appeals which affirmed the judgment of the lower court. The opinion is found in 22 C.C. (N.S.), 1, 29 C.D., 636; paragraph two of the syllabus thereof, which clearly states the decision of the question involved, is as follows:
"Plans and specifications which provide in the alternative for different materials and methods of construction, and are full, accurate and complete as to each alternative in accordance with the requirements of G.C. Section 2343, and afford the opportunity for full competition as to each alternative, are valid; and an award to the lowest bidder on such alternatives as may be finally adopted, after the bids have been opened and considered, will be sustained."
A motion to certify the record was filed in this court which entered the following decision:
"Motion for an order directing the Court of Appeals of Hamilton County to certify its record. Motion overruled for the reason that no error has intervened. The question involved, however, being one of public interest."
That decision of the Supreme Court constituted an affirmance of the judgment of the Court of Appeals and answers directly the contentions of the plaintiff herein. It is in accord with the general rule as stated by the following authorities:
3 McQuillin on Municipal Corporations (2 Ed. Rev.), 1209, Section 1312, reads as follows:
"The fact that the authorities specify different kinds of material — putting the materials, in a sense, in competition with each other — does not constitute hindrance to competition, even though the authorities cannot decide which material to use until after all the bids are presented. They may specify different kinds of asphalt for street improvement, or free or limestone flagging and artificial cement stone. So, too, they may specify brick or bituminous macadam, and may decide after all bids are received to adopt one or the other and they need not select the cheaper of the two."
The following is quoted from 3 Page on the Law of Contracts (2 Ed.), 3323, Section 1946:
"If bids have been advertised for on two different specifications, intended as alternative for the same work, a provision requiring the letting of the contract to the lowest bidder does not bind the city to select that specification on which the lowest bid is given."
In 43 American Jurisprudence, Public Works and Contracts, 778, Section 37, it is stated:
"Requirements that contracts for public work be let to the lowest bidder are not violated when plans and specifications are drawn for different materials or articles answering the same general purpose, bids are sought on the different kinds, and a choice by the proper officers is not to be made between the alternative materials or articles until all bids are in. On the contrary, the propriety of proposals based on alternative plans or materials has been recognized in many cases, although there are cases in which the right to call for alternative bids in specifications has been denied."
We hold, therefore, that the defendants (members of the board of control) were authorized to award the contract to Loesch.
It follows that the demurrers to the petition of the plaintiff in the action for injunction and the demurrer to the petition in the mandamus case were properly sustained.
The judgments of the Court of Appeals, affirming the judgments of the Court of Common Pleas, are accordingly affirmed.
Judgments affirmed.
WEYGANDT, C.J., HART, ZIMMERMAN and STEWART, JJ., concur.
TURNER and TAFT, JJ., dissent in cause No. 31739, but concur in cause No. 31740.
I concur in the judgment in Case No. 31740, the mandamus case, but dissent from the judgment in Case No. 31739, the injunction case.
I believe that the decision in State, ex rel. Waltz, v. Green, supra, relied upon in the majority opinion, should not be controlling in the instant case at this stage of the proceeding. The theory of the party attacking the contract in the Waltz case was that alternative bidding, as such, was illegal where a right was reserved to select one of the alternatives after all bids were in. It was not established in that case that a bid on one alternative was lower than the bid actually accepted where the two alternatives were substantial equivalents. In fact, the courts that considered the Waltz case pointed out that the evidence clearly established advantages apart from price of the alternative selected over the only alternative where it might have been claimed that the price was lower.
In the instant case it appears from the record that the court was confronted with a situation where there would be no advantage to the city in adopting either of the two alternatives, apart from the amount it was required to pay.
Thus, the petition in the injunction suit reads in part:
"The construction of said runway in asphalt by the Lombardo Bros. Construction Company would complete a runway in full compliance with the design and specifications provided in the ordinance authorizing said improvement and the advertisement for bids made pursuant to terms of the City Charter of the City of Cleveland, and is $68,044.50 lower in cost than the cost of the contract proposed to be awarded to the Loesch Green Construction Company; and, further, the construction of a runway in asphalt as designed in the specifications and design for said runway would produce a runway of at least equal quality to the runway designed for construction in concrete; and, further, the runway constructed in asphalt as designed and specified would complete a runway as good in length of life, maintenance cost, safety, and salvage value, as would be the case of a runway constructed of concrete as designed and specified in said advertisement."
The only question to be decided by this court at this time is whether the demurrer of the city to the petition of plaintiff taxpayer was properly sustained. That demurrer admits the truth of the facts pleaded in the foregoing quotation from the petition.
If both bidders are admittedly responsible and the asphalt proposal of Lombardo is at least in all respects the equivalent of the concrete proposal of Loesch, I cannot comprehend how the higher bid for concrete can be that of "the lowest responsible bidder."
Even though no fraud may be involved, the situation, disclosed by the facts alleged in the petition and admitted by the demurrer, offers a broad opportunity for the exercise of bad judgment, the abuse of discretion or unconscious favoritism, the results of which to taxpayers will be substantially the same as those which would flow from fraud.