Public Entities Obligated to Avoid Arbitrary Acts in Procurement

Responders to bids or requests for proposals (RFPs) can expect fairness in the public body’s evaluation of their response to a bid or RFP. The right to expect fairness in the context of a response to an RFP is illustrated in a protest involving a public body that was recently settled.

A public entity issued an RFP for insurance. Two parties responded, “A” and “B”. The executive of the public entity favored “A” for personal reasons. The executive ordered an independent analysis of the proposals. The expert recommended “B.” The executive sought another opinion. The second opinion criticized both “A” and “B”. Immediately the entity issued a determination that the RFP had been inadequate and determined to use its emergency procurement powers to obtain its insurance. “B” protested.

“B” alleged that the entity acted arbitrarily in cancelling the RFP when its proposal had been found to be the best by one expert and had not been found to be inadequate by either expert although it was criticized by the second expert. “B” alleged that the “emergency” claimed by the entity was manufactured because the entity had known from the beginning about the pretextual reasons it used to say the RFP itself was inadequate.

“B” alleged the cancellation was demonstrably capricious since (1) each of the criticisms was either patently false or could be easily remedied and (2) one of the key distinctions between an RFP and a hard bid is that RFP responses are inherently negotiable. Where a bid states a certain result the entity wants, an RFP states a problem the entity has and seeks a proposal for responding to it.

“B” also alleged that the executive had a personal conflict of interest in that the executive’s brother stood to gain financially if “A” was selected.

The protest was to be decided under the entity’s procurement policy. The entity was not a state agency. Therefore the South Carolina Consolidated Procurement Code did not apply although a state statute required that the entity’s procurement policy be “substantially similar.” The entity first argued that cancellation of a solicitation is not protestable. The procurement policy, however, said “Any …offeror... who is aggrieved in connection with the solicitation of a contractor shall protest…with in fifteen days of the Request for proposal….”

After “B” ’s bid protest unequivocally demonstrated that “B” ‘s proposal (a) was better than “A” ’s (b) met the entity’s needs and (c) the executive was acting out of self interest, the matter was settled. The moral of the story is that public entities have an obligation to the public to avoid arbitrary and capricious behavior in public procurement.