Weeden Const. v. MDT

INJUNCTION: TRO/preliminary injunction denied in challenge of Disadvantaged Business Enterprise requirement for highway contract… Lovell.

MDT advertised 6/27/13 for bids on the Arrow Creek Slide Project to correct 2 large slides on Hwy 80 20 miles north of Stanford. The slides are moving at 1-2/mo and if the project is not undertaken soon a redesign at significant cost to MDT may be required. Delay through winter and spring will diminish safety and may disrupt the highway for public use. DOT’s Disadvantaged Business Enterprise Program requires states receiving federal highway funding to set goals for use of disadvantaged enterprises. MDT established a goal of 5.83% DBE participation, which DOT approved in 4/11. It set a goal of 2% on the Arrow Creek project. A bidder must demonstrate that 2% of the contract amount will be performed by DBE subcontractors. Weeden Const. was low bidder at $14,770,163.01. It concedes that it relied on only 1.87% DBE subcontractors; MDT notes that its bid actually identified only .81% DBE subcontractors. The other 5 bidders ranged from 2.19% to 6.98%. Weeden attempted to utilize the good faith exception to the DBE requirement. MDT’s DBE Participation Review Committee found that it failed to demonstrate a good faith effort to solicit DBE subcontractors. The DBE Review Board affirmed the Review Board. It found that Weeden had received a DBE bid for traffic control but decided to do that work itself to lower its bid, and that its mass emailing to 158 DBE subcontractors was a pro forma effort not credited by the Review Board or federal guidance as an active & aggressive effort. Proposed intervenor DeAtley Const. contends that it submitted the lowest bid of $15,552,004.46 and that its DBE utilization was 3.3%. Weeden seeks an injunction to prevent MDT from letting the contract to another bidder (presumably but not necessarily, DeAtley). It claims that the DBE program violates equal protection and there is no evidence of discrimination in Montana highway construction and therefore no government interest that would justify favoring DBE entities. It claims that its right to due process has been violated by MDT not providing reasonable notice of the good faith requirements and that it was not given notice of DeAtley’s letter challenging Weeden’s bid based on the 2% requirement. It asserts that it has a constitutionally protected property interest in award of the contract.

The injunctive relief criteria favor Defendants. It is not a certainty that Weeden will suffer irreparable harm absent preliminary relief. It has obtained 6 state highway contracts valued at $26 million in the past 4 years. MDT has $50 million more in projects to be let during the rest of 2013 alone. Weeden has demonstrated capacity to obtain other contracts that might allow it to put its employees and equipment work. Although it asserts that the good faith effort rules are “confusing, non-specific, and contradictory, the other bidders were able to exceed the 2% requirement without any difficulty. The balance of equities do not tilt in favor of the one bidder who did not meet the requirements, especially when numerous others ably demonstrated ability to meet them. It is also questionable whether Weeden raises serious questions on the merits of its equal protection claim. It is “the inability to compete on equal footing in the bidding process, not the loss of a contract,” that defines injury in fact. NFCAGCA (US 1993). Weeden was not deprived of the ability to compete on equal footing with the other bidders, so it suffered no equal protection injury and lacks standing to assert an equal protection claim as if it were a non-DBE subcontractor. In any event, MDT presents significant evidence of under-utilization of disadvantaged businesses generally, which supports a narrowly tailored race & gender preference program. Weeden points out that some business categories in Montana’s highway industry do not have a history of discrimination (construction businesses in contrast to professional). AGC (9th Cir. 2013) rejected a similar argument requiring evidence of discrimination in every segment of the highway industry before a preference program can be implemented. It held that Caltrans’ DBE program need not isolate construction from engineering contracts or prime from subcontracts to determine if the evidence in each category gives rise to an inference of discrimination. Instead, California — and, by extension, Montana — is entitled to look at the evidence “in its entirety” to determine if there are “substantial disparities in utilization of minority firms” practiced by some elements of the construction industry. There is no allegation that MDT has exceeded any federal requirement or done other than comply with DOT regulations. Given the similarities between Weeden’s claim and AGC’s equal protection claim against Caltrans, it does not appear likely that Weeden will succeed on its equal protection claim. The Court rejects its bald assertion that it has a protected property right in a contract that has not been awarded to it where the agency retains discretion to determine responsiveness. When an official has discretion to award or withhold the contract, Montana does not recognize a legitimate claim of entitlement to the contract in a disappointed bidder. ISC (Mont. 1995). Montana requires that a public contract for construction, repair, or public works go to the lowest responsible bidder. MCA 18-1-102(1)(a). “`Lowest responsible bidder” does not merely mean the lowest bidder whose pecuniary ability to perform the contract is deemed the best, but the bidder who is `most likely in regard to skill, ability and integrity to do faithful, conscientious work, and promptly fulfill the contract according to its letter and spirit.”’ Debcon (Mont. 2001); Koich (Mont. 1941). This statute confers broad discretion in the award of a public works contract, which cannot be set aside absent evidence of bad faith, fraud, or corruption. Id. Thus a low bidder such as Weeden acquires no vested property right in a contract until it has been awarded, which has not yet occurred. Further, it was granted notice, hearing, and appeal from MDT’s decision denying the good faith exception. Thus it does not appear likely that it will succeed on its due process claim. Finally, the public interest favors immediate correction of the slides. Potential damage to Weeden can be remedied by money damages and is outweighed by the need for public safety.

DeAtley’s motion to intervene is granted. Weeden’s application for TRO and preliminary injunction is denied.

Weeden Const. v. MDT, 41 MFR 56, 9/4/13.

Gregory Gould & Mark Lancaster (Luxan & Murfitt), Helena, and Ronald Schmidt (Schmidt, Schroyer, Moreno, Lee & Bachand), Rapid City, for Weeden; David Ohler & Valerie Wilson (MDT); Sarah Simkins (Johnson, Berg & Saxby), Kalispell, for DeAtley.