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Illegal Bids and Contracts on Public Contracts

Illegal Bids and Contracts on Public Contracts

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If a public contract is awarded in violation of the competitive bidding statutes, the contract will be designated as null and void. In Resco Equipment & Supply Corp. v. City Council, City of Watertown (1970) it was held that competitive bidding requirements are violated not only when a contract is awarded without advertisement for bids, but also when a municipality manipulates the specification so as to prevent true competitive bidding. In these situations, a contractor may not recover for its work or materials, regardless of the contractor’s innocence and the fact that the owner has received the benefits of the contract. In Albany Supply and Equipment Company, Inc. v, City of Cohoes (1965) it was held that the mere fact that a municipality has received benefits does not make the municipality liable where the contract was entered into without observing charter requirements. Furthermore, public owners may recover any payments made to the contractor pursuant to the contract.

Complete forfeiture is necessary in order to deter illegal contracts. In S.T. Grand, Inc. v. City of New York (1973), a contractor was convicted of a bribery scheme in relation to an award of an emergency contract. The Court of Appeals held that the contractor was not entitled to a payment of $148,000 owed on a completed contract and that the city could recover $689,000 it had already paid to the bidder. In D’Angelo v. Cole (1986), a paving contract was found void due to noncompliance with the bidding statutes and the municipality was entitled to recover the $8,374 it had paid to the contractor even though performance was complete. However, complete forfeiture is not always the case. In Gerzof v. Sweeney (1968) recovery was allowed to the contractor. A village advertised for bids and the village commissioner recommended accepting the low bidder. Award of the contract was delayed and eventually a new bidder was awarded the contract. The low bidder brought suit and the court ordered that the high bidder’s contract be set aside and awarded the low bidder the contract. However, new specifications for the project were prepared with the assistance of the high bidder in order to assure that the high bidder would be the only one able to perform the work. The Court of Appeals found the new specification to be illegal, but allowed the village to recover the different in cost between the original contract and new contract under the higher bidder.

When a contract is shown to have been awarded illegally and in violation of the bidding statutes, any taxpayer, including a bidder, is entitled to have the contract set aside without having to show actual injury, as indicated in Gerzof. However, not every irregularity results in an illegality. In Fischbach and Moore, Inc. v. New York City Transit Authority (1992) the court upheld a bid award despite a leak of bid information that allowed bidders to know the initial bids of other bidders on a project. The court upheld the bid award because the petitioner and other bidders continued to participate in the bidding even after the leak, and under N.Y. Pub. Auth. Law § 1209(9)(f) all bidders had an opportunity to submit better proposals.

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