Maryland Port Administration v. John W. Brawner Contracting Co.

SMITH, Judge. COMAR 21.05.02.12D states relative to State contracts: “Mistakes Discovered After Award. Mistakes [in bids] may not be corrected after award of the contract except when the procurement officer and the head of a procurement agency makes [sic] a determination that it would be unconscionable not to allow the mistake to be corrected. Changes in price are not permitted.

Corrections shall be submitted to and approved by the State Law Department.” (Emphasis added.) We shall here hold that the regulation means what it says when it specifies, “Changes in price are not permitted.” Hence, we shall reverse the judgments of the trial court. We have here an appeal on behalf of State agencies in each of two cases which were consolidated for consideration in the Circuit Court for Baltimore City. That court af ⁴⁶ firmed decisions made by the State Board of Contract Appeals. I Maryland Code (1957, 1981 Repl.Vol., 1984 Cum.Supp.) Art. 21, entitled “Procurement,” was enacted by Ch. 775 of the Acts of 1980.

Except for § 2-301(a), specifying that the Board of Public Works and certain departments were to “adopt regulations to carry out the provisions of th[at] article” by December 1, 1980, it became effective July 1, 1981. Pursuant to the provisions of Joint Resolution No. 28 of the Acts of 1977, a Purchasing and Procurement Policies Task Force was appointed by the Speaker of the House of Delegates and the President of the Senate. Among other things, the resolution referred to the fact that the American Bar Association had “released for study a Model Procurement Code which [was then] being examined in detail by a Special Committee on State and Local Public Contract Law formed by the Maryland State Bar Association and which [was then] also being reviewed by other professional associations and government groups____” A proposed act, basically in the form of the present Art. 21, was appended to the final report of the Task Force filed on March 19, 1979. The report indicates that its original proposal, embodied in Senate Bill 748 of the 1978 session, “which ultimately failed to pass,” “was modeled after the American Bar Association’s Model Procurement Code.” The report is silent as to the issue presented in the case at bar.

Art. 21, § 3-202 pertains to competitive sealed bidding. Subsection (h) stated at the time here relevant, “After bid opening, correction or withdrawal of bids may be allowed only (1) if permitted by the regulations of the department, and (2) upon written approval by the State Law Depart ⁴⁷ ment.” 1 It differs from § 3-202(6) of the American Bar Association Model Procurement Code approved in February 1979. The latter states: “Correction or Withdrawal of Bids; Cancellation of Award. Correction or withdrawal of inadvertently erroneous bids before or after award, or cancellation of awards or contracts based on such bid mistakes, shall be permitted in accordance with regulations promulgated by the Policy Office.

After bid opening no changes in bid prices or other provisions of bids prejudicial to the interest of the [State] or fair competition shall be permitted. Except as otherwise provided by regulation, all decisions to permit the correction or withdrawal of bids, or to cancel awards or contracts based on bid mistakes, shall be supported by a written determination made by the Chief Procurement Officer or head of a Purchasing Agency.” (Bracketed word in original.) It will be noted that the latter has a provision in it forbidding changes in bid prices. Subsequent to the enactment of Art. 21, the Board of Public Works and certain other agencies adopted COMAR 21.05.02.12D, which we have heretofore quoted. As we have indicated, it contains a provision forbidding changes in price.

Accordingly, it differs from Recommended Regulation R3-202.13.5 of the American Bar Association Recommended Regulations, which states: “Mistakes Discovered After Award. Mistakes shall not be corrected after award of the contract except where the Chief Procurement Officer or the head of a Purchasing Agency makes a written determination that it would be unconscionable not to allow the mistake to be corrected.” ⁴⁸ The absence of a provision relative to changes in price undoubtedly is because this was covered in the recommended code provision and thus it was unnecessary for it to be in the regulation. The American Bar Association Model Procurement Code states, “Code Commentary is used, where appropriate, to explain the rationale underlying various Sections, to aid in the interpretation of the statutory language, and to provide guidance in the development of regulations.” The commentary to § 3-202(6) in the Model Code reads in part: “(1) Correction or withdrawal of bids before or after contract award requires careful consideration to maintain the integrity of the competitive bidding system, to assure fairness, and to avoid delays or poor contract performance. While bidders should be expected to be bound by their bids, circumstances frequently arise where correction or withdrawal of bids is proper and should be permitted. “(2) To maintain the integrity of the competitive sealed bidding system, a bidder should not be permitted to correct a bid mistake after bid opening that would cause such bidder to have the low bid unless the mistake is clearly evident from examining the bid document; for example, extension of unit prices or errors in addition. “(3) An otherwise low bidder should be permitted to correct a material mistake of fact in its bid, including price, when the intended bid is obvious from the bid document or is otherwise supported by proof that has evidentiary value.

A low bidder should not be permitted to correct a bid for mistakes or errors in judgment. “(4) In lieu of bid correction, the [State] should permit a low bidder alleging a material mistake of fact to withdraw its bid when there is reasonable proof that a mistake was made and the intended bid cannot be ascertained with reasonable certainty. “(5) After bid opening an otherwise low bidder should not be permitted to delete exceptions to the bid conditions or specifications which affect price or substantive obliga ⁴⁹ tions; however, such bidder should be permitted the opportunity to furnish other information called for by the Invitation for Bids and not supplied due to oversight, so long as it does not affect responsiveness. “(6) ... “(7) Correction of bid mistakes after award should be subject to the same proof as corrections before award with a further requirement that no correction be permitted that would cause the contract price to exceed the next low bid. “(8) ____” (Bracketed word in original.) II Appellee John W. Brawner Contracting Company, Inc., was the low bidder for construction of the Marine Service Building at the Dundalk Marine Terminal of the Maryland Port Administration (MPA). After the award of the contract to Brawner, it discovered an arithmetical error of $10,000 in its bid based upon a similar error of like amount in a quotation made to it by a subcontractor. The subcontractor notified Brawner and MPA of the error. A meeting was arranged between representatives of MPA, Brawner, and the subcontractor.

The subcontractor produced its work sheet and explained the nature and extent of its error. Despite the error, Brawner and the subcontractor proceeded under the contract. Correction of the error would not have caused Brawner’s contract price to equal or exceed that of the next lowest bidder. MPA’s representative denied Brawner’s claim for a change.

His jurisdiction arose under Art. 21, § 7-201. Pursuant to § 7-202 Brawner appealed to the State Board of Contract Appeals. The Board said: “There is no dispute here that an arithmetical error was made by Appellant’s subcontractor in submitting a bid on the interior plumbing required under the captioned contract. Likewise, the intended bid price has been established by credible evidence of record.

The issue before us ⁵⁰ is whether these facts permit Appellant to obtain reformation or price correction on behalf of its mistaken subcontractor.” It referred to that portion of Art. 21, § 1-201 which states: “(b) Purposes and policies.—The underlying purposes and policies of this article are, among others to: “(1) Provide for increased public confidence in the procedures followed in public procurement; “(2) Insure the fair and equitable treatment of all persons who deal with the procurement system of this State; * * * * -}c * “(6) Provide safeguards for the maintenance of a procurement system of quality and integrity.” The Board went on to state: “Prior to the enactment of Code Article 21, reformation was the sole remedy available to a contractual party, under appropriate circumstances, for correction of mistakes, including those involving price. Housing Equity Corporation v. Joyce, 265 Md. 570, 580 [ 290 A.2d 769 ] (1972); Painter v. Delea, 229 Md. 558, 564 [ 184 A.2d 913 ] (1962); Flester v. The Ohio Casualty Insurance Company, 269 Md. 544, 556 [ 307 A.2d 663 ] (1973). The MPA’s interpretation of COMAR 21.05.02.12D thus represents a restriction on the application of equity as it traditionally has been practiced by the courts of this State. In view of the underlying purpose and policies of Maryland’s procurement law, such an interpretation and result would not be consistent with the intent of the Legislature in enacting Code Article 21. “COMAR 21.05.02.12D, in our view, was intended by its drafters to substitute an informal and relatively fast administrative process for more cumbersome judicial procedure.

The regulation was derived from a body of recommended regulations prepared by the American Bar Association to implement its Model Procurement Code. Because the Model Procurement Code and its regulations incorporate Federal contracting principles, we look to the ⁵¹ Federal common law for guidance in interpreting the regulation in question here. “Correction of a mistake determined after award (i.e., reformation) is permitted administratively in Federal contracting where either (1) a mutual mistake has been made, (2) a contracting (procurement) officer has actual or constructive notice of the mistake, or (3) where the contract otherwise is unconscionable. Hagberg, Mistake in Bid, Including New Procedures Under Contract Disputes Act of 1978, 13:2 Public Contract Law Journal 257, 298 (1983). Reformation of bids or publicly bid contracts has been limited in Federal forums, however, by considerations involving the integrity of the competitive bid system.” The Board further said: “This regulation expressly permits correction of a mistake but not a change in price.

This language is consistent with the Federal common law. Where a contractor seeks to conform a contract price to the amount which he intended at the time of bid, he is asking to correct an error. If the intended bid is proven with clear, strong and convincing evidence, the procurement officer may permit such a correction under COMAR 21.05.02.12D where it would be unconscionable not to do so. On the other hand, if a contractor seeks to alter a contract price based on factors which he either failed to consider or improperly evaluated at the time of bid, he is seeking to change his bid price.

This would be impermissible under both existing equitable principles and Maryland’s procurement regulations. This interpretation, we conclude, gives meaning to COMAR 21.05.02.12D and is consistent with the Legislature’s intent in enacting Code Article 21.” The Board said that the MPA procurement officer in his decision failed to comply with the requirements of COMAR 21.10.04.01B as to what was to be included in his decision, asserted that it did not know the basis for his decision, and stated that it was not “satisfied that he exercised the discretion expressly given him by COMAR 21.05.02.12D.” ⁵² Accordingly, the case was “remanded to the MPA procurement officer and his agency head for the required discretionary determination as to whether it would be unconscionable, under the facts present, not to permit the correction asked for.” Pursuant to the provisions of Art. 21, § 7-203, the Maryland Port Administration appealed to the Circuit Court for Baltimore City. III Appellee J. Roland Dashiell & Sons, Inc., was the low bidder by $542,000 on a contract for construction of a laboratory at the Department of Agriculture Headquarters Building in Annapolis. After award to it of the contract, Dashiell discovered that it had made an error in extending certain unit prices.

Accordingly, its bid was too low by $110,581 plus $400 for each optional temperature recorder. It, too, elected to proceed with its contract rather than to seek rescission. Pursuant to Art. 21, § 7-201, Dashiell requested the Department of General Services procurement officer to allow it to recover this error. Nothing was requested for overhead expenses.

This request was denied with reliance on COMAR 21.05.02.12D. An appeal to the Board of Contract Appeals followed. That Board noted, “The DGS procurement officer has not made a finding concerning whether it would be unconscionable not to allow the mistake to be corrected.” It referred to its decision handed down on the same day pertaining to Brawner, said, “[T]he DGS procurement officer and agency head have not exercised the discretion given them by CO-MAR 21.05.02.12D,” and “remand[ed] the appeal to the DGS procurement officer for further consideration consistent with [the Board’s] opinion.” An appeal to the Circuit Court for Baltimore City followed. IV The two cases were consolidated in the circuit court.

The circuit court said: ⁵³ “Art. 21 of the Annotated Code and Title 21 of COMAR are based on the Model Code and Model Regulations promulgated by the Councils of the Sections of Public Contract Law and Urban, State and Local Government Law of the American Bar Association. Art. 21, § 3-202(h), following the model code, leaves the method for dealing with mistaken bid problems to the regulations. The model regulations and COMAR divide the mistaken bid problem into three periods, viz., (1) pre-opening, (2) post-opening (but pre-award), and (3) post-award.[ 2 ] If the model regulations and COMAR are read literally, there appears to be an anomaly in that there are detailed criteria established for the first two periods but the only criterion for the third is unconscionability. Logic would dictate that the same criteria applicable to the first and second periods with additional criteria should apply to the third period.

Strangely, the comment to the Model Code suggests such criteria, but the Model Regulations contain none. While it is possible it was intended by the draftsmen of the Model Regulations and of COMAR that the ⁵⁴ criteria applicable to the first two periods would also apply to the third,