This article was originally published in the Spring 2021 issue of the Oregon State Bar Construction Law Section's Construction Law Newsletter.
State and local governments must follow public bidding and procurement laws, including letting projects out for competitive bids, unless an exception applies.1 Competitive bidding enables the contracting agency to identify and award the contract to the “lowest responsible bidder.”2 Normally, the contracting agency awards the contract to the lowest bidder, but there may be instances in which the contracting agency wishes to award the project to the second lowest bidder, particularly where the contracting agency views the lowest bidder as not “responsible.” However, a contracting agency’s belief that the lowest bidder as not “responsible” could be seen as retaliatory, exposing the agency to a First Amendment claim.
A “responsible” bidder is one that has “completed previous contracts of a similar nature with a satisfactory record of performance.”3
[A] satisfactory record of performance means that to the extent that the costs associated with and time available to perform a previous contract remained within the bidder’s control, the bidder stayed within the time and budget allotted for the procurement and otherwise performed the contract in a satisfactory manner.4
If the contracting agency finds the bidder “is not responsible,” the contracting agency must “document the bidder’s record of performance.”5
This ensures the contracting agency’s decision is not arbitrary, capricious, or based on unlawful grounds, but instead based on a record of past performance showing the bidder failed to stay on time and on budget when it was in the bidder’s control to do so. Ideally, the agency makes its determination at the prequalification stage, allowing the potential bidder to appeal the agency’s determination before it incurs the time and expense of preparing a bid.6
Overlaying the agency’s determination, however, is the constitutional prohibition on retaliation for exercising First Amendment rights. Generally speaking, a contracting agency cannot retaliate against a contractor for engaging in protected speech activity. Thus, an agency cannot make its decision to award a contract based on the bidder’s prior protected speech activity, which could include a prior lawsuit arising out of delay or payment claims.
In 1990, the United State Supreme Court held that a government entity's refusal to hire an employee for engaging in protected activity supports a claim for First Amendment retaliation.7 Then, in 1996, the United States Supreme Court extended its First Amendment retaliation cause of action to contractors and regular providers of services.8 In reaching its decision, the Supreme Court did “not address the possibility of suits by bidders or
applicants for new government contracts”9 Picking up this queue, the Fifth Circuit recognized that a low bidder might have a cause of action for
First Amendment retaliation where the contracting agency refuses to award the contract because the agency viewed the bidder as “lawsuit happy.”10 Since First Amendment rights have been afforded to individuals applying for government employment, bidders applying for “employment” with the government under a bidding arrangement should have no less protection.11
For bidders to state a First Amendment retaliation claim, the bidder must allege (1) it suffered an adverse contract/employment decision; (2) its speech-activity involved a matter of public concern; (3) its interest in commenting on the matter of public concern outweighs the agency's interest in promoting efficiency; and (4) its speech-activity must have motivated the owner's adverse action.12 Of course, even if a bidder can allege the elements, it may be difficult to prove the elements.13
In summary, while contracting agencies may consider a bidder’s history of performance in determining whether the bidder is “responsible,” it cannot retaliate against that bidder for engaging in prior protected speech activity.
1 ORS 279C.300; ORS 279C.335(1).
2 ORS 279C.375(1).
3 ORS 279C.375(3)(b)(H).
6 ORS 279C.430.
7 Rutan v. Republican Party of Illinois, 497 U.S. 62, 74 (1990).
8 Board of County Com'rs, Wabaunsee County, Kan. v. Umbehr, 518 U.S. 668 (1996); O'Hare Truck Service, Inc. v. City of Northlake, 518 U.S. 712 (1996).
9 518 U.S. at 670.
10 Oscar Renda Contracting, Inc. v. City of Lubbock, Tex., 463 F.3d 378 (5th Cir. 2006) (holding that the First Amendment protects an independent contractor whose bid has been rejected by a city in retaliation for the contractor's exercise of freedom of speech, even if the contractor had no pre-existing commercial relationship with that city), cert. denied 127 S. Ct. 2033 (2007).
11 Id. See also Lucas v. Monroe Cty., 203 F.3d 964, 972–75 (6th Cir.2000) (extending Umbehr to tow operators on call with Sheriff’s Department); Del Valle Grp. v. Puerto Rico Ports Auth., 756 F Supp 2d 169, 181 (DPR 2010) (observing Oscar Renda Contracting as the “logical extension of previous Supreme Court rulings”); The Yadin Co., Inc. v. City of Peoria, CV06-1317-PHX-PGR, 2007 WL 63611, at *4 (D Ariz Jan 8, 2007) (noting absence of 9th Circuit authority and following Oscar Renda Contracting, supra.); Heritage Constructors, Inc. v. City of Greenwood, Ark., CIV. 06-2183, 2008 WL 90457, at *3 (WD Ark Jan 18, 2008), aff'd, 545 F3d 599 (8th Cir 2008) (finding “an independent contractor bidding on a new contract, like an individual employment applicant, is protected by the First Amendment if its bid is rejected in retaliation for the exercise of protected activity” but
holding the contractor’s initiation of private arbitration seeking additional compensation on a prior project did not involve a matter of public concern).
12 Oscar Renda Contracting, 463 F.3d at 382.
13 See Oscar Renda Contracting, Inc. v. City of Lubbock, Tex., 577 F.3d 264 (5th Cir. 2009) (affirming dismissal on summary judgment where bidder was unable to prove its prior lawsuit was the cause of the agency's refusal to award it a contract based on its low bid).