What's New:
Remedy for violation of Public Bidding requirements.
On July 21, 2010, the Ohio Supreme Court , in Meccon, Inc. v. Univ. of Akron, held that a wrongfully rejected bidder who timely but unsuccessfully sought to enjoin the improper award of a public contract, could recover the reasonable cost of having prepared its bid. The Court had previously held that "lost profits" could not be recovered. It reiterated in Meccon that lost profits are speculative and uncertain and that an award of them against a public entity would create excessive cost to taxpayers. The avoidance of undue expense to taxpayers for public improvements was the purpose of the bidding requirements in the first place.
On the other hand the Court did not want violators of the bidding requirements to be able to act with impunity knowing that their victims would have no remedy once the contract was awarded and thus no longer susceptible to an injunction. In its decision the Court stated that:
"This rule, together with the rule prohibiting recovery of the more speculative lost-profit damages, seems best calculated to strike a balance between protecting the public from incurring extra cost due to the misconduct of the public authority, ameliorating the damages sustained by the lowest and best bidder in its good-faith participation in the competitive-bidding process, and deterring the public authority from violations of the competitive-bidding law."
The appellate court also recognized the distinction between bid-preparation costs and lost profits as damages:
" . . . There are good public-policy reasons favoring [the recovery of bid-preparation costs]. First, without some penalty, there is little deterrent to a public entity who fails to follow the competitive-bidding statutes. Second, contractors may be reluctant to bid on public projects when they suspect the competitive bidding will not be conducted fairly. Ultimately, refusal to bid harms the public as the pool of qualified bidders shrinks. Any harm to the public from these types of damages is de minimus when compared to the harm to the public from recovery of lost profits. Allowing recovery of bid-preparation costs will serve to enhance the integrity of the competitive-bidding process." 182 Ohio App.3d 85, 2009-Ohio-1700, 911 N.E.2d 933, at 24. We hold that in appropriate circumstances, as delineated above, reasonable bid-preparation costs are recoverable as money damages."