No, "Competitive Bidding" is not a Popularity Contest, Why do You Ask?

Every once in a while we run across a case in the advance sheets that stands out in its moral clarity, soundness of reasoning, and wisdom of disposition; a case that stands as a beacon of all that is good about the rule of law.  Eel River Disposal Resource Recovery, Inc. v. County of Humboldt  2013 Cal. App. Lexis 894 is such a case.

Eel River Disposal addresses the abuse of a competitive bidding process for a 10-year exclusive franchise to collect and dispose of solid waste in the Willow Creek area of Humboldt County.  Willow Creek is the Big Foot Capital of the world, marijuana country.  We have a friend who teaches cello in the region.  All her students come from parents involved in the marijuana trade; they are the only ones with stable, reliable, and disposable incomes.  The legal no mans land of the marijuana trade makes the culture secretive.  All is not what it seems.  The lawlessness is apparently infectious.

For 37 years Humboldt County had awarded an exclusive franchise to collect solid waste in the Willow Creek area to Tom's Trash.  In 2010 the County elected not to renew the contract amidst findings that Tom's Trash was delinquent in submitting franchise fees and otherwise not in compliance with the terms of its contract.  The Board of Supervisors directed the Department of Public Works to competitively bid a new solid waste franchise for the Willow Creek Area.

The DPW published selection criteria in a request for proposals, with price being the predominant factor for selection.  Four companies responded, including Eel River and Tom's Trash.  The DPW duly ranked the proposals and recommended an award to Eel River:

[I]n the minds of the three members of the review committee …[Eel River] "hit all the buttons."  It not only "scored 100% on the evaluated criteria identified in the RFP," but also offered "the lowest cost to the community and a reasonable cost for adding curb-side recycling availability to the community and even with the curb-side recycling, they are still the lowest cost provider. 

Tom's Trash tied for last place in the DPW's evaluation.

So what happened?  Shortly before the hearing on award of a contract to Eel River Supervisor Ryan Sundberg, whose district includes Willow Creek,  distributed packets to other members of the Board containing letters from residents supporting an award to Tom's Trash.  At the hearing, the board,  without making a finding that dispensing with competitive bidding would be in the public interest, ignored the bidding process and awarded a contract to Tom's Trash.   The county counsel did her best to accommodate the whim of her client, apparently without a word of caution.

Eel River filed for a writ of mandate that the Board had a duty to award a contract to Eel River as the lowest responsible bidder.  The trial court denied the writ application, finding that the phrase "competitive bidding" in the relevant county ordinance did not imply a requirement that the county award a contract to the lowest responsible bidder.

The court of Appeal came out swinging:

 As we shall explain, the trial court's confusing analysis fails to properly inquire into the ambiguity of the phrase "competitive bidding," fails to consider substantial extrinsic evidence bearing upon the meaning of that ambiguous phrase, fails to recognize that section 40059 and 49201, which are both part of the 1989 Act and in pari materia, can readily be reconciled, misapplies Cypress Security and ignores important policies regarding the letting of public contracts and settled principles of statutory construction.   As we shall explain, the court's ruling renders section 49201, subdivision (c) and subdivision (a)(2) of Humboldt Code section 521-6 meaningless and vindicates a grossly unfair bidding process that would invite the very favoritism, fraud and corruption the law relating to the letting of public contracts is designed to prevent.  

It's possible to view this case as "Forget it, Jake.  It's Chinatown," as Shuan Martin (professor UCSD law school) does.  But I think the case is more important than this quip would suggest.

• The case holds the Board, County Counsel, and Superior Court judge accountable, and does so with a very solid explanation of what's at stake with public bidding laws.   It teaches by example.
• The case provides a great review of statutory construction and why these doctrines are more than just words to be employed in rationalizing an outcome.

In California, as elsewhere, there has been a general eroding of competitive bidding standards as public entities have struggled to gain more control over the selection of their contractors for projects.  This sentiment is contributing to the movement towards design-build and public private partnerships.  But this sentiment is also driving more questionable practices like using lease-lease-back schemes to avoid competitive bidding.  If, or should we say when, the legality of lease-lease-back without competitive bidding makes it to the Court of Appeal in California, this decision will be prominently discussed.  

The Remedy

The court's adopted remedy is also interesting.  Rather than hold "the board called for competitive bids and Eel River was the successful bidder, ergo a contract must be awarded to Eel River," the court remanded this case to the trial court.  The trial court, having been sharply rebuked, will now have to decide whether the granting of injunctive relief is practical (as the Court of Appeal strongly suggests it is).  In addition, the Court of Appeal seemed to leave the door open for the county to make an end run and keep the contract with Tom's Trash by making a public finding that this is in the public interest and that competitive bidding is waived--as allowed by Humboldt Code Section 561-2 (and CA Public Resources Code Section 40059).  This would not be an easy finding to make in light of the facts outlined by the Court of Appeal.  Such a finding might bring into focus constitutional limits on a public entity's discretion to declare something in the public interest in the absence of any cognizable facts.

The case is wise because it does not force a decision on the parties, but strongly sets the scene for the court and the county to do the right thing in this case, and perhaps the next time.

Time will tell.