An agency’s decision to reject all bids and re-solicit as part of the procurement process can be extremely disappointing to the contractor that submitted the low bid or top ranked proposal. The contractor has to decide whether to devote additional time and money to submit a new bid in response to the subsequent solicitation, with no guarantee that it will be selected for award. With its initial bid on the street, the contractor faces the unfortunate prospect of bidding against itself, i.e., an “auction scenario.”
In Maryland, it is not uncommon for agencies to reject all bids. Agencies make the decision for a variety of reasons, such as a legitimate protest from another bidder, a change in economic conditions, or a mistake made by the agency in the procurement process. Unfortunately for the contractor, the standard for reviewing a rejection of all bids is extremely deferential to the State. And there is no provision in the law that allows for the reimbursement of proposal preparation expenses, even when the cancellation of the solicitation stems solely from mistakes made by the State.
In a recent decision, the Maryland State Board of Contract Appeals provided addition guidance on the legal standard for the review of an agency’s decision to reject of all bids. See STG International, Inc., MSBCA 2755 (2011). Below is a summary of the “rejection of all bids” standard as articulated in STG International. The Board’s articulation builds on Board precedent and reflects the great deference paid to State agencies under Maryland procurement law. A full copy of the Board’s decision can be accessed at its website at http://www.msbca.state.md.us/2011.html.
Summary of Legal Standard for Review of Rejection of all Bids
After bid opening or proposals are submitted, an agency may cancel the solicitation if it determines that it is “fiscally advantageous or otherwise in the best interests of the State.” MD. CODE ANN., State Fin. & Proc, § 13-206(b); COMAR 21.06.02.02C(1). Under this standard, the State retains broad discretion to decide whether to cancel a solicitation. The agency’s decision to reject all bids shall be assessed as of the date the decision is made. The Board of Contract Appeals will not disturb the agency’s decision absent a finding that the decision was not in the best interest of the State to such an extent that it was fraudulent or so arbitrary as to constitute a breach of trust.
As part of the analysis, the Board of Contract Appeals will consider evidence of the likelihood that the Board of Public Works will approve the contract. Indeed, the Board of Contract Appeals does not have the authority to order the Board of Public Works to approve the award of a contract.
According to the Board of Contract Appeals, cancellation of a solicitation is highly disfavored practice because it wastes the time and money of the contractors and has the potential to discourage future competition. In theory, there may be factual scenarios where prejudice to bidders and harm to the competitive process outweighs the agency’s interest in re-solicitation. Thus far, however, such a scenario has not played out before the Board of Contract Appeals.
