Unknown-1The recent Northern District of Florida opinion of Community Maritime Park Associates, Inc. v. Maritime Park Partners, LLC, 2014 WL 415955 (N.D.Fla. 2014) is a case with complex facts that illustrates what can happen if a public contract is declared void as against public policy. It illustrates what can happen when a public solicitation goes terribly wrong! In this case, the outcome was disgorgement of all profits/benefits the public body paid to its master developer and design-builder.


A. Facts and the Consultants’ Competitive Negotiations Act


The public body filed suit against its master developer for fraud and rescission of a development contract (and design-build contract). The public body is a publicly funded non-profit corporation with a board appointed by the City of Pensacola tasked to manage city owned property for purposes of a project. It was looking for a master developer for its project to competitively award the development contract pursuant to Florida’s Consultants’ Competitive Negotiations Act (“CCNA”) set forth in Florida Statutes s. 287.055. (Notably, the CCNA governs a public body’s award of professional architectural and engineering services and design-build agreements.)


Without going into all of the specifics of the CCNA, it is a statute that requires two main steps for public bodyies to competitively award professional services: (1) competitive selection and (2) competitive negotiation.


Under the competitive selection step, the public body evaluates qualifications and performance data from bidders (typically, by sending out a Request for Qualifications) and typically requires presentations regarding the qualifications by no fewer than three firms. The public body then selects in order of preference no fewer than three firms that are qualified to perform the professional services it is seeking. As the CCNA states:


In determining whether a firm is qualified, the agency shall consider such factors as the ability of professional personnel; whether a firm is a certified minority business enterprise; past performance; willingness to meet time and budget requirements; location; recent, current, and projected workloads of the firms; and the volume of work previously awarded to each firm by the agency, with the object of effecting an equitable distribution of contracts among qualified firms, provided such distribution does not violate the principle of selection of the most highly qualified firms. The agency may request, accept, and consider proposals for the compensation to be paid under the contract only during competitive negotiations….” Fla. Stat. s. 287.055(4).


Under the competitive negotiation step, the public body then starts competitive negotiations with its preferred–most qualified–professional. “Should the agency be unable to negotiate a satisfactory contract with the firm considered to be the most qualified at a price the agency determines to be fair, competitive, and reasonable, negotiations with that firm must be formally terminated. The agency shall then undertake negotiations with the second most qualified firm.” Fla. Stat. s. 287.055(5).


Here, the public body submitted Request for Qualifications to potential master developers. After receiving qualifications and narrowing the list to four finalists, it submitted a Request for Proposals to the finalists getting their proposal for their concept for the development of the project. Land Capital, the entity it deemed the most qualified, submitted a proposal and put on a public presentation. Land Capital presented that it partnered in a joint venture with other real estate entities known as “Brass/Magi” and that Land Capital and Brass/Magi formed a specific development company, the defendant, to execute the development agreement with the public body. Land Capital was deemed to be the top-ranked developer and was, thus, the first entity the public body could engage in competitive negotiations with. During these competitive negotiations, Land Capital collapsed financially. When the public body became aware of this, it approached Land Capital and Brass/Magi represented that Brass/Magi was financially sound and there was no threat to the project. The public body went forward with the development agreement since its understanding was the defendant was a joint venture between Land Capital and Brass/Magi.


Pursuant to the proposed development agreement, the master developer (defendant) had the option of serving as the design-build contractor for an additional fee but it would need to be qualified as a design-build contractor on the date the development agreement was executed, although the design-build contract would be separately awarded. The master developer entity could not get bonding capacity to serve as the design-build contractor and had to team up with a general contractor to form a new construction company to serve as the general contractor. The public body then awarded the design-build contract to the defendant knowing the design-build contractor would be a joint venture and would not specifically be the defendant.


Then, after the development agreement was entered, the public body learned that Land Capital (the entity it deemed the most qualified) had in fact financially collapsed, that defendant was not a part of a Brass/Magi joint venture, and the defendant was a project-specific entity with no assets–a shell. For these reasons, the public body rescinded the contracts and filed suit, specifically to recoup the monies paid to the defendant.


B. The Court’s Ruling


UnknownThe Northern District agreed concluded that a participant in a public procurement cannot gain an unfair competitive advantage by injecting material misrepresentations. “Having been chosen to negotiate in this statutory public procurement process based on qualifications, Land Capital and MPDP [master developer entity contracted] through their officers…had a continuing duty to disclose material information or withdraw if material qualifications were no longer met.Community Maritime Park Associations, supra, at *14. Instead of complying with the continuing duty, Land Capital’s representatives misled the public body in order to enter into the contract. The Court, therefore, disgorged the entire development fee paid to the master developer irrespective of services that were rendered and the profit on the design-build contract. The only monies that were not disgorged were monies paid directly to third party subcontractors or other project professionals. (Notably, the public body wanted these monies repaid back too.)


C. Rumblings and Considerations


Look, there is no doubt that the master-developer (defendant) the public body hired did not meet the required qualifications. There is also no doubt that misrepresentations were made, although it is uncertain whether the misrepresentations were made in bad faith with the intent to deceive the public body. This case exemplifies:


Where a competitive public contract was awarded in violation of a statute but in ‘apparent good faith, in an honest effort to pursue the requirements of competitive bidding statutes, and it is not shown that the contract as actually entered into is to the public’s disadvantage in any way, nor that it has been entered into with unlawful or fraudulent intent,’ the decision of whether to restrain payment to the contracting party–or, presumably the converse, whether to require complete disgorgement [of] payments received on the void contract–will rest with the court’s discretion in light of the equities involved.” Community Maritime Park Associates, supra, at *13.


And, considering the court found that the master development agreement with a shell-defendant was clearly not in the public’s advantage, disgorgement was the remedy. But, in light of the facts , the public body appeared part of the very problem it complained about and instead of there being potential accountability (perhaps there will be) disgorgement was the remedy.


For instance, the public body thought Land Capital (not a joint venture or the entity it hired) was the most qualified under the CCNA to enter into the development agreement. Even though Land Capital represented that it joint ventured with another entity to form the defendant that the public body contracted, common sense would seem to dictate that the entity was a single-purpose entity created for purposes of the project.  Or, the public body should have known that the defendant was really not what it was looking for pursuant to its solicitation requirements. There was nothing that would have prevented the public body from asking to see the joint venture agreement, partnership agreement, or any other agreement demonstrating that the proposed master developer defendant was more than a sole purpose entity. If defendant was a joint venture with separate firms, there should be an agreement memorializing this.  The fact remains that the public body found Land Capital its most qualified master developer–not any other entity! Then, during competitive negotiations, the public body learned that Land Capital collapsed financially. Instead of this being a pretty big red flag since, again, Land Capital was its preferred entity, it proceeded with the negotiations because the supposed other joint venture partner to the defendant represented it was financially sound. Well, the other joint venture partner should really have not even been in the equation because Land Capital was the entity it deemed the most qualified. Nevertheless, not only did the public body forge ahead with the negotiations and contract, but then allowed the defendant to serve as the design-builder provided it had the proper license at the time the development agreement was executed. But, it knew that the defendant was not licensed at the time (there was a delay in the execution so the defendant could obtain a license) and did not have the bonding capacity to provide public payment and performance bonds. So, instead of both of these raising potentially more red flags (since lack of bonding capacity would indicate that the defendant did not have the financial wherewithal that complied with the public body’s qualifications and lack of licensure may have indicated that it not have certain design build qualifications), the public body allowed the defendant to joint venture with a contractor that could provide the bonding capacity and then separately awarded the contract to the joint-venture design-builder.


The point is that neither party in this situation appears to be entirely blameless. But, because the public body utilizes public funds to competitively award a contract, what it could have done or should have done (the what ifs, could ifs, or should ifs) to potentially avoid this scenario become moot due to the perception and reality that it was bamboozled into paying public funds to a master developer that was neither qualified nor financially solvent pursuant to the public solicitation. Certainly, the master developer entity (defendant) should not get a windfall or benefit from misrepresentations that undermine the competitive solicitation process and disgorgement of its benefit (its profit and monies paid to it) make sense. Yet, now the public body is most likely left to re-start the public procurement process to locate a new qualified master developer and new design builder.


Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.




imagesThe difficulty in prevailing in a bid protest is illustrated in the non-construction case of Charlotte County v. Grant Medical Transportation, Inc., 36 Fla. L. Weekly D173a (2d DCA 2011).   In this case, Charlotte County solicited bids to provide the County with bus drivers and washers for a transit program for disabled persons. An unsuccessful bidder sued the County arguing that the winning bidder’s bid was nonresponsive because it failed to comply with requirements of the solicitation. In particular, the unsuccessful bidder argued that the bid solicitation required all bidders to acknowledge receipt of any addenda to the bidding documents prior to the close of the bids, i.e., bid opening, and the winning bidder failed to comply with this requirement making its bid nonresponsive. (A bid is nonrespnsive if it materially fails to comply with the solicitation. While minor irregularities can be waived by the public entity, material irregularities cannot in that they impact the integrity of the public procurement process which requires all bidders to be on an equal playing field.) After the bid opening, the County required the winning bidder to confirm its receipt of all addenda to the bid documents. (Notably, material portions of a bid should never be able to be changed after bid opening.)


The unsuccessful bidder moved for a temporary injunction preventing the County from awarding the contract at-issue to the winning bidder. The trial court granted the temporary injunction and the County appealed. At the time the trial court granted the injunction, the County had already contracted with the winning bidder and services had been provided in accordance with the contract.


The Second District relied on the following standard for granting injunctive relief:


To obtain temporary injunctive relief, the movant must satisfy each of the following elements: (1) the movant has a clear legal right to the requested relief or, in other words, it has a substantial likelihood of success on the merits; (2) the movant will suffer irreparable harm if the trial court refuses to grant the injunction; (3) the movant does not have available another adequate remedy at law; and (4) a public interest will be served by the imposition of the injunction.Grant Medical citing Snibbe v. Napoleonic Soc’y of Am., Inc., 682 So.2d 568, 570 (Fla. 2d DCA 1996).


The Second District reversed the granting of the temporary injunction primarily because the unsuccessful bidder offered no evidence at the noticed and contested hearing (to determine whether an injunction should be entered) to support any of the above-mentioned elements. Although the Second District noted that the winning bidder failed to confirm its receipt of all addenda prior to bid opening,  at the injunction hearing, the Senior Division Manager of the County’s Purchasing Department testified that the winning bidder’s failure to confirm receipt was simply a minor deficiency or irregularity. The Second District also noted that at the time the trial court entered the injunction, the contract between the County and the winning bidder had been finalized, with services starting to be performed pursuant to the contract.


It is exceedingly difficult to satisfy each of the above-mentioned elements for the entry of a temporary injunction, especially in the bid protest arena. This case exemplifies the uphill battle an unsuccessful bidder has to prevent the public entity from awarding the contract to the winning bidder.


First, when a public entity waives a known irregularity with a winning bidder’s bid, it will always claim the irregularity is minor and, thus, waiveable at their discretion. This is the reason the County offered testimony at the injunction hearing to basically acknowledge the deficiency with the winning bidder’s bid but to say “it was not big deal.” Well, if it was not a big deal, then why did the County require the winning bidder to confirm receipt of the addenda AFTER bid opening? From a logical standpoint, it would seem that if it is important enough for the County to require that the winning bidder confirm in writing that it received all addenda to the solicitation after the bids were already opened and they knew who the winning bidder was, then it was a material component of the bid solicitation.


Second, unless something totally egregious transpires during the solicitation process, how can a unsuccessful bidder truly establish each and every element to the entry of injunctive relief at what is ultimately an early stage in the lawsuit when discovery should be ongoing? In other words, unless the movant can establish a substantial likelihood of success on the merits or a public interest will be served by the imposition of the injunction, an injunction should not be entered. In Grant Medical, the trial court actually granted the injunction, but the Second District found reasons to reverse the entry of the injunction.


Finally, if the movant does not act quickly in getting the hearing on a temporary injunction, which should mean little discovery, if any, has been conducted, then the movant risks the public body finalizing and entering into the contract with the winning bidder and the winning bidder starting to perform services pursuant to the contract. A no-win situation for an unsuccessful bidder.


While unsuccessful bidders should certainly explore the possibility of protesting, it is important to consider the uphill battle that will be encountered. If the trial court will consider having a hearing and entering injunctive relief in a an ex parte (and, thus, uncontested hearing), that should be explored to avoid the undesirable situation of the contract being entered and services performed by the winning bidder. For this to take place, legal arguments and factual arguments need to be well framed to establish entitlement to the entry of injunctive relief. If a noticed and contested hearing is required, legal and factual arguments still need to be very well framed, but it is important to offer evidence at the hearing. Specifically, if your protest is based on the argument that the winning bidder’s bid was nonrespnsive, you need to know that the public body will argue that the deficiency was minor so that you are prepared to rebut this argument in order to establish a substantial likelihood of success on the merits. You should also offer evidence to show that the deviation is material in that it affects the public interest by detrimentally impacting the competitive procurement process (i.e., it would affect some material component of your bid such as price or scope, etc.).



Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.


images-1In most circumstances, public entities are required to competitively bid the construction of their projects. Sometimes, competitive bidding is as simple as the public entity publishing an Invitation To Bid (“ITB”) seeking to solicit the lowest, responsible, and responsive bidder. In this solicitation, assuming the bidder is responsible (qualified) and responsive (complies with the invitation to bid in all material respects), the public entity is seeking the lowest cost to perform the construction. The ITB process is commonly referred to as the hard bid process because the public entity knows exactly what it wants and seeks the lowest cost to construct per the plans and specifications.


However, seeking an ITB is not the only way a public entity selects a contractor to construct its project. Another common method is the public entity publishing a Request For Proposals ( “RFP”) whereby cost is a factor, but not the only factor in selecting the contractor. A RFP is typically the solicitation when the public entity wants to utilize the experience and sophistication of the contractor to help it determine what specifically it wants. In other words, the public entity wants to resolve a problem and relies on the contractor to submit proposals with the solution and the costs to implement the solution. The public entity then ranks the proposals based on scoring criteria and selects the contractor that has the preferred or highest ranking.


Contractors that participate in the public procurement process, whether through the ITB, RFP, or another approved method of procurement, can often feel frustrated with the process based on the wide latitude and discretion that are afforded to public entities in the process. This frustration is exemplified in Pensacola Builders, Inc. v. King, 36 Fla. L. Weekly D1304c (1st DCA 2011), which involved a 13 year old dispute over a public project that was not awarded to the plaintiff contractor. In this case, a public entity was soliciting a contractor to build and operate a concession stand on a pier through the RFP process. The plaintiff was the highest ranked contractor in the process and was in the process of negotiating the contract with the public entity. However, the defendant contractor that also participated in the RFP process wrote letters to the public entity threatening litigation (after apparently missing the deadline to file a bid protest) regarding the manner in which the public entity conducted the RFP. Due to the public entities apparent fear of the threatened litigation, it ceased negotiations with its highest ranked contractor, readvertised for proposals, and then ranked the defendant as its preferred contractor. This naturally was perceived as an injustice to the plaintiff.


The plaintiff filed suit against the public entity for breach of an implied covenant of fair dealing based on the public entity readvertising the proposals and selecting the defendant contractor as its preferred contractor. See Santa Rosa Island Authority v. Pensacola Beach Pier, Inc., 834 So.2d 261 (Fla. 1st DCA 2002). The plaintiff’s objective was to force the public entity to reengage in contract negotiations with it. The First District Court of Appeal shot down plaintiff’s lawsuit and objective holding, “Absent evidence of illegality, fraud, oppression, or misconduct, Appellee [plaintiff] is without a remedy for Authority’s [public entity] readvertising for proposals and rearranging the preference order of the parties.” Santa Rosa Island Authority, 834 So.2d at 263. Stated simpler, the plaintiff was out of luck as it is hard to establish the government committed a wrong, even though the public entity readvertised proposals due to threatened litigation from a bidder that apparently failed to timely protest!


The plaintiff, however, did not end its pursuit of seeking redress for what it perceived as injustice in the competitive bidding process. The plaintiff creatively asserted claims against the defendant contractor for, among other things, tortious interference with a business relationship and defamation. The plaintiff’s arguments were premised on letters that the defendant sent to the public entity when plaintiff was in the process of negotiating its contract threatening litigation due to the illegality of the RFP process and accusing plaintiff of certain illegal actions. The trial court ruled in favor of defendant on plaintiff’s claims and, unfortunately, because plaintiff did not properly preserve these issues on appeal, the First District Court of Appeal was not in a position to reverse the trial court’s ruling. (Notably, this case demonstrates the importance of preserving all issues and arguments for appeal.) However, had plaintiff preserved these issues for appeal, there may have likely been meat on the bone as to its arguments against the defendant that ultimately got the public entity not to award the contract to the plaintiff, but, instead, to defendant.


In an economy where private projects are not as booming as they once were and public projects being a main source of revenue for many contractors, bid protests and/or the threat of litigation are measures that are being strongly considered when a perceived injustice occurs in the public procurement process. Although this case did not work out well for the plaintiff, plaintiff’s arguments are still creative and worthy of merit against another bidder in a similar context that overtly hinders a contractor’s efforts in contracting with the public entity.


Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.