In the world of public works bidding, competition can be fierce. At times the competition may even break some laws in lowering their costs in order to ensure the lowest possible bid. Historically, the only procedure for the aggrieved bidder was to submit a bid protest, and if necessary, file a petition for writ of mandate against the awarding agency. However, suing the agency provides a limited remedy, and in most cases, damages are not recoverable. Other than this indirect attack, there have been no remedies available to sue the competition directly. Several contractors decided to test a new theory, and sued the alleged wrongdoer for intentional interference with prospective economic advantage. The California Supreme Court recently heard the matter in a case of first impression.
In Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., several slurry seal contractors became incensed when their competitor, American Asphalt South, continued to outbid them. Several plaintiff contractors jointly sued American, alleging several theories, including intentional interference with prospective economic advantage. To support this allegation, the plaintiffs alleged that the costs of the materials for all of the bidders were essentially the same. However, they alleged that American submitted deflated bids, because it failed to pay prevailing wage and overtime compensation in connection with the projects. The plaintiffs alleged that this unlawful and unfair activity interfered with their relationship with the various agencies to successfully bid the work.
The first element of the tort is the existence between the plaintiff and a third party of an economic relationship that has the probability of a future economic benefit. Here, that would be the relationship between the plaintiff contractors and the awarding agencies. Analyzing this element, the Supreme Court held that a bidder on a public works project does not have an “economic relationship” with an agency. Rather, the bidder merely has the “hope of one.” Since the aggrieved bidders failed to show the existence of an economic relationship with the various public agencies, their cause of action failed.
For now, the status quo remains unchanged. The only procedure available to aggrieved bidders is to follow bid protest procedures and seek a writ of mandate against the public agency.