On March 25, 2010, the Ohio Supreme Court held that if a public authority creates a policy establishing criteria by which it will evaluate bids for public works contracts to determine the lowest and best bidder, the public authority is obligated to apply its bid evaluation criteria by exercising its sound discretion.

            At the center of this case is the Prevailing Wage standard in a set of 18 criteria adopted by the Franklin County Board of Commissioners for evaluating construction bids.  One of the criteria imposed by the County is that the bidder had not “violated” Prevailing Wage law more than three times in a two-year period in the last ten years.

The Painting Company’s bid on the Huntington Park baseball stadium project in Columbus was $46,000.00 less than the next-low bid.  The County rejected the low bid on the basis that fourteen complaints had been filed against The Painting Company with the Ohio Department of Commerce during the specified time period.  However, several investigations concluded that any Prevailing Wage violation either was not intentional, or resulted in no liability or a settlement agreement denying any violation.

The Supreme Court held that the County did not exercise sound discretion in rejecting The Painting Company’s bid.  The Supreme Court based its holding on the meaning of the term “violation,” which is not defined either in the statutes on prevailing wages, or in the County’s Project Manual.  The Supreme Court defined “violation” to mean, “the situation in which the director makes a formal finding that a contractor or subcontractor intentionally violated the prevailing-wage laws, and all appeals are exhausted.”

The Supreme Court reasoned that The Painting Company never “violated” Ohio’s Prevailing Wage law (since it never was subject to a formal finding by the State), and thus the County’s rejection of its low bid was not an exercise of sound discretion.  The Supreme Court also held that the County abused its discretion by failing to consider other evaluation criteria, instead using this single Prevailing Wage criterion as a “gate-keeping function.”

The Supreme Court acknowledged that a public authority has considerable latitude in selecting a low, qualified bidder, and that the courts cannot interfere unless it clearly appears that the public authority is abusing its discretion.  Still, based on these facts, the Supreme Court held that the County did not exercise sound discretion in this instance because:  (i) the County misapplied one of its selection criteria; and (ii) the County did not take into consideration the other selection criteria.

Of significance is that the Supreme Court did not consider any of the County’s other 17 bidder qualifications criteria, affirmed by the lower courts.  Nor did the Supreme Court agree with The Painting Company that the County cannot consider Prevailing Wage violations at all.  Thus, the County legally may revise its Prevailing Wage violation standard to evaluate low bidders.

The Supreme Court decision is at odds with the recent federal decision in Gaylor, Inc. v. Franklin County Board of Commissioners, et al., U.S. District Court, Southern District of Ohio (Eastern Division), Case No. 2:10-cv-00183, in which Franklin County rejected Gaylor’s low bid for reasons identical to those in the The Painting Company case.  The Supreme Court will consider the Gaylor case, separately filed and pending.