When do you have a contract with a public entity?

It can be unclear when a contractor bidding on a public construction project actually has a binding contract with a public entity. This question appears to have been addressed by the Mississippi district court in Northeast Mississippi Community College District v. Vanderheyden Construction Company. In that case, the community college had issued an advertisement for bids from qualified contractors for the construction of a new science and math building. The advertisement reserved the right to reject any and all bids. After bids were opened, Vanderheyden was declared the low bid. The Board of Trustees ("the Board") voted to award the contract to Vanderheyden but after the board meeting the second low bidder challenged the award alleging a number of deficiencies in Vanderheyden’s bid. Rather than risk a lawsuit by the second low bidder, the Board decided to rescind the award and readvertise. At the second bid opening the protester on the original procurement was the low bidder and Vanderheyden was the second low bidder.

The issue presented to the district court was whether the Board could properly rescind its prior award to Vanderheyden and readvertise the project. The district court concluded that "a public entity cannot reject all bids and readvertise the project after it has already accepted the lowest responsible bidder." In analyzing the actions of the Board, the district court when on to state:

[T]he court is of the opinion that once the board chose to accept Vanderheyden’s bid, the reserved right to reject any and all bids had not been exercised and it was no longer operative. To hold otherwise would be contrary to well-established principles of contract law and would permit the possibility of favoritism in public bidding, the very evil which the bidding process statutes were enacted to prevent.

Therefore, once a public entity has officially accepted a bid, there is a binding contract between the parties unless the public entity has expressly conditioned the award upon certain requirements.

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