Past Performance of Newly Formed Company

Public agencies may use past performance to award a contract to the lowest and best bidder or reject a bid. Occasionally, construction companies may dissolve or form new companies. The reasons for a change in a company’s corporate structure may vary. However, the good and/or the bad may follow the newly formed company. This issue was addressed a number of years ago by the Mississippi Attorney General and the position explained as follows:

[I]f a bidder presenting a valid COR number is a company with which DFA/BOB has no past experience or past performance history, DFA/BOB may consider past experience with or past performance of the company from which the bidder originated, the bidder’s parent company, or the company with which the bidder merged, partnered, or changed names.

The Attorney General went on to state that a public agency can also reject an apparent low bidder "who submits a bid under the same COR number as its predecessor, predecessor in name, parent company, or merger/partner" where the public agency considers a poor past performer. [Link to AG Opinion No. 2003-649].

The important point to understand is that good and/or poor past performance follows the COR number which is held by the qualifying party.

No Certificate of Responsibility--No Payment for Work Performed

How would you feel if you performed thousands of dollars of work on a construction project and were then told you would not be paid anything?  That is exactly what has happened with a recent decision from the Mississippi Court of Appeals.  The Court’s opinion makes it absolutely clear that any contract entered into in violation of Miss. Code Ann. §31-3-15 is null and void.  [click here for decision]  This means if a contractor does not have a Certificate of Responsibility (“COR”) from the Mississippi State Board of Contractors for work in excess of $50,000 on a private or public project, the contract is null and void and the contractor is not entitled to ANY compensation under ANY legal theory if it performed work without the appropriate COR.  

In this particular case, the subcontractor did not have a COR but entered into a contract with the prime contractor.  When the subcontractor sued for payment, the prime contractor claimed the subcontract was null and void and refused to pay the subcontractor.  The trial court agreed and the Mississippi Court of Appeals affirmed the decision.  

This decision is an important reminder for prime contractors and subcontractors at all tiers to make sure that you have the required COR for the work to be performed.  If there is any doubt, contractors should contact the Mississippi State Board of Contractors at (601) 354-6161, (808) 880-6161 or visit their website at www.msboc.us.