The Massachusetts Office of the Attorney General (“AGO”) this month denied a bid protest by a low bidder because it had access to “insider knowledge” about the University of Massachusetts building project through its subsidiary, which performed pre-bid services and developed the project estimate, which was not made available to the bidders. 

Even though there was no suggestion that the low bidder took advantage of its access to the inside information, the very fact that the low bidder had access to the information, as well as the low bidder’s failure to disclose its relationship to its subsidiary, unleveled the playing field among the bidders.  The AGO’s August 3, 2015 bid protest decision, titled In Re: University of Massachusetts Building Authority, underscores the strength and reach of the equal footing principle on public projects in Massachusetts.

The awarding authority rejected the low bid on the grounds that the appearance of a conflict of interest due to the relationship between the low bidder and its subsidiary violated the state conflict of interest laws and that the access to the project estimate (and other information) violated the “equal footing” principle.  The second low bidder argued that Massachusetts law imputed the knowledge of the subsidiary to the low bidder – destroying equal footing.

The low bidder asserted that there was no basis to pierce the corporate veil, that the conflict of interest statute was inapplicable, and that the low bidder did not have any access to materials not available to the other bidders.

While the AGO did not believe it had jurisdiction to decide the conflict issue, it found sufficient grounds under the equal footing principle to deny the protest.  First, while noting the purpose of the competitive bidding statutes to ensure “an open and honest procedure for public contracts,” the AGO held that the low bidder should have disclosed the relationship with its subsidiary pre-bid.  Next, the AGO agreed that under Massachusetts law the subsidiary’s knowledge of the project estimate was imputed to the low bidder.  Equal footing required all bidders to have the opportunity to bid in the same way, on the same information, and with the same risk of rejection.  It was unfair for one bidder to have access to superior information – even though there was no suggestion that the low bidder took advantage of its relationship with the subsidiary. 

The AGO also noted that the low bidder’s subsidiary would play an ongoing role in the project. This only added to the potential conflict of interest, as, if the low bidder was awarded the contract, the subsidiary would be questioning its parent’s estimates, giving the low bidder an inherent unfair advantage throughout the project.

While In re: University of Massachusetts Building Authority presents unique facts, it also is a useful reminder of the importance and reach of the equal footing principle in public bidding.  Simply having superior access to information is enough to disrupt equal footing.