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Disappointed Bidder Recovery Of Lost Profit

Monday, May 09, 2005 02:51 pm

Disappointed Bidder Recovery Of Lost Profit

If a bidder is denied a public works contract, and it is subsequently determined that the denial was improper, the bidder quite understandably wants compensation. Bid preparation costs can frequently be recovered from the public project owner. But this is a paltry amount compared with the profit the bidder would have made, or believes it would have made, on the wrongfully denied contract.

There is not a lot of case law on this issue. The precedent that does exist reflects divergent policies regarding a disappointed bidder's right to recover lost or anticipated profit. The issue is frequently framed as a question of whether the competitive bidding statutes exist primarily to protect the taxpaying public or primarily to protect bidders. Some courts have recognized, however, that these two forms of protection are not mutually exclusive.

At one end of the spectrum is case law holding that the competitive bidding statutes exist solely for the protection of the public and confer no benefits whatsoever on the bidders themselves. As the North Dakota Supreme Court stated, "Statutory competitive bidding requirements are enacted for the benefit of the public to invite competition, to prevent favoritism, fraud, and collusion, and to secure the best work and supplies at the lowest price. Because these statutes are enacted to benefit the public and are not intended to directly benefit contractors, it is equally well settled that a contractor generally may not recover damages against a public entity for violation of the competitive bid [...]

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