cb june 04 - jones day · construction briefings / june 2004 2 construction briefings west, a...

practical tight-knit briefings including action guidelines on construction contract topicsJune 2004

In brief...

Prequalification Programs in General� Competitive Bidding & the Concept

of Responsibility� Responsibility Determinations:

Traditional Method v. Prequalification� Project Specific & Program Specific

Prequalification Programs� Types of Prequalification Programs� Benefits of Prequalification� Limitations & Drawbacks of

Prequalification� Elements of a Prequalification Program� Subcontractor Prequalification� A Case in Point

Substantive Legal Considerations� Agencies Using Prequalification for

the First Time� Context In Which Prequalification

Programs Are Challenged� Statutory Authorization� Attacks on the Qualifying Criteria� Uniformity� The Use of Objective Standards� Lawful Adoption of the Program� Other Substantive Grounds� Procedural Rules

Administrative Challenges to Denialof Prequalification: ProceduralConsiderations

� Reasons to Appeal� Considerations Relating to Appeals� A Warning About Administrative

Processes� Agency Considerations

Revocation of Prequalified Status

The Future

Guidelines

The authors...Daniel D. McMillan is a partner with the LosAngeles office of Jones Day and co-chair ofthe firm’s international Construction PracticeTeam. Erich R. Luschei is counsel in thefirm’s Los Angeles office and specializes inconstruction law.

Prequalification Programs: The KeyTo The Public Contract DoorBy Daniel D. McMillan and Erich R. Luschei

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or contractors performing public works,prequalification has increasingly become the key toopening the public contract door. Whileprequalification programs date back at least to the

1930s, the use of such programs to determine which contrac-tors are entitled to bid for public construction projects has ex-perienced a dramatic resurgence and expansion over the pastfive years.

California, for example, is witnessing an explosion ofprequalification programs throughout the state. Legislationenacted in 1999 expanded the number and range of local pub-lic entities authorized to use prequalification programs to in-clude cities, counties, and special purpose districts.1 This legis-lation, coupled with the model prequalification documents re-leased in 2001 by the California Department of Industrial Rela-tions, has facilitated the development of prequalification pro-grams throughout the state.2 Some of the largest public entitiesin California have embraced prequalification as a quality con-trol instrument for construction projects, including the LosAngeles Unified School District, which is engaged in one of thelargest and most ambitious school construction programsfunded by dollars of recently approved bonds, and the LosAngeles County Metropolitan Transportation Authority, whichis continually engaged in construction activities of varying scalesof magnitude.3 The proliferation of prequalification programsis not confined to California, and the construction bar aroundthe country needs to become better versed at advising publicowners who are formulating or administering such programsand contractors seeking to secure prequalified status or chal-lenging the denial of prequalification.

Counties ” 115, 116, 117Highways ” 113Municipal Corporations ” 334–336Public Contracts ” 5, 5.1, 6, 8, 11Schools ” 80

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Construction Briefings / June 2004

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The increasing use of prequalification pro-grams on public works projects has not beenwithout controversy. Many smaller contractorsfind themselves precluded from bidding onwork. The decision by Charleston County,South Carolina to use prequalification for diffi-cult or time-sensitive school projects made thefront cover of the Engineering News-Record,which also editorially predicted a “painfulshakeout” in the ranks of contractors eligibleto bid on such work.4 Even larger contractorshave discovered that past performance disputesand litigation with public agencies is being takeninto account in determining whether theyshould be prequalified.5 Moreover, the multi-plicity of prequalification programs with diver-gent requirements has also increased the bur-den, expense and complexity of public workscontracting by establishing another process con-tractors must navigate in order to compete forpublic projects.

Despite the longstanding and expanding useof prequalification programs, there is no com-prehensive body of law defining the legal rulesapplicable to such programs, and little has beenwritten about the legal issues associated withsuch programs. In part, this appears due to thegreat variety in the programs that exist and the

fact that statutes authorizing such programs typi-cally do not require the use of a singleprequalification system. In contrast, for instance,to the significant body of law that has emergedin connection with non-responsibility determina-tions in the area of competitive bidding,6 thereare relatively few court decisions involvingprequalification programs, and those that do ex-ist are scattered across a number of different ju-risdictions. While laws mandating competitivebidding for public works contracts often applythroughout a state, prequalification programstend to be unique to the agencies using them andthe statutes authorizing such programs oftendelegate to the agency the responsibility for de-veloping the program, with few guidelines.

Due to the idiosyncratic nature ofprequalification programs, it is not possible todescribe them all or to articulate rules of uni-versal application. This CONSTRUCTION BRIEFING,however, provides a framework with which toassess prequalification programs, highlights thecentral legal issues relating to prequalificationprograms, identifies the authorities that haveaddressed those issues, and provides guidanceof a general nature to owners establishing andadministering prequalification programs andcontractors seeking to comply with or challengethe requirements of such programs.

The first part of the BRIEFING discussesprequalification programs in general. The nextaddresses substantive legal considerations ap-plicable to prequalification programs. It thenhighlights procedural considerations involvingdenial and revocation of prequalified status.Finally, this BRIEFING presents a list of “Top Ten”guidelines for contractors and owners involvedwith prequalification programs.

Prequalification Programs inGeneral

Defining prequalification is not a simple taskbecause prequalification has different meaningsin many different contexts. Broadly speaking,


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prequalification involves a determination as towhether a person, product, or service has thecharacteristics necessary to satisfy the require-ments of an anticipated transaction. A personplanning to purchase a home may prequalifywith a lender in anticipation of making an offerto purchase a house; a supplier may prequalifyits products for purchase by a public agency; alawyer may prequalify to provide services to apotential client. Licensing requirements for con-struction contractors are a general form ofprequalification established to assure that onlythose contractors meeting certain minimum re-quirements are permitted to perform work.7

As used in this BRIEFING, the term“prequalification” refers to a process used by apublic agency to determine which contractorsare qualified to perform construction projectsfor the agency. The two general forms ofprequalification this article addresses are (1)prequalification programs used in connectionwith a specific project an agency plans to con-struct (“Project Specific Prequalification”), and(2) general prequalification programs used byan agency for the purpose of establishing a poolof qualified contractors eligible to bid on con-struction projects or various types of projectscontemplated as part of an overall constructionprogram (“Program Specific Prequalification”).

Even thus narrowed, a further clarificationis necessary to define the type ofprequalification programs addressed in thisCONSTRUCTION BRIEFING. This BRIEFING principallyaddresses prequalification programs used bypublic agencies in conjunction with competi-tive bidding requirements. Project Specific andProgram Specific Prequalification may also beused in connection with best value procure-ments, design-build projects, and other mecha-nisms by which public agencies contract fordesign and construction services.

In addition, this article is principally con-cerned with state and local, rather than fed-eral, contracts for construction of public works.Prequalification under federal law is a complex

topic in itself and subject to laws perhaps asvaried as those that exist on the state and locallevels. Many contracts with the federal Gov-ernment are governed by the Federal Acquisi-tion Regulation. The FAR generally does notallow prequalification of contractors,8 althoughexceptions exist under certain circumstances,such as for negotiated contracts9 and procure-ment of products.10 In some instances, the abil-ity of state agencies to use prequalification pro-grams is limited by federal regulations that pro-scribe the use of prequalification on federallyfunded projects.11 However, there are some fed-eral agencies, such as the United States PostalService, that routinely use prequalification inconnection with procurement decisions.12

� Competitive Bidding and the Concept of Responsibility

Statutes and ordinances throughout theUnited States mandate (with certain exceptions)that public works contracts exceeding a speci-fied dollar threshold be competitively bid andawarded to the lowest responsible bidder whosebid is responsive to an advertisement for bids.Generally, the lowest responsible bidder is “thelowest bidder whose offer best responds in qual-ity, fitness, and capacity to the particular re-quirements of the proposed work.”13 Put dif-ferently, a public agency may only award a con-tract to the contractor who (1) submits the low-est responsive bid, and (2) satisfies the require-ments of being a responsible contractor. Deter-mining the lowest bid ordinarily does notpresent a challenge unless the bid requirementsnecessitate bidding on an array of alternates oroptions. However, responsibility determinationsare often more complex in nature and generatemore disputes. Prequalification is a means ofdetermining the responsibility of contractorsbefore bids are submitted.

In general, whether a bidder is responsibledepends on its ability to perform the particularwork involved in a competent manner for theprice agreed upon and within the time allotted


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for completion of the project.14 As defined byone statute, a responsible bidder is “a bidderwho has demonstrated the attribute of trust-worthiness, as well as quality, fitness, capacity,and experience to satisfactorily perform thepublic works contract.”15 Numerous cases ex-ist in the bid protest context in which the courtshave upheld or rejected agency decisions thatbidders were or were not responsible. Depend-ing on the specific circumstances and law ofthe particular jurisdiction, an agency may bejustified in finding a bidder nonresponsiblewhere the bidder does not hold the requiredlicense classification,16 is embroiled in disputeswith the agency awarding the work concern-ing issues of fraud, improper billings and de-fective work on prior projects,17 fails to demon-strate that it has sufficient working capital toperform the work,18 has engaged in multipleviolations of the prevailing wage laws,19 or isthe subject of criminal indictments.20

The concept of responsibility is wide-rang-ing. A contractor’s past experience in suc-cessfully completing projects suggests that itcan be expected to successfully complete fu-ture projects; conversely, a contractor with apoor track record may inspire little confi-dence that future contracts will be performedin a competent manner. A contractor’s finan-cial condition may be indicative of its abilityor inability to complete the job without inter-ruption, whether due to its ability to procurematerials or to pay laborers and subcontrac-tors. The ability of a bidder’s corporate andproject managers and the bidder’s relation-ships with sureties, subcontractors, and sup-pliers may also be relevant to whether the bid-der would achieve successful completion.Some public agencies may consider a host ofother factors as being encompassed within theconcept of responsibility, including thecontractor ’s claims history and philosophy,the frequency of claims made by subcontrac-tors and suppliers against the contractor, andthe contractor’s compliance with numerousdifferent regulatory requirements, including

those pertaining to the environment, prevail-ing wages, worker ’s compensation, and dis-advantaged business set-asides.

� Responsibility Determinations: Traditional Method v. Prequalification

Customarily, public agencies have determinedbidder responsibility after the submission ofbids. The traditional competitive bidding modelinvolves a notice advertising for or inviting bids.Bids consist of (1) the financial terms on whichbidders are willing to perform the work, and(2) information concerning the qualifications ofthe bidders to perform the work. Under the tra-ditional method, contractors interested in ob-taining copies of a solicitation incur, usually attheir own expense, the cost of securing the con-tract documents, analyzing the contract require-ments, performing take-offs on quantities, so-liciting subcontractor bids and preparing pre-liminary schedules. After each of the interestedbidders undertakes those costs and submits itsbid, a determination is made by the awardingagency whether the lowest bidder is responsible,often on the basis of statements of qualificationssubmitted with the bids.

Prequalification programs separate the finan-cial proposal from the question of thecontractor ’s qualifications. In the case ofprequalification programs, the public agencydetermines, before the submission of the finan-cial proposal, which contractors are responsibleand have the requisite qualifications to performthe work the agency plans to award. Where anagency uses a prequalification program, onlythose contractors prequalified by the agency areentitled to bid for the work.

In some cases, prequalification programs mayrepresent little more than a change in the se-quence in which agencies make responsibilitydeterminations. Instead of determiningwhether bidders are responsible after bids aresubmitted, prequalification programs determinewhich contractors are qualified before bids aresubmitted. For example, an agency may require


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as a condition of an award that the successfulbidder have a certain license classification or aparticular certification from a trade associa-tion.21 A requirement that a contractor hold ageneral contractor’s license may advance anagency’s objectives by ensuring that the success-ful bidder is capable of performing complexwork as a prime contractor, is able to minimizethe use of subcontractors, or is able to ensurethat change orders will be executed effectively.22

A requirement that bidders hold certificationsfrom a trade association may be justified on thebasis that the agency itself lacks certifying orauditing capabilities.23

If the only criterion for determining respon-sibility is whether a contractor holds the re-quired license or certification specified by theagency, a contractor lacking the requisite licenseor certification may be precluded from biddingaltogether under a prequalification program. Bycontrast, under the traditional method for mak-ing responsibility determinations, the contrac-tor would be permitted to bid but the agencycould not award the contract to that contrac-tor because the contractor would not be con-sidered to be responsible or responsive. Whetheror not a public agency uses prequalification, theagency may establish criteria and an objectivesystem for scoring information regarding con-tractor qualifications.24 The use of selective cri-teria and objective scoring systems, while char-acteristic of prequalification programs, is notlimited to such programs.

� Project Specific and Program Specific Prequalification Programs

As previously discussed, there are two gen-eral types of prequalification: (1) Project Spe-cific Prequalification; and (2) Program SpecificPrequalification. In the case of Project SpecificPrequalification, the qualifications of potentialbidders are evaluated directly in relationship tothe particular project that will be advertised forbid. Because the public agency knows the ex-act nature of the project it intends to construct,

the agency’s requirements may be very specificand require contractors to have experience withparticular types of construction. A $30,000,000renovation of a hospital facility meeting stateregulatory requirements that includes enhance-ment or replacement of communications, emer-gency, and data systems is likely to exclude manysmall and even mid-size contractors, as well asthose who lack prior experience in hospital con-struction. Under Project Specific Prequali-fication, a contractor must submit its applica-tion for prequalification and be prequalifiedbefore it is entitled to bid on the project. A con-tractor that fails to submit the application suffi-ciently in advance of bids may be precluded frombidding. Where Project Specific Prequalificationis used, a contractor’s prequalified status existsonly for the particular project, even if the agencyhas other projects coming up for bid.

Program Specific Prequalification ordinarilyis used by agencies when they anticipateawarding multiple contracts over a period oftime. The prequalification criteria are not di-rectly linked to a specific project but insteadreflect the characteristics of contractors withwhom the agency determines it should do busi-ness for certain types of projects. Program Spe-cific Prequalification may be structured in a tiersystem based upon the value of contract workon which prequalified contractors may bid. Forexample, an agency may have tiers that createseparate pools of bidders, such as those that maybid on work valued in excess of $10 million, thoseauthorized to bid on work in the range of $5 to$10 million, and so forth. An agency may alsouse financial caps on the total dollar value ofthe work a contractor may have outstandingfor an agency at any given time. If, for instance,a contractor’s authorized cap is $5,000,000 andthe contractor has contracts in process of$4,000,000, the contractor could bid on a newcontract valued at $1,000,000 but not a newcontract valued at $2,000,000.25

Where a public agency adopts Program Spe-cific Prequalification, the agency typically uses


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a system of open enrollment and grantsprequalified status for a specified period of time,such as one year. Once the contractor isprequalified, it is entitled to bid on any workthat the agency advertises for bid (subject toother program rules) without having toprequalify for the particular projects that areadvertised for bid. In connection with ProgramSpecific Prequalification, contractors are gen-erally allowed to reapply for prequalificationat periodic intervals (e.g., every three months)if an earlier application is denied.

One significant issue presented by ProgramSpecific Prequalification that ordinarily is notpresented by Project Specific Prequalificationconcerns circumstances that intervene betweenthe time that an agency prequalifies contrac-tors and the time that prequalified status lapses.Annual prequalification creates the possibilitythat events may occur after a contractor securesprequalified status, but before the contractor isrequired to apply for renewal, that otherwisewould disqualify a contractor from securingprequalified status. For example, a contractor’sfinancial responsibility may experience a sud-den and dramatic decline if it has a majorproject that experiences unexpected difficulties.Or a contractor’s trustworthiness may be calledinto question by a criminal conviction that oc-curs after a contractor is prequalified but be-fore the contractor’s prequalified status lapses.

Absent ongoing scrutiny of each prequalifiedcontractor, it may be difficult for an agency tolearn of adverse intervening circumstances. Asa result, an agency’s primary protection in suchcircumstances may rest in program rules thatrequire prequalified contractors to submitsupplemental information involving materialchanges when they occur, or to certify, at thetime of bidding, that no material change hasoccurred with respect to the information sub-mitted to secure prequalified status. In addi-tion, an agency may have greater protection ifit includes, both as part of its prequalificationprogram and in advertisements for bids, a con-

dition entitling the agency to revoke or rescindan award to a contractor who has failed to pro-vide the required certificate.

� Types of Prequalification ProgramsPrequalification programs vary widely with

respect to the qualifying criteria employed.Some prequalification programs focus almostexclusively on the contractor ’s financial re-sources to perform the work. Such programsmay not only preclude undercapitalized con-tractors from bidding on work but also restrictthe dollar value of the contracts on which con-tractors are entitled to bid. Other programs lookto a much broader range of criteria for deter-mining the contractor ’s qualifications, includ-ing its record of past performance on similarprojects, the status of ongoing projects, priordefaults, litigation instituted by or against it, itsownership of equipment, its safety record, andmany other factors. The diversity of prequali-fication programs, even within similar nichesin the construction industry, was highlighted ina recent survey of prequalification programsestablished by various state departments oftransportation. The survey indicated that whilemany state DOTs use similar criteria, no twoprograms of the 35 surveyed used all of the samecriteria in prequalifying contractors for trans-portation-related construction.26 Such variationwithin a particular segment of construction sug-gests that prequalification programs maypresent a considerable challenge to, if not bur-den on, contractors bidding on work in mul-tiple geographic areas, because they must fa-miliarize themselves with the peculiar require-ments of numerous prequalification programs.

At the state level, adoption of prequalificationprograms for public projects varies consider-ably.27 While most states use prequalificationprograms for transportation programs,28 the useof such programs for other types of projects isgenerally not as pervasive. Massachusetts, forexample, mandates the use of prequalificationfor construction of public buildings but not forother public works.29 In New York, prequali-


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fication is specially required for all public schoolconstruction in New York City.30 Californiaauthorizes but does not require cities, counties,special purpose districts, and school districts toadopt prequalification programs under certainspecified conditions.31

The meaning and value of prequalificationmay also be different under different programsand in different states. The fact that a contrac-tor has prequalified does not necessarily meanthat a public agency is obligated to award a con-tract to the lowest bidder among otherprequalified bidders. The public agency gener-ally has the right to reject all bids.32 Further-more, if an agency has a reason to believe thatthe bidder, though prequalified, is not respon-sible, the agency may retain the discretion toaward the contract to the second lowest bid-der.33 One court has held that a determinationthat a contractor is qualified to bid on work foran agency is different in nature from a determi-nation that the contractor is a responsible bid-der.34 Another court has held that an agency isnot required to close its eyes to circumstancesoccurring after it has prequalified a contractorin deciding whether to award a contract to thatcontractor and is not required to revoke thecontractor’s prequalified status as a conditionto denying the contractor an award.35 Never-theless, litigation is a distinct possibility wherean agency does not award a contract to aprequalified bidder that submits the lowest bid.A prequalified contractor who has incurred theexpense of preparing a bid may feel entitled tothe contract award and a judge may be predis-posed to side with the contractor. An agencyfacing such a situation must be sure it has asolid foundation to support its decision.

� The Benefits of PrequalificationBy permitting only prequalified contractors

to bid for work, many legislatures and agenciesreason that projects will be performed in a moretimely manner, with fewer claims and betterquality. This has not been established with quan-titative studies. No empirical study appears to

have been conducted that provides a scientificlevel of confidence that the use ofprequalification achieves a lower cost or betterquality product than use of the traditional ap-proach, or vice versa. Nonetheless, the conven-tional wisdom of proponents of prequalificationis that it yields a more satisfactory result thanthe traditional method for making responsibil-ity determinations.

Although in some cases prequalification mayrepresent little more than a change in sequenc-ing of decision making, its advocates contendthat the practice has numerous benefits thatmake it a better alternative to the traditionalmode of determining responsibility. They as-sert that such programs are advantageous be-cause they (1) more effectively avoid the selec-tion of unqualified contractors than the tradi-tional method, (2) provide better structure anddiscipline in the bidding process, (3) facilitatebidding by contractors otherwise inhibited frombidding due to low bids by unqualified contrac-tors, and (4) protect contractors against beingawarded work they cannot perform.36

As a practical matter, separation of the re-sponsibility determination from the bidding pro-cess may tend to focus more attention on thequalifications of contractors with which anagency wishes to do business or on the specificskills and experience necessary for the success-ful completion of a particular project. Underprequalification programs, determination of thequalifications of potential bidders is a processseparate from bidding rather than merely oneof the many steps involved in evaluating thebids themselves. In developing a prequali-fication program, an agency devotes consider-able attention to specific requirements it has forupcoming projects and the attributes of the con-tractors the agency believes are beneficial ordetrimental to the successful completion of theproject(s) to be constructed. The qualificationsof all interested contractors, rather than merelythose of the lowest bidder, are the subject ofseparate examination and determination. As a


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result of an expanded analysis of contractorqualifications, agencies may do a better job ofassuring that the ultimate low bidder can becounted on to complete the job in accordancewith the plans and specifications, within theproject budget, and on time.

Prequalification may also afford an agencymore time to investigate and evaluate contrac-tor credentials than when it goes through thisprocess after bids have been opened and itwants to commence the project. Post-bid re-sponsibility determinations may leave anagency with insufficient time or information toscreen bidders for responsibility even wherecontractors are required to submit statementsof qualifications with their bids. Practical diffi-culties include the collection and review of in-formation concerning the contractor. As is of-ten the case, an agency relies to a great extenton information submitted by the contractor it-self that the agency does not have time to in-vestigate independently. Where the bidder ispublicly traded and frequently featured in con-struction periodicals, verification may be easierthan where a contractor is privately held andlittle public information exists about its pasthistory. Because of the costs and delays associ-ated with bid protests, the default philosophyof some owners may be that all bidders arequalified absent compelling, verifiable, andpublic information suggesting the contrary.Such a position shifts the burden to the secondlowest bidder to challenge the lowest bidder’squalifications, an uphill and expensive battlethat even if successful diminishes the return thesecond lowest bidder would receive if ultimatelyawarded the contract. Moreover, a publicagency facing difficult budget cuts may be con-flicted about disqualifying a low bid on respon-sibility grounds because such a decision mayresult in a loss of substantial cost savings. Fail-ing to disqualify a nonresponsive contractormay save money in the short run but can cre-ate other problems down the road.Prequalification minimizes this pressure be-cause the responsibility determination is ordi-

narily made without bids having been submit-ted on a particular project.

Post-bid responsibility determinations aresubject to decisional law that constrains theagency’s ability to shop for the best qualifica-tions among the bidders. Case law exists insome jurisdictions that precludes a publicagency from awarding contracts to the mostqualified of the low bidders and requires agen-cies instead to award contracts to the lowestbidder absent a determination that the lowestbidder is not a responsible bidder.37 In the caseof post-bid responsibility determinations, apublic agency that decides not to award a con-tract to the lowest bidder may be required toafford that bidder notice and an opportunityfor a hearing.38 The project in question maybe enjoined by a court until factual and legalissues have been resolved. If the agency’s de-termination of non-responsibility is not upheld,the agency faces two undesirable choices: (1)awarding the contract to the lowest bidder,whom the agency has already determined isnot qualified, or (2) starting from scratch byrebidding the work. In either case, the projectin question may be substantially delayed.

In some cases, the use of prequalification mayavoid delays associated with bid protests basedon responsibility determinations. First, it maybe less likely that a challenge to the lowestbidder’s qualifications will be made or be suc-cessful. The agency’s good faith selection andapplication of lawful qualifying criteria is likelyto result in a pool of bidders comprised entirelyof contractors with demonstrated credentials.Second, a challenge to the qualifications of aprequalified low bidder may face proceduralhurdles if brought in the guise of a bid protest.A bidder protesting an award to a prequalifiedbut assertedly unqualified contractor may havelimited ability to make a successful legal chal-lenge. At least one court has held that a chal-lenge to the qualifications of the bidder must bemade in connection with the agency’s decisionto prequalify that bidder.39


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Finally, even in those cases in which a con-tractor denied prequalification seeks to enjoinan agency from awarding a contract or con-tracts, the existence of a prequalification pro-gram may provide the agency with a litigationadvantage. An agency’s decision to denyprequalification generally will be reversed by acourt only where the agency’s decision is arbi-trary or capricious.40 A court is unlikely to over-turn an agency’s decision where the agencyuses a lawful program and denies pre-qualification in good faith using a process thattreats all applicants in the same manner. Inaddition, the agency may have procedural de-fenses it can assert against the disqualified con-tractor. For example, if a contractor deniedprequalification has the right to take an admin-istrative appeal, and fails to do so, it may bebarred from pursuing a bid protest on the basisthat it failed to exhaust its administrative rem-edies.41 Similarly, where an agency usesprequalification for its general constructionneeds, and the decision to deny prequalificationto a contractor is independent of a specificproject, a court may be reluctant to enjoin anentire construction program based on the de-nial of prequalification to a single contractorwho cannot show that it would be the lowestbidder on any particular contract. There arecases, however, in which an agency has beenenjoined from awarding contracts in connec-tion with its decisions to deny a contractorprequalified status.42

� The Limitations and Drawbacks of Prequalification

While there are many benefits toprequalification, limitations and drawbacksexist as well. Among the asserted problems withthe use of prequalification programs are that(1) developing and implementing objectiveprequalification criteria is difficult, (2)prequalification is costly both to agencies andto contractors, (3) qualified contractors maychoose not to participate in such programs dueto administrative costs or other considerations,

and (4) prequalification may operate to restraincompetition by precluding new entrants into aconstruction niche.43

The possibility that qualified contractors willchoose not to participate in prequalification pro-grams may increase in certain circumstances.Where prequalification is widely used in a juris-diction, such as by numerous cities and specialpurpose districts within a county, contractorsmay find it cost prohibitive to apply for andmaintain prequalified status. Becauseprequalification programs ordinarily are notuniform, a contractor cannot simply maintain astandard application for submission to eachagency requiring prequalification. Instead, sepa-rate applications typically must be completed foreach agency. In addition, prequalified status isusually limited in duration and the contractormust reapply for such status periodically to re-main eligible to bid on contracts. Thus, in con-trast to securing a contractor’s license, whichpermits a contractor to perform work on a state-wide basis, securing prequalified status only givesthe contractor a right to bid on work for a par-ticular agency and that status is usually limitedin duration. The increased overhead associatedwith prequalification operates to reduce acontractor’s profitability by increasing its indi-rect costs. And this increase is not directly linkedto revenue generating activity, such as bidding,because securing prequalified status is merely aprelude to being able to bid. Qualified contrac-tors, therefore, may self-winnow the ranks ofbidders by limiting the number of jurisdictionsin which they decide to prequalify.

If qualified applicants shun prequalification,one of the primary purposes of adopting thepractice is thwarted. Agencies adopt pre-qualification programs to ensure that onlyqualified contractors will ultimately be hired.Moreover, the decision of a number of contrac-tors not to participate in prequalification pro-grams has at least three potentially adverse ef-fects on competition. One is that the number ofbidders is restricted, which in turn operates as


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a constraint on competition because fewer bidsare submitted. Thus the agency may find thatit is not receiving significant cost savings frombidding activities. A second adverse effect isthat the qualified bidders’ capacity may itselfbe constrained if the agency has a substantialnumber of projects. Contractors cannot absorband effectively perform an unlimited numberof projects. Where the agency’s workload chal-lenges the capacity of its pool of qualified bid-ders, the agency may find itself receiving lack-luster performance. Third, if prequalificationoperates to limit bidding to a handful of con-tractors, the possibility of collusion may increase.And even if the qualified bidders do not collude,contractors may submit higher bids where mul-tiple projects are advertised based on their in-dependent yet mutual recognition that no con-tractor will try to secure all of the awards.

Another significant limitation to prequali-fication is that it is more time-consuming andexpensive for the procuring agency than the tra-ditional method of determining responsibility.Even aside from the cost of establishing crite-ria, questionnaires, scoring systems, and pro-gram rules, prequalification requires an agencyto review the qualifications of multiple poten-tial bidders. The agency must have sufficientstaff to review applications and address appealsor hire a consultant to perform those functions.In contrast, under the traditional approach, anagency typically reviews only the qualificationsof the low bidder(s) and perhaps the two orthree next lowest bidders to determine whetherthey are responsible contractors. As a conse-quence, an agency need not devote resourcesto evaluating the responsibility of ten or morebidders who might seek to be prequalified.

� The Elements of a Prequalification Program

Prequalification programs generally containfive general components: (1) qualifying crite-ria, (2) a standardized questionnaire, (3) a sys-tem used to score the questionnaire, (4) an ap-peals process that is made available to contrac-

tors whose applications are denied, and (5) rulesapplicable to the functioning of the program.

The criteria an agency uses to prequalify con-tractors may be specified by statute or may sim-ply mirror the criteria used for making post-bid responsibility determinations.44 Exceptwhere legislation specifies the only qualifyingcriteria that may be considered, the criteria arechosen by the agency through a variety ofmeans—consultants, public workshops, or theagency’s own staff.45 Qualifying criteria shouldbe objective in nature and allow the agency tocompare information supplied by applicants ina uniform manner.46 Subjective criteria, orthose that permit subjective evaluation, aremore vulnerable to attack because they presentthe potential for favoritism and unequal treat-ment of contractors.

A contractor’s compliance with the qualify-ing criteria is typically determined using a stan-dardized questionnaire that all applicants mustsubmit. These questionnaires may require thecontractor to provide information from othersources, such as owners on other projects, banksand sureties, insurers, and other governmentalagencies. For example, for an evaluation of itsfinancial capacity, the contractor may be re-quired to submit reviewed or audited financialstatements, a letter of bondability from a quali-fied surety, information concerning credit linesavailable to the contractor, and/or referencesfrom a bank or other financial institution.

The questionnaires are standardized in an ef-fort to ensure that all applicants are treated inthe same manner in the prequalification process.Such questionnaires also serve, in the case of anappeal from a denial of prequalification, as theprimary record for an agency’s decision.

An agency using prequalification must makesure that its questionnaire actually does solicitthe information it desires and that the questionsasked of contractors are reasonably clear andfree of doubt. Many prequalification question-naires ask whether a contractor or its manag-ing officers have been convicted of felonies, such


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as the submission of false claims. While suchquestions, if answered honestly, are likely toprovide the agency with information about con-victions of a contractor and its responsible man-aging officers, they may not apprise an agencyof indictments or pending civil litigation. Aftera public controversy has arisen, the agency mayregret that it did not word its questions morebroadly to collect information that, with the ben-efit of hindsight, it wished it had obtained.

A contractor submitting an application forprequalification should review the questionnaireclosely and must be careful to respond accu-rately. Prequalification questionnaires may haveambiguous questions, and this ambiguity maynot be apparent on the first reading. An inno-cent mistake on the contractor’s part may notbe viewed as innocent by the public agency andmay cause the agency to reject an applicationbased on a perceived misrepresentation. More-over, even if the agency is not suspicious of thecontractor’s reasons for submitting what ap-pears to be inaccurate information, the agencymay believe it is required to deny an applica-tion based on inaccurate or incomplete infor-mation in order to avoid showing favoritism tothe erring contractor. As discussed below,47 acontractor applying for prequalification with theCity of Manhattan Beach, California, failed toprovide examples of three “completed” projectsexceeding $10,000,000 in value because an ear-lier part of the questionnaire asked for infor-mation about projects “completed or in pro-cess.” The contractor could have provided pastcontract experience meeting the qualificationcriteria, but instead included a contract in pro-cess in responding to a question about completedprojects. The contractor’s prequalification ap-plication was denied as a result of this mistake.

Even where a contractor exercises care in re-sponding to its queries, such questionnaires of-ten contain unintended pitfalls that are not ap-parent on their face. For example, there areoften requests for relatively innocuous informa-tion about the form of business organization

through which the contractor operates (e.g.,partnership, joint venture, corporation). Insome cases, the answer to this question may bevery simple, such as in the case of an corpora-tion that is in fact incorporated. However, thequestion may not be so simple where two ormore contractors team up in a joint venture forthe purpose of a costly and complex project. Inone case, an agency prequalified a contractorbased on the contractor’s response to a ques-tion that indicated that it was a “joint venture.”The prequalified applicant had structured thearrangement between its constituent “partners”as a limited liability corporation. The applicantwas the lowest bidder on the project, but theagency refused to award it the contract becausethe agency considered a joint venture to be apartnership arrangement in which each of thejoint venturers was jointly and severally respon-sible for the obligations of the entity. The con-tractor argued that a joint venture relationshipneed not be structured as a partnership butcould also be a limited liability company. Theagency’s decision was upheld against a chal-lenge by the contractor on the basis that theagency’s conception of a joint venture was notan abuse of discretion.48

Once the contractor submits itsprequalification application or questionnaire, itsresponses are evaluated using a pre-establishedscoring system to determine whether it meetsthe minimum requirements for prequalification.Despite its appearance as an objective testingdevice, the scoring system reflects many quali-tative judgments by the agency or its consult-ants as to the appropriate weight that shouldbe given to different types of information. Acontractor, for instance, that is well-capitalizedand has a strong history of successful comple-tion of projects may not be grantedprequalification if a scoring system penalizesthe contractor for safety violations or prevail-ing wage violations. Scoring systems mayweight some answers in a manner that auto-matically disqualify an applicant, such as a re-cent civil judgment or criminal conviction for


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making false claims to a public agency. Thescoring systems are typically made availableto contractors, and contractors should calcu-late their scores before submitting their appli-cations. Knowing the approximate score mayenable the contractor to avoid denial of itsapplication by presenting information thatmitigates what otherwise might be a disquali-fying score.

In the event that the contractor’s applicationfor prequalification is denied, there is usuallythe opportunity for appeal. This allows the con-tractor to learn the reasons for the denial andmay permit it to supply additional informationthat may cause the agency to reverse its posi-tion. Contractors are usually required to makesuch appeals very shortly after an applicationis denied. Where a hearing, as opposed to writ-ten submissions, is permitted, the hearing is in-formal in nature and may consist of little morethan a meeting with the head of theprequalification program or the agency’s chiefcontracting officer. Depending on the program,a further appeal to the governing body of theagency may be available; otherwise, thecontractor’s recourse is to the courts.

� Subcontractor PrequalificationThe concept of prequalification of subcontrac-

tors raises interesting issues at several levels.Some programs require prequalification of sub-contractors while others do not, and those thatdo differ in their scope. Some require only lim-ited prequalification, such as safetyprequalification, while others require subcontrac-tors to prequalify on a broad range of criteria.

Programs requiring prequalification of sub-contractors permit general contractors to useonly subcontractors who have been prequalified.General contractors therefore have an incen-tive to encourage subcontractors with whomthey have good relationships or wish to workto prequalify. The prequalification of subcon-tractors restricts the flexibility of a general con-tractor that is preparing its bid because the gen-

eral contractor is limited to the pool of subcon-tractors who have prequalified.

A public agency requiring prequalificationof subcontractors should evaluate theprequalification program carefully to ensurethat it is coherent and consistent with appli-cable subcontractor listing laws. For example,an agency that requires a general contractorto list its subcontractors in the generalcontractor’s prequalification application maycreate a problem for the general contractor inconnection with the subsequent bidding pro-cess. Subcontractor listing laws may require ageneral contractor to list subcontractors it in-tends to use for more than a certain percent-age of the work and preclude the general con-tractor from using other subcontractors for thatwork if it is awarded the contract.49 But re-quiring the general contractor to list its sub-contractors in a prequalification applicationmay be putting the cart before the horse. Atthe time of submitting the prequalification ap-plication, the contractor often will not haveprepared a bid or determined which work itintends to subcontract or which subcontrac-tor it intends to use for that work. Thus, pub-lic agencies should carefully consider whetherto require general contractors to list subcon-tractors in their prequalification applications.

� A Case in Point: The City of Manhattan Beach Police & Fire Facility Project

The Police and Fire Protection Project beingconstructed by the City of Manhattan Beach,California, provides a good case study of howprequalification programs operate in the con-text of Project Specific Prequalification. TheCity advertised for interested contractors to sub-mit prequalification applications for the project,and twenty firms requested applications.50 Ofthese twenty contractors, fifteen submitted ap-plications by the deadline.51 Seven of those ap-plications were granted and eight were re-jected.52 Five of the contractors whose applica-


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tions were rejected appealed the denial of theirapplications.53 The construction managementfirm hired by the City to oversee theprequalification program approved one of theappeals and rejected the remaining four.54

Thus, of the original twenty contractors whorequested applications, only eight of the con-tractors ultimately were prequalified.

The prequalification questionnaire each con-tractor was required to submit included threegraded sections, each of which needed to bepassed by the applicants.55 The first section in-cluded proof of licensing, a statement indicat-ing bondability, submission of relevant pastproject information, information concerning thecontractors’ construction management philoso-phy, and certification of the contractors’ recordfor worker safety.56 Relevant prior projects wereprojects completed within the previous five yearsvalued in excess of $10,000,000. To be pre-qualified, applicants had to demonstrate thatthey had completed three such projects duringthe applicable period, one of which was a Cali-fornia public works project that met at least twoof four specific criteria.57 The second gradedsection included 23 questions concerning anapplicant’s business history, its organizationalperformance, and its compliance with civil andcriminal laws. Each question was worth a setnumber of point.58 The last section consisted of13 questions concerning the relevant projectsidentified in the first section, each of which alsowas worth a set number of points.59

As mentioned, five of the applicants appealedtheir denial of prequalified status. The one ap-plicant whose appeal was approved demon-strated that the projects it submitted as relevantwere public works projects, which had not beenapparent to the reviewers at the time they con-sidered the application.60 One of the applicantswas disqualified because the value of one of itssubmitted projects was $9,979,124, or $20,876less than the established $10,000,000 threshold.61

Another applicant was rejected because a $24million dollar project it had listed was still under

construction at the time the application was sub-mitted. The applicant argued that the projectwas phased and that the completed phase satis-fied the $10 million criterion.62 Another appli-cant failed to supply correct contact informationfor project owners of its listed prior projects, andits attempt to submit corrected contact informa-tion was rejected. The final appealing applicantfailed in a number of different respects to satisfythe prequalification criteria.63

The City Council’s consideration of the appealswas instructive.64 It voted to approve, withoutdiscussion, the appeal of the contractor that wassupported by the construction management firmoverseeing the prequalification program. Thecontractor, whose relevant projects included onevalued at $20,000 less than the $10 millionthreshold, appeared at the Council’s meeting insupport of its appeal. The contractor explainedthat the prequalification form was ambiguousbecause it asked for projects “completed or cur-rently in process.”65 The contractor also pre-sented the City Council with information aboutother completed projects, not included in the ap-plication, that exceeded the $10 million thresh-old.66 Ultimately, the City Council voted 5-0 todeny that appeal, with councilmembers takingthe position that although the contractor cer-tainly seemed qualified, it would be unfair toother contractors to permit a deviation from therules, that the rejection of the appeal was unfor-tunate but that the City needed to stand by itscriteria, and that permitting the deviation wouldinvite other appeals.67 The contractor that hadsubmitted, as relevant experience, a two-phaseproject of which only one phase was complete,also appeared before the Council. After a briefexplanation about the project, the City Councilsummarily voted to deny the appeal for the samereasons that it denied the other appeal.68 Nocontractor representatives appeared to supportthe other appeals and those appeals were sum-marily denied.69

At first glance, the decisions made by theCity Council in rejecting the appeals of two of


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the contractors may seem harsh. One of theprior projects barely missed the dollar thresh-old set by the City and the other seeminglyqualified as to the completed part of the work.The City Council acknowledged that those twocontractors were qualified to perform the work.In fact, one of the councilmembers stated asmuch, and but for one criterion the contrac-tors appeared to be well qualified to under-take the project. Both contractors, moreover,appeared to have reasonable explanations tosupport the position that other projects theyhad performed would qualify if the contrac-tors were permitted to supplement their ap-plications.

The City Council likely would have been jus-tified, as a matter of legislative discretion, inreaching the opposite conclusion and grantingthe appeals on the grounds that there was aminor deviation from the program require-ments. In the context of bids on public worksprojects, a public entity can waive minor de-viations where a bid is not completely respon-sive as long as the deviation in question doesnot give the potentially non-responsive biddera competitive edge over other bidders.70 TheCity Council could have waived the asserteddefects based on the minor deviation principleas well, particularly considering that the con-tractors were not submitting bids butprequalification applications, and thus no com-petitive edge was gained in the bidding pro-cess. Bidding would not commence untilprequalification was complete.

On the other hand, counterbalancing con-siderations were apparent in the CityCouncil’s decisions. First, the record of deci-sion made clear that the City placed a highvalue on assuring equality in treatment of allapplicants. For this reason, the City decidedthat no information would be considered thatwas not apparent from the application itself.Prior to submission of the application, the Cityalso allowed a two-week period for questions.Based on this procedure, the City rejectedattempts by contractors to supplement their

applications through the submission of addi-tional information and held contractorsstrictly to that standard. In considering theappeals, moreover, the City Council took intoaccount fairness to other applicants, theprecedential effect of granting the appeals,and the importance of the criteria establishedfor prequalification. The history of this casemakes clear the importance of carefully read-ing and understanding a prequalification ap-plication or questionnaire before submittingit to a public agency.

Substantive Legal ConsiderationsEach component of a prequalification pro-

gram carries with it potential pitfalls for agen-cies that develop and administer such pro-grams and contractors seeking to beprequalified. Prequalification programs mayoperate to limit the number of potential bid-ders, and not simply due to the exclusion ofcontractors who are deemed to be unquali-fied. Because prequalification may limit com-petition, courts may be wary of such programswhere they significantly restrict the numberof bidders. This can occur if the qualifyingcriteria are set inordinately high, the criteriaplay to the strengths of a single contractor orsmall class of contractors, or are subjective innature and permit the discretionary exclusionof contractors for reasons that may be arbi-trary or capricious. An agency that adoptscriteria that are not authorized by statute maybe enjoined from using the prequalificationprogram entirely, face a court order enjoiningperformance of work under contracts thatalready have been awarded, or both.71

Because of the great variation inprequalification programs, substantive con-siderations regarding their validity may dif-fer from program to program. For both theagencies that adopt prequalification pro-grams and contractors seeking prequalifiedstatus, it is important to understand the po-tential legal pitfalls.


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� Agencies Using Prequalification for the First Time

With the expanding use of prequalification bypublic agencies, litigation can arise concerningthe development and administration of aprequalification program. Some public agencieshave used prequalification for many years andhave had the opportunity to learn from experi-ence. However, many public agencies are nov-ices with respect to prequalification. Agenciescontemplating the use of prequalification for thefirst time must anticipate, as with other new pro-grams and processes, that there will be a learn-ing curve associated with their adoption ofprequalification. Such agencies should consultcounsel experienced with prequalification pro-grams to make sure that (1) they have the au-thority to adopt such programs, (2) the criteriathey are using are authorized, (3) the question-naires they will use will pass muster in potentiallitigation, (4) the scoring system they plan to useis rational, objective in nature, and treats con-tractors equally, and (5) program rules are law-ful. These agencies should also consult otheragencies that have established prequalificationprograms. Such agencies may be helpful in pro-viding lessons learned from prior experience. Inaddition, a cottage industry of prequalificationconsultants, consisting mainly of established con-struction management firms, has formed thatmay be an important resource in planning orcarrying out a new program.

� The Context In Which Prequalification Programs Are Challenged

Before considering the substantive legal issuesassociated with prequalification programs, it isimportant to understand the context in which achallenge to the denial of prequalification ismade. State laws vary considerably in mattersof procedure. Depending on the jurisdiction, acontractor challenging the denial of pre-qualification ordinarily may commence the pro-cess by filing a petition for a writ of mandatedirecting the agency to grant the contractorprequalified status, a civil complaint for declara-

tory or injunctive relief seeking the same rem-edy, or a combination of both. Depending onthe circumstances, a contractor may also seek toenjoin the agency’s use of prequalification en-tirely or may request injunctive relief precludingthe agency from awarding a contract or contractsuntil the contractor’s legal challenge is resolved.

Subject to the law of the state in which theproceeding is brought, a contractor filing a pe-tition for a writ of mandate may be requiredto show that the agency is required by law togrant the contractor prequalified status. If so,a contractor that has complied with the re-quirements for, and meets, the standards forprequalification may be entitled to relief on thebasis that the agency’s decision to prequalifythe contractor is ministerial and may be com-pelled by the court.72 A writ of mandate is de-signed to compel an agency to perform an actwhen it has a duty to do so in a specific man-ner based on the requirements of law.73 A writof mandate is not typically available, however,to compel the agency to exercise its discretionin a particular way.74 Accordingly, if a con-tractor has satisfied all of the requirements tosecure prequalified status, and no other legalreason exists to deny the application, a writ ofmandate may be issued to compel the agencyto prequalify a contractor.75

Declaratory and injunctive relief operate ina similar manner but the legal requirements forsecuring such relief may differ in a particularcase. Declaratory relief consists of a legal rul-ing by a court resolving a dispute concerningthe parties’ rights and obligations under a spe-cific set of facts. Injunctive relief operates toenforce a declaration of rights but may begranted with or without declaratory relief. Acontractor initiating a lawsuit will typically re-quest a temporary restraining order on an emer-gency basis or an award of preliminary injunc-tive relief. Such relief, if granted, is operativeimmediately until the case is finally determinedon its merits. Depending on the law of the statein which the proceeding is brought, in order toobtain such relief a contractor must usually dem-


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onstrate a likelihood of success on the merits ofits claims and the presence of irreparable harmshould the relief not be granted.76

An agency’s decision denying prequali-fication will generally not be reversed unlessit is arbitrary or capricious, lacking in eviden-tiary support, contrary to established policyor law, or violates due process.77 In manycases, establishing that an agency’s denial ofa prequalification application is arbitrary orcapricious may be difficult. If the agency ap-pears to be acting in good faith but has exer-cised its discretion in a debatable way, thecourt is likely to uphold the agency’s deci-sion.78 It is usually not arbitrary or capriciousfor an agency to make a reasonable determi-nation about a matter on which reasonablepeople could disagree. An agency’s decisionrequiring contractors to be certified by indus-try or trade groups, for example, has beenupheld even though the complaining contrac-tor had past experience performing the typeof work for which the certifications were re-quired.79 In dismissing one such complaint,the court observed that the agency staff didnot have the resources to audit contractorsand thus depended on certification by an in-dustry group.80

A contractor can increase the likelihood ofestablishing that the agency’s decision is arbi-trary or capricious by demonstrating someunique circumstance that calls into questionthe good faith of the agency making the de-termination. An agency’s decision to revoke acontractor’s prequalified status may be foundarbitrary or capricious where it is apparentthat the agency’s decision arises from politicalconsiderations independent of the contractor’scapabilities and past performance.81 Similarly,procedural irregularities in the process usedby the agency to consider revocation of acontractor’s prequalified status may also sup-port a determination that the agency acted inan arbitrary and capricious manner.82 Like-wise, an agency’s failure to investigate the

grounds for disqualification of a contractor mayindicate that the agency’s decision lacks a suf-ficient factual basis.83

As discussed above, other grounds also ex-ist for setting aside an agency’s decision, suchas where the agency’s decision is contrary tothe law. A court is generally not required toshow deference to an agency’s legal determi-nations because the determination of points oflaw is a matter for the courts to resolve. Wherethe question is whether an agency is entitledto adopt a prequalification program, the issueis purely one of law that the court can deter-mine regardless of the agency’s own decision.84

However, there are some legal questions onwhich the courts defer to agencies. Courts of-ten give considerable weight to an agency’s in-terpretation of statutes that its administers andits own substantive and procedural rules.85

Courts may also defer to an agency where theissue of the contractor ’s qualifications is of alegal nature but determination of that issueimplicates an agency’s discretion. For example,where a group of contractors prequalifies onthe basis of joint venture status, but the busi-ness structure of the joint venture arrangementis a limited liability corporation, an agency’sdecision to reject the bid of the limited liabilitycorporation has been upheld.86

Agencies may also have procedural or sub-stantive defenses to a contractor ’s case. Onedefense that may be available is the doctrine ofexhaustion of administrative remedies. If therules of a prequalification program permit acontractor to administratively appeal a denialof prequalification, and the contractor fails toexercise its right to such an appeal, the contrac-tor may be barred from bringing a subsequentjudicial challenge.87 Other possible defensesmay include laches and waiver, which are im-plicated where a contractor waits too long tobring a challenge to the agency’s decision.88

These defenses are likely to be raised where acontractor seeks to enjoin contract awards byan agency well after the agency has denied the


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contractor prequalified status or after it has al-lowed construction to commence.

� Statutory AuthorizationAn agency’s decision to adopt a prequali-

fication program is usually dependent upon astatutory grant of authority permitting the agencyto prequalify contractors to bid on public con-tracts. Absent legislative authorization, a courtmay invalidate a prequalification program on theground that the program contravenes competi-tive bidding laws.89 While some courts have heldthat public agencies may adopt prequalificationprograms without a specific legislative grant,90

courts are likely to scrutinize such programs care-fully when they are not authorized by the statelegislature. This is particularly true where anagency employs a prequalification program lack-ing objective standards or criteria, thus raisingthe possibility of favoritism.91

Courts have generally been highly protec-tive of the competitive bidding laws and mayperceive prequalification as a threat to thepublic interests that these laws were designedto advance. Those interests including guard-ing against favoritism, improvidence, extrava-gance, fraud, and corruption; preventing thewaste of public funds; and obtaining the besteconomic result for the public.92 The courtsgenerally give competitive bidding laws anexpansive interpretation consistent with theliberal construction generally afforded to stat-utes protecting the public interest.93 As a re-sult, a court may be reluctant to accept whatit perceives to be a departure from conven-tional standards applicable to competitive bid-ding. Absent a statutory grant of authority,concern may exist that public agencies willadopt programs that unduly constrain the po-tential pool of bidders on public works projects.A court may reason that any change to thestandard post-bid procedure for determiningresponsibility should be made by the legisla-tive body that enacted the competitive biddinglaws. A contractor denied prequalified statusshould check to see whether the agency deny-

ing an application for prequalification is au-thorized by statute to adopt such a program.

� Attacks on the Qualifying CriteriaWhere prequalification programs are autho-

rized by statute, the enabling legislation mayidentify the criteria that an agency is entitled touse in prequalifying contractors.94 Where a pub-lic agency includes criteria in its program thatare not authorized by statute, injunctive reliefmay be available to contractors who are deniedthe ability to bid on a project.95 On the otherhand, if a state legislature authorizes the use ofthe specific criteria, that legislative authoriza-tion is likely to be beyond attack. The legisla-ture has the authority to place limits on com-petitive bidding statutes that it has establisheditself. Absent legislation that is patently irration-al, discriminates against interstate commerce,or is unlawful in other respects, legislation man-dating or authorizing the use of particular cri-teria will usually be upheld.

Enabling legislation, however, often paintswith a broad brush and identifies very generalcriteria that may be used. Broadly stated criteriamay create ambiguities. It may also be unclearwhether such criteria are intended to be exhaus-tive or merely illustrative. Public agencies arerequired to translate these broad standards intospecific requirements. A statute may, for example,permit agencies to take into account the finan-cial condition or prior experience of the contrac-tor in determining its qualifications.96 The agencymust then determine how to take such criteriainto account, what information to request of con-tractors, and what weight to give to the infor-mation contractors submit.

While the use of prequalification criteria speci-fied by statute presumptively protects an agencyagainst attacks directed against those criteria, theagency’s use of the criteria may be challengedwhere they are employed in a manner that is overlyrestrictive. The criteria may operate to limit greatlythe pool of potential bidders, or they may favor aselect group of contractors. For example, in de-


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termining the prior experience of contractors, anagency may require them to have successfullycompleted prior projects for that same agency. Theuse of such criteria, while relevant to thecontractor’s past experience, would restrict thepool of potential bidders and ensure that contrac-tors that previously performed work for theagency would have a lock on future work.

Similarly, while an agency may be authorizedto consider a contractor’s financial condition,it may set the bar so high that the criteria pre-clude prequalification of any but a small groupof contractors. Public agencies often requirecontractors to submit financial statements inorder to prequalify. Many agencies accept “re-viewed” financial statements—that is, financialstatements that are reviewed by a certified pub-lic accountant but not audited. Such statementsare based largely on representations of man-agement and involve little if any testing by theaccountant. An agency that requires contrac-tors to submit audited financial statements,rather than reviewed financial statements, mayrestrict the bidding pool because many contrac-tors do not have audited financial statements.Their cost, moreover, can be a significant com-ponent of overhead, and smaller contractors arenot likely to have them.

An agency’s using prequalification criteria ina manner that unduly restricts the pool of po-tential bidders may be subject to attack on thebasis that the criteria exceed the agency’s au-thority. Where the prequalification criteria ex-clude clearly responsible contractors, the pro-gram may run afoul of court rulings that pre-clude agencies, in the case of post-bid responsi-bility determinations, from awarding contractsto the most responsible, but not the lowest, bid-der.97 The courts have not resolved the ques-tion of whether an agency may use more rigor-ous criteria for prequalification than it uses forresponsibility determinations. As a result, acourt may find it unlawful for an agency to re-quire contractors to be “extra-qualified” in or-der to be prequalified.

� UniformityUniformity in the treatment of contractors

occupies a fundamental role in the legality of aprequalification program. All applications mustbe judged by the same criteria and be deter-mined in the same manner. The requirement ofuniformity may be expressly stated in statutesauthorizing prequalification programs98 or maybe implicit in statutes requiring competitive bid-ding and the award of contracts to the lowestresponsible bidder.99

Uniformity in treatment was first recog-nized as a requirement for a lawfulprequalification program by the Pennsylva-nia Supreme Court.100 In that case, the Cityof Philadelphia adopted a prequalificationordinance that gave city personnel subjectivediscretion to determine which applicants weresatisfactory. Those that were were placed ona “white list” of approved bidders. Rejectedapplicants could appeal, but the appeal boardwould not have access to information con-cerning bidders whose applications were ap-proved. As a result, the Board could not com-pare the qualifications of a rejected applicantwith those of applicants who were pre-qualified. The Pennsylvania Supreme Courtviewed the prequalification program as a po-tential instrument of favoritism and held thatit was unlawful because it did not treat allapplicants in a like manner.

[A]ll bidders on a municipal contract mustbe accorded the same treatment, for not oth-erwise can the requirements of the [com-petitive bidding] statute be compliedwith….[The City] may not impose condi-tions on one prospective bidder, which arenot imposed upon all; nor may [it] enforcea method by which, through favoritism,one person may be conclusively authorizedto bid on a pending contract, while an-other, equally as responsible and perhapsmore so, is wholly excluded from even sub-mitting a bid.101

A prequalification program that treats somecontractors differently than others may there-fore violate the principle of uniformity in treat-ment.


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� The Use of Objective StandardsAnother general requirement, either expressly

mandated by statute or implicit in determiningresponsibility, is the use of objective standardsin prequalifying contractors.102 Subjectivity inthe evaluation of information supplied by con-tractors presents a potential for favoritism andmay be difficult for an agency to justify as asignificant component of a prequalification pro-gram. Establishing objective standards soundseasier than it often is in practice. Certainprequalification criteria are more capable ofobjective determination than others.

Financial capacity seemingly would be a clearexample of a criterion that can be evaluatedobjectively. But even that requirement can op-erate, in some contexts, in a subjective manner.A contractor’s stated working capital often de-rives from estimates about the status of contractsin process, estimates that themselves may besubject to manipulation. Even though anagency may request information that seeminglyis objective in nature (e.g., financial statements),permitting contractors to submit reviewed, asopposed to audited, financial statements maydisadvantage those contractors who have theirfinancial statements audited because reviewedfinancial statements are not subject to the morerigorous standards applicable to audited finan-cial statements.

Requirements relating to the prior experienceof the applicants likewise seem objective in na-ture. Often, however, prequalification programsrequire contractors to supply client referencesconcerning completed projects. These refer-ences are themselves potentially laden with sub-jective information. Whether a contractor isqualified may depend on who provides the ref-erence. Different representatives of an ownermay have sharply different attitudes and assess-ments of the same contractor and the same per-formance. In addition, some owners may beinclined to overlook minor deviations from plansand specifications or may not be concernedabout delays in completion of a project for rea-

sons peculiar to the project itself. Other own-ers, by contrast, may nitpick a contractor overthe most minor circumstances.

Objectivity in the assessment of a contractor’squalifications may also be complicated by thescoring system employed. Information submit-ted by contractors in their applications isweighted in a predetermined manner by a sys-tem adopted by the agency. The weighting ofthe answers and other information suppliedwith a prequalification questionnaire involves,to a significant extent, policy determinationsabout the relative importance of certain con-tractor characteristics. How much weight, forexample, should an agency place on acontractor ’s safety record versus thecontractor ’s financial condition versus thecontractor’s prior work history? A contractordisqualified on the basis of a low score may wantto take a closer look at how the agency weightedinformation in reaching that score. If the scor-ing system is nonsensical, it may be susceptibleto challenge as arbitrary or capricious.

Another problematic area concerns informa-tion that is not requested of a contractor butthat is germane to the contractor’s qualifica-tions. A new contractor that cannot demon-strate a sufficient prior history of performancemay nevertheless be highly qualified because itis a startup formed by top players from anothercontractor. Or a contractor whose financialstatement does not appear strong on its face maynevertheless have resources at its disposal thatare not reflected in the financial statement. Acontractor that finds itself in a unique positionbecause the prequalification program excludesconsideration of information material to itsqualifications may have a basis for challengingthe criteria used by the agency.

� Lawful Adoption of the ProgramEven if a public agency is authorized to adopt

a prequalification program, the agency mustadopt the program in the manner prescribedby law. The manner in which an agency must


20

adopt a prequalification program differs fromagency to agency and from state to state. Acity, for example, may be permitted to adopt aprequalification program only by ordinance.Other agencies may be subject to the require-ments of state administrative procedure acts.103

If an agency does not follow the procedure re-quired to adopt a prequalification program, theprogram may be unlawful and the agency pre-cluded from using it.104 It is not unusual for anagency to adopt rules without following the for-mal process required by law.

� Other Substantive GroundsA contractor may have other grounds for

challenging a denial of prequalified status thatarise in the context of particular factual situa-tions. For example, federal bankruptcy law maylimit a public agency’s ability to deny a con-tractor prequalified status based solely on acontractor’s status as a bankruptcy debtor.105

At least one court has held that it is unlawfulfor a public agency to remove a contractor froma list of prequalified bidders based upon thecontractor’s filing of a bankruptcy petition.106

Prequalification programs may also presentquestions of unlawful discrimination on thebasis of race or other prohibited factors. Suchquestions may be presented where the rules ofa prequalification program are alleged to oper-ate in a manner that excludes disadvantagedbusiness enterprises from securing prequalifiedstatus,107 or where an agency’s rules establishpreferences for minority business enterprises.108

It is important for contractors and owners aliketo consider substantive federal and state lawsthat may be implicated in particular situations.

� Procedural RulesJust as with prequalification criteria, the rules

applicable to a prequalification program mayoperate to restrict the pool of potential bidders.For example, it can be argued that an agencythat does not provide contractors with sufficientadvance notice of the need to prequalify in or-der to bid on work the agency plans to adver-

tise restricts the number of bidders. Similarly,where an agency fails to provide a contractorwith a prompt opportunity to contest denial ofan application for prequalification, or repeat-edly postpones a hearing it has agreed to pro-vide, a court might intervene. Program rulesthat are overly restrictive concerning the fre-quency of applications for prequalification simi-larly may provide a ground for challenge. Anagency that too greatly limits the frequency ofapplications may be restraining competition andsubject to legal challenge.

Administrative Challenges toDenial of Prequalification:Procedural Considerations

A contractor denied prequalified status facesa loss of potential work from the entity reject-ing its application. Public entities with estab-lished prequalification programs may also of-ten be the entities engaged in ongoing construc-tion programs and therefore control a signifi-cant part of the public construction market. Acontractor denied prequalification may face sec-ondary consequences where subsequent appli-cations are submitted to different public enti-ties whose questionnaires ask whether the ap-plicant has been denied prequalified status byany other public agency.

Prequalification programs usually containprovisions allowing applicants to appeal theagency’s denial.109 The appeal is administra-tive in nature, typically informal, and is madeto the same agency that rejected the contractor’sapplication. Such hearings have been held tosatisfy the requirements of the due processclause of the United States Constitution.110 Inthe absence of an administrative hearing, theavailability of a post-denial state court hearingmay satisfy due process concerns.111

A contractor whose application forprequalification is denied may decide to foregoan appeal based on the view that trying tochange the agency’s mind would be futile. Such


21

subsequent court challenge. Depending on thejurisdiction, a court’s review of the agency’s de-cision may be confined to the information pre-sented to the agency in connection with its deci-sion to deny prequalification. In other words,whether the agency has acted arbitrarily or ca-priciously will often be considered by the courtprimarily (if not solely) on the basis of the infor-mation presented by the contractor to the agencyand other information forming the record onwhich the agency based its decision. Accord-ingly, the contractor ’s responses to theprequalification questionnaire and other infor-mation the contractor submits to the agency willbe the cornerstone of the record of decision thata court will consider. Therefore, a contractor thatbuilds a strong record relating to the deficienciesin the agency’s decision stands a better chanceof succeeding in a court challenge than a con-tractor who does not pursue an administrativeappeal or who does so in a perfunctory manner.

� Considerations Relating to AppealsA contractor should pay careful attention

to the appeal provisions of a prequalificationprogram. It is typically required to appealwithin a very short period following theagency’s decision. Depending on the struc-ture and language of the program, failure toappeal within the time and in the manner re-quired may result in the appeal’s being con-sidered waived and the contractor precludedfrom challenging the decision.114

Where an agency does have a process foradministrative appeals, that process is usuallyfairly straightforward in nature. Sometimes theadministrative appeal will be little more than ameeting with the agency’s contracting officer.The contractor often learns at the hearing, forthe first time, the reason(s) for denial of itsprequalified status.

Generally, if the agency refuses to change itsdecision, and the contractor seeks judicial re-lief, the contractor will be limited in its courtchallenge to the information in the administra-

an attitude may not be warranted and mayforeclose any possibility for relief if the contrac-tor later decides to mount a court challenge.

� Reasons to AppealExcept where a contractor clearly cannot sat-

isfy bona fide qualifying criteria, an adminis-trative appeal may be successful for a variety ofdifferent reasons. The agency may be usingunauthorized or outdated criteria in its pro-gram; the prequalification questionnaire maybe ambiguous, the agency may have incorrectlyscored the contractor’s application, the scoringsystem itself may be faulty, or the agency maydecide to waive a specific criteria in light of otherinformation the contractor provides. A face-to-face meeting with agency representatives mayenable the contractor to explain why the agencyshould reverse its decision or permit the con-tractor to provide additional information to sat-isfy the agency’s concerns.

Where an administrative hearing does notresult in a reversal of the decision, an adminis-trative appeal may be allowed to the governingboard, although not all prequalification pro-grams allow for further appeals within anagency.112 The governing board is often notclosely involved in the daily administrative op-erations of the public entity and its membersmay bring to an administrative appeal a per-spective different from that of the contractingofficers who run the entity’s operations. Thegoverning board may be more concerned aboutpolicy and appearance than about technicalcompliance with particular criteria.

Most importantly, where the contractor intendsto pursue judicial relief, using the appeal processis often a matter of legal necessity. A contractorwho foregoes an administrative appeal may beprecluded from filing suit, since a well-establishedlegal doctrine requires parties challenging agencydecisions to exhaust administrative remedies be-fore resorting to the courts for relief.113

Another important reason to pursue admin-istrative appeals is to build the record for any


22

tive record before the agency. In other words,the contractor’s preparation for the adminis-trative hearing may limit what it can presentin court.

To ensure that it is prepared for the hear-ing, there are several steps a contractor shouldtake in an effort to build a strong record. First,it should attempt to obtain a written state-ment, or at least an oral one, on the reason(s)for the agency’s decision and how the agency“scored” the disqualifying factor(s) in relationto other information. The contractor cannoteffectively appeal the decision unless thereason(s) behind it are clear. Having a writ-ten statement protects the contractor frommiscommunication and from the possible at-tempt by the agency to offer a different justifi-cation. An agency’s refusal to provide a state-ment may place it in a bad light before a courtby making it look evasive.

Second, the contractor must prepare a fulland persuasive case to argue that the agency’sdecision should be reversed. This includes thepreparation of written information, the collec-tion of affidavits, and the presentation of im-portant witnesses at the hearing. A contractoralso needs to keep in mind that the board ofthe agency may make the final decision. Asindicated above, the agency’s board is less likelyto be concerned with minor contracting issuesand more concerned with agency policy andits public appearance. In preparing an appeal,the contractor should include information thatmay be of concern to the board, such as thecontractor’s reputation for competent perfor-mance, prior projects the contractor has suc-cessfully completed for the agency, and infor-mation indicating that the prequalification pro-gram will undermine the competitiveness ofbids for projects advertised by the agency.

Third, a contractor should request the oppor-tunity to submit additional information beforethe agency makes its decision. If the contrac-tor is caught unprepared, or there is importantinformation the significance of which first be-

comes apparent at the hearing, such subsequentsubmissions may be crucial. Even if the agencydeclines its request, the contractor should sub-mit such information to the agency as quicklyas possible. A judge may more closely review amatter when an agency refuses to consider im-portant information that is submitted in a timelymanner by the contractor, particularly if theagency appears to be acting blindly for the sakeof expediency.

Contractors must also pursue their appealsdiligently. If a contractor is contemplating seek-ing judicial relief, such as an injunction, thelonger it waits to pursue that relief, the worseits position will be when the agency asserts de-fenses of laches and waiver.115 A contractorfaced with an agency that refuses to schedule ahearing on an appeal, schedules the hearing farin the future, or repeatedly postpones hearingsthat were promptly scheduled, may need to con-sider alternative strategies. Short circuiting theadministrative process entirely and seeking ju-dicial relief may be the best strategy.

� A Warning About Administrative Processes

Administrative processes may be opaque inthe sense that it is often difficult to determinewhether there even is an administrative appealprocess. Agencies differ in their levels of sophis-tication and the degree to which they make in-formation concerning appeals processes publiclyavailable, in general or in the form of regula-tions or guidelines, varies. Sometimes even themost sophisticated agencies may not have ap-peals procedures directly relating to disqualifi-cation, but they may have procedures that aregenerally applicable to appealing disputed de-cisions. It may be far from clear, based on thelanguage used in those general rules, that theyapply to a prequalification program. A contrac-tor who concludes that the general rules do notapply to a specific appeal may find itself sec-ond guessed by the agency or the courts. Courtsgive considerable weight to an agency’s inter-


23

pretation of the statutes it administers and itsown substantive and procedural rules.116 If theagency contends that its poorly worded appealrules apply to appeals of disqualification, a courtmay conclude that the agency is right.117

As a matter of precaution, contractors shouldalways ask about their right to an administra-tive appeal. If no administrative process existsto challenge an agency’s decision, the contrac-tor nevertheless has the constitutional right tobe heard.118 Moreover, if a contractor is toldthat there is no administrative appeal available,it should consider documenting that fact clearlyand unambiguously, preferably by obtaining aletter from the agency.

� Agency ConsiderationsFrom an agency’s standpoint, it is better to

have a well-founded basis for a decision not toprequalify a contractor than a questionablerecord. A poorly developed record may resultin the issuance of a writ of mandate requiringthe agency to grant the contractor prequalifiedstatus. Such a result, particularly where theagency does have a well-founded concern buta poorly documented record, is the worst casescenario for an agency. If the unqualified con-tractor is the low bidder on a subsequent con-tract, the agency may have no real options otherthan to reject all bids or to award the contractto a contractor the agency originally determinedis unqualified. In the latter case, subsequentdisputes over delays, claims, and changes maybe tainted by the agency’s overturned decisionto disqualify the contractor. Agencies, there-fore, should make sure to document for therecord the basis for their decisions.

In addition, it is important for an agency toensure that the process provided to the contrac-tor is fair and reasonable and that the agency’sgood faith is apparent from the record. Pettydisputes should be avoided as they tend to placethe agency in a bad light. Personal animositytowards the contractor should be avoided anddecisions made in a careful and balanced man-

ner regardless of the tension inherent in appealprocesses. At the end of the day, the judge willwant to be assured that the agency treated thecontractor fairly, and circumstances suggestingthe contrary may result in an adverse court rul-ing. On a more practical level, it is in theagency’s interest to have a fair process that en-courages contractor participation because, in theend, an agency needs qualified contractors toconstruct public works.

Revocation of Prequalified StatusA contractor who has been prequalified may

nevertheless lose its prequalified status for anumber of different reasons.

For example, it may come to the attention ofthe agency involved that the contractor know-ingly submitted materially false information inits application for prequalification. Or eventsoccurring after prequalification has been grantedmay adversely affect the contractor’s ability toperform work for the agency, such as where acontractor loses its surety and is unable to find areplacement. Other events may occur that causethe agency to lose faith in the contractor’s re-sponsibility in the area of safety, such as a stringof work-related injuries. Moreover, even absenta change in circumstances, courts have held thatpublic agencies are entitled to refrain fromawarding a contract to a bidder who submittedthe lowest bid where the bidder is determined tobe not responsible, notwithstanding the fact thatit has been prequalified.119

An agency’s decision to revoke a contractor’sprequalified status may have serious repercus-sions beyond the contractor’s relationship withthe agency involved and the contractor’s abil-ity to secure work from that source. Some agen-cies require that contractors disclose past de-barments in their prequalification applications.As prequalification gains increasing acceptance,and agencies become more expansive in thequestions they ask, it is likely that agencies willincreasingly request and rely upon actions takenby other agencies in deciding whether to


24

prequalify contractors.120 Agencies may ask inprequalification applications whether a con-tractor has been prequalified by other agencies,whether the contractor has lost its prequalifiedstatus, and, if so, why the contractor lost thatstatus. Thus, a contractor who receives a no-tice of intended suspension or revocation ofprequalified status needs to be mindful of thecircumstances and how those circumstancesmight be explained, and may need to considera challenge to the agency’s action to avoid theserious financial consequences of its potentialloss of prequalified status with other agencies.

Procedurally, the rules of a prequalificationprogram may authorize the agency to revoke orsuspend a contractor’s prequalified status onlyafter the contractor has been given notice andan opportunity to be heard. Even where theagency’s rules do not afford a contractor the rightto a pre-revocation hearing, a court may con-clude that due process requires such a hearing,because revocation of prequalification may betantamount to debarment, for which due pro-cess safeguards are provided.121 Becauseprequalified status enables a contractor to bidon work for an agency, a court may regard suchstatus as akin to a property or liberty interestnecessitating a pre-revocation hearing ratherthan a post-revocation hearing. Some courtshave held that revocation or suspension of acontractor’s prequalified status and denial ofawards the contractor otherwise would receivedoes not implicate a liberty or property interestand therefore does not require a pre-revocationhearing.122 However, whether an agency mustprovide a hearing before it revokes a contractor’sprequalified status or can act first and then pro-vide a hearing is not a settled matter, and a courtmay come out either way on the issue. Wherean agency does specify a pre-revocation hear-ing, it is likely that a court will hold the agencyto its own rules and enjoin an effort to imple-ment the revocation without a hearing.123

The same procedural considerations concern-ing challenges to the denial of prequalification

apply to challenges to suspension or revocationof prequalified status. The contractor must un-derstand precisely the basis for the suspensionor revocation and the factual information onwhich the agency is relying. It should fullyevaluate all the information pertaining to thereasons for the agency’s action and develop acase that either undermines the evidence onwhich the agency is relying or mitigates the ef-fect of the information that forms the basis ofthe agency’s decision. The contractor must un-derstand and follow all procedures for challeng-ing the agency’s decision.

An agency seeking to disqualify a contractoris likely to be adamant in its position if the basisfor revocation is the contractor’s submission offalse information or failure to include completeinformation. The purpose of prequalification isto ensure that an agency has a qualified pool ofresponsible bidders. Discovery by an agencythat a contractor has provided false informa-tion or has not been candid in its application islikely to raise serious concerns about the con-tractor.124 It has been held that a contract pro-cured through the submission of false informa-tion concerning the contractor’s qualificationsis voidable at the election of the agency.125 Thus,to the extent the contractor can demonstratethat the information submitted (or not submit-ted) resulted from mere inadvertence or ambi-guity in the application, that the informationthe agency believes is false is in fact true, or thatthere is no intention to mislead the agency, thecontractor may be able to reassure the agency.

The FutureThe courts have yet to confront an array of

potential issues associated with prequalificationprograms. However, with the growing use ofsuch programs, the legal issues associated withprequalification are likely to be litigated withgreater frequency. Some of these issues includethe effect such programs have on competition,the criteria used to prequalify contractors, theevaluation of these criteria through questionnaires


25

and scoring systems, and various matters of ad-ministrative law and procedural due process.Ideally, this guide will enable contractors and

Guidelines

These Guidelines are intended to assist con-tractors and agencies in connection with theirparticipation in prequalification programs. Theyare not, however, a substitute for professionalrepresentation in any specific situation.

Top Ten Guidelines for Contractors

1. Carefully read all program rules andquestions on prequalification applications.Questionnaires may not be clear and even ques-tions that seem clear may be ambiguous. If pro-gram rules permit it, ask for clarification whenyou do not understand a question on the appli-cation.

2. Be forthcoming in all aspects of yourapplication. Even an innocent mistake maybe viewed with suspicion. An agency thatdiscovers discrepancies, half truths, or omis-sions in your application is likely to deny yourapplication. Remember, one significant rea-son prequalification is used is to enable agen-cies to ensure that they are hiring trustwor-thy contractors.

3. Run your prequalification score beforeyou submit your application. Knowing howyou score may enable you to supplement yourapplication to avoid disqualifying scores or toplace yourself in a better position in the eventyou need to appeal a denial of yourprequalification application.

4. Pay attention to the time requirementsincluded in the program rules. Failure to do somay result in being precluded from bidding,being able to reapply in time to maintainprequalified status, and waiving appeal rightswhere an application is denied or prequalifiedstatus is suspended or revoked.

5. If your application is denied, consult anexperienced construction attorney quickly. Ap-peal processes have short durations and delaycan result in the inadvertent waiver of any rightto challenge the agency’s decision or result in adetermination that your legal rights are barredby laches.

6. Request and obtain in writing the rea-sons for the denial of your application, andevaluate whether the agency’s decision wasbased on a mistake or incorrect or incompleteinformation. Consider whether there is infor-mation not requested in the application thatmay affect the agency’s decision.

7. Try to find reasons that indicate theagency’s decision to deny prequalification doesnot make sense. Look closely at the question-naire and scoring system to see if they are il-logical in the way they solicit information orweigh the value of the answers. Does any partof the process permit the agency to make sub-jective determinations? Is there an objectivereason to believe the agency treated you differ-ently than other contractors (e.g., personal ani-mosity, politics, bias)?

8. Do not overlook the possibility that anagency lacks the authority to useprequalification or has employed criteria itis not authorized to use. Check the sourceof the agency’s authority to useprequalification and the particular criteriathe agency has used.

9. Know your appeal rights. Agency rulesconcerning appeals may be obscure or unpub-lished and may only be known by a few agencyemployees. If there is any doubt about your

agencies alike to avoid the many potential pit-falls associated with prequalification programsthat can lead to contentious and costly litigation.


26

References

right to appeal, make sure to ask if there is anappeal process and get the answer in writing.

10. Maintain good relationships with theowners of your projects. Remember that theseowners are the people who will be asked to rateyour work on their projects for the purpose offuture applications for prequalified status.Owners who feel burned by marginal or ques-tionable claims or litigation can be expected tovoice their displeasure.

Top Ten Guidelines for Public Owners

1. Verify that you have the authority toadopt a prequalification program, that you areusing authorized criteria, and that your pro-gram satisfies all other requirements of enablingstatutes or ordinances.

2. See to it that your program results in anadequate pool of potential bidders. Do not setyour criteria so high that they exclude quali-fied contractors. The more limited the pool ofbidders, the higher will be the bids on yourprojects and the greater will be the possibilitythat your program will be challenged in court.

3. Consider the cost to contractors of se-curing and maintaining prequalified status. Ifother agencies in your jurisdiction are usingprequalification programs, try to make the pro-grams consistent to minimize the burden thatprequalification places on contractors.

4. Use objective criteria in evaluating thequalifications of contractors. Subjective crite-ria or those that permit subjective determina-tions raise the possibility of favoritism and in-crease the likelihood of a lawsuit.

5. Make sure that your program makessense. Hire an outside consultant, hold work-shops, and get contractor input. If you havedifficulty understanding why information youare requesting is important, or why informationis weighted and score in a particular way, it willbe difficult to convince a judge that your pro-gram is not arbitrary or capricious.

6. Treat all applicants in the same manner,even if it means making hard decisions in somecases. Dissimilar treatment of contractors islikely to draw a legal challenge and may be dif-ficult to justify in court.

7. Keep an open mind about possible infir-mities in your criteria, questionnaires, scoringsystems, and rules. It is better to change a ques-tionable denial following an appeal processwhere problems exist with the program than tohave a judge issue orders that make you changethe program later.

8. Develop fair processes for appeals andmake sure your rules are available to contrac-tors. Judges are likely to be concerned aboutprocess.

9. Follow your own rules in appeals, sus-pensions and revocations relating to prequalifiedstatus. A failure to do this is likely to result in asuccessful challenge to your decision.

10. Do not let the matter become personalor political. Evidence of personal animosity to-wards a contractor, political decisionmaking,or departures from regular decisionmaking pro-cesses will cloud your ability to defend yourdecisions.

1. Cal. Pub. Cont. Code § 20101 (2004). Section 20101(b) authorizes abroad range of public agencies to adopt and apply a uniform systemof rating bidders, based on objective criteria, in order to determinethe minimum requirements for prequalification and the type and sizeof contracts upon which each bidder may bid. Section 20101(a)directs the California Department of Industrial Relations to develop aquestionnaire through which to implement the uniform system ofrating bidders. Any prequalification program adopted pursuant to this

statute must include provisions for appeals of the denial of prequalified

status. Id., § 20101(c).

2. California Department of Industrial Relations, Pre-Qualification of

Contractors Seeking to Bid on Public Works Projects: The 1999

State Legislation and the Model Forms Created by the Department of

Industrial Relations (2001) (available at http://www.dir.ca.gov/prequal.htm).


27

21. M & B Const., supra n.16, 68 Cal. App. 4th at 1361, 81 Cal Rptr. 2d at235; Textar Painting Corp. v. Delaware RiverPort Auth., 296 N.J.Super. 251, 259, 686 A.2d 795, 799–800 (N.J. Super. 1996).

22. M & B Const., supra n.16, 68 Cal. App. 4th at 1361–62, 81 Cal Rptr. 2dat 235.

23. Textar, supra n.21, 296 N.J. Super. at 259, 686 A.2d at 799–800.

24. See, e.g., City of Inglewood, 7 Cal. 3d at 869, 500 P.2d at 606, 103Cal. Rptr. at 694.

25. See, e.g., Keffler Bridge Co. v. State, 102 Ohio App. 3d 270, 656N.E.2d 1374 (1995).

26. R. E. Minchin, Jr. & G.R. Smith, Quality-Based Performance Rating ofContractors for Prequalification and Bidding Purposes at 11–12 (March2001) (on file with National Cooperative Highway Research Program(NCHRP Web Document 38), Transportation Research Board, NationalResearch Council) (available at http://www4.trb.org/trb/crp.nsf/All+Projects/NCHRP+10-54). The survey was conducted with written questionnairesand interviews of officials at state transportation departments.

27. See 5 Bruner & O’Connor on Construction Law § 16:16 (West 2003).

28. Minchin & Smith, supra n.26 at 11–12. Prequalification applicationsand rules are available online for many state transportation agencies.See, e.g., Alabama (http://www.dot.state.al); Indiana (http://www.in.gov/dot); Massachusetts (http://www.mass.gov/eotc/business/business_highway.html); Michigan (http://www.michigan.gov/mdot);Nevada (www.nevadadot.com); Tennesee (http://www.tdot.state.tn);Texas (http://www.dot.state.tx); Virginia (http://www.virginiadot.org/business); Wyoming (http://wydotweb.state.wy.us).

29. Mass. Gen. Laws c. 149 §§ 44A-44L (2004) (public buildings); Mass.Gen. Laws c. 30 § 39M(a) (2004) (public works other than publicbuildings).

30. N.Y. Pub. Auth. Law § 1734 (2004).

31. Cal. Pub. Cont. Code § 20101 (2004).

32. See generally Noralyn O. Harlow, “Public Contracts: Authority ofState or Its Subdivisions to Reject All Bids,” 52 A.L.R.4th 186 (2001).

33. Crest Const. Corp. v. Shelby County Bd. of Educ., 612 So. 2d 425, 430(Ala. 1992) (affirming agency’s decision to award contract to secondlowest bidder even though lowest bidder was prequalified, based onagency’s concern that prequalified low bidder lacked the resources tocomplete the project); Rollings Const., Inc. v. Tulsa Metro. Water Auth.,745 P.2d 1176, 1179 (Okla. 1987) (ongoing disputes between agencyand prequalified contractor concerning late performance and con-tested cost overruns supported agency’s decision not to award con-tract to contractor despite its low bid and prequalified status).

34. Crest, supra n.31 at 430 (“Prequalification saves time, money, andeffort by eliminating obviously unqualified bidders, and it is generallybased on tangible and objective criteria, such as work experience,size, net worth, equipment, etc. Determining responsibility is differ-ent, because it involves more qualitative and less quantitative con-siderations, such as determining which bidders ‘in point of skill,ability and integrity would be most likely to do faithful, conscientiouswork, and to fulfill the terms of the contract.’”).

35. Rollings, supra n.33 at 1179.

36. Minchin & Smith, supra n.26 at 7–9.

37. See, e.g., City of Inglewood–Los Angeles County Civic Center Auth.v. Superior Court, 7 Cal. 3d 861, 871, 500 P.2d 601, 607, 103 Cal. Rptr.689, 696 (1972); 1 Bruner & O’Connor on Construction Law § 2:94(West 2003).

3. See Cal. Pub. Cont. Code § 20111.5 (2004) (statute authorizingprequalification programs for construction undertaken by Californiaschool districts); Cal. Pub. Util. Code § 130051.21 (2004) (statuteauthorizing prequalification for MTA construction projects). Somepublic agencies in California, such as the Los Angeles Unified SchoolDistrict, post information concerning their prequalification programs,prequalification questionnaires, scoring systems, and lists ofprequalified contractors on their websites. See, e.g., http://laschools.org/contractor/cc/pq.

4. Richard Korman & Tony Illia, “South Carolina School District “Grades”Bidders—and Some Fail,” Engineering News-Record, Dec. 16, 2002;“Quest for Quality and Speed Will Cost Some Contractors,” Engineer-ing News-Record, Dec. 16, 2002 (available at http://enr.construction.com).

5. See, e.g., John Gil Const., Inc. v. Riverso, 72 F. Supp. 2d 242, 251(S.D.N.Y. 1999), appeal dismissed, 7 Fed. Appx. 134, 2001 WL 363509(2d Cir. 2001) (finding that the Vendor Information Exchange Systemused by the City of New York made it likely that a contractor disquali-fied by one agency in the city will not be awarded contracts by othercity agencies).

6. See, e.g., City of Inglewood–Los Angeles County Civic Center Auth.v. Superior Court, 7 Cal. 3d 861, 871, 500 P.2d 601, 607, 103 Cal. Rptr.689, 695 (1972).

7. 5 Bruner & O’Connor on Construction Law § 16:16 (West 2003).

8. Federal Acquisition Regulation, 48 C.F.R. § 9.105-1(b)(1) (2003).

9. Id.

10. Id. § 9.202.

11. The regulations of the Federal Highway Administration require thatfederally funded highway construction contracts generally be awardedthrough competitive bidding. 23 C.F.R. § 635.104(b) (2003). The FHAis required to approve in advance procedures and requirements astate transportation department proposes to use for qualifying andlicensing contractors. Id. § 635.110(a). The regulations provide thatno prequalification requirement “shall be approved which, in thejudgment of the [FHA] Division Administrator, may operate to restrictcompetition [or] to prevent submission of a bid by . . . any responsiblecontractor[.]” Id. § 635.110(b).

12. United States Postal Service, Office of Inspector General, Procure-ment Prequalification Process 1 (1998) (available at http://www.uspsoig.gov/FOIA_files/CA-AR-98-003.pdf).

13. City of Inglewood, supra n.6, 7 Cal. 3d at 867–68, 500 P.2d at 604,103 Cal. Rptr. at 693; see also 1 Bruner & O’Connor on ConstructionLaw § 2:94 (West 2003).

14. Bruner & O’Connor, supra n.13.

15. Cal. Pub. Cont. Code § 1103 (2004).

16. E.g., M & B Const. v. Yuba County Water Agency, 68 Cal. App. 4th

1353, 1357–58, 81 Cal. Rptr. 2d 231, 232–33 (1999).

17. See, e.g., Miami-Dade County v. Tower, Inc., 715 So. 2d 1084 (Fla.App. 1998); Stacy & Witbeck, Inc. v. City & County of San Francisco,36 Cal. App. 4th 1074, 44 Cal. Rptr. 2d 472 (1995).

18. E.g., B. Milligan Contracting, Inc. v. State of New York, 674 N.Y.S.2d204 (App. Div. 1998).

19. Ray Angelini, Inc. v. City of Philadelphia, 984 F. Supp. 873 (E.D. Pa.1997).

20. E.g., Rutigliano Paper Stock, Inc. v. United States Gen. Servs. Admin.,967 F. Supp. 757 (S.D.N.Y. 1997).


28

38. Id.

39. See, e.g., D.A.B. Constructors, Inc. v. State Dep’t of Transp., 656 So.2d 940, 944 (Fla. App. 1995). In this case, the agency’s regulationsrequired that challenges to a contractor’s qualifications be madeseparately from protests to the contract award.

40. Frontier Traylor Shea, LLC v. Metro. Airports Comm’n, 132 F. Supp. 2d1193, 1196 (D. Minn. 2000); M & B Const. v. Yuba County WaterAgency, 68 Cal. App. 4th 1353, 1361, 81 Cal. Rptr. 2d 231, 235 (1999),Textar, supra n.21, 296 N.J. Super. at 295; 686 A.2d at 799–800;Crest, supra n.32 at 429 .

41. Cf. Styne v. Stevens, 26 Cal. 4th 42, 56, 26 P.3d 343, 535, 109 Cal.Rptr. 2d 14, 25 (2001) (“With limited exceptions, the cases state thatwhere an adequate administrative remedy is provided by statute,resort to that forum is a ‘jurisdictional’ prerequisite to judicial consid-eration of the claim.”).

42. See, e.g., John Gil Const., Inc. v. Riverso, 72 F. Supp. 2d 242, 247(S.D.N.Y. 1999), appeal dismissed, 7 Fed. Appx. 134, 2001 WL 363509(2d Cir. 2001); Manson Const. & Eng’g Co. v. Washington, 24 Wash.App. 185, 190, 600 P.2d 643, 646 (1979).

43. Minchin & Smith, supra n.26 at 7–9.

44. The California Government Code authorizes state agencies to adoptprequalification programs for design-build projects. See Cal. Gov’tCode § 14661 (2004). This section specifies and limits the list offactors that may be considered for prequalification. These factorsinclude licensing, past experience demonstrating that the applicanthas completed projects of similar size, scope, and complexity,bondability and insurability, financial capacity, defaults requiring sure-ties to perform bond obligations, claims and litigation, OSHA viola-tions, violations of state or federal laws, prevailing wage violationsand convictions for fraud or the making of false claims.

45. California Public Contract Code section 20101 authorizes local agen-cies to adopt prequalification programs for construction projects.This section does not identify criteria that may be used in ratingcontractors. Instead, section 20101(a) directs the California Depart-ment of Industrial Relations to prepare a standardized questionnairefor use by local agencies in consultation with participants in theconstruction industry. California school districts are authorized touse prequalification under a different statute, Cal. Pub. Cont. Code§ 20111.5, that does not establish a process for determining thecriteria that may be used.

46. These requirements are specified in California prequalification stat-utes. Cal. Pub. Cont. Code §§ 20101, 20111.5 (2004).

47. See infra n.50 and accompanying text.

48. Frontier Traylor Shea, supra n.40 at 1197.

49. See, e.g., Cal. Pub. Cont. Code § 4104.

50. Staff Report, Consideration of Pre-qualfied General Contractors forthe Police & Fire Facility Contract and Appeal of Disqualified GeneralContractors, Attachment A at 2 (Aug. 5, 2003) (available at http://www.ci.manhattan-beach.ca.us/agenda/2003/Ag-Min20030805/20030805-17.pdf).

51. Id.

52. Id.

53. Id.

54. Id.

55. Id. at 4.

56. Id.

57. Id. at 4–5. The criteria included (1) facilities with equivalent squarefootage and cost of the project, (2) an underground parking struc-ture, (3) essential facilities (i.e., police, fire or medical facilities), and(4) facilities with complex building systems such as security monitor-ing and alarms, energy management, emergency power generation,telecommunications, and data distribution.

58. Id. at 5.

59. Id.

60. Id. at 6.

61. Id.

62. Id. at 7.

63. Id. at 7.

64. City of Manhattan Beach Meetings of the City Council AdjournedRegular Meeting August 5, 2003 (available at www.ci.manhattan-beach.ca.us/agenda/2003/Ag-Min20030819/20030819-01a.pdf).

65. Id at 7.

66. Id.

67. Id. at 7–8.

68. Id. at 8.

69. Id.

70. See, e.g., MCM Const., Inc. v. City & County of San Francisco, 66Cal. App. 4th 359, 373–74, 78 Cal. Rptr. 2d 44, 51–52 (1998); GhilottiConst. Co. v. City of Richmond, 45 Cal. App. 4th 897, 904, 53 Cal. Rptr.2d 389, 393 (1996). The concept of responsiveness usually relatesto the financial proposal made by the contractor and involves adetermination as to whether it has submitted a proposal complyingwith the bid requirements. In the area of prequalification, a contractor’sability to satisfy the qualifying criteria may be viewed in some casesas a question of responsiveness, in which case the minor deviationprinciple may apply.

71. Manson Const. & Eng’g Co. v. Washington, 24 Wash. App. 185, 191,600 P.2d 643, 646–47 (1979) (affirming order enjoining award ofcontract to construct flotation bridge where statute authorized con-sideration of contractor’s ability to perform contract but prequalificationcriteria further required evidence of prior construction of floatationbridges).

72. See, e.g., August H. Skoglund Co. v. Illinois Dep’t of Transp., 67 Ill.App. 3d 276, 278, 384 N.E.2d 849, 851 (1978).

73. Id.

74. Id.

75. Id.

76. Modern Continental Const. Co. v. City of Lowell, 391 Mass. 829, 837,465 N.E.2d 1173, 1178 (1984).

77. Frontier Traylor Shea, LLC v. Metro. Airports Comm’n, 132 F. Supp.2d 1193, 1196 (D. Minn. 2000); M & B Const. v. Yuba County WaterAgency, 68 Cal. App. 4th 1353, 1361, 81 Cal. Rptr. 2d 231, 235(1999); Textar Painting Corp. v. Delaware RiverPort Auth., 296 N.J.Super. 251, 259, 686 A.2d 795, 799–800 (N.J. Super. 1996); CrestConst. Corp. v. Shelby County Bd. of Educ., 612 So. 2d 425, 429(Ala. 1992).


79. Textar, supra n.77.

80. Id.


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98. See, e.g., Cal. Pub. Cont. Code §§ 20101, 20111.5 (2003).

99. Harris v. Philadelphia, 299 Pa. 473, 480, 149 A. 722, 724 (1930).

100. Id.

101. Id.; see also Allegheny Contracting Ind., Inc. v. Flaherty, 6 Pa.Commw. 164, 171–72, 293 A.2d 639, 642–43 (1972) (affirming trialcourt order requiring city to open bid of complaining contractor wheremayor refused, for undisclosed reasons, to open contractor’s bid).

102. See, e.g., Cal. Pub. Cont. Code § 20101 (2003).

103. Under the California Administrative Procedure Act, no state agencycan issue or enforce any guideline, standard of general application,or other rule that is a “regulation” without following specific proce-dures. Cal. Gov’t Code § 11340.5 (2004). Section 11342.600 of theAPA defines “regulation” broadly to include “every rule, regulation,order, or standard of general application . . . adopted by any stateagency to implement, interpret, or make specific the law enforced oradministered by it, or to govern its procedures.” Cal. Gov’t Code § 11342.600 (2002).

104. See, e.g., Pulaski v. Occupational Safety & Health Stds. Bd., 75 Cal.App. 4th 1315, 1328, 90 Cal. Rptr. 2d 54 (1999).

105. The bankruptcy code provides that “a governmental unit may notdeny, revoke, suspend, or refuse to renew a license, permit,charter, franchise, or other similar grant to . . . a person that is orhas been a debtor under this title or a bankrupt or a debtor underthe Bankruptcy Act . . . solely because such bankrupt or debtoris or has been a debtor under this title or a bankrupt or debtorunder the Bankruptcy Act, has been insolvent before the com-mencement of the case under this title, or during the case butbefore the debtor is granted or denied a discharge, or has notpaid a debt that is dischargeable in the case….” 11 U.S.C. §525(a) (2004).

106. In re Son-Shine Grading, Inc., 27 B.R. 693, 696–96 (E.D.N.C.1983).

107. See, e.g., Maryland Minority Contractor’s Ass’n v. Maryland StadiumAuth., 70 F. Supp. 2d 580 (D. Md. 1998).

108. Contractors Ass’n of E. Pa., Inc. v. City of Philadelphia, 893 F. Supp.419 (E.D. Pa. 1995), aff’d, 91 F.3d 586 (3d Cir. 1996), cert. denied,519 U.S. 1113 (1997).

109. See, e.g., Cal. Pub. Cont. Code § 20101 (2004); 21 N.Y. Comp. CodesR. & Regs. § 9600.5 (2004).

110. See, e.g., John Gil Const., Inc. v. Riverso, 72 F. Supp. 2d 242, 254–55 (S.D.N.Y. 1999), appeal dismissed, 7 Fed. Appx. 134, 2001 WL363509 (2d Cir. 2001).

111. Id.

112. See, e.g., id. at 247.

113. Styne v. Stevens, 26 Cal. 4th 42, 56, 26 P.3d 343, 535, 109 Cal. Rptr.2d 14, 25 (2001); but see Balfour Beatty Const. v. Department ofTransp., 783 A.2d 901, 906 (recognizing narrow exception to exhaus-tion of administrative remedies where challenged requirements vio-late constitutionally protected rights).

114. But see Balfour Beatty, supra n.113 at 906 (failure to file permissivereply to order suspending prequalification status did not waive appel-late rights where filing of the reply was optional).

115. See, e.g., Richardson Eng’g Co. v. Rutgers, 51 N.J. 207, 219, 238A.2d 673, 679 (1968) (contractor’s action to enjoin constructionbarred where contractor did not act promptly in seeking to enjoinproject).

81. See, e.g., In the Matter of Caristo Const. Corp. v. Rubin, 221 N.Y.S.2d956, 966 (Sup. Ct. 1961), appeal dismissed, 221 N.Y.S.2d 979 (App.Div.), modified and aff’d as modified, 222 N.Y.S.2d 998 (App. Div),aff’d, 222 N.Y.S.2d 998 (N.Y. 1962). The Caristo case has a compli-cated history on appeal that is not adequately explained in theappellate decisions. Because of this history, the lower court’s opin-ion may not be of precedential value. However, the lower court’sopinion provides the best illustration of a factually intensive exami-nation of the conduct of the public agency denying the petitions forwrits of mandate by petitioner contractors that were disqualified by aresolution of the public agency from bidding on work for the agency.The Appellate Division’s opinion at 222 N.Y.S.2d 998, moreover,demonstrates how difficult it can be to establish that an agency’sfactual determinations are arbitrary and capricious. Notwithstandingthe trial court’s detailed findings of fact, the Appellate Division deter-mined in a tersely worded opinion that the trial court erred in findingthe agency’s decision to be arbitrary and capricious: “[I]n ouropinion, there was a substantial factual basis for the making of thesubject resolution; hence, the court may not substitute its judgmentfor that of the Board of Eduction[.]” 222 N.Y.S.2d at 998.

82. Id. at 966–67.

83. Id. at 977.

84. See, e.g., Louisiana Gen. Contractors, Inc. v. Calcasieu Parish Sch.Bd., 586 So. 2d 1354, 1364 (La. 1991).

85. See, e.g., D.A.B. Constructors, Inc. v. State Dep’t of Transp., 656 So.2d 940, 944 (Fla. App. 1995).


87. Cf. Styne v. Stevens, 26 Cal. 4th 42, 56, 26 P.3d 343, 535, 109 Cal.Rptr. 2d 14, 25 (2001).

88. In re Twighla, 4 Cal. App. 4th 799, 803, 5 Cal. Rptr. 2d 752, 754 (1992);In re Kristin W., 222 Cal. App. 3d 234, 249, 271 Cal Rptr. 629 (1972).

89. See, e.g., Louisiana Gen. Contractors, supra n.84 at 1364.

90. See, e.g., Sciaba Const. Corp. v. Massachusetts Turnpike Auth., 412Mass. 606, 609–10, 591 N.E.2d 190, 192–93 (1992).

91. See, e.g., In the Matter of Application of J. Weinstein Bldg. Corp. v.Scoville, 254 N.Y.S. 384, 389, 141 Misc. 902, 906 (Sup. Ct. 1931).

92. Amelco Elec. v. City of Thousand Oaks, 27 Cal. 4th 228, 240–41, 38P.3d 1120, 1128–29, 115 Cal. Rptr. 2d 900, 909–10 (2002); M & BConst., supra n.77, 68 Cal App. 4th at 1360, 81 Cal Rptr. 2d at 234;Stacy & Witbeck Inc. v. City & County of San Francisco, 36 Cal. App.4th 1074, 1095, 44 Cal. Rptr. 2d 472, 484 (1995); Graydon v. Pasa-dena Redevelopment Agency, 104 Cal. App. 3d 631, 636, 164 Cal.Rptr. 56, 59 (1980).

93. Amelco, supra n.92, 27 Cal. 4th at 239–40, 38 P.3d at 1128, 115 Cal.Rptr. 2d at 909.

94. See, e.g., Cal. Gov’t Code § 14661 (2004); Cal. Pub. Util. Code§ 130051.21 (2004).

95. Manson Const. & Eng’g Co. v. Washington, 24 Wash. App. 185, 191,600 P.2d 643, 646–47 (1979) (affirming order enjoining award ofcontract to construct flotation bridge where statute authorized con-sideration of contractor’s ability to perform contract but prequalificationcriteria further required evidence of prior construction of flotationbridges).

96. See, e.g., Cal. Pub. Cont. Code §§ 20101, 20111.5 (2004).

97. See, e.g., City of Inglewood–Los Angeles County Civic Center Auth.v. Superior Court, 7 Cal. 3d 861, 871, 500 P.2d 601, 607, 103 Cal. Rptr.689, 696 (1972) (not involving a prequalification program).


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116. See, e.g., D.A.B. Constructors, Inc. v. State Dep’t of Transp., 656 So.2d 940, 944 (Fla. App. 1995).

117. Id.

118. In the case of suspension or debarment, a pre-deprivation hearingmay be required. Balfour Beatty, supra n.113 at 906.

119. Crest Const. Corp. v. Shelby County Bd. of Educ., 612 So. 2d 425,430 (Ala. 1992); Rollings Const., Inc. v. Tulsa Metro. Water Auth., 745P.2d 1176, 1179 (Okla. 1987).

120. See, e.g., John Gil, supra n.110 at 247.

121. Southern California Underground Contractors, Inc. v. City of SanDiego, 108 Cal. App. 4th 533, 543, 133 Cal. Rptr. 2d 527, 534 (2003);

Golden Days Schools, Inc. v. State Dept. of Educ., 83 Cal. App. 4th

695, 703, 99 Cal. Rptr. 2d 917, 923 (2000).

122. See, e.g., Ruby-Collins, Inc. v. Cobb County, 237 Ga. App. 517, 519,515 S.E.2d 187, 189–90 (1999); John Gil, supra n.110 at 253–54.

123. See, e.g., White Const. Co. v. Division of Admin., 281 So. 2d 194, 197(Fla. 1973) (failure of agency to follow its own rules for suspendingprequalified status of contractor required agency to considercontractor’s bid).

124. See, e.g., August H. Skoglund Co., 67 Ill. App. 3d at 277–78, 394N.E.2d at 850-51.

125. Prote Contracting Co. v. New York City School Const. Auth., 670N.Y.S.2d 562, 564 (N.Y. App. Div. 1998).

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