Disappointed Bidders Can Now Sue Lowest Bidder in Public Works Project

May the second place bidder on a public works contract state a cause of action for intentional interference with prospective economic advantage against the winning bidder if the winner was only able to obtain lowest bidder status by illegally paying its workers less than the prevailing wage? According to the California Court of Appeals, the answer is yes.

In the case of Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., 234 Cal. App. 4th 748 (2015), plaintiffs, Roy Allan Slurry Seal, Inc. and Doug Martin Contracting, Inc., accused awarded low bidder, American Asphalt South, Inc., of under cutting their labor costs on public works projects from 2009 to 2012 by failing to pay state-mandated prevailing wages to its employees. Plaintiffs were able to establish standing by demonstrating that combined they were the second-lowest bidders 23 public works contracts and but for defendant’s deflated labor costs Plaintiffs would have been award the contracts.

After receiving conflicting rulings in the lower courts, the California Court of Appeals, reviewed the case and found that Plaintiffs, as the lawful and second lowest bidders, had a reasonably probable economic expectancy that they would be awarded the contracts. Note the holding is limited only to the second lowest bidder that can actually prove it should have been the lowest bidder.

The takeaway here is that contractors who fail to pay the prevailing wage may now be liable under tort law in addition to prevailing wage laws.