Court of Appeals said St. Paul created the appearance of "folly and favoritism" with construction contract.
St. Paul unlawfully handled the construction contract for the Farmer's Market Lofts in Lowertown, allowing the appearance of "folly and favoritism," according to a ruling released by the state Court of Appeals on Monday that upended a district court's decision.
City Attorney Sara Grewing said the city will appeal the 10-page ruling written by Judge Kevin Ross for a three-judge panel.
The ruling reversed a decision by Ramsey County District Court Judge Elena Ostby. She allowed the city's contract with Shaw-Lundquist to stand. She awarded $33,652 to Rochon Corp. to cover the costs of preparing its losing bid.
The result of the lawsuit won't affect the construction of the 58 Lowertown units that already are built and completely rented. Dean Thomson, a lawyer for Rochon, still declared victory. He said the decision gives clarity to how bidding should work.
"We wanted to protect the integrity of the public bidding process," Thomson said. "I know my client's happy."
In November 2010, the city asked for bids to build the lofts and sought a budget of $7.5 million. The city told bidders that "a bid may not be modified, withdrawn, or canceled by the bidder for" 60 days after submission, the ruling said.
Shaw-Lundquist submitted the lowest of six bids at $7.3 million. The next lowest bid was $8.3 million. Rochon was fourth at $8.7 million. The city dropped the second and third bidders for not including a statement supporting the hiring of minority and female contractors, pushing Rochon into second place.
The day after the city opened the bids, Shaw-Lundquist told the city it would withdraw its bid because of a typo. A subcontract that should have been listed at $688,000 was listed at $68,800.
Instead of voiding Shaw's contract, the city allowed the company to not only correct the error in the subcontractor cost, adding in $619,020, but also to add $89,211 more to the tab. With the changes, Shaw-Lundquist still had the lowest bid at $8 million.
Ostby held that the city violated state law by allowing the change, but determined it to be "not material."
The appellate court disagreed, finding Shaw-Lundquist's modification to be a "material change" because the company was allowed to "make its correction fully aware of how much it could increase its bid while yet retaining its place in the ranking."
That would have been enough to void the contract, but the court found two more grounds that "call the fairness of the process into substantial doubt," Ross wrote.
For one, the city allowed Shaw-Lundquist to change its bid not only to fix its error but also to add the extra $89,211, "giving it both cake and icing."
He also said that unlike Shaw-Lundquist, the second- and third-place bidders, Doran Construction and Sand Cos., were never allowed to correct the "disqualifying elements in their bids. So the appearance of both folly and favoritism arise."
Rochelle Olson 651-925-5035 Twitter: @rochelleolson