This is one in a series of posts which will highlight significant Pennsylvania court decisions in the area of public bidding and contracts. The first decision highlighted concerns waiver of bid defects.
In Gaeta v. Ridley School District, 567 Pa. 500, 788 A.2d 363 (2002), the low bidder submitted as bid security a B-rated bid bond, whereas the bid instructions had required an “A-rated” bid bond. However, the school district waived the apparent bid defect and allowed the bidder to substitute an A-rated bid bond for the B-rated bid bond. The school district’s decision was challenged as a violation of the basic rules of public bidding.
On appeal, the issue was whether the school district could waive the defect in the low bidder’s bid. The Supreme Court of Pennsylvania rejected the taxpayer challenge, and upheld the bid bond substitution because no competitive advantage was conferred on the low bidder and because the bid bond did not affect the performance of the contract as the bid bond would ultimately be replaced by a performance bond.
In Gaeta, the Supreme Court announced a new test for waiver of bid defects. Under the test announced in Gaeta, a municipality is permitted to waive a bid defect where the waiver will not deprive the municipality of an assurance that the contract would be entered into, performed, and guaranteed according to its specified requirements, and where the waiver will not place one bidder in a position of advantage over the other bidders or will not otherwise undermine the necessary standard of competition.
The waiver test in Gaeta has been applied in numerous case since Gaeta was decided.