Dear fellow Hanoverians:
A friend sent this to me with the following simple cover
note: “Hanover wins”.
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Kirt FORDYCE & others [FN1] vs. TOWN OF HANOVER
& others. [FN2]
No. SJC-10643.
March 1, 2010. – July 9, 2010.
Public Works, Bidding procedure, General contractor. Contract,
Public works, Construction contract, Bidding for contract. Fraud. Practice,
Civil, Preliminary injunction, Interlocutory appeal.
CIVIL ACTION commenced in the Superior Court Department on November 9, 2009.
After a motion for preliminary injunction was heard by Richard J. Chin,
J., a proceeding for interlocutory review was heard in the Appeals Court by David
A. Mills, J.
The Supreme Judicial Court on its own initiative transferred the case from the
Appeals Court.
Kevin Conroy, Assistant Attorney General, for the Commonwealth.
Christopher N. Souris for the plaintiffs.
James A. Toomey (Bryan R. LeBlanc with him) for town of Hanover.
Paul W. Losordo for Callahan, Inc.
The following submitted briefs for amici curiae:
Patrick J. Sullivan & James G. Grillo for TLT Construction Corp.
Donald J. Siegel & James A.W. Shaw for Foundation for Fair
Contracting of Massachusetts & another.
Joel Lewin & Robert V. Lizza for Construction Industries of
Massachusetts, Inc., & another.
Christopher J. Petrini, Peter L. Mello, & Thomas J. Urbelis for City
Solicitors and Town Counsel Association.
Stanley A. Martin & Edwin L. Hall for Associated General Contractors
of Massachusetts.
Christopher A. Kenney & Michael P. Sams for Associated Builders and
Contractors, Inc.
Present: Marshall, C.J., Ireland, Spina, Cowin, Cordy, Botsford, & Gants,
JJ.
GANTS, J.
This case comes to us on appeal from an order of a single justice of the
Appeals Court vacating a preliminary injunction issued by a judge in the Superior Court against the town of Hanover (town) and
Callahan, Inc. (Callahan), a general contractor with whom the town has entered
into a contract for the construction of a new high school. The injunction
ordered the town and Callahan to cease further work on the school pending a trial
on the merits of the plaintiffs’ claim that the contract had been entered into
in violation of the public bidding statutes, G.L. c. 149, =A7=A7 44A-44H, because
Callahan had made intentional misrepresentations to the town’s prequalification
committee regarding its experience in school building projects. We affirm the
order of the single justice, though on different grounds from those expressed
in his order. Although a contractor’s intentional misrepresentation in seeking
prequalification may allow an awarding authority to terminate a previously
awarded contract, we conclude that where, as here, there is no allegation that
any member of the town’s prequalification committee acted corruptly in deciding
to prequalify Callahan, there is unrefuted evidence that the committee did not
act in reliance on any of the alleged misrepresentations, and the town wishes
to proceed with the contract, the motion judge committed an error of law in
issuing a preliminary injunction requiring the town to cease further work on
the school. [FN3]
1. Background. Under G.L. c. 149, =A7 44A(2)(D), contracts for the
construction of public buildings that are estimated to cost more than $100,000
may only be awarded to "the lowest responsible and
eligible general bidder" on the basis of competitive bids and in
conformity with procedures set forth in =A7=A7 44A-44H. Where, as here, a public
construction project has an estimated cost in excess of $10 million, a general
contracting firm must satisfy two requirements to be deemed a
"[r]esponsible" and "[e]ligible" bidder. G.L. c. 149, =A7
44A(1). First, the contractor must hold a certificate of eligibility, issued by
the commissioner of the division of capital asset management and maintenance
(DCAM), showing that the firm has the expertise and financial capacity to
perform the work required. G.L. c. 149, =A7=A7 44A(2)(D), 44D(1)(a ).
Second, the contractor must be prequalified to bid on the project by a
four-member committee of the awarding authority, that is, the agency,
municipality, or other governmental authority awarding the contract, [FN4]
based on the contractor’s responses to questions contained in a written request
for qualifications (RFQ) issued by the committee. G.L. c. 149, =A7 44D1/2(a
) & (c ).
While the questions that must be asked in the RFQ and the potential points to
be awarded in each category of questions are specified by statute, the relative
value assigned to each individual question and the scoring of contractor
responses is committed to the discretion of the prequalifying committee.
[FN5] This allows a
prequalification committee to evaluate a general
contractor’s experience and
qualifications in light of the specific needs of the particular project for
which the awarding authority will be soliciting bids. G.L. c. 149, =A7 44D1/2(a
)-(h ). Only general contractors whose responses to the RFQ receive a
score of seventy points or more may be prequalified by the committee, and
only prequalified contractors may be invited to submit bids on the project.
G.L. c. 149, =A7 44D1/2(h ). "The prequalification committee shall
select a minimum of [three] qualified general contractors to submit
bids…." Id. Section 44D 1/2 (h ) protects the
considerable discretion vested in the prequalification committee by providing
that all decisions of the committee "shall be final and shall not be
subject to appeal except on grounds of arbitrariness, capriciousness, fraud
or collusion" (emphasis added). Id.
In conformity with these statutory requirements, in May, 2009, the town issued
a RFQ inviting interested general contractors to submit statements of
qualification (SOQs) to prequalify to bid on the construction of a new high
school. Eleven general contractors submitted SOQs by the June 5 deadline, and
on July 6, the town reported the results of the committee’s evaluation in a
public register. Callahan was one of nine applicants prequalified by the
committee to submit formal bids on the project. General bids were opened by the
town on September 11. Callahan was the low bidder, with a base price of $37,099,999. The next low bidder was almost one million
dollars higher.
[FN6]
On September 17, 2009, N.B. Kenney Company, Inc., a heating and air
conditioning subcontractor whose subbid had not been adopted in Callahan’s
winning general bid, filed a bid protest with the Attorney General, who is
charged with enforcement of the competitive bidding statutes. See G.L. c. 149,
=A7 44H. The Attorney General also received bid protests from J & J
Contractors, Inc., the second lowest bidder among the general contractors, and
from the Laborers’ New England Region Organizing Fund. The protesters alleged
that the committee’s decision to prequalify Callahan was obtained through fraud
because Callahan’s SOQ contained misrepresentations of the firm’s prior
construction experience that were intended to mislead the committee.
Consequently, they argued, Callahan should have been disqualified as an
eligible bidder, and the town should be prohibited from entering into a
contract with Callahan. Following the filing of the protests, the town
requested and received additional information from Callahan about the
representations made in its SOQ concerning the company’s prior construction
experience.
In response to the bid protests, the Attorney General undertook an
investigation and asked the town to refrain from awarding the contract or commencing work on the project while her investigation was
ongoing. On September 24, however, the town issued Callahan a notice to
proceed. At the bid protest hearing later that month, the Attorney General requested
that the town suspend further work on the project pending her determination of
the bid protests on the merits. Notwithstanding these requests, the town
entered into a general contract with Callahan on or about October 15 and
proceeded with construction. Two weeks later, on October 30, the Attorney
General issued a decision which essentially confirmed the allegations of the
bid protestors.
The Attorney General concluded that Callahan had committed "fraud"
within the meaning of G.L. c. 149, =A7 44D1/2(h ), by knowingly
misrepresenting material facts in its SOQ with the intention of misleading the
prequalifying committee. The Attorney General found that Callahan had
misleadingly identified itself in its SOQ as the "successor
corporation" to another general contracting company, J.T. Callahan &
Sons, Inc. (JTC). In fact, although many of the senior managers of Callahan
were former employees of JTC, Callahan had been incorporated independently, JTC
continued to survive as a corporation, and the two companies shared no
corporate officers. According to the Attorney General, the effect of this
misrepresentation was to permit Callahan in its SOQ to claim JTC’s experience
in building seventy-five schools in Massachusetts over the preceding twenty
years, when Callahan itself lacked this kind of project experience.
More specifically, where the SOQ required a listing of "Similar Project
Experience" undertaken by the firm in the last five years, defined by the
prequalification committee to mean construction of "phased educational
facilities," the only educational facility Callahan included was North
Andover High School, a $42 million project completed in 2005. [FN7] In fact,
JTC had been the general contractor on this project and had completed nearly
all of the work before running into financial difficulties. In order to finish
the project, the insurance company serving as JTC’s surety recommended the
formation of a new corporate entity, Callahan, which employed former JTC
personnel and in effect acted as a subcontractor for JTC. Under this
arrangement, Callahan completed the final $1.2 million of work on the $42
million project, comprising three per cent of the school’s total construction
cost. The Attorney General also found that Callahan had made selective use of JTC’s
prior history in its SOQ: while Callahan took credit for JTC’s work on the
North Andover High School project and its almost twenty years of public
construction experience, Callahan did not list the North Andover High School
project where the SOQ required disclosure of projects the applicant had failed
to complete, and Callahan similarly failed to disclose pending or adversely
concluded legal proceedings against JTC, although the SOQ also called for this
information.
Based on these findings, the Attorney General concluded
that Callahan should not have been prequalified by the committee, and as a
consequence, that Callahan should not have been awarded the contract. When the
town made no move to halt construction or terminate its contract with Callahan
following the Attorney General’s announcement of her bid protest decision, the
plaintiffs, ten taxable inhabitants of the town, brought suit in the Superior
Court under G.L. c. 40, =A7 53, seeking temporary and permanent injunctive relief
to restrain the town from making payments to Callahan under the contract and to
require the town to rescind the contract. [FN8], [FN9] The plaintiffs alleged
that Callahan had committed fraud during the mandatory bidder prequalification
procedure, that its fraud effectively voided the decision of the
prequalification committee under G.L. c. 149, =A7 44D1/2(h ), and that,
because Callahan could no longer be considered a "responsible and eligible
bidder," the town’s award of the contract to Callahan was unlawful under
G.L. c. 149, =A7 44A(2).
After a nonevidentiary hearing on November 16, 2009, the motion judge allowed
the plaintiffs’ motion for a preliminary injunction and ordered the town and
Callahan to cease further construction of the school pending a trial on the
merits. In reaching his decision, the judge held that, in contrast to
common-law fraud, there is no requirement of detrimental reliance to prove
fraud under G.L. c. 149, =A7 44D 1/2 (h ). Relying
principally on the reasoning of earlier bid protest decisions issued by the Attorney
General, the judge concluded that, to succeed on the merits in their effort to
overturn the decision of the prequalifying committee under =A7 44D1/2(h ),
the plaintiffs need only establish that "(1) Callahan made statements or
omissions relating to a material fact, (2) that had the tendency to be relied
upon by or to influence the average person, (3) that were knowingly false or
misleading, and (4) were intended to mislead the prequalification committee or
awarding authority." After setting forth this standard for fraud under the
statute, the judge found that the plaintiffs had shown a reasonable likelihood
of prevailing on the merits at trial because Callahan’s misrepresentation of
its prior construction experience on the North Andover High School project,
together with its failure to mention in the SOQ that JTC had failed to complete
that project, were "highly suggestive" of Callahan’s intent to
deceive the prequalification committee. The judge also concluded that the
public interest favored the issuance of a preliminary injunction, because
"[t]he inconvenience and expense caused by the delay in the construction
of the school is of significantly less importance than ignoring this type of
disregard for the competitive bidding statute."
[FN10]
Presumably because he deemed it irrelevant under his interpretation of the meaning of fraud under G.L. c. 149, =A7 44D1/2(h ), the
judge did not address unrefuted evidence in the record that the prequalification
committee had not been misled by the misrepresentations in Callahan’s SOQ and
had not relied on them to its detriment. Affidavits submitted by two members of
the four-person committee stated that, before the committee prequalified Callahan
to bid, the committee members knew and had discussed the true nature of the
relationship between Callahan and JTC, and were aware that JTC, not Callahan,
had done the great majority of the work on North Andover High School. The
committee’s consideration of this information is reflected in the fact that it
awarded Callahan two out of a possible ten points for similar project
experience.
The defendants sought relief from a single justice of the Appeals Court under
G.L. c. 231, =A7 118, first par. In reviewing the motion judge’s grant of the
preliminary injunction, the single justice adopted the judge’s factual findings
as well as his interpretation of the meaning of fraud under G.L. c. 149, =A7
44D1/2(h ). The single justice agreed that the plaintiffs had demonstrated
a likelihood of success on the merits, but he found that the motion judge had
"insufficiently considered the fact that enjoining performance on the
contract will shut down the project for several months (or longer) as the town
sorts through the bid protests and conducts the re-bidding process….
[S]hutting down this project will result in substantial cost for the
town." He concluded that "the judge’s failure to
place these factors on the scale governing preliminary injunctive relief
resulted in an abuse of discretion," and he vacated the preliminary
injunction.
The plaintiffs appealed from the single justice’s order to the full Appeals
Court, Mass. R.A.P. 3(a), as amended, 378 Mass. 927 (1979), [FN11] and we
transferred the case here on our own motion. [FN12]
2. Standard of review. In reviewing the allowance of a preliminary
injunction, whether that review is conducted by a single justice of the Appeals
Court pursuant to G.L. c. 231, =A7 118, first par., or by an appellate court
reviewing a decision of the single justice, the standard is whether the motion
judge abused his discretion in issuing the preliminary injunction. See Planned
Parenthood League of Mass., Inc. v. Operation Rescue, 406 Mass. 701,
709 & n. 7, 717 (1990) (vacating suspension of preliminary injunction
ordered by single justice); Packaging Indus. Group, Inc. v. Cheney,
380 Mass. 609, 615 (1980) (standard of review framed in terms of abuse of
discretion). In conducting our review, we decide "whether the judge
applied proper legal standards and whether there was reasonable support for his
evaluation of factual questions." Commonwealth v. Fremont Inv. &
Loan, 452 Mass. 733, 741 (2008). See Packaging Indus. Group, Inc. v.
Cheney, supra. On review, the motion judge’s
"conclusions of law are subject to broad review and will be reversed if
incorrect." Id. at 616, quoting Buchanan v. United States Postal
Serv., 508 F.2d 259, 267 n. 24 (5th Cir.1975).
3. Discussion. The motion judge did not abuse his discretion in finding
from the circumstantial evidence that Callahan knowingly made false or
misleading statements of material fact in the SOQ with the intention of
misleading the prequalification committee. Therefore, in determining whether
the judge abused his discretion in finding that the plaintiffs were likely to
prevail at trial, the key issue is whether the judge was correct as a matter of
law in concluding that Callahan’s intentional misrepresentations constituted
fraud within the meaning of G.L. c. 149, =A7 44D1/2(h ), even in the
absence of evidence of detrimental reliance by the prequalification committee.
We conclude that he erred.
Fraud is not a defined term under G.L. c. 149, =A7 44D1/2(h ), and no
appellate court of the Commonwealth has previously decided any claim involving
this statute. Under the common law, fraud is a knowing false representation of
a material fact intended to induce a plaintiff to act in reliance, where the
plaintiff did, in fact, rely on the misrepresentation to his detriment. See Masingill
v. EMC Corp., 449 Mass. 532, 540 (2007); Barrett Assocs. v. Aronson, 346 Mass. 150, 152 (1963). As earlier noted,
in bid protest decisions issued pursuant to her authority under G.L. c. 149, =A7
44H, to enforce compliance with the competitive bidding statutes, the Attorney
General has asserted that proof of fraud under G.L. c. 149, =A7 44D1/2(h
), does not require the element of detrimental reliance. See, e.g., Matter of
Everett High Sch. Elec. Subcontract, Att’y Gen. Bid Protest Decision (Nov. 2,
2006); Matter of Police Headquarters and East Fire Station, Att’y Gen. Bid
Protest Decision (Aug. 10, 2006). However, these bid protest decisions, because
they arise from the Attorney General’s prosecutorial, rather than her
adjudicative, function, carry no precedential weight. See Brasi Dev. Corp.
v. Attorney Gen., 456 Mass. 684, 694 (2010); Annese Elec. Servs, Inc.
v. Newton, 431 Mass. 763, 771 (2000). See also E. Amanti & Sons
v. R.C. Griffin, Inc., 53 Mass.App.Ct. 245, 253 (2001); Department of
Labor & Indus. v. Boston Water & Sewer Comm’n, 18 Mass.App.Ct.
621, 623-624 n. 7 (1984).
To determine the meaning of "fraud" as used in G.L. c. 149, =A7 44D1/2(h
), we look to the intent of the Legislature "ascertained from all its
words construed by the ordinary and approved usage of the language, considered
in connection with the cause of its enactment, the mischief or imperfection to
be remedied and the main object to be accomplished, to the end that the purpose
of its framers may be effectuated." Industrial Fin. Corp. v. State
Tax Comm’n, 367 Mass. 360, 364 (1975), quoting Hanlon
v. Rollins, 286 Mass. 444, 447 (1934). We do not read statutory language in
isolation. LeClair v. Norwell, 430 Mass. 328, 333 (1999). "Where
possible, we construe the various provisions of a statute in harmony with one
another, recognizing that the Legislature did not intend internal
contradiction." DiFiore v. American Airlines, Inc., 454 Mass. 486,
491 (2009). In a case such as this, where the meaning of a single word in a
statute is at issue, we generally infer that the Legislature intended the word
be interpreted in accordance with its "ordinary and approved usage." Suffolk
Constr. Co. v. Division of Capital Asset Mgt., 449 Mass. 444, 454
(2007). Where a statute employs a word with an established meaning in the
common law, we consider the statute in light of that meaning, and we do not
construe the statute as "effecting a material change in or repeal of the
common law unless the intent to do so is clearly expressed." Id.,
quoting Riley v. Davison Constr. Co., 381 Mass. 432, 438 (1980). See Busalacchi
v. McCabe, 71 Mass.App.Ct. 493, 497 (2008) ("Without a clear
expression from the Legislature breaking with the common law, the common law
will apply"). Nowhere in G.L. c. 149, =A7=A7 44A-44H, does the Legislature
direct us to disregard the well-settled common-law meaning of fraud in
interpreting and applying =A7 44D1/2(h ) which, in the context of an
intentional misrepresentation, requires detrimental reliance.
Notwithstanding these familiar principles of statutory
construction, the plaintiffs, the Attorney General, and the two judges who
ruled on the injunction concluded that the Legislature intended that a
contractor’s intentional misrepresentation would constitute the fraud necessary
to vacate a decision of a prequalifying committee under =A7 44D1/2(h ),
even where the contractor’s deception falls short of common-law fraud. The
plaintiffs contend that this conclusion is compelled by the objectives of the
competitive bidding statutes, G.L. c. 149, =A7=A7 44A-44H. A careful examination of
the evolution of these statutes, however, reveals that, in the context of a
claim of intentional misrepresentation, defining fraud under =A7 44D1/2 to mean
common-law fraud, as the defendants contend, respects the Legislature’s purpose
in enacting =A7 44D1/2 and is consistent with the over-all objectives of the
competitive bidding statutes.
The basic framework of the Commonwealth’s contemporary competitive bidding
statutes was created thirty years ago when the Legislature repealed the
previously enacted public construction statute and adopted a series of
amendments that extensively revised the Commonwealth’s system of public
construction. See St.1980, c. 579, =A7 55. See also St.1984, c. 484, =A7 46. These
revisions were undertaken in response to a report issued by the Special
Commission Concerning State and County Buildings chaired by Amherst College President John William Ward (Ward Commission), which
documented extensive corruption in the awarding of public construction
contracts and proposed comprehensive remedial legislation. See LeClair v.
Norwell, supra at 332; Modern Cont. Constr. Co. v. Lowell,
391 Mass. 829, 832 n. 5 (1984). Accordingly, the statute enacted in 1980 states
as its purpose the creation of a system of public construction which will
provide fair costs, professionalism, and accountability, and which will
"reduce[ ] opportunities for corruption, favoritism, and political
influence in the award and administration of public contracts." St.1980,
c. 579, Preamble. The statute is intended "not only to ensure that the
awarding authority obtain the lowest price among responsible contractors, but
also to establish an open and honest procedure for competition for public
contracts." Modern Cont. Constr. Co. v. Lowell, supra at
840.
The competitive bidding statutes in effect before 1980, as they do today,
required that public construction contracts be awarded to the "lowest
responsible and eligible bidder," [FN13] but prior to the reform
undertaken following the Ward Commission report, there were no useful statutory
or regulatory criteria for what constituted a responsible and eligible bidder
and no centralized system to monitor and document the competency and integrity
of contractors undertaking public construction projects. [FN14] See 8 Ward
Commission Report at 343-346 (Final Report 1980); Note, Prescribing Preventive Remedies for an Ailing Public Construction Industry: Reforms
Under the New Massachusetts Competitive Bidding Statute, 23 B.C. L.Rev. 1357,
1359-1364 (1982) (Note). It was instead left to each awarding authority, at its
option and without the benefit of guidelines issued by an expert authority, to
solicit information from prospective contractors that might allow it to
determine whether a bidder firm was competent to perform the work under
consideration in an honest and professional manner. See G.L. c. 149, =A7 44A, as
appearing in St.1956, c. 679, =A7 1 ("Essential information in regard to
such qualifications shall be submitted in such form as the awarding authority
may require"); 8 Ward Commission Report, supra; Note, supra.
Because the law required that contracts be awarded to the lowest bid received
from a "responsible and eligible bidder," but provided minimal
guidance for determining whether a bidder was "responsible and
eligible," the result too often was that all bidders were deemed
"responsible and eligible," regardless of their competency or
experience, and the selection of a contractor was based solely on price. This
resulted in a widespread problem of defective construction work requiring
extensive repair. See Note, supra at 1365.
Beginning with the Ward Commission legislation enacted in 1980, the Legislature
required bidders to provide specified information regarding their competence
and experience to the awarding authority, which the awarding authority was required to evaluate "according to procedures and
criteria which the deputy commissioner [of DCAM [FN15]] shall prescribe by
regulations or guidelines." [FN16] G.L. c. 149, =A7 44D(3), as appearing in
St.1980, c. 579, =A7 55. In 1984, the Legislature transferred responsibility for
determining whether a bidder was "responsible and eligible" to DCAM.
G.L. c. 149, =A7 44D(3), as appearing in St.1984, c. 484, =A7 46. Any bidder for a
public construction contract now must submit as part of the bid process a certificate
of eligibility from the commissioner of DCAM showing that the bidder has the
classification and capacity rating to complete the project on which it is
bidding. G.L. c. 149, =A7 44D(1)(a ). Certificates of eligibility, which
must be renewed annually, are issued only after DCAM’s review of the
contractor’s prior construction experience, professional references, financial
condition, and organizational capacity. [FN17] See G.L. c. 149, =A7 44D(1)-(3).
DCAM may "decertify a contractor or reduce the classes of work and amount
of work on which the contractor is eligible to bid," if DCAM learns of a
contractor’s incompetence, poor performance, or misconduct. See G.L. c. 149, =A7
44D(5). A contractor who is debarred or whose certification is suspended,
revoked, or not renewed by DCAM, loses the ability to contract for construction
work from any public authority in the Commonwealth. See G.L. c. 29, =A7 29F; G.L.
c. 149, =A7 44E.
It was not until 2004, with the enactment of G.L. c. 149,
=A7 44D1/2, inserted by St.2004, c. 193, =A7 19, that awarding authorities were
required to prequalify general contractors for individual projects; the
statutory requirement, however, applies only to projects estimated to cost at
least $10 million.
[FN18] G.L. c. 149, =A7 44D1/2(a
). Section 44D1/2 was one of several amendments proposed by a special
commission, see St.2003, c. 46, =A7 138, charged with recommending legislation
to improve the "adequacy and efficiency" of the public construction
laws. While the 1980 and 1984 legislation had standardized the review and
monitoring of contractors under the centralized administration of DCAM, many
of the 2004 amendments enhanced the flexibility and discretion of
municipalities, State agencies, and other governmental authorities in
managing their own construction projects. [FN19] See St.2004, c. 193, =A7=A7 13,
19, 27.
As a result of the 2004 legislation, a general contractor who submits a bid for
a project costing at least $10 million has been twice qualified for the work,
initially through the DCAM certification procedure, and then again by the
prequalification committee’s approval of the applicants’ specific responses to
its RFQ. [FN20] The prequalification process serves to ensure that parties who
may be "responsible and eligible bidders" in a general sense also
have the particular skills and experience most relevant to the project at
issue. It also requires the awarding authority to invest substantial time and
effort, and exercise its sound discretion, in determining
the considerations critical to the project and assigning points within the
statutory categories accordingly, and then, after submission of the SOQs, in
scoring the responses of potential bidders according to the weighted criteria.
The 2004 legislation narrowly limited the grounds for appealing from the
committee’s prequalification decision: "A general contractor’s score shall
be made available to the general contractor upon request. The decision of the
prequalification committee shall be final and shall not be subject to appeal
except on grounds of fraud or collusion." G.L. c. 149, =A7 44D1/2(h
). [FN21]
In determining the meaning of "fraud" as it appears in =A7 44D1/2(h
), we note that the logical implication of the sequence of these two sentences–with
the sentence governing an appeal from a decision of the prequalification
committee following immediately after the sentence declaring that a general
contractor is entitled to learn the score given to its SOQ by the
prequalification committee–is that the Legislature anticipated that a general
contractor denied prequalification might seek to challenge the committee’s
scoring of the contractor’s SOQ. In such an appeal, "fraud" could not
mean an intentional misrepresentation in the SOQ itself, because a general
contractor challenging an unfavorable decision of the committee would not
allege that it was entitled to relief because it had
intentionally misrepresented material information in its own SOQ. Rather, in
the context of a general contractor challenging the denial of its own
prequalification, "fraud" must mean corrupt conduct by one or more
members of the committee designed unfairly to prevent the general
contractor from being prequalified to bid. Pragmatically, in this context,
"fraud" would surely involve "collusion," G.L. c. 149, =A7
44D1/2(h ), a corrupt agreement between at least one member of the
committee and another person, most likely a competing general contractor
seeking to fix its competitor’s score below the minimum threshold for
prequalification to prevent that competitor from bidding. See Dickerman v.
Northern Trust Co., 176 U.S. 181, 190 (1900); Black’s Law Dictionary 300
(9th ed.2009) (collusion is "[a]n agreement to defraud another or to do or
obtain something forbidden by law"). [FN22]
The Legislature, however, did not foreclose an appeal from a decision of a
prequalification committee from third parties. Because G.L. c. 149, =A7 44D1/2(g
), provides that the "register of responders shall be open for public
inspection," and, on completion of the evaluations by the prequalification
committee, the "contents of the [SOQs] shall be open to the public,"
we infer that the Legislature also recognized the possibility of an appeal from
an allowance of prequalification by a fellow bidder or a member of the general
public based, at least in part, on the contents of the SOQ. In this context, "fraud" could still mean corrupt conduct by one or
more members of the committee, alone or in collusion with another, but we do
not so limit its meaning. We conclude that, consistent with its common-law
meaning, "fraud" in this context means a fraudulent misrepresentation
by a general contractor applying for prequalification that the committee relied
on to its detriment in qualifying the general contractor to bid. In the absence
of detrimental reliance by the committee, a general contractor’s intentional
misrepresentation, even if intended to deceive the committee, does not
constitute "fraud" within the meaning of G.L. c. 149, =A7 44D1/2(h
), and therefore does not require that the committee’s prequalification of the
contractor be vacated.
We believe that this conclusion is consistent with the comprehensive
legislative scheme embodied in the public construction statute for two reasons.
First, we do not believe the Legislature, by allowing a prequalification
decision to be appealed from on grounds of "fraud," intended to
require an awarding authority to disqualify a general contractor or terminate a
construction contract because of an intentional misrepresentation in a SOQ
where the committee did not act corruptly or in reliance on the
misrepresentation and where, in its discretion, the awarding authority does not
wish to disqualify the contractor or terminate the contract. Under G.L. c. 149, =A7 44D(2), "[a]ny materially false statement"
made by a general contractor in its application for DCAM certification or its
update statement "may, in the discretion of the awarding authority, result
in termination of any contract awarded the applicant by the awarding authority."
As a result, where an awarding authority learns that a general contractor with
whom it has contracted has made an intentional misrepresentation in either of
these two filings, the awarding authority may terminate the contract, but is
not required to do so. The awarding authority retains this discretion even
though a certificate of eligibility from DCAM and an update statement are both
mandatory elements of a general contractor’s SOQ. G.L. c. 149, =A7 44D1/2(e
)(4). [FN23] Under the interpretation of "fraud" proffered by the
plaintiffs and the Attorney General, if an intentional misrepresentation were
made in a SOQ or an incorporated update statement rather than an application
for DCAM certification, an awarding authority would lose this discretion
because a court, as the motion judge did here, could enjoin the awarding
authority from continuing with the contract. We see nothing in G.L. c. 149, =A7
44D1/2(h ), to suggest that the Legislature intended to deny an awarding
authority the discretion it has under G.L. c. 149, =A7 44D(2), simply because the
materially false statement appears in a committee-scored portion of a SOQ
rather than in an application for DCAM certification or update statement. In
addition, we note that, even where a general contractor’s misconduct results in
debarment or suspension by DCAM, the Legislature did not require
termination of the contractor’s existing public construction contracts. Rather,
pursuant to G.L. c. 29, =A7 29F(h ), a public agency may not
"execute, renew, or extend any contract with, a debarred or suspended
contractor," but it need not rescind or terminate a contract. [FN24]
Second, giving the word "fraud" its common-law meaning under =A7
44D1/2(h ) does not conflict with the "transparent"
legislative intent that the competitive bidding statutes "establish an
open and honest procedure for competition for public contracts." John
T. Callahan & Sons v. Malden, 430 Mass. 124, 128 (1999), quoting Modern
Cont. Constr. Co. v. Lowell, 391 Mass. 829, 840 (1984). In
formulating the provisions of =A7 44D1/2 in 2004, the Legislature had no need to,
and did not, concern itself with remedying intentional misrepresentations that
do not infect a prequalification committee’s decision-making process because
sufficient means to remedy this kind of misconduct–and thereby to ensure the
integrity of the public bidding process–were already provided by statute. A
general contractor who makes an intentional misrepresentation in a SOQ with the
intention of deceiving the prequalification committee risks grave sanctions,
regardless of whether the committee acted in reliance on the misrepresentation.
The commissioner of DCAM has broad statutory authority to debar a contractor
from public contracting based on "substantial evidence" that the
contractor has "willfully suppli[ed] materially false
information incident to obtaining or attempting to obtain or performing any
public contract or subcontract." G.L. c. 29, =A7 29F(c )(2)(i). See
G.L. c. 149, =A7 44C. Under regulations promulgated by the commissioner, wilfully
supplying false material information in obtaining or attempting to obtain any
public contract or subcontract within the last five years "shall
constitute cause for decertification or denial of certification." 810 Code
Mass. Regs. =A7 4.04(8)(e) (2005). The "[f]ailure to provide accurate
information" to any party with whom a contractor does business may also be
grounds for denial of certification or debarment. 810 Code Mass. Regs. =A7
4.04(6) (2005). Finally, a contractor making an intentionally false statement
in a SOQ risks criminal conviction and its consequent penalties. An applicant
must sign the SOQ "under pains and penalties of perjury," G.L. c.
149, =A7 44D1/2(e )(ii), so a wilful false statement in the SOQ may
subject the applicant to a perjury charge. G.L. c. 268, =A7=A7 1, 1A. Moreover, any
person who intentionally makes a material false statement, or omits or conceals
a material fact in a written statement, in attempting to procure a construction
contract from any department, agency, or municipality of the Commonwealth, may
be charged criminally under G.L. c. 266, =A7 67A.
4. Conclusion. In view of our interpretation of the meaning of fraud
under G.L. c. 149, =A7 44D1/2(h ), we conclude that the motion judge
committed an error of law in determining that the
plaintiffs would not need to prove detrimental reliance by the prequalification
committee to prevail on their claim for injunctive relief. As a result of this
error, because there is no allegation that any member of the prequalification
committee acted corruptly in deciding to prequalify Callahan, and because there
is unrefuted evidence that the committee did not act in reliance on any of the
alleged misrepresentations, the motion judge abused his discretion in
concluding that the plaintiffs were likely to succeed on the merits at trial.
Having so found, we need not reach the issue whether a preliminary injunction
would promote or adversely affect the public interest, because the preliminary
injunction cannot survive if the plaintiffs are unlikely to succeed on the merits.
We affirm the single justice’s order vacating the allowance of the plaintiff’s
motion for a preliminary injunction.
So ordered.
FN1. John Robison, Brian
Feinstein, Stephen O’Brien, David Kleimola, William Bzdula, David Ferris,
Sean Freel, Peter Serighelli, and Gerard McCann.
FN2. Callahan, Inc. (Callahan),
whose motion to intervene was allowed in the
Superior Court; and the
Commonwealth, whose motion to intervene was allowed in this court.
FN3. We acknowledge amicus briefs
filed by the Attorney General; Associated Builders and Contractors, Inc.; the
Associated General Contractors of Massachusetts; the City Solicitors and Town
Counsel Association; Construction Industries of Massachusetts, Inc., and
Utility Contractors Association of New England, Inc.; Foundation for Fair
Contracting of Massachusetts and Brockton & Vicinity Building Trades
Council; and TLT Construction Corp.
FN4. "The prequalification committee
shall be comprised of 1 representative of the designer and 3 representatives
of the awarding authority." G.L. c. 149, =A7 44D 1/2 (c ).
FN5. The statute instructs each
awarding authority issuing a request for qualifications (RFQ) to solicit information
in four specified categories and to assign points among the first three
categories according to a fixed formula: (1) management experience (fifty
points); (2) references (thirty points); (3) capacity to complete projects
(twenty points). G.L. c. 149, =A7 44D1/2(e ). The awarding authority is
instructed to use its own discretion in allocating points within each of
these categories and in evaluating and scoring contractor
responses. G.L. c.
149, =A7 44D1/2(e ), (h ). The fourth
category, for which no points are awarded, requires applicants to submit: (1)
a commitment letter for payment, and performance bonds in the full estimated
value of the contract from a surety company licensed to do business in the
Commonwealth and approved by the United States Treasury Department; and (2) a
certificate of eligibility from the division of capital asset management and
maintenance (DCAM) demonstrating that the contractor has a capacity rating
commensurate with the size and scope of the project, as well as an update
statement with the information required under G.L. c. 149, =A7 44D(1)(a
). G.L. c. 149, =A7 44D1/2(e ).
FN6. The project specifications
allowed for certain alternate design elements above the base plan. Callahan was
also the winning bidder when estimates were considered with the alternate
design elements included.
FN7. Callahan also included five
residential projects and one project on a university campus, none of which
fell within the definition of "Similar Project Experience"
specified by the statement of qualification (SOQ).
FN8. General Laws c. 40, =A7 53,
provides that ten taxable inhabitants of a municipality may bring suit to
enforce laws relating to the expenditure of
public funds by local officials.
See Edwards v. Boston, 408 Mass. 643, 646 (1990), and cases cited.
FN9. N.B. Kenney Company, Inc.
(Kenney), one of the parties who had filed a bid protest with the Attorney General
following Callahan’s selection as the winning bidder, filed a separate suit
and was a party to the proceedings in the Superior Court and before the
single justice.
FN10. Where, as here, a suit is
brought by citizens acting as private attorneys general to enforce a statute
or a declared policy of the Legislature, a showing of irreparable harm is not
required for the issuance of a preliminary injunction. LeClair v. Norwell,
430 Mass. 328, 331-332 (1999). In these circumstances, a judge instead must
first determine whether the plaintiffs have shown a likelihood of success on
the merits of the asserted claim and then determine whether "the
requested order promotes the public interest, or, alternatively, that the
equitable relief will not adversely affect the public." Id.,
quoting Commonwealth v. Mass. CRINC, 392 Mass. 79, 89 (1984).
FN11. The defendants each filed
cross appeals as to specific conclusions reached by the single justice but
not as to his decision that the preliminary
injunction should be vacated.
FN12. Kenney also appealed from
the order of the single justice to the full Appeals Court but withdrew its
appeal prior to oral argument before this court.
FN13. Compare G.L. c. 149, =A7
44A, as amended through St.1977, c. 968, with G.L. c. 149, =A7 44A, as
appearing in St.1980, c. 579, =A7 55.
FN14. The only guidance given in
the earlier statute was that a "responsible and eligible bidder"
was a bidder "possessing the skill, ability and integrity necessary to the
faithful performance of the work and who shall certify that he is able to
furnish labor that can work in harmony with all other elements of labor
employed or to be employed on the work." G.L. c. 149, =A7 44A, as
appearing in St.1956, c. 679, =A7 1. (See G.L. c. 30, =A7 39M.)
FN15. At the time of the 1980
and 1984 legislation, the agency was known as the division of capital
planning and operations. In 1990, it was changed to the division of capital
asset management and maintenance (DCAM). St.1998, c. 194, =A7=A7 182-185. For
purposes of simplicity, we refer to it as DCAM.
FN16. Pursuant to St.1980, c.
579, =A7 55, the burden of making this
determination remained with the
awarding authority, although the statute permitted an awarding authority to request
that DCAM perform such an evaluation on its behalf.
FN17. Every bid made to an
awarding authority for a contract of general construction must also include
an "update statement" reflecting changes in the bidder’s financial
position or business organization since the date of certification of
eligibility. G.L. c. 149, =A7 44D(1)(a ).
FN18. For contracts estimated to
cost at least $100,000 but not more than $10,000,000, G.L. c. 149, =A7 44D1/2(a
), permits, but does not require, an awarding authority to prequalify general
contractors. Therefore, an awarding authority issuing a public contract
costing less than $10,000,000 is free to rely on DCAM’s certification alone
as a guarantee of a bidder’s capacity and expertise. See id.
FN19. The 2004 amendments
expanded the range of construction options available to awarding authorities
by allowing for the election of "at risk" and "[d]esign
build" approaches for projects estimated to cost $5 million or more
(G.L. c. 149A, =A7=A7 1, 14), and required awarding authorities to retain an
"owner’s project manager" for any project estimated to cost $1.5
million or
more to ensure hands-on project
oversight (G.L. c. 149, =A7 44A1/2[a ] ). See St.2004, c. 193, =A7=A7 13,
19, 27.
FN20. An awarding authority must
select its prequalified bidders before soliciting general bids. By
regulation, the deadline for submission of general bids from prequalified
general contractors must be at least fourteen days after the awarding
authority’s issuance of invitations to bid. 810 Code Mass. Regs. =A7 9.10
(2005).
FN21. In 2008, G.L. c. 149, =A7
44D1/2(h ), was amended to include "arbitrariness" and
"capriciousness" as additional grounds for appeal. St.2008, c. 303,
=A7 23. Because the plaintiffs here allege only fraud, the addition of these
grounds for appeal do not affect our analysis.
FN22. The inclusion in 2008 of
"arbitrariness" and "capriciousness" as additional
grounds for appeal allows a disqualified contractor to challenge the denial
of his prequalification without needing to make the difficult showing of
collusion. St.2008, c. 303, =A7 23. Before this amendment, a contractor without
direct evidence of collusion had only the argument that collusion should be
inferred from the arbitrariness and capriciousness of the committee’s
decision.
FN23. Because the application
for DCAM certification, the update statement, and the SOQ are so interwoven
in the statutory scheme to ensure that bidders are qualified, we understand
that the awarding authority would have the same discretion to terminate a
construction contract based on a materially false statement in a SOQ.
FN24. For this reason, we are
not persuaded by the plaintiffs’ argument that fraud under G.L. c. 149, =A7
44D1/2(h ), does not require detrimental reliance because a DCAM
regulation provides, "Any General Contractor who fails to respond to the
RFQ in accordance with the instructions provided in the RFQ in any material
way shall be deemed to be disqualified from consideration for
prequalification." 810 Code Mass. Regs. =A7 9.06(5) (2005). This
regulation disqualifies a general contractor from prequalification who has
failed to abide by the procedural requirements in the RFQ, such as the
deadline for submission, the obligation to sign the SOQ under the pains and
penalties of perjury, and the need to include the required commitment letter,
performance bonds, and DCAM’s certificate of eligibility. Id. It
cannot reasonably be understood to require an awarding authority to
disqualify a general contractor and terminate a contract based on an
intentional misrepresentation that the authority did not rely on in its
prequalification decision, where the statutes cited above do not require an
awarding authority to terminate a contract after
debarment, or after learning of
an intentional misrepresentation in the contractor’s application for DCAM
certification or in the update statement submitted with its SOQ. See G.L. c.
29, =A7 29F(h ); G.L. c. 149, =A7 44D(2).
END OF DOCUMENT
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