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Decision No. 13,848

Appeal of ACME BUS CORPORATION from action of the Board of Education of the Half Hollow Hills Central School District of Huntington and Babylon awarding transportation contracts to Seacoast Transportation Co. Inc., and Educational Bus Transportation Inc.

Decision No. 13,848

(November 3, 1997)

Richard Charles Hamburger, P.C., attorney for petitioner, Lane T. Maxson and Richard Hamburger, Esqs., of counsel

Ingerman, Smith, Greenberg, Gross, Richmond, Heidelberger, Reich & Scricca, L.L.P., attorneys for respondent board of education, Jonathan Heidelberger, Esq., of counsel

Van Nostrand & Martin, attorneys for respondents Seacoast Transportation Co., Inc., and Educational Bus, Inc., William C. Morrell, Esq., of counsel

MILLS, Commissioner.--Petitioner ("Acme") appeals the decision of the Board of Education of the Half Hollow Hills Central School District of Huntington and Babylon ("respondent") to award two transportation contracts to respondents Seacoast Transportation Co. Inc. ("Seacoast") and Educational Bus Transportation Inc. ("Educational"), respectively. The appeal must be sustained in part.

Respondent solicited sealed bids for the provision of bus transportation services in two categories, regular transportation -- section I, part 1 (66 passenger buses), and private, parochial and handicapped transportation -- section II (20 passenger vans). The solicitation was for a one-year contract for the 1996-1997 school year, but also requested bids for a two-year, three-year and four-year contract.

The bid proposal form for section I, the regular transportation category, called for bids based on the cost per vehicle for a 5 hour bus, a 3 hour bus, a 2 hour bus and, as an alternative, a 6 hour bus. The form also requested the cost per hour of a driver assistant. The form stated at the top:

For base bid, it is assumed that the annual contract will be for:

approximately 7 - 5 hour/66 passenger buses;

approximately 2 - 3 hour/66 passenger buses;

approximately 2 - 2 hour/66 passenger buses.

As alternate #1, the District also requests pricing on a 6 hour/66 passenger bus, should the school day be lengthened. If the District school day changes, this pricing may be used instead of the 5 hour bus listed above. Seven (7) buses are estimated to be needed.

The form for a single contract year, 1996-1997, asked for the following information:

1996-1997

1. $____________ - Per part time bus for use of district,

5 hrs. 5 hours, in or out of the district.

2. $____________ - Per part time bus for use of district,

3 hrs. 3 hours, in or out of the district.

3. $____________ - Per part time bus for use of district,

2 hrs. 2 hours, in or out of the district.

4. $____________ - Driver Assistant per hour.

Alternate # 1

1. $___________ - Per part time bus for use of district,

6 hrs. 6 hours, in or out of the district.

ONE YEAR CONTRACT

*Total Item 1. $_____

*Total Item 2. $_____

*Total Item 3. $_____

*total = estimate number of buses x cost per bus

Grand Total....$_____

[Items 1,2,3] 1996-1997 One Year Contract

Bidders were required to multiply the quoted cost per bus for each time span by the estimated number of buses needed. The base price (grand total) was determined by adding the total for each hourly category (Items 1, 2 and 3). The forms for multi-year contract proposals were virtually the same, except that an extra column for the relevant year was added next to each item, and the totals for each year were added to produce a two, three and four year grand total. For example, for a two-year contract, the first line looked like:

1996-1997 1997-1998

1. $______ $_______ - Per part time bus for use of district, 5 hrs. 5 hrs. 5 hours, in or out of the district.

Similarly, bids were solicited for private, parochial and handicapped transportation services under section II in two formats: first, a price per student per year and price per van per year for each of the private, parochial or special education schools for which the district expected to provide transportation, and second, a price per vehicle for a 4 hour/20 passenger van (van), a 3 hour van, and a 2 hour van, and the cost of a driver assistant for each duration. The price per vehicle form stated on top:

For base bid, it is assumed that the annual contract will be for:

approximately 10 - 4 hour/20 passenger vans

approximately 20 - 3 hour/20 passenger vans

approximately 20 - 2 hour/20 passenger vans.

The form for a single contract year, 1996-1997, asked for the following information:

1996-1997

1. $_____________ - Per part time van for use of district,

4 hrs. 4 hours, in or out of the district.

2. $_____________ - Per part time van for use of district,

3 hrs. 3 hours, in or out of the district.

3. $_____________ - Per part time van for use of district,

2 hrs. 2 hours, in or out of the district.

  1. $_____________ - Driver Assistant per van - 2 hours.
  2. $_____________ - Driver Assistant per van - 3 hours.
  3. $_____________ - Driver Assistant per van - 4 hours.

ONE YEAR CONTRACT

*Total Item 1. $_____

*Total Item 2. $_____

*Total Item 3. $_____

*Total Item 4. $_____

*total = estimate number of buses x cost per bus

Grand Total....$_____

[Items 1,2,3,4] 1996-1997 One Year Contract

The forms for multi-year contract proposals were virtually the same, except that an extra column for the relevant year was added next to each item, and the totals for each year were added to produce a two, three and four year grand total.

The following table reflects the bids of the two lowest bidders for each section by grand total and by vehicle.

 

Section I

Seacoast

Acme

Section II

Educational

Acme

 

Grand

Total

1 year

$ 369,124.69

$ 368,860.00

1 year

$ 959,043.00

$ 961,000.00

2 year

$ 749,249.38

$ 737,720.00

2 year

$1,941,232.00

$1,922,000.00

3 year

$1,129,374.00

$1,106,580.00

3 year

$2,957,382.00

$2,883,000.00

4 year

$1,509,498.70

$1,490,194.00

4 year

$4,019,682.00

$3,882,660.00

           

1996-1997

   

1996-1997

   

 

Per Vehicle

Price

5 hour bus

$ 35,500.99

$ 42,900.00

4 hour van

$ 20,443.00

$ 25,300.00

3 hour bus

$ 31,858.88

$ 19,300.00

3 hour van

$ 20,193.00

$ 22,400.00

2 hour bus

$ 28,450.00

$ 14,980.00

2 hour van

$ 17,193.00

$ 12,650.00

Driver Asst.

2 hours

$ 9.00

$ 27.50

Driver Asst.

2 hours

$ 6,893.00

$ 7,000.00

6 hour bus

$ 37,400.00

$ 44,919.00

3 hours

$ 6,893.00

$ 13,000.00

     

4 hours

$ 7,993.00

$ 15,000.00


Under section I, for all four proposed contract years, Acme had the lowest aggregate bid price, and Seacoast had the second lowest. For a one-year contract, Acme bid $368,860 compared to Seacoast’s $369,124.69. The district ultimately determined its needs to be 5 hour buses and 6 hour buses. Accordingly, it looked at the lowest per vehicle price submitted for each of those categories. Respondent's Associate Superintendent for Business, Robert Sandak, determined that Seacoast was the lowest responsible bidder meeting the specifications on an "item by item" basis, i.e., the 5 hour and 6 hour categories, and recommended that Seacoast be awarded a four year contract. Its bid for a 5 hour bus was $35,500.99 compared to Acme’s bid of $42,900, a difference of 17%. Seacoast’s bid for the 6 hour bus was $37,400, compared to Acme’s bid of $44,919, a difference of 16.7%. Additionally, Seacoast’s bid for a driver assistant was $9.00, compared to Acme’s bid of $27.50. Seacoast’s bid represented almost $50,000 in savings per year over the current contract with Acme (approximately $7,000 per bus times 7 buses). Respondent accepted Mr. Sandak's recommendation on May 13, 1996, awarded the contracts on a one-year basis, and conditionally awarded the contracts on a four-year basis pending approval of the budget. The voters approved the award of the four-year contract as part of the overall budget on May 21, 1996.

Under section II, Acme had the lowest aggregate bid for the two-year, three-year and four-year contract, but Educational had the lowest bid for a one-year contract. Educational also bid lowest for the 4 hour and 3 hour van categories, but Acme bid lowest for the 2 hour van category. Mr. Sandak determined that the district’s needs were ten 4 hour vans, thirty 3 hour vans and ten 2 hour vans. Accordingly, he determined that Educational was the lowest responsible bidder meeting the specifications on an "item by item" basis, and recommended that Educational be awarded a four year contract. Although Acme’s price for a 2 hour van was lower than Educational’s, Acme’s prices for 3 and 4 hour vans were so much higher than Educational’s that by applying the unit prices to actual needs, the district could realize substantial savings in excess of $200,000 compared to Acme’s current contract. Since the majority of the van use fell into the 3 hour category where Educational was the low bidder, Mr. Sandak recommended that the award go to Educational. Respondent accepted that recommendation also, and the award was approved as part of the overall budget on May 21, 1996.

Petitioner seeks an order annulling the contract awards to Seacoast and Educational and awarding petitioner both contracts. Petitioner contends that the bid specifications required respondent to use the aggregate base price to determine the lowest bidder. Instead, respondent based its awards on individual or unit prices. Petitioner contends that by using unit pricing, respondent acted arbitrarily and capriciously, violated public policy and statutory law, and opened the door to the exercise of favoritism and manipulation of the public bidding process. Petitioner also requested a stay order prohibiting respondents from taking any action to execute or implement the contracts. On June 24, 1996, I granted a partial stay only with respect to the contract awarded to Educational for 2 hour van service under section II.

Petitioner asserts that the district improperly awarded the regular bus contract under section I based solely upon the price per vehicle for a 5 hour and 6 hour bus and ignored the specific quantities of buses indicated on the bid proposal form for each type of hourly bus. Therefore, petitioner contends respondent applied a different formula than that articulated in the bid specifications, which called for awards based on total or aggregate prices. Petitioner further contends that it is the lowest responsible bidder meeting the bid specifications for the regular transportation contract because its base bid, or grand total, for each proposed contract (one-year, two-year, three-year and four-year) was the lowest of the five bidding companies. Petitioner also claims respondent improperly awarded 6 hour buses in addition to 5 hour buses, whereas the bid proposal form specifically stated that the 6 hour pricing was to be used as an alternative to the 5 hour bus pricing.

Petitioner similarly asserts that the district improperly awarded the section II contract based solely upon the price of one 4 hour van, one 3 hour van, one 2 hour van and one driver assistant for each van, and thus acted contrary to the bid specifications, which again called for awards based on total or aggregate prices. Petitioner contends that it is the lowest responsible bidder for the section II contract, because its base bid was the lowest of the four bidding companies for the two-year, three-year and four-year contracts, and a four-year contract was awarded. Petitioner also contends that it should have been awarded the 2-hour van contract since it submitted the lowest per vehicle price.

Respondent argues that it was not required to award the contract on an aggregate basis, and that the aggregate bid was never intended to be the basis for the award. First, respondent asserts that the estimates of the number and types of buses set forth in the bid specifications were included for only two reasons: to provide bidders with an indication of the magnitude of the job to be undertaken, and to provide a base figure upon which bid security could be calculated by multiplying the number of buses by the unit price. (The Terms and Conditions specified that 10% of the basis price for one year would be required as a bond to be submitted with the bid.) According to respondent, those estimates were never intended to be utilized to calculate a unitary aggregate price per year to be compared as the basis for the award of the bid. Second, respondent argues that the original legal notice specifically reserved to respondent "the right to reject any or all bids and to act in the best interests of the School District...[and] the right to award contracts for any, or all items, or any combination of items." Third, respondent argues that numerous provisions of the General Conditions, Terms and Conditions, and Award of Contract sections of the bid specifications gave notice as to how respondent intended to award the contracts. Moreover, respondent argues that the current contract, under which petitioner has served as the district's contractor for the past 12 years, is based on unit pricing, and in fact, virtually all contracts let by respondent are so based.

Respondents Seacoast and Educational both assert that they were not personally served with the petition in accordance with "275.8 of the Commissioner's regulations and thus were not joined as necessary parties. Seacoast and Educational also argue that since the bid forms required each bidder to sign each sheet and acknowledge having read and understood the enclosures, petitioner should be estopped from challenging the bids. Moreover, they contend that petitioner, as incumbent contractor, knew and understood the terms of the bid specifications and was familiar with bid practices and conditions.

I will first address the procedural issue of joinder of necessary parties. Educational claims that the corporate entity "Educational Bus Transportation, Inc.," incorporated March 30, 1961, which is the entity served and named in the petition, is a separate and distinct corporate entity from "Educational Bus, Inc.," incorporated March 4, 1996. It claims it is the latter company which bid for the contracts. However, I note that Warren Gumbs, the vice president of Educational Bus, Inc., received service of the petition on behalf of Educational Bus Transportation, Inc., as vice president. Additionally, in his affidavit in opposition to the stay, Mr. Gumbs stated that he was vice president of Educational Bus Transportation, Inc., one of the respondents and one of the bidders. Also, as petitioner points out, Mr. Gumbs lists as three prior references school districts with which Educational Bus Transportation, Inc. had contracted. In any event, since Mr. Gumbs had sufficient notice to participate fully in the appeal, there is no prejudice or harm in the corporate entity being misnamed in the caption and I find that Educational has been joined as a necessary party.

Seacoast claims it does not maintain an office at the address at which the petition was served, and that the person served was not an officer, agent or employee of Seacoast. However, I note, that the Secretary of State of the State of New York was properly served on behalf of Seacoast, in accordance with "306(b) of the Business Corporation Law. Accordingly, I find that Seacoast was able to participate in the appeal and was properly joined as a necessary party. I therefore need not address the particulars of the various addresses and name permutations of the company.

I now turn to the merits. Respondent insists that under the bid specifications, the aggregate total of the number and type of buses (i.e., seven 5 hour buses) was solely to indicate the scope of the job and a total upon which a bid bond could be calculated. Unfortunately, nowhere in the specifications can this restrictive language be found. On the other hand, there is no language in the specifications expressly supporting petitioner’s claim that the bid terms clearly and unambiguously call for an award based solely on the aggregate bid. Nor is it explicitly stated that the award will be made solely on a unit price.

Petitioner relies on the bid form and page 3 of the specifications in support of its position that respondent was obligated to award the contracts on the aggregate bid price. Page 3 provides:

For the purpose of providing a uniform basis on which all prospective bidders may calculate a total bid price, the number of sixty-six [66] passenger buses required has been estimated to be eleven [11]. It is not possible to estimate the required number of buses more accurately at the time of preparation of this document. The number as of initiation of work may be larger or may be substantially smaller than eleven [11]. All prospective bidders prior to the bid opening, and the successful bidder thereafter, will be provided with all updates estimates [sic] when and as available. The busing schedule may not be complete until a date which at the latest shall be two [2] calendar weeks prior to the first day of school (emphasis added).

Petitioner argues that this language requires the district to make awards on the "total bid price."

On the other hand, respondent argues that there are numerous references in the bid specifications which provide it with the flexibility to make awards on a unit price basis. Item VII entitled "Award" of the Terms and Conditions provides:

This bid may be awarded to the lowest total aggregate bid by a responsible bidder or by any combination of items to responsible bidders in the best interests of the school district.

Bidders were required to bid a yearly price per bus, within each of the different categories as specified on proposal sheet 1. Item X entitled "Award of Contract" makes clear that the award and reimbursement will be based on the submitted bid prices for each year (not a single price). The fifth unnumbered paragraph under Item I of the Terms and Conditions specifically reserves to the district the right to

make such additions, deductions, or changes as it deems necessary, making allowance or deduction therefore at the specified unit cost rates thereof and this contract shall in not way be invalidated thereby . . . [and] to make awards in any way it deems advisable in the best interests of the school district."

Item III of the Terms and Conditions entitled "Length of Contract" reserves to the Board:

... the right to award a base year contract or a multiple year contract in any combination of items, in the best interest of the school district.

Paragraph 28 of the General Conditions provides:

28. Where a bidder is requested to submit a bid on individual items and also on a total sum or sums, the right is reserved to award bids on individual items or on total sums.

Finally, the original legal notice specifically reserves to respondent

"the right to reject any or all bids and to act in the best interests of the School District...[and] the right to award contracts for any, or all items, or any combination of items."

Additionally, on March 14, 1996, respondent held a pre-bid conference, which all prospective bidders were required to attend and which Acme, Seacoast and Educational did indeed attend. Respondent asserts that at the pre-bid conference, Jean R. Poppe, the Assistant to the Superintendent for Business, specifically advised all potential bidders "that the bid would be awarded on a unit price basis with those unit prices being applied to expected needs as of the date of award to determine who was low bidder in each section of the bid." In Ms. Poppe's affidavit, she alleges that she explained to the bidders that the purpose of "requesting aggregate totals was not for the purpose of making a bid award, but rather for the purpose of calculating appropriate levels of bid security." She further alleges that the bid specifications were replete with indications that the estimates were only approximate and subject to substantial change since the district did not know its needs at the time. Therefore, Ms. Poppe asserts that she told the bidders that the district "would be looking at the unit prices and applying them to our best estimates of need as of the time of bid award in determining the low bidder." Furthermore, Ms. Poppe explained to the bidders that the district had never used 2 or 3 hour 66 passenger buses and that it might award 5 and 6 hour buses if school hours changed. Respondents Seacoast and Educational also assert that Ms. Poppe was careful to point out at the pre-bid conference that all bids would be awarded on a "unit price per vehicle" basis.

For section II, Ms. Poppe alleges that she indicated at the pre-bid conference "that the award would be based on whichever scenario or combination of scenarios gave the district the very lowest price for transportation," and that in some cases it might award "on a per student basis, others on a per school basis, and yet others on a per bus basis." Thus, respondent argues it was clear to all bidders that the district would not be awarding the contracts on an aggregate bid basis. In addition, Ms. Poppe pointed out that the deadline for parental requests for transportation to private schools was not until April 1, only one day before the bid deadline, and consequently, the numbers and needs might change after that date.

It is well settled that contracts subject to competitive bidding shall be awarded "to the lowest responsible bidder" (Education Law "305(14); General Municipal Law "103(1). The issue before me is whether petitioner is the lowest responsible bidder. Petitioner contends, based on the aggregate bid price, it is. Thus, I must consider whether respondent was obligated to make awards based solely on the aggregate price and if not, whether bidders were sufficiently informed about respondent's method of determining the low bid.

In an appeal to the Commissioner, the petitioner has the burden of demonstrating a clear legal right to the relief requested and the burden of establishing the facts upon which it seeks relief (8 NYCRR "275.10; Appeal of Catherine B., 37 Ed Dept Rep 34; Appeals of Lindauer and McKee, 34 id. 596). I find that petitioner has not met this burden. With one exception discussed below, relating to the 2 hour vans under section II, this is not a case where the rules were changed during the bidding process, or where the respondent adjusted and recomputed the bids using a different set of standards (see, Matter of Coram Bus Service, Inc., 23 Ed Dept Rep 493). In contrast to Coram, this is not a case where "the bid proposal and specifications are so indefinite that they deprive prospective bidders of the opportunity to submit responsive bids based on their actual costs." Petitioner and all other bidders had a fair opportunity to submit bids containing their lowest per unit and aggregate prices.

Based on the totality of the evidence, namely, the original legal notice, the bid specifications, the bid forms and the information conveyed at the pre-bid conference, I find that the district provided sufficient information to permit the bidders to formulate carefully considered bids and to inform them that contracts could be awarded on any combination of individual items or on total sums. I find further that, with the exception of the 2 hour van service as discussed below, respondent complied with the bid specifications in awarding the contracts. Accordingly, I find that respondent had the option of awarding the contracts on a unit price basis and was not obligated to make awards on aggregated bid prices. In fact, to have done so, would have led to an irresponsible and untenable result, a result surely not "in the best interests of the district," whereby the district would have not only paid substantially higher prices for individual buses, but also paid for services not needed and not used.

I also find that although the bid form for section I sought the price for a 6 hour bus as an alternative, it was permissible for respondent to determine its needs to be both 5 and 6 hour buses. All bidders had notice and opportunity to provide a 6 hour bus price, and choosing the lowest unit price for that category is no different than choosing the lowest price for any other category.

With respect to the 2 hour van service, however, I find that respondent did not follow its own procedures to award the contract to the lowest responsible bidder on an item by item basis. Respondent admits that petitioner is the low bidder for the 2 hour van category. Furthermore, it admits that greater savings could be realized by awarding a contract for the 2 hour category to petitioner, and a separate agreement for the 3 hour and 4 hour vans to Educational. Nonetheless, respondent determined that since the majority of van use fell into the 3 hour category where Educational was the low bidder, the contract should go to Educational. Respondent argues that by combining the unit prices for 2, 3, and 4 hour vans, Educational's bid is lower than petitioner's. Moreover, respondent contends that by using only one contractor, there is much less potential for disruption to the students. Although there is language in the specifications to the effect that the district could make awards on "any combination of items," I find this recomputation and manipulation of the bid prices impermissible. In this instance, respondent used a method to determine the lowest bidder which had not been disclosed in the bid specifications (Matter of Coram Bus Serv. Inc., 23 Ed Dept Rep 493; Progressive Dietary Consultants of N.Y., Inc. v. Wyoming County, 90 A.D.2d 214, 457 N.Y.S.2d 159 (4th Dept. 1982). Accordingly, the petition is sustained only with respect to the 2 hour van service under section II and that portion of the contract award to Educational is voided. If respondent chooses to use 2 hour van service under these specifications, it is obligated to award that contract to petitioner.

THE APPEAL IS SUSTAINED TO THE EXTENT INDICATED.

END OF FILE