Danvir Corp. v. City of Wilmington, (Del. Ch., Oct. 6, 2008), read opinion here , is a Chancery Court decision that denied injunctive relief requested by the lowest bidder on a public contract awarded by the City of Wilmington. Although the facts of this case involve some aspects that are peculiar to the City of Wilmington and its charter, there are several general principles recognized by the Court that may be applicable more generally to contests in connection with many types of bids awarded by public entities for public projects.
The Court discussed the distinction between a mere "low bidder" as compared to the "lowest responsible bidder", and rejected the request that the City re-bid the contract based on that distinction. The bids were for a towing contract for the City and the instructions included the proviso that "the price of the services alone would not be determinative of the successful bidder".
Procedurally, the Court considered the case in the context of cross motions for summary judgment which under Rule 56(h) had the net effect of a stipulation on the key facts, and made unnecessary the deferral of such motions when more factual development is needed. Although the corporate plaintiffs did not establish their standing as taxpayers, based on the Delaware Supreme Court’s Wahl case cited by the Court (nn. 25 and 30), the Court found that the corporate plaintiffs had standing based on their status as disappointed low bidders on a disputed contract.
Standard of Review Used by Court
The Court regarded the City’s decision to award the disputed contract as an administrative decision and applied the following standard of review for a court considering a challenge to an administrative decision:
"The ultimate standard that it must apply is a normal appellate one. Reversal is warranted if the adminstrative agency exercised its power arbitrarily, or committed an error of law or made findings of fact unsupportable by substantial evidence…. If the record clearly indicates that the adminstrative agency made its decision on improper or inadequate grounds, discretion has been abused and reversal upon judicial review is required." (citation omitted).
Additional Deference Given to Decisions on Public Bidding
Moreover, the Court recognized that a "state-contracting agency" has broad discretion in awarding contracts and the Chancery Court will not overturn a decision to award a contract "that complies with the law unless the award was made arbitrarily, capriciously or in bad faith." (nn. 31 and 32)
Also, the Court noted that where as here the contract has already been signed, the "challenger’s burden is heightened and he must show that the agency clearly acted illegally in making the award." (n. 33)
This opinion is a useful primer on the high thresholds that one needs to overcome in cases where a bid awarded by a public entity is contested.