../West Educational Publishing

Low Bidder Denied a Government Contract May Sue on Promissory Estoppel Theory
Description California high court held that a low bidder for a government contract, who was improperly denied the contract, may sue on the basis of promissory estoppel to recover bid preparation costs, but not lost profits.
Topic Contracts
Key Words Promissory Estoppel; Bid Preparation; Public Contracts
C A S E   S U M M A R Y
Facts The L.A. Metropolitan Transportation Authority (MTA) solicited bids to build a new station and tunnels. Wilson successfully protested the award to another bidder because it did not follow Disadvantaged Business Enterprise (DBE) rules. The MTA then rejected all bids and solicited new bids. Wilson was the low bidder but was rejected because, under an unwritten MTA policy, another bidder got more DBE credits for the structure of their bid. Wilson then sued the MTA and was awarded $924,000 for bid expenses, lost profits, and overhead. Appeals court affirmed and the MTA appealed.
Decision Reversed in part. The lowest responsible bidder that is not awarded a public contract has a cause of action for monetary damages on a promissory estoppel theory if injunctive relief is not available for that party. Promissory estoppel is "a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced." Such damages furthers the purposes of competitive bidding laws and deters government misconduct, as occurred with MTA here. However, lost profits are not recoverable, only bid preparation costs are.
Citation Wilson v. Los Angeles County Metropolitan Transportation Agency, 96 Cal.Rptr.2d 747 (Sup. Ct., Calif., 2000)

Back to Contracts Listings

©1997-2001  South-Western, a division of Cengage Learning, Inc. Cengage Learning is a trademark used herein under license.