A contractor that was not awarded road contracts, despite being the low bidder, had no claim against the town that advertised the contracts, a Wisconsin appeals court has ruled. It agreed with the town that the contractor was not a responsible bidder.

In May 2003, the Town of Pittsfield, Wis., advertised for bids on four road construction projects. D.M.K. Inc. was the lowest bidder on each. The town board met on May 13, 2003, to evaluate three bids after deciding to postpone one project.

At the meeting, the town’s attorney, Jon Anderson, expressed concerns about D.M.K. because of problems on an earlier project in which gravel was left on the road, creating a safety hazard. The town chairperson, Dawn Kelm, said that she had stopped work on a previous D.M.K. project because an inexperienced worker was not being supervised. And an engineer whose firm did work for the town reported that his firm had to correct issues regarding D.M.K.’s grading and undercutting of a road.

The town supervisor, Tom Huetter, stated that D.M.K. did not have the town’s confidence. While agreeing with Huetter, Kelm said she thought D.M.K. might be capable of performing one or two contracts.

D.M.K.’s lawyer, Michael Hermes, said that D.M.K. might fare better by getting no contracts and suing the town.  Anderson then suggested that if D.M.K. were awarded only two contracts, it should be required to sign a waiver, relinquishing any right to sue the town over the other contracts.

After a recess, Hermes stated that if D.M.K. received no contracts, it would sue the town. D.M.K.’s owner, Craig Duchateau, said that if the firm received three contracts, it would sign a waiver.

The town then passed a motion to award two contracts to D.M.K., conditioned upon the waiver. Hermes responded that D.M.K. would not accept the award of only two contracts.

The town then rescinded its motion and decided not to award any contracts to D.M.K. The town stated that the firm did not have “the capacity and competence” to comply with the terms of the contract, and that the town no longer trusted D.M.K.   The contracts then were  awarded to other bidders.

D.M.K. sued the town, seeking $216,000 as damages for lost profits.  The Wisconsin trial court granted summary judgment for the town, ruling that the town’s decision to place a condition on its contract award was a discretionary act within its power.

D.M.K. appealed to the Wisconsin Court of Appeals. The firm said the town found D.M.K. to be a responsible bidder when it made a conditional award of two contracts. And it argued that the town had no authority to require a waiver.

The appellate court said the town’s finding that D.M.K. was not a responsible bidder was supported by legitimate concerns about its performance on prior contracts. The town’s offer to award D.M.K. two contracts if it signed a waiver did not mean that the town had concluded that D.M.K. was a responsible bidder, said the court.  “Given the context of the conditional award, we cannot determine that the town implicitly found D.M.K. to be a responsible bidder because it is just as plausible that the town was simply negotiating with D.M.K. in an attempt to avoid litigation,” the court explained. D.M.K. Inc. v. Town of Pittsfield, 711 N.W. 2d 672 (Wis. App. 2006).