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The city of St. Paul illegally awarded a contract to a construction firm when it allowed the contractor to change its bid, a violation of the city's own competitive bidding laws, a state appellate court ruled today.

The three-judge panel says the city's contract with Shaw-Lundquist Associates on Lowertown's Lofts at Farmers Market project is void. That part of the ruling reverses a lower court's decision in a lawsuit filed last year by Rochon Corp., one of the losing bidders.

But at this point, it's more complicated than just switching contractors. The five-story lofts project is finished, and all 58 units are rented out, says City Attorney Sara Grewing. The city plans to appeal the decision.

"We don't believe the Court of Appeals got the law exactly right," Grewing says.

In issuing the ruling, Judge Kevin Ross noted that Shaw-Lundquist appeared to be the clear winner when St. Paul opened the sealed bids to construct the lofts project in late 2010. Shaw bid at $7.3 million. The second-lowest bid went to Rochon Corp., at $8.7 million.

But the next day, Shaw informed the city it had discovered a mathematical error in its spreadsheet and asked to withdraw the bid. For one of the items, it meant to type in the correct amount of $688,000, but left off a zero, and indicated only $68,800 -- a difference of $619,200. Oops. If you were to add that $688,000 to the rest of the bid, it would raise the total to around $7.9 million.

The city asked Shaw if it would would submit a modified bid. The city refused to hold a rebid, saying a delay would jeopardize funding, according to court documents.

Shaw-Lundquist replaced its old bid with one for $8 million -- some $89,000 higher than what the original bid would have been without the clerical error -- but still lower than the Rochon bid.

"The city allowed Shaw-Lundquist to change its bid not only to fix its error but also to add another $89,211, giving it both cake and icing," Ross wrote. "The appearance of both folly and favortism arise."

Ross also said when Shaw-Lundquist modified the bid, it knew the next lowest bid, "allowing it to make its correction fully aware of how much it could increase its bid while yet retaining its place in the ranking."

The court ruled that Rochon was entitled to declaratory judgment. The city has already paid the firm about $34,000 to cover the costs to prepare the bid.

Attorney Dean Thomson, who is representing Rochon, said the appellate court's decision preserves the integrity of the public bidding process.

"The court made it quite clear you can't play games with bids after the fact," he said. "You can't let illegal conduct go forward, under the theory it's somehow good for the citizens. It's not."

Legal squabbling over the Lowertown site, across from the downtown farmers market, is nothing new. For years, the site languished as a hole in the ground while contractors, the developers and the city bickered over the contract. In 2011, Mayor Chris Coleman 

 the project as part of a new initiative called "Rebuild St. Paul."

Minnesota News

The Cities Blog

Laura Yuen

Author

A state appeals court rules that the contract for the Lofts at Farmers Market should have been voided.

St. Paul goofed in awarding lofts contract, court says

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