SN Nielsen Co. v. PUBLIC BUILDING COMM'N OF CHICAGO

410 N.E.2d 40, 81 Ill. 2d 290, 43 Ill. Dec. 40, 1980 Ill. LEXIS 361

• Court: Illinois Supreme Court
• Decided: July 11, 1980
• Docket: 53511
• Status: Published

Opinions

MR. JUSTICE KLUCZYNSKI

delivered the opinion of the court:

This action was filed by plaintiff, S. N. Nielsen Company, seeking a determination that it is entitled to the contract for the construction of the New Loop and City Wide College, to be located in downtown Chicago. The circuit court of Cook County agreed with plaintiff that the bidding formula used by the defendant Public Building Commission was unlawful, but it refused to grant the relief requested. We allowed plaintiff’s motion for direct appeal. 73 Ill. 2d R. 302(b).

Plaintiff, S. N. Nielsen Company, and defendant Del E. Webb Corporation are general contractors in the construction industry. Both submitted bids in response to the defendant Public Building Commission’s April 11, 1980, advertisement for bids for the construction of the New Loop and City Wide College, 30 E. Lake St., Chicago. On May 15, 1980, the Commission opened the bids of Nielsen, Webb, and five other bidders. Nielsen’s bid of $19,130,000 was lowest, and Webb’s bid of $19,320,000 was third lowest. By resolution of May 20, 1980, however, the Commission awarded the contract to Webb on the basis of its application of the Commission’s so-called “canvassing formula” under which a bidder receives credits for the percentage of hours worked by minority members not in excess of 50% of the total hours worked on the project. These credits are subtracted from the contractor’s bid, and the result is denominated the “award criteria figure.” The formula is included in bidding documents distributed to interested contractors, and the contractors calculate their own minority credits. The formula, as contained in the bidding documents, is set out below:

CANVASSING FORMULA

Line 1. Base Bid, in figures ______

Line 2. Percentage of the journeymen hours that the Contractor proposes to be worked by minority journeymen during construction of the project ______

Line 3. Multiply line 2 by line 1 by 0.04 ______

Line 4. Percentage of the total apprentice manhours that the Contractor proposes to be worked by minority apprentices during construction of the project _______

Line 5. Multiply line 4 by line 1 by 0.03 ______

Line 6. Percentage of the total laborer manhours that the Contractor proposes to be worked by minority laborers during construction of the project ______

Line 7. Multiply line 6 by line 1 by .01 ______

Line 8. Summation of lines 3, 5, and 7 ______

Line 9. Subtract line 8 from line 1 = ______

Award Criteria Figure ______

The formula was taken verbatim from a form used by the city of Chicago. We also are informed that the Commission began using the formula as early as 1974 but that no resolution was passed formally adopting the formula. Nielsen, however, does not attack the Commission’s failure to pass such a resolution and has stipulated that the case is not thereby affected in any manner.

After application of the formula, the bidder with the lowest award criteria figure is awarded the contract. The award criteria figure, however, is used only to determine which contractor receives the contract; the contract is actually performed for the amount specified in the contractor’s bid. Through application of the formula, it was determined that Webb had the lowest award criteria figure, $18,547,200, and that Nielsen had the second lowest such figure, $18,565,000. Webb was accordingly awarded the contract, to be performed at its bid price of $19,320,000, a figure $190,000 in excess of that specified by Nielsen.

That same day, May 20, Nielsen filed suit, alleging that the Commission’s award to Webb violates the Commission’s bidding statute. In its complaint, Nielsen sought declaratory and injunctive relief and a writ of mandamus directing the Commission to comply with its bidding statute and to award the contract to Nielsen. The bidding statute, section 20 of the Public Building Commission Act, provides in pertinent part that the Commission’s contracts “shall be let to the lowest responsible bidder.” (Ill. Rev. Stat. 1979, ch. 85, par. 1050.) Nielsen does not contend that the formula used by the Commission is arbitrary or that it unlawfully discriminates against non-minorities. Similarly, Nielsen does not contest the desirability of increased minority representation in public works projects.

On May 23, 1980, the circuit court entered a 10-day temporary restraining order, restraining the Commission and Webb from executing the awarded contract and from engaging in any construction thereunder. On May 30, the circuit court ruled that the Commission’s use of the formula resulted in a conflict with its bidding statute, section 20 of the Public Building Commission Act, providing that contracts be awarded to the lowest responsible bidder. The court therefore held that use of the formula was unlawful. The court, however, dissolved its restraining order and denied Nielsen the requested declaratory and injunctive relief and writ of mandamus, reasoning that Nielsen could sue at law for lost profits and that the rights of members of the public not before the court — the City College Board and minority members — might be adversely affected. This appeal by Nielsen followed, and the Commission cross-appealed from the circuit court’s ruling that the Commission’s use of the canvassing formula is unlawful.

Nielsen argues initially that the Public Building Commission, a creature of statute (Ill. Rev. Stat. 1979, ch. 85, par. 1031 et seq.), possesses only the authority granted therein (Ill. Const. 1970, art. VII, sec. 8). Citing cases from this and other jurisdictions, Nielsen argues that the Commission cannot, without legislative authority, implement its own notions of desirable public policy and thereby inject its minorities canvassing formula into its bidding process. (See, e.g., Holden v. City of Alton (1899), 179 Ill. 318; Fullilove v. Beame (1979), 48 N.Y.2d 376, 398 N.E.2d 765, 423 N.Y.S.2d 144.) The Commission and Webb argue in response that authorization for the formula is found in the affirmative action provisions of the Fair Employment Practices Act (Ill. Rev. Stat. 1979, ch. 48, par. 851 et seq.) and that a contractor’s affirmative action efforts should be taken into account in determining whether that contractor is the “lowest responsible bidder” within the meaning of the Commission’s bidding statute. We agree and accordingly reverse the circuit court’s ruling that the formula is unlawful, and we affirm its decision not to disturb the award to Webb.

Section 3 of the Fair Employment Practices Act provides in pertinent part:

“Unfair employment practices. It is an unfair employment practice:

(a) For any employer, because of the race, color, religion, sex, national origin, ancestry or physical or mental handicap unrelated to ability of an individual, or an unfavorable discharge from military service, to refuse to hire, to segregate, or otherwise to discriminate against such individual with respect to hire, selection and training for apprenticeship in any trade or craft, tenure, terms or conditions of employment ***.” (Ill. Rev. Stat. 1979, ch. 48, par. 853(a).)

Section 4 of the Act, however, requires more and provides that a showing of affirmative action is a precondition to obtaining a public contract. That section provides:

“Public contracts. Every contract to which the State, any of its political subdivisions or any municipal corporation is a party shall be conditioned upon the requirement that the supplier of materials or services or the contractor and his subcontractors, and all labor organizations furnishing skilled, unskilled, and craft union skilled labor, or who may perform any such labor or services, as the case may be, shall not commit an unfair employment practice in this State as defined in this Act, and shall take affirmative action to insure that no unfair employment practice is committed.” (Emphasis added.) (Ill. Rev. Stat. 1979, ch. 48, par. 854.)

The Public Building Commission, a municipal corporation (Ill. Rev. Stat. 1979, ch. 85, par. 1044), is clearly governed by section 4 and is thereby authorized to implement affirmative action requirements in the letting of its contracts “to insure” that no discrimination is practiced against minorities in employment decisions. (See John N. Brunsfeld & Sons, Inc. v. Board of Education (1977), 54 Ill. App. 3d 119, 123-25, and cases cited therein.) Though not in effect at the time of the bidding here in question, we also note that the new Illinois Human Rights Act, repealing the Fair Employment Practices Act and recodifying its affirmative action provisions effective July 1, 1980, similarly provides:

“Equal Employment Opportunities; Affirmative Action.

(A) Public Contracts. Every party to a public contract shall:

(1) Refrain from unlawful discrimination in employment and undertake affirmative action to assure equality of employment opportunity and eliminate the effects of past discrimination;

(2) Comply with the procedures and requirements of the Department’s regulations concerning equal employment and affirmative action;

(3) Provide such information, with respect to its employees and applicants for employment, and assistance as the Department may reasonably request.” (Emphasis added.) Ill. Rev. Stat., 1979 Supp., ch. 68, par. 2 — 105(A)(1).

Nielsen disputes the interpretation of section 4 of the Fair Employment Practices Act set out above, suggesting instead that the section “merely requires contractors to refrain from active discriminatory hiring practices, nothing more.” Such an interpretation, we believe, simply ignores the plain meaning of the section. “The obligation to take affirmative action imports more than the negative obligation not to discriminate.” (Southern Illinois Builders Association v. Ogilvie (7th Cir. 1972), 471 F.2d 680, 684.) Nielsen’s interpretation might indicate that there exists some disagreement as to the plain meaning of the section, but to the extent that the section may be considered ambiguous, it should be remembered that remedial legislation should be construed liberally to effectuate its purposes. Zehender & Factor, Inc. v. Murphy (1944), 386 Ill. 258, 263.

We also do not agree with plaintiff that the express mention of affirmative action programs in the bidding statute of the Metropolitan Sanitary District of Greater Chicago (Ill. Rev. Stat. 1979, ch. 42, par. 331.3) indicates the General Assembly’s intention that the Public Building Commission not implement such a program. Our cases establish that this sort of “negative inference” is not one that we should draw, especially in light of a contrary expression of legislative intent such as that found in section 4 of the Fair Employment Practices Act. Concrete Contractors’ Association v. Village of La Grange Park (1958), 14 Ill. 2d 65, 72.

Finally, Nielsen makes the argument that the Commission’s canvassing formula must fall because its application results in the award of contracts to one other than the lowest responsible bidder. It is Nielsen’s position that a contractor’s commitment to affirmative action has nothing to do with whether it is responsible. The word “responsible” has previously been interpreted in the decisions of this State to mean financially responsible and able to discharge one’s obligations “in accordance with what may be expected or demanded under the terms of the contract.” (People ex rel. Peterson v. Omen (1919), 290 Ill. 59, 67. See also Hallett v. City of Elgin (1912), 254 Ill. 343, 346-47; People ex rel. Assyrian Asphalt Co. v. Kent (1896), 160 Ill. 655, 661-62.) We believe, however, that a contractor’s commitment to affirmative action is something that “may be expected or demanded under the terms of the contract” within the meaning of the cases above cited. Antidiscrimination statutes such as section 4 of the Fair Employment Practices Act indicate the legislature’s intention that, in public contracting, the social responsibility of the contractor should also be a concern. Financial responsibility and the ability to perform the contract are therefore not the only relevant factors, and the fact that a contractor submits the lowest bid will not automatically require that the contract be awarded to that contractor. As McQuillin states in his treatise on municipal corporations, “In proper circumstances a contract may be awarded to one who is not the lowest bidder, where this is done in the public interest, in the exercise of discretionary power granted under the laws, without fraud, unfair dealing, or favoritism, and where there is a sound and reasonable basis for the award as made.” (10 E. McQuillin, Municipal Corporations sec. 29.73a, at 429-30 (3d ed. 1966).) Though none of the cases cited by McQuillin involve a contractor who obtained an award because of the operation of an affirmative action plan, we believe that such a situation is within the intendment of the quoted passage. As one court has said, speaking of the Federal antidiscrimination and bidding statutes and those of its own State:

“It may be argued that requiring public contractors to take affirmative action to forestall discriminatory employment practices in the performance of their contracts will tend to raise the cost of such contracts. Increased costs impair another governmental interest, that of economy.

It must be noted, however, that neither state nor federal contracts are secured only to the lowest bidder, but to the lowest and best bidder [citation] and lowest responsible bidder [citation]. Moreover, the alternative of securing a like degree of compliance with equal employment opportunity laws by means of public prosecutions and administrative proceedings is also costly and, in addition, is both post hoc and punitive. Indeed, it might reasonably be supposed that the governmental objectives of equal employment opportunity and low-cost public construction would be better served by requiring public contractors to undertake affirmative duties in practicing nondiscrimination in their dealings with and through others in the performance of the contract, thereby denying the benefits of public contract expenditures to those who would discriminate.

In addition to economics as a reason for requiring public contractors to assure nondiscriminatory performance, the strong moral commitment of both state and federal government to fair employment practices is reflected in their respective legislation. A government which has declared discriminatory employment practices unlawful should not then finance them indirectly by binding only its direct contractor, and not the entire contract performance, to a promise of attempted compliance. We conclude that the capacity to assure a performance which complies with antidiscrimination laws is reasonably a part of the standard of a best or responsible bidder on a contract involving the expenditure of public funds. Accordingly, a bidder for a construction contract to be awarded by a public body of this state may be required to assure, by appropriate promises contained in contract provisions or related instruments, nondiscrimination in employment in the entire performance of the contract.” (Emphasis in original.) Weiner v. Cuyahoga Community College District (1969), 19 Ohio St. 2d 35, 38-39, 249 N.E.2d 907, 910, cert, denied (1970), 396 U.S. 1004, 24 L. Ed. 2d 495, 90 S. Gt. 554:

For the foregoing reasons, we hold that the circuit court erred in ruling that the minorities canvassing formula used by the Public Building Commission in awarding its contracts is unlawful. We further hold that the circuit court correctly refused to order that the contract for the construction of the New Loop and City Wide College be awarded to plaintiff, S. N. Nielsen Company.

Affirmed in part and reversed in part.