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Oscar George Elec. v. Fair & Exposition Auth.

OPINION FILED FEBRUARY 26, 1982.

OSCAR GEORGE ELECTRIC COMPANY, PLAINTIFF-APPELLEE,

v.

THE METROPOLITAN FAIR & EXPOSITION AUTHORITY, DEFENDANT-APPELLANT. — (HENRY NEWGARD & COMPANY, DEFENDANT.)



APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.

JUSTICE MEJDA DELIVERED THE OPINION OF THE COURT:

Rehearing denied April 27, 1982.

This action was brought by the plaintiff-appellee, Oscar George Electric Company (Oscar George), an unsuccessful bidder, to enjoin an electrical service contract between defendant-appellant, The Metropolitan Fair & Exposition Authority (the Authority), and defendant, Henry Newgard & Company (Newgard), the recipient of the contract awarded pursuant to competitive bidding. A temporary restraining order prohibiting the Authority and Newgard from entering into the contract was entered. The Authority filed a motion to dissolve or stay the order but prior to a ruling thereon, filed notice of appeal therefrom (appeal No. 81-1173). The court thereafter entered a preliminary injunction and denied the motion to dissolve or stay that order. These rulings were appealed (appeal No. 81-1439). The two appeals were consolidated upon motion of the Authority.

The Authority has prosecuted these interlocutory appeals challenging the issuance of the temporary restraining order and preliminary injunction and the denials of motions to dissolve or stay these orders. The Authority's primary contentions on appeal challenge the standard applied in reviewing the Authority's statutory exercise of discretion, and further challenge the pertinent findings with respect to the necessary prerequisites to the issuance of temporary and preliminary injunctive relief. The Authority also contends that the court abused its discretion in not requiring any bond for the temporary restraining order and in requiring a $70,000 bond for the preliminary injunction.

Essentially, this suit challenges the propriety of the bidding procedure used by the Authority in contracting for electrical services at McCormick Place and Donnelley Hall in Chicago. These facilities accommodate public and private expositions, trade shows, theatrical performances and other events. The Authority purchases electrical services for these events, charging exhibitors a flat fee and thereby making a profit on its charges. Due to steadily declining profits over past years, the Authority in 1980 decided that electrical work should be awarded to the lowest responsible bidder.

Under an interim agreement, U.S. Electric Company (U.S. Electric) was hired to provide temporary electrical work until a contract was awarded and signed. The agreement was memorialized by a letter stating the rates which U.S. Electric would charge. This letter agreement expired on May 31, 1981. At the time of this appeal, electrical services are still being provided under this agreement, which is terminable at will by either party and contains no guarantee of future service.

Meanwhile, the Authority composed a bid package and solicited competitive sealed bids in three daily newspapers of general circulation published in the Chicago area. The ads ran on February 28, 1981, March 1, 1981, and March 2, 1981. Prospective bidders were provided with copies of the advertisement for bids, instructions to bidder (Instructions), a bid form for electrical services (Bid Form), a copy of the proposed electrical services contract and other forms. The bid form requested information concerning the rates that would be charged by the bidder.

A total of 15 contractors submitted bids for the project. All bids were accompanied by a $50,000 bid deposit in the form of certified or cashier's checks.

On March 17, 1981, the bids were opened publicly. The bids were then analyzed by the Authority's accountants, who initially determined that based upon the quoted rates the Authority would pay Commercial $8,304,132, Newgard $8,478,262, and Oscar George $8,587,668 during the contractual period. These calculations indicated that Commercial was the lowest bidder.

Subsequently, the Authority's electrical consultant noted an "irregularity" in Commercial's bid in that the labor component quoted figures significantly below the prevailing union rates. Commercial then revealed that it planned to renegotiate all terms of the contract after a new labor collective bargaining agreement went into effect on June 1, 1981, and that the company had underbid the labor component of the contract in order to be the lowest bidder.

The Authority objected to Commercial's proposed renegotiation of the contract. A financial study of the impact of the three lowest bids was undertaken by the Authority's accountants. The accountants concluded that Commercial would be the lowest bidder if union rates did not increase but since there was an anticipated increase effective June 1, 1981, and since Commercial indicated that it would increase the rates it charged the Authority by an amount greater than other contractors, that then Commercial was no longer the lowest bidder. Instead, the accountants determined that Newgard was the lowest bidder and recommended that Newgard be awarded the contract.

At the regular monthly meeting of the Authority on April 3, 1981, representatives of Commercial were given an opportunity to be heard. A member of the board of directors of the Authority asked if Commercial had tried to pull a "fast one" and a representative replied, "we did."

A motion made and seconded that Commercial be declared the lowest bidder and be awarded the contract was unanimously defeated by the 10 members present. A motion was then made and seconded that the electrical services contract be awarded to Newgard. The motion was adopted by the unanimous vote of all members present. These votes and the board's reasons therefor were written up in the minutes of the meeting and retained on file at the Authority.

Upon rejecting Commercial as the lowest bidder, a motion was made and carried that Commercial's $50,000 bid deposit was to be returned. Thereafter, Commercial's deposit was returned, as were those of the other unsuccessful bidders.

At a meeting on April 17, 1981, the Authority, U.S. Electric and Newgard agreed that the electrical services changeover from U.S. Electric to Newgard was to be completed by June 8, 1981. This date was selected to provide sufficient time for familiarization with electrical systems and to interfere least with the scheduled trade shows. The contract was signed by Newgard on or about May 1, 1981, and by the Authority at the regular monthly meeting on May 8, 1981.

On May 7, 1981, Oscar George filed its verified complaint seeking injunctive relief prohibiting the Authority and Newgard from entering into the contract, a declaration that the bid procedure utilized was void, and an order compelling the Authority to seek the services with a bid form consistent with the intent and prohibitions of the Metropolitan Fair and Exposition Authority Act (Ill. Rev. Stat. 1979, ch. 85, par. 1221 et seq.).

On May 12, 1981, the court entered a temporary restraining order enjoining the Authority and Newgard from doing any act in furtherance of the contract. The order further provided that Oscar George would not be required to post bond, and that a hearing as to the preliminary injunction was set for May 21, 1981. The Authority filed an emergency motion to dissolve or stay this order in the circuit court on May 13, 1981. After a brief hearing on that date, the matter was continued until May 18, 1981, to allow Oscar George adequate time to respond to the Authority's ...


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