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05/09/97 BEST BUS JOINT VENTURE v. BOARD EDUCATION

May 9, 1997

BEST BUS JOINT VENTURE, LAIDLAW TRANSIT, INC., WILLETT MOTOR COACH COMPANY, ROBINSON BUS SERVICE, INC., LATINO EXPRESS, INC., EXPRESS LATINO, INC., AND B&B COACH, PLAINTIFFS-APPELLANTS,
v.
THE BOARD OF EDUCATION OF THE CITY OF CHICAGO, AND RR JOINT VENTURE, DEFENDANTS-APPELLEES (ALLTOWN BUS SERVICE, INC., ART'S TRANSPORTATION, INC., JEWEL'S TRANSPORTATION, INC., PAIGE BUS ENTERPRISES, PAIGE TRANSPORTATION, INC., AND WHITE TRANSPORTATION, INTERVENORS AND DEFENDANTS-APPELLEES).



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. THE HONORABLE JOHN MADDEN, JUDGE PRESIDING.

Released for Publication June 25, 1997.

The Honorable Justice South delivered the opinion of the court. Hartman, P.j., concur. Justice Hoffman, specially concurring.

The opinion of the court was delivered by: South

The Honorable Justice SOUTH delivered the opinion of the court:

Plaintiffs, Best Bus Joint Venture (Best Bus), Laidlaw Transit, Inc. (Laidlaw), Willett Motor Coach Co. (Willett), Robinson Bus Service, Inc. (Robinson), Express Latino, Inc. (Express), Latino Express, Inc. (Latino), and B&B Coach (B&B) challenged the Board of Education of the City of Chicago's (the Board's) award of bus contracts for the 1996-97 through 1998-99 school years and sought permanent injunctive relief. At issue was the Board's application of a 2% local business preference (2% LBP) to Best Bus; the validity of such a preference; and the Board's award of bus contracts.

In count I, plaintiffs sought an order compelling the Board to apply the 2% LBP based upon the entity plaintiffs claimed would actually provide service (Willett), rather than the entity which participated in the bid (Laidlaw). In the alternative, in count II, plaintiffs sought to invalidate he 2% LBP. In count VII, plaintiffs claimed that the Board's action must be reversed as "palpable error, amounting to constructive fraud." In count VIII, plaintiffs claimed that Board Rule 5.5 violates due process and equal protection.

Plaintiffs filed a complaint only three weeks before the start of the school year. They sought a preliminary injunction, and a hearing was held by the trial court on August 12, 14 and 16, 1996. Both the Board and codefendant RR Joint Venture (RR) raised the affirmative defense of estoppel.

The parties entered into a number of stipulations. The parties also agreed to the authenticity of a number of documents. The stipulations and documents are as follows.

On January 24, 1996, the Board adopted Rule 5.5, establishing a 2% LBP for contracts over $10,000. Pursuant to Board Rule 5.5, a company must meet the following four requirements in order to qualify for the 2% LBP: (1) be authorized to do business and doing business in Chicago; (2) be located in the City of Chicago; (3) have the majority of its regular full-time work force in Chicago; and (4) be subject to City of Chicago taxes.

In March 1996, the Board let out for bid contracts for provision of school bus services for the 1996-97 through 1998-99 school years, bid number 96-130050. The Board notified prospective bidders of the bid period and pre-bid meeting by a letter dated March 12, 1996. All plaintiffs and defendants present at the preliminary injunction hearing received the letter. Bid specifications were made available to the public on March 15, 1996.

The pre-bid meeting was held on March 21, 1996. Representatives from all of the plaintiffs and defendants present at the preliminary injunction hearing attended the March 21, 1996, pre-bid meeting.

A list of revisions and additions from the previous contract was made available to the public by the time of the pre-bid meeting. The list of revisions and additions noted the 2% LBP on page 9 of the contract. The terms and conditions of the 2% LBP were described during the March 21, 1996, pre-bid meeting and were set forth on page 9 of bid number 96-130050. The terms and conditions of the 2% LBP were set forth in the bid prepared and proposed on behalf of Best Bus.

Best Bus submitted a bid to provide services to transport students for the Board. Laidlaw was a member of Best Bus, but Willett was not. Laidlaw was not a local company as defined in the bidding specifications. As applied by the Board, Best Bus was not qualified as local under Board Rule 5.5 and the bids specifications because the majority of Laidlaw's employees work outside Chicago and, therefore, the majority of employees of the venturers in the joint venture also work outside Chicago.

At the meeting of the Board on July 24, 1996, the bus service contracts were awarded. Although Best Bus was the lowest bidder for type I buses, when the 2% LBP was considered, RR became the low bidder for these buses and received the award.

Diane Minor, chief purchasing officer in the Chicago public school system, testified that when she became the Board's chief purchasing officer she brought with her knowledge regarding the city's use, application of and experience with a 2% LBP in its competitive bidding process, and she wished to apply that knowledge and those benefits to purchasing for the Board. Minor testified that a 2% LBP had been used by the city in evaluating who was the lowest responsible bidder in procurement of contracts. In her experience, the 2% LBP had an impact on the ability of local businesses to compete because it provided local businesses with a more level playing field in competing with suburban businesses that had lower operating or fixed costs as a result of being located outside the City of Chicago.

Minor testified that the city did undertake a study to quantify the allotted extra costs that it determined were associated with doing business in the city and it arrived at the 2% amount as a balancing factor. She believed that the 2% LBP was a success as used by the city, and it was her intent to obtain the same success for the Board. In Minor's experience, the 2% LBP allowed local companies to bid successfully and eventually, in some cases, actually bid lower than the nonlocal companies.

Minor relied upon the knowledge that she had from working with the 2% LBP while employed by the city. She did not hold any public hearings prior to presenting it to the Board. The Board did make the rule available for public commentary, but Minor did not recall any public commentary on the rule. The Board was familiar with the requirements of Rule 5.5 and its intended purpose at the time the Board voted on it. Rule 5.5 was presented to the Board and passed unanimously.

Minor testified that the four requirements of the 2% LBP were designed to improve education indirectly by improving the local communities. Companies located in the City of Chicago pay real estate taxes that go to support the public school system directly in terms of monies that go to education. Employment of city residents would lead to children who are better fed, clothed and housed and such children are better students.

Minor first became familiar with Best Bus and its members in July 1996, while reviewing all Board reports submitted for recommendation of the award of bus contracts. She was familiar with the provision of the Best Bus Joint Venture agreement, which stated that Laidlaw may assign its responsibilities and duties under the agreement. She asked her staff whether it was aware of any assignment by Laidlaw. Minor's staff was unsure at that point. In any event, she considered the assignment provision irrelevant because the bid documents that she had and the information presented in the bid showed Laidlaw as the bidding partner and a member of ...


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