SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-7005-94T2
BODIES BY LEMBO, INC.,
Plaintiff-Appellant,
vs.
COUNTY OF MIDDLESEX and THE
NORCIA CORPORATION,
Defendants-Respondents.
Submitted December 12, 1995 - Decided January 4, 1996
Before Judges Michels, Villanueva and Kimmelman.
On appeal from Superior Court of New Jersey,
Law Division, Middlesex County.
Nord & Associates, attorneys for appellant
(Vito C. DeMaio, of counsel and on the
brief).
Bruce J. Kaplan, attorney for respondent
County of Middlesex (Mr. Kaplan, on the
letter brief).
Respondent The Norcia Corporation did not
submit a brief.
The opinion of the court was delivered by
VILLANUEVA, J.S.C.
Plaintiff Bodies by Lembo, Inc., appeals from an order
requiring rebidding for road maintenance equipment by the County
of Middlesex (County) after plaintiff was declared the lowest
responsible bidder. We reverse and remand to have the trial
court order that the contract be awarded to plaintiff.
On September 1, 1994, the Board of Chosen Freeholders of
Middlesex County (Board) adopted a resolution authorizing the
bidding for road maintenance equipment including, inter alia,
eight dump bodies, each with snow plow and hydraulic system, to
be installed on eight truck chassis owned by the County.
Plaintiff submitted a bid in the total amount of $172,000. The
bid of The Norcia Corporation (Norcia) for the same equipment was
$177,688. Both of these bids conformed to the specifications set
forth in the County's Notice to Bidders (Notice). In addition to
its bid for the installation of a Biebeau MS1034 dump body with a
Valk snow plow, Norcia submitted an alternate bid in the total
amount of $169,152 for a purportedly "equivalent" product, i.e.,
a Chief Mark II dump body with Power-Trol hydraulic system and
Valk snow plow, under section 13.0 of the bid specifications.
On November 30, 1994, Jack Garber, the County's purchasing
agent, recommended that five of the seven items contained in the
Board's resolution be awarded to bidders. Included in that
recommendation was the contract for the eight dump bodies for
which plaintiff was designated as the "lowest responsible
bidder."
On December 12, 1994, prior to any announcement of an award,
Norcia sent a "letter of protest" to Jack Garber requesting a
hearing in the event that its alternate bid was not accepted. A
purported hearing took place on December 14, 1994, between the
County and Norcia. That hearing apparently caused Norcia to make
numerous changes to its alternate bid which either corrected or
bettered the non-conformities. Thereafter, on January 19, 1995,
the Board awarded the contract (Contract) to Norcia.
Plaintiff filed a verified complaint in lieu of prerogative
writs, together with an order to show cause with temporary
restraints, seeking to have the court, inter alia, rescind the
Contract between the County and Norcia and award it to plaintiff.
On March 3, 1995, the trial judge granted plaintiff's application
for temporary restraints and set March 22, 1995, as the return
date for the order to show cause. On March 22, the parties
consented to the imposition of permanent restraints pending the
outcome of the within litigation and agreed to a disposition of
the matter by summary judgment.
After oral argument the judge found that the hearing
requested by Norcia and held without notice to the other bidders,
constituted a violation of Local Public Contracts Law, N.J.S.A.
40A:11-1 to -49, sufficient to invalidate the Contract. He
concluded that the Contract was awarded to Norcia based on the
modifications Norcia made to the alternate bid after the December
14 hearing. He found, further, that since the irregularities in
Norcia's original alternate bid demonstrated a material departure
from the bid specifications and prejudiced other bidders, the
County could not waive the irregularities.
By order dated July 7, 1995, the judge granted plaintiff's
motion for summary judgment, invalidated Norcia's alternate bid
and rescinded the Contract. In addition, he ordered the County
to "advertise for new bids as soon as practicable." The judge
made no mention of attorney's fees.
Plaintiff filed a motion for reconsideration, seeking to
vacate that portion of the court's order requiring the County to
readvertise for bids and to have the court reconsider its denial
of plaintiff's request for attorney's fees. Plaintiff also
sought an order excluding Norcia from submitting a bid in
response to the County's rebid of the Contract, or,
alternatively, a stay preventing the County from rebidding the
Contract pending appeal. On September 29, 1995, the court
entered an order which denied plaintiff's motion to vacate the
order compelling the County to advertise for new bids,
plaintiff's application for attorney's fees and costs, and
plaintiff's application for a stay pending appeal.
In the meantime, on July 20, 1995, the Board rescinded the
January 19, 1995, Contract with Norcia, revised its bid
specifications, and passed a resolution authorizing public
advertising for bids on the revised bid specifications.See footnote 1
According to the resolution, the revisions were made to "reflect
changes on the basis of new technology, added safety, and
availability of parts."
On August 9, 1995, plaintiff filed a notice of appeal with
the Appellate Division, and, pursuant to R. 2:9-5, sought an
order staying the County from opening the bids submitted to it
pursuant to its readvertisement. We granted the stay on August
14, 1995. Plaintiff now appeals from that part of the trial
court's order of July 7, 1995, which required the County to
readvertise for bids.
The purpose of the Local Public Contracts Law is to "'secure for the public the benefits of unfettered competition.'" Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 313 (quoting Terminal Constr. Corp. v. Atlantic County Sewerage Auth., 67 N.J. 403, 410 (1975)). Accordingly, bids must be awarded to the lowest bid conforming to the specifications. Township of Hillside v. Sternin, 25 N.J. 317, 324 (1957). Bid proposals, to be accepted, must not materially deviate from the specifications set forth by the contracting agency. Meadowbrook Carting Co., supra, 138 N.J. at 314. The rationale for this is obvious:
"The conditions and specifications must apply equally to all prospective bidders. Otherwise, there is no common standard of competition. Every element which enters into the competitive scheme should be required equally for all and should not be left to the volition of the individual aspirant to follow or to disregard and thus to estimate his bid on a basis different from that afforded the other contenders. So it follows that all bids must comply with the terms imposed, and any material departure therefrom invalidates a nonconforming bid as well as any contract based upon it. If this were not the rule,
the mandate for equality among bidders would
be illusory and the advantages of competition
would be lost."
[In re On-Line Games Contract,
279 N.J.
Super. 566, 590 (App. Div. 1995) (quoting
Sternin, supra, 25 N.J. at 323)).]
In order to protect these important policies, a contracting
entity "cannot be permitted to breathe validity into an invalid
bid." Sternin, supra, 25 N.J. at 326. Similarly, where a rebid
would effectuate just such a result, a court cannot order a
rebidding, but must award the bid to the lowest bidder. Only in
this way can the pitfalls of a public bidding system, i.e.,
"favoritism, improvidence, extravagance and corruption," be
avoided. Terminal Constr. Corp., supra, 67 N.J. at 410.
The remedy the court ordered herein, i.e., rejection of all
bids by virtue of the court's order to readvertise, is contrary
to our "`long-standing judicial policy' in construing [public
bidding] statutes `. . . to curtail the discretion of local
authorities by demanding strict compliance with public bidding
guidelines.'" 426 Bloomfield Ave. Corp. v. City of Newark,
262 N.J. Super. 384, 387 (App. Div. 1993) (quoting L. Pucillo, supra,
73 N.J. at 356)). See also Meadowbrook Carting Co., supra, 138
N.J. at 314 (stating that a contracting entity "generally is
without discretion to accept a defective bid").
Although the County awarded the Contract to the lowest
numerical bidder -- Norcia's alternate bid was $169,152 while
plaintiff's bid was $172,000 -- Norcia was not the "lowest
responsible bidder."See footnote 2 The trial court determined that Norcia
submitted a substantially deficient bid and properly invalidated
it. Norcia has not appealed that determination.
The law is clear that "where a party does not materially
respond to the bid specifications he cannot be classified as a
bidder at all, since the specifications are mandatory and
jurisdictional." George Harms Constr. Co. v. Borough of Lincoln
Park,
161 N.J. Super. 367, 374 (Law Div. 1978). Recently, this
court restated that proposition, finding that "a non-conforming
bid is no bid at all." In re On-Line Games Contract, supra, 279
N.J. Super. at 595. Further emphasizing the procedural
constraints of the bidding process, this court observed that
"[o]nce the lowest responsible bidder on a local public contract
is identified, the bid must be awarded to that entity." Id. at
590. Since plaintiff's bid conformed in every respect to the
specifications required in the County's notice to bidders,
plaintiff qualified as the lowest responsible bidder and the
County should have awarded the Contract to plaintiff.
When the County failed to properly award the Contract to
plaintiff, the trial court should have ordered the County to do
so. Instead, the judge concluded that case law impliedly
required that the County advertise for new bids, citing
Meadowbrook Carting Co., supra,
138 N.J. 307, and L. Pucillo &
Sons v. Mayor of New Milford,
73 N.J. 349 (1977).
In Meadowbrook, supra, there were only two bidders, one of
which failed to include a consent of surety or a Certificate of
Insurance as required by the bid specifications. 138 N.J. at
311. The remaining bid was 18" -- or $100,000 -- higher than the
other bid. The Court stated: "Under the circumstances, we hold
that all bids are to be rejected and the contract readvertised."
Id. at 325 (emphasis added).
In L. Pucillo, supra, the Borough of New Milford solicited
bids for garbage collection services for contracts of one, two,
three and five years' duration. 73 N.J. at 351. Although Pacio
Sanitation failed to supply figures for the five-year contract
and did not include the requisite bid bond and consent of surety
with its proposal, the borough awarded it the three-year contract
for which it had submitted the lowest bid. Id. at 355. The
Supreme Court held that Pacio Sanitation's bid represented a
substantial departure from the bid specifications which could not
be waived by the borough. It therefore invalidated the contract
between Pacio Sanitation and the borough. Id. at 358-59.
Plaintiff L. Pucillo originally sought to have the contract
awarded to itself as the lowest responsible bidder, but later
suggested that the borough accept new bids for the balance of the
three-year term. The Court, "in view of the substantial period
of time which ha[d] elapsed since the submission of bids,"
elected to adopt L. Pucillo's suggestion. Id. at 359. However,
the Court did not limit the borough to the solicitation of bids
only for the balance of the contract, but stated that it could
"solicit proposals for any term up to the statutory maximum of
five years." Id.
In Meadowbrook and L. Pucillo the Court fashioned remedies
both practical and appropriate to the respective circumstances.
However, the Court's qualifying language when ordering a rebid in
each of these cases suggests that there is no judicial mandate to
rebid a contract whenever an awarded contract is invalidated.
See also Gannett Outdoor Co. v. City of Atlantic City,
249 N.J.
Super. 217, 221 (App. Div. 1991) (holding that a municipality may
reject bids where only one bid is submitted, where the price is
too great, or where the municipality decides to abandon the
project); Marvec Constr. Corp. v. Township of Belleville,
254 N.J. Super. 282 (Law Div. 1992) (finding that a decision to rebid
was appropriate where there was a $15,000 difference between the
nonconforming bid and the lowest conforming bid); George Harms
Constr. Co., supra, 161 N.J. Super. at 380-81 (ordering a rebid
due to the "imminent circumstances" of the case, the difference
of $200,000 between the relevant bids, and the "unreasonably
short time" the borough would have in which to deliberate
further).
A cogent rationale for allowing a contracting entity to
rebid a project only when it acts in good faith and for very good
reason is set forth in Marvec Constr. Corp., supra:
Rebidding a contract is fraught with certain
dangers. While it is true that in some
instances rebidding will benefit the public
through achieving a lower price, the converse
result of a higher contract price is also a
factor to be considered. This is because the
low bidder who may have given his best
possible price may drop out of the bidding or
other bidders by reason of insight gained
through revelation of the competition's
bidding strategy may see the weaknesses in
their own bids. One cannot presume that
rebidding will ipso facto bring a lower
price. There is also the potential in some
instances for rebidding to be demanded until
the "favorite son" candidate is awarded the
contract.
[254 N.J. Super. at 291.]
Despite the fact that serious irregularities between the
County and Norcia marred the bidding process and there was no
indication that a rebid would result in a lower bid, the judge
devised a remedy which could cause plaintiff, although winning
the battle, to lose the war.
A contracting agency under certain circumstances has the
right to reject all bids. N.J.S.A. 40A:11-24. This right serves
an important function in that it provides a "strong inducement"
for bidders to submit as low a bid as possible. Cardell, Inc. v.
Township of Woodbridge,
115 N.J. Super. 442, 450-51, (App. Div.
1971), certif. denied,
60 N.J. 236 (1972). However, that
discretionary privilege is not without limit.
In Poling v. Roman,
86 N.J. Super. 484 (Law Div. 1965), the
court held that "in order for a municipality to reject bids there
must be evidence of such a character as would cause reasonable
men to believe that it was not in the best interests of the
municipality to award the contract to the lowest bidder." Id. at
489. We reiterated that principle in Cardell and, in dicta,
specified several circumstances when a rejection of all bids
would be a valid exercise of municipal discretion: where the
contracting entity makes a good faith determination that the
purposes of the public bidding statute have been violated; where
the lowest bid "substantially" exceeds the cost estimate or
appropriation for the project; or where the contracting entity
forgoes or "substantially" revises the project. Cardell, Inc.,
supra, 115 N.J. Super. at 450-51. These examples of valid
exercises of municipal discretion are not exhaustive. Marvec
Constr. Corp., supra, 254 N.J. Super. at 289.
Here, the County asserts that, in complying with the court
order to readvertise, it "had the opportunity to review its needs
. . . [and] discovered 21 errors in the original bid
specifications which it corrected." However, the County revised
its bid specifications "not as a result of the defendant's
decision to revise the project," but rather as a result of the
trial court's order of July 7, 1995, requiring the County to
rebid. Therefore, the rationale of Cardell does not apply.
In Ace-Manzo, Inc. v. Township of Neptune,
258 N.J. Super 129 (Law Div. 1992), the court had an opportunity to address the
issue of a municipality's right to reject all bids after it had
determined that the proposal of lowest numerical bidder was
nonconforming. Judge Milberg stated, "[t]he mere
disqualification of a low bidder does not in itself give a
municipality the right to reject all bids. To do so would
undermine competitive bidding and discourage competition." Id.
at 139.
Although in Ace-Manzo there was a difference of over $38,000
between the nonconforming bid and the lowest conforming bid, when
the court ascertained that Neptune's decision to readvertise was
based in part on its fear of litigation over the bidding process
and the "prevailing economic climate," the trial court ordered
that the project be awarded to Manzo. Id. at 143. The court
stated that, although Neptune may have been acting in good faith,
"[i]f such arbitrary action by a bidding authority is permitted,
or if a defect in a resolution can be cured in litigation, our
public bidding statute will be undermined." Id.
In determining whether a contracting entity has exceeded its
authority to reject all bids, courts apply the standard of
arbitrary and capricious. Marvec Constr. Corp., supra, 254 N.J.
Super. at 289. If the County had rejected all bids in this case,
it would have been arbitrary and capricious because plaintiff's
bid fully complied with the County's Notice, the County initially
intended to award the Contract to plaintiff as the lowest
responsible bidder, and the monetary difference between
plaintiff's bid and Norcia's alternate bid was de minimis, i.e.
$2,848, or only $356 per truck.
Moreover, once the bids "`have . . . been opened and each
bidder's competitive position has been exposed, rejection of all
bids should only occur for cogent or compelling reasons.'" Id.
at 288 (quoting Cushman & Doyle, Construction Bidding Law (1990)
§ 1.7 at p. 9). See also In re On-Line Games Contract, supra,
279 N.J. Super. at 590 n.2. Given that the County originally
characterized Norcia's alternate bid as deviating from
specifications only to a "minor" extent, the County cannot now
reasonably state that its revised specifications were formulated
for "cogent and compelling" reasons. Since the County itself
could not have rejected all of the bids, the court should not
have done so.
At the hearing on the motion for reconsideration, plaintiff
argued to the trial court that a contracting agency should not be
allowed to change the bid specifications once the trial has
begun. The judge concluded that he could not prevent the County
from revising the specifications "if they decide[d] in good
faith, that what they want to do now is different than what they
originally wanted to do." Because this case must be remanded to
the trial court to award the Contract to plaintiff, this issue is
moot.
Plaintiff contends that since the defendants' conduct violated the Local Public Contracts Law, plaintiff's law suit is analogous to a derivative action on behalf of the taxpayers, and the court's refusal to award attorney's fees will have a chilling effect on litigation where a public entity engages in misconduct, public policy dictates that plaintiff should have been awarded attorney's fees.
Attorney's fees are allowable, however, only when agreed to
by contract or as expressly provided under R. 4:42-9, including
where permitted by statute, R. 4:42-9(a)(8). Since neither the
rules nor the Local Public Contracts Law provide for an award of
attorney's fees and costs, the trial judge properly denied
plaintiff's request.
We reverse that part of the order of July 7, 1995, that ordered the County of Middlesex to advertise for new bids and remand this matter to the trial court for it to enter an order requiring the County of Middlesex to award the subject contract to plaintiff Bodies by Lembo, Inc.
Footnote: 1 Plaintiff complains that the "revised Detail Specifications require the furnishing of Henderson Chief Mark II dump bodies," which is equivalent to Norcia's alternate bid. Furthermore, plaintiff contends that Norcia is the sole and exclusive New Jersey distributor for Henderson Dump Bodies. Norcia disputes this claim, stating that it "understands that there is another Henderson dump body dealer in Bergen County and numerous distributors in the tri-state area." Footnote: 2 The term "responsible" refers to a bidder with the "experience, financial ability, moral integrity and the availability of facilities necessary to perform the contract." D. Stamato & Co. v. Township of Vernon, 131 N.J. Super. 151, 157 (App. Div. 1974).