(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
TORMEE CONSTRUCTION, INC., ET AL. V. MERCER COUNTY IMPROVEMENT AUTHORITY
(A-55-95)
Argued September 11, 1995 -- Decided September 20, 1995 -- Opinion released February 6, 1996
POLLOCK, J., writing for a majority of the Court.
On March 16, 1995, the Mercer County Improvement Authority (MCIA) solicited bids for a
construction project captioned "Mercer County Library Phase One" (Phase One). Phase One involved a
series of contracts for additions and alterations to the Ewing Township, Hopewell Township, and Lawrence
Township branches of the Mercer County Library System. Thereafter, the MCIA advertised for bids for
"Phase Two," involving similar renovations to other branches in the library system.
Included in the Phase One bid package was a copy of Executive Order 94-2, which directed that in
"appropriate construction projects," each contractor and subcontractor was required to sign a project
agreement to be negotiated between the construction manager or architect of the contractor and "the
appropriate Building and Construction Trade Unions." The project agreement was to establish work hours,
wage rates, fringe benefits, dispute and grievance procedures and other terms necessary to ensure "a
harmonious relationship between the parties." The Order justified the "Project Agreement" provision as
necessary to avoid "labor strife" and to ensure the timely and orderly completion of the library project.
The deadline for receipt of the bids was April 13, 1995. However, on April 6, 1995, in a letter
addressed to MCIA's attorney, the Associated Builders & Contractors, Inc. (ABC), the Utility and
Transportation Contractors Association of New Jersey (UTCA), and Tormee Construction, Inc. (Tormee),
questioned the legality of the MCIA's PLA. Based on that letter, the MCIA, in a second addendum,
extended the date for the receipt of bids.
On April 20, 1995, the MCIA sent prospective bidders Addendum No. 3, which made numerous
changes to the bidding documents. One of the changes deleted the specific reference to the Building and
Construction Trades Union and instead specified that the project labor agreement be negotiated with "an
appropriate labor organization in the building and construction industry."
Motivated by concerns for labor peace, quality of work, and efficient construction schedules, the
MCIA adopted Resolution 95-62 on April 24, 1995, declaring that the library projects were appropriate for
PLAs. Under MCIA policy, a successful bidder had to enter into a PLA with "appropriate labor
organizations." The PLA was to include a procedure for the resolution of grievances and jurisdictional
disputes and for the elimination of the possibility of strikes, work stoppages, and lock-outs. Addendum No. 4
set April 27, 1995, as the date for the receipt of bids. The total contract price was approximately $6.03
million and the project was scheduled to last a maximum of 420 calendar days.
Tormee, ABC, UTCA, Thomas Emick (a non-union worker), and Joseph Landolfi (a resident and
taxpayer of Mercer County) (collectively plaintiffs) filed an action in lieu of prerogative writ to restrain the
MCIA from receiving bids and to declare the PLA invalid. On April 27, 1995, the Law Division found the
PLA valid and dismissed the complaint, finding that the amended specification did not offend George Harms
Construction Co. v. New Jersey Turnpike Authority, thus rendering the PLA requirement valid. The
Appellate Division denied plaintiffs' request for a stay. The Supreme Court denied a stay but granted direct
certification.
On May 22, 1995, the MCIA adopted Resolution 95-105, awarding the contracts for the library
projects. The Supreme Court heard oral argument on September 11, 1995. On September 20, 1995, this
Court issued an order declaring invalid the PLA specification in Phase Two and directing the removal of that
specification from the bid documents. This opinion sets forth the Court's reasons for that decision.
HELD: The specification in the Mercer County Improvement Authority bid for the Mercer County library
construction project that required contractors to enter into a "project labor agreement" with
"appropriate labor organizations" is invalid as inconsistent with public-bidding statutes.
1. The validity of PLAs is primarily a matter of state law. Although less restrictive than the PLA in Harms,
the subject PLA still contravenes the underlying purposes of public-bidding laws. Under the specifications
and definitions of the MCIA PLA, only two kinds of labor organizations could qualify. That fails to satisfy
the statutory requirements for bidding on local public contracts. (pp. 6-7)
2. PLAs can contravene the goals of competitive bidding by lessening competition. PLAs also can increase
labor costs by excluding or reducing the number of employable non-union workers. However, PLAs can
serve useful purposes in some situations. By preventing the expiration of collective bargaining agreements of
various unions during the term of a construction contract, a PLA can provide substantial public benefits and
resolve disputes among the trades working on the project. The Appellate Division in New York State
Supreme Court sustained a PLA in New York State Chapter, Inc. v. New York Thruway Authority. That
case exemplifies the exceptional circumstances that would justify recourse to a PLA. The improvements to
the MCIA library system lack the scope and complexity of the New York Thruway project. Furthermore, the
MCIA's PLA did not permit contractors to hire a stated percentage of their non-union employees. The
MCIA's PLA, in essence, is contrary to public bidding laws and impermissibly restricts contracts to a union-only work force. (pp. 7-10)
3. The PLA conflicts with the policy underlying Executive Order No. 11 signed by Governor Whitman on
March 21, 1994. Although not binding on local public contractors, that Executive Order represents State
policy and does not contemplate the use of PLAs on routine construction projects. The MCIA is such a
routine project. Whether measured by dollars, estimated time for construction, or complexity of the project,
the MCIA project does not justify a PLA limited to two kinds of labor organizations. In reaching that result,
the Court recognizes that the Legislature is better suited than the Judiciary to determine the size,
complexity, and costs of projects that justify recourse to a PLA and to accommodate the interests of labor,
management and the public. However, until such time as the Legislature acts, the Court must adjudicate
such bid specifications on a case-by-case basis. (pp. 10-11)
4. The dissenting colleagues repeat the same arguments originally advanced and rejected in Harms. The
cases cited by the dissent are of little help or are readily distinguishable. (pp. 11-12)
Judgment of the Law Division is REVERSED and the matter is REMANDED to it for entry of a
judgment consistent with this opinion.
HANDLER, J., dissenting, in which the CHIEF JUSTICE joins, is of the view that the critical
inquiry in this case should not be whether the specification that requires a project labor agreement places a
limit on competition, but must be whether such a specification is reasonably related to the work proposed by
the public contract. Even though it may reduce the number of parties eligible to compete for the contract,
the specification calling for a PLA is not an invalid, anti-competitive standard if the PLA is reasonably
related to the satisfactory performance and completion of the public job. The record in this case supports a
finding that the project labor agreement is reasonably related to the work proposed.
JUSTICES O'HERN, GARIBALDI, STEIN and COLEMAN join in JUSTICE POLLOCK's opinion.
JUSTICE HANDLER filed a separate dissenting opinion in which CHIEF JUSTICE WILENTZ joins.
SUPREME COURT OF NEW JERSEY
A-
55 September Term 1995
TORMEE CONSTRUCTION, INC., a
Corporation of the State of New
Jersey; NEW JERSEY CHAPTER,
ASSOCIATED BUILDERS &
CONTRACTORS, INC., a
Not-For-Profit Corporation of
the State of New Jersey;
UTILITY & TRANSPORTATION
CONTRACTORS ASSOCIATION OF
NEW JERSEY, INC., A Not-For-
Profit Corporation of the
State of New Jersey; THOMAS
EMICK, Individually; and
JOSEPH D. LANDOLFI,
Individually,
Plaintiffs-Appellants,
v.
MERCER COUNTY IMPROVEMENT
AUTHORITY, a Body Politic of the
State of New Jersey
and the County of Mercer,
Defendant-Respondent.
Argued September 11, 1995 -- Decided September 20, 1995
-- Opinion released February 6, 1996
On certification to Superior Court, Law
Division, Mercer County.
Steven E. Brawer argued the cause for
appellants (Ravin Sarasohn Cook Baumgarten
Fisch & Rosen, attorneys).
Anthony M. Massi and James R. Zazzali argued
the cause for respondent (Paglione & Massi
and Zazzali, Zazzali, Fagella & Nowak,
attorneys; Mr. Massi and Kevin H. Main, on
the briefs).
Frederick J. Rohloff submitted a brief for
amici curiae Associated Builders and
Contractors, Inc., and Chamber of Commerce of
the United States of America (Archer &
Greiner, attorneys; Mr. Rohloff, John C.
Connell, and Louis L. Chodoff, on the brief).
Albert G. Kroll submitted a brief for amicus
curiae New Jersey State AFL-CIO (Kroll &
Gaechter, attorneys).
The opinion of the Court was delivered by
POLLOCK, J.
In George Harms Construction Co. v. New Jersey Turnpike
Authority,
137 N.J. 8 (1994) (Harms), we declared invalid, as
inconsistent with public-bidding statutes, the designation of a
particular labor organization as the sole source of labor for a
public-construction project. On the facts of the present case,
we likewise find invalid a specification requiring contractors to
enter into a "project labor agreement" (PLA) with "appropriate
labor organizations."
On March 16, 1995, the Mercer County Improvement Authority (MCIA) solicited bids for a construction project captioned "Mercer County Library Phase One" (Phase One). Phase One involved a series of contracts for additions and alterations to the Ewing Township, Hopewell Township, and Lawrence Township branches of the Mercer County Library System. Subsequently, the MCIA advertised for bids for "Phase Two," which involved similar renovations to other branches in the system.
Included in the Phase One bid package, along with general
project documents and specifications, was a copy of Executive
Order 94-2, signed by the county executive. The executive order
directed "that for appropriate construction projects, there be
included in the bid specifications that each contractor, and
subcontractor must sign a project agreement which will be
negotiated by the construction manager, or the architect of the
project, and the appropriate Building and Construction Trade
Unions." This "Project Agreement" was to "establish the hours of
work, wage rates, fringe benefits, dispute and grievance
procedure, and any other terms that may be necessary to ensure a
harmonious relationship between the parties." The order
justified the "Project Agreement" provision as necessary to avoid
"labor strife" and to ensure the timely and orderly completion of
the project.
The deadline for the receipt of the bids was April 13, 1995. In a letter of April 6, 1995, addressed to MCIA's attorney, the Associated Builders & Contractors, Inc. (ABC) (a construction industry trade organization with a constituency of approximately 200 non-union firms), the Utility & Transportation Contractors Association of New Jersey (UTCA) (a construction-industry trade organization whose members include prospective subcontractors), and Tormee Construction, Inc. (Tormee) (an "open shop" contractor unaffiliated with any union) questioned the legality of the
MCIA's Project Agreement. Consequently, in a second addendum,
the MCIA extended the date for the receipt of bids.
On April 20, 1995, the MCIA sent prospective bidders
Addendum No. 3, which made numerous changes to the bidding
documents. The first change replaced Executive Order 94-2 with
Executive Order 95-1. This new order required that
for appropriate construction projects, there
be included in the bid specification that
each contractor, and subcontractor must sign
a project agreement which will be negotiated
by the construction manager, or the architect
of the project, and an appropriate labor
organization in the building and construction
industry.
The second change included a definition of "Appropriate Labor
Organization." Addendum No. 3 defined an "appropriate labor
organization" as
an organization representing journeymen in
one or more crafts or trades listed in
N.J.A.C. 12:60-3.2, for purposes of
collective bargaining and which has (1)
entered into a labor agreement with an
employer in the building and construction
industry, (2) has represented journeymen,
mechanics and apprentices employed in
projects similar to the contracted work, and
(3) has the present ability to refer, provide
or represent sufficient numbers of qualified
journeymen in the crafts or trades required
by the contract to perform the contracted
work.
Allegedly motivated by concerns for labor peace, quality of
work, and efficient construction schedules, the MCIA adopted
Resolution 95-62 on April 24, 1995. That resolution declared
that the library projects were appropriate for PLAs. Neither in
that resolution nor elsewhere did MCIA express the reasons
justifying the PLA. Under MCIA policy, however, a successful
bidder, to receive the award of the contract, must enter into a
PLA with "appropriate labor organizations."
The PLA was to include a procedure for the resolution of
grievances and jurisdictional disputes and for the elimination of
the possibility of strikes, work stoppages, and lockouts.
Addendum No. 4 set April 27, 1995, as the date for the receipt of
bids. The total contract price was approximately $6.03 million,
and the project was scheduled to last a maximum of 420 calendar
days.
Tormee, ABC, UTCA, Thomas Emick (a non-union worker), and Joseph Landolfi (a resident and taxpayer of Mercer County) (collectively "plaintiffs") filed an action in lieu of prerogative writ to restrain the MCIA from receiving bids and to declare the PLA invalid. On April 27, 1995, the Law Division found the PLA valid and dismissed the complaint. The Appellate Division denied plaintiff's request for a stay. Although we
denied a stay, we granted direct certification.
141 N.J. 90
(1995).
On May 22, 1995, the MCIA, through Resolution 95-105,
awarded the contracts for the library projects. We heard oral
argument on September 11, 1995. On September 20, 1995, we issued
an order declaring invalid the PLA specification in Phase Two and
directing the removal of that specification from the bid
documents.
In Harms, we analyzed the substantive law relating to the validity of PLAs. No useful purpose would be served by repeating that analysis here. Suffice it to state, the validity of a PLA is primarily a matter of state law. Harms, supra, 137 N.J. at 24-27, 43. The most recent decision of the United States Supreme Court, Construction Trade Council v. Associated Builders & Contractors, Inc,, 507 U.S. 218, 113 S. Ct. 1190, 122 L. Ed.2d 565 (1993) (Boston Harbor), did not preempt state courts from considering the validity of a PLA. Harms, supra, 137 N. J. at 26-27.
The basic policy underlying the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -49, is to promote competition and combat corruption in public bidding. Cubic W. Data, Inc. v. New Jersey
Turnpike Auth.,
468 F. Supp. 59, 63 n.4 (D.N.J. 1978). Harms
involved a PLA that specified the use of a solitary labor
organization. Here, in contrast, the MCIA's PLA requires dealing
with "appropriate labor organizations." Although less
restrictive than the PLA in Harms, the subject PLA still
contravenes the underlying purposes of public-bidding laws.
Under the specifications and definitions of the MCIA PLA, only
two kinds of labor organization could qualify: an organization
like the Building Trades Council, "comprised of several different
unions representing various crafts," Harms, supra, 137 N.J. at
24, or a multi-craft union, the members of which perform a
variety of construction tasks. That restriction, like the one
limiting the choice to a single labor organzation, binds too
tightly to satisfy the statutory requirements for bidding on
local public contracts.
By any test, contracts for public improvements are among the most important contracts that public entities enter. 34 Michael A. Pane, New Jersey Practice, Local Government Law § 204 at 343 (2d ed. 1993). Taxpayers have an interest in assuring that public entities are cost-effective in spending public funds. Accordingly, the State's competitive-bidding statutes direct that all contracts requiring public advertisement for bids "shall be awarded to the lowest responsible bidder." N.J.S.A. 40A:11-6.1. That direction guards "against favoritism, improvidence,
extravagance and corruption" in the awarding of state and
municipal contracts. Terminal Constr. Corp. v. Atlantic County
Sewerage Auth.,
67 N.J. 403, 410 (1975). As we stated in Harms,
"[a]voidance of any potential for contract manipulation is a
central theme of all public-bidding doctrine." 137 N.J. at 38.
Competitive public bidding obviously fosters competition
among bidders. The more companies that can bid on a project, the
greater the likelihood that the public entity will receive the
lowest possible contract price from responsible bidders. Skakel
v. Township of North Bergen,
37 N.J. 369, 378 (1962).
PLAs can contravene the goals of competitive bidding. By
mandating that workers belong to certain limited labor
organizations, PLAs restrict bidders to contractors with
relationships with those organizations. The obvious effect of
such a restriction is to lessen competition. Additionally, PLAs
can increase labor costs by excluding or reducing the number of
employable non-union workers.
In some situations, however, PLAs can serve useful purposes.
By preventing the expiration of collective bargaining agreements
of various unions during the term of a construction contract, a
PLA can provide substantial public benefits and resolve disputes
among the trades working on the project.
Recently, the Appellate Division of the New York State
Supreme Court sustained a PLA. New York State Chapter, Inc. v.
New York Thruway Auth.,
620 N.Y.S.2d 855 (1994), leave to appeal
granted,
631 N.Y.S.2d 607 (1995) (New York Thruway). In New York
Thruway, the Appellate Division held that the Thruway's use of a
PLA was a valid bid specification that did not violate the
competitive- bidding requirements of New York law. Id. at 856.
That case, which involved the refurbishment of the Tappan Zee
Bridge, exemplifies the exceptional circumstances that could
justify recourse to a PLA.
"[A]ccording to the Thruway Authority, [it] is the largest
such construction project in size, complexity and cost since the
bridge was constructed." Ibid. The project "would subject the
work to the jurisdiction of some 19 local unions with separate
labor contracts having different starting times, scheduling
restrictions, holidays, grievance resolution procedures, and
other terms and conditions of employment." Ibid. The Thruway
Authority directed its own consultant to negotiate with the
various trade unions having jurisdiction over the work to be
performed. It also directed the consultant
to seek concessions from all the unions
concerning work rules and other terms and
conditions. The result of the consultant's
efforts was the PLA which, inter alia,
creates uniform procedures for dealing with
all disputes, contains a comprehensive no-strike clause, establishes a standardized
work week, permits flexibility in scheduling,
and contains other provisions which,
according to the Thruway Authority,
standardize the terms and conditions of
employment and will reduce the cost of the
project.
Significantly, the PLA allowed contractors and subcontractors to
retain up to twelve percent of their current work force. The PLA
specifically recognized that the successful bidder need not be a
union contractor and that the unions must comply with the terms
of the PLA whether the successful bidder was a union or non-union
contractor. Furthermore, the PLA expressly prohibited
discrimination against prospective employees on the basis of
union membership. Workers were not required to join the union.
The PLA also recognized the right of the contractors to determine
the competency of workers, to select workers to be laid off, and
to use any other source of workers if a union hall did not refer
workers within forty-eight hours. On those facts, the court held
that the PLA did not conflict with public-bidding laws.
In contrast, the improvements to the MCIA library system lack the scope and complexity of the New York Thruway project. Furthermore, the MCIA's PLA did not permit contractors to hire a stated percentage of their non-union employees. The MCIA merely attached to the bid specifications for Phase Two a model form
that neither bound the "appropriate labor organizations" nor
assured coordination among them. In essence, the MCIA's PLA,
contrary to public-bidding laws, impermissibly restricts
contractors to a union-only work force. Harms, supra, 137 N.J.
at 39.
The PLA, moreover, conflicts with the policy underlying
Executive Order No. 11 signed by Governor Christine Todd Whitman
on March 21, 1994. That order contemplates that state agencies
might include a PLA in a public works project on a "project by
project basis where it has been determined that such project
agreement will promote labor stability and advance the state's
interest in cost, efficiency, quality, safety and/or timeliness."
Although not binding on local public contractors, the executive
order represents state policy. As we read it, the executive
order does not contemplate the use of PLAs on routine
construction projects. The MCIA project is, in our judgment,
such a project. Whether measured by dollars, estimated time for
construction, or complexity of the project, the MCIA project does
not justify a PLA limited to two kinds of labor organizations.
Although the total cost of the project might seem large by some
standards, the sum is not substantial when compared to the $425
million cost of the tunnel in Boston Harbor or the $1 billion
cost for the work on the Tappan Zee Bridge in New York Thruway.
In reaching that result, we recognize that the Legislature
is better suited than the judiciary to determine "the size,
complexity and cost" of projects that justify recourse to a PLA.
New York Thruway, supra, 620 N.Y.S.
2d at 856. We also believe
that the Legislature is better suited to accommodate the several
interests of labor, management, and the public. Harms, supra,
137 N.J. at 45. Until such time as the Legislature acts,
however, we are obligated to adjudicate such bid specifications
case-by-case.
Our dissenting colleagues repeat the same arguments that they originally advanced and that we rejected in Harms. To support their position, they rely on a string citation of cases from other jurisdictions. Post at ___ (slip op. at 9-10). Because we rely on the New Jersey competitive-bidding statutes, cases based on statutes from other jurisdictions are of little help. The cases cited by the dissent, moreover, are readily distinguishable. General Building Contractors of New York State, Inc. v. Dormitory Authority of the State of New York, 620 N.Y.S.2d 859 (App. Div. 1994), leave to appeal granted, 63l N.Y.S.2d 607 (1995), decided on the same day as New York Thruway, involved a project of indeterminate cost, size, and duration. Phoenix Engineering, Inc. v. MK-Ferguson of Oak Ridge Co., 966 F.2d 1513 (6th Cir. 1992), cert. denied, ___ U.S. ___, 113 S. Ct. 1577, 123 L. Ed.2d 146 (1993), and Associated Builders &
Contractors, Inc. v. City of Seward, 966 F.2d 492 (9th Cir. 1992), cert. denied, ___ U.S. ___, 113 S. Ct. 1577, 123 L. Ed.2d
146 (1993), involved claims based on federal, not state, law.
The PLA in Minnesota Chapter of Associated Builders &
Contractors, Inc. v. County of St. Louis,
825 F. Supp. 238 (D.
Minn. 1993), required the successful bidder to recognize a
specific union as the bargaining agent for all employees,
contrary to Harms. In Glenwood Bridge, Inc. v. City of
Minneapolis,
940 F.2d 367 (8th Cir. 1991), the Eighth Circuit
Court of Appeals directed the entry of a preliminary injunction
for a contractor who was the low bidder on a bridge construction
contract. After opening of the bids, the City of Minneapolis
tried to condition the award, among other things, by requiring
the contractor to agree to a PLA. The Eighth Circuit directed
the United States District Court to enter a preliminary
injunction ordering the city to award the contract without the
PLA, provided the successful bidder posted a bond. The opinion
hardly constitutes an endorsement of the PLA in the present case.
The judgment of the Law Division is reversed, and the matter
is remanded to it for entry of a judgment consistent with this
opinion.
JUSTICES O'HERN, GARIBALDI, STEIN and COLEMAN join in
JUSTICE POLLOCK's opinion. JUSTICE HANDLER filed a separate
dissenting opinion in which CHIEF JUSTICE WILENTZ joins.
SUPREME COURT OF NEW JERSEY
A-
55 September Term 1995
TORMEE CONSTRUCTION, INC., ETC.,
ET AL,
Plaintiffs-Appellants,
v.
MERCER COUNTY IMPROVEMENT
AUTHORITY, ETC.,
Defendant-Respondent.
HANDLER, J., dissenting.
In this case, the Court invalidates a public bidding specification that requires the successful bidder to negotiate a project labor agreement. The agreement was required to assure the expeditious completion of the project by avoiding delays attributable to labor stoppages. The project itself involves the substantial improvement and renovation of the county library system. The work entails three successive phases of construction, each covered by a separate contract. The first phase of the project relates to construction on the Ewing, Hopewell and Lawrence branches of the Library System. Phase Two involves three other branches of the Library System, and Phase Three is expected to consist of renovations to two other library
branches. The entire project will have an approximate cost of
$18 million dollars, and will take several years to complete.
The Mercer County Improvement Authority ("MCIA"), in the
issuance of the first-phase bid documents containing
specifications, adopted Executive Order 94-2. The Executive
Order expressed the finding that such an agreement was necessary
to avoid labor strife and to ensure timely and orderly completion
of the project. The Order directed that in "appropriate
construction projects," each contractor and subcontractor was
required to sign a project labor agreement. The Order provided
that the agreement was "to establish the hours of work, wage
rates, fringe benefits, dispute and grievance procedures and any
other terms that might be necessary to ensure a harmonious
relationship between the parties."
The specification further required that a contractor would
have to bargain with a labor organization that could adequately
represent the interest of the workers, so that labor peace could
be assured. The project labor agreement was to be negotiated
between the construction manager or architect of the contractor
and "the appropriate Building and Construction Trade Unions."
Under Executive Order 94-2, the only entity qualified to bargain
on the part of the workers was the Mercer County Building and
Trades Council ("BTC").
Bids were scheduled to be received On April 13, 1995, but on
April 6, counsel for the Associated Builders and Contractors, the
Utility and Transportation Contractors Association of New Jersey,
and Tormee Construction, Inc. requested that the MCIA delete
sections of the project agreement. Following discussions
concerning the general terms for a project labor agreement, the
MCIA issued a second addendum to the bid documents, expressed in
Executive Order 95-1, which made several changes in the
specifications and extended the deadline for bids until April 27,
1995. One of the changes deletes the specific reference to the
BTC, and instead specifies that the project labor agreement be
negotiated with an "Appropriate Labor Organization in the
Building and Construction Industry."
Notwithstanding those changes, plaintiffs, claiming that the
specification requiring a project labor agreement was unlawful,
on April 25, 1995, filed a declaratory judgment action, and
sought temporary and permanent injunctions to restrain the MCIA
from receiving bids on the construction projects. The Law
Division found the requirement for the PLA valid, dismissed the
complaint, and denied a request to stay the judgment. The trial
court stressed that the original specification, which required
negotiation of the project labor agreement with a member in the
Building and Trades Council, was invalid under George Harms
Construction Co., Inc. v. New Jersey Turnpike Authority,
137 N.J. 8 (1994) because it was too restrictive in limiting a
contractor's source of labor to a single union. However, the
trial court found that the amended specification, which required
an agreement with an "appropriate labor organization," did not
offend Harms, and thus the change in the specifications rendered
the PLA requirement valid.
The Court granted plaintiffs' petition for direct
certification.
141 N.J. 90 (1995). Subsequently, the New Jersey
State AFL-CIO filed a motion to appear as amicus curiae, which
was granted.
Ten contractors submitted bids for the contract, and the
combined estimate of the three lowest bidders was approximately
$276,000 dollars under the MCIA's budget. This first phase of
the project was scheduled to last a maximum of 420 calendar days.
Plaintiffs then moved for a stay of the award of bids for Phase
One of the Project. On May 5, this Court denied the stay and, on
May 22, 1995, the MCIA awarded three contracts for construction
on the three library branches in Phase One, for an aggregate cost
of approximately $6.03 million.
Thereafter, in connection with Phase Two of the project,
plaintiffs moved for a stay of the receipt and award of bids. On
September 14, 1995, the stay was temporarily granted in respect
of the opening of bids, the award of the contracts, and the
commencement of construction. The receipt of bids, however, was
not stayed. On September 20, the Court granted a permanent stay,
and in its order declared that the project labor agreement
requirement was invalid. Accordingly, the Court ordered the
return of all bids, and allowed the MCIA the option of having the
project rebid without the PLA requirement. The Court's opinion
now explains its reasons for declaring the project labor
agreement to be invalid. I disagree with its reasoning and
conclusion.
The premise of the majority opinion is that public bidding policy "requires competition among bidders. The more companies that can bid on a project, the greater the likelihood that the public entity will receive the lowest possible price from responsible bidders." Ante at __ (slip op. at 7). My problem with the majority's approach is not in its recognition of the vital importance of competition in public bidding. Rather, I am disturbed by its singular focus on competition, seemingly to the exclusion of other important considerations that bear on the responsibility of bidders and the sound and expeditious completion of public works.
Without doubt, competition is essential in the awarding of public contracts. It is well established that
the fundamental philosophy of our competitive bidding statutes is that economy be secured and extravagance, fraud and favoritism prevented. Such statutes are designed to safeguard the public good and should be rigidly enforced by the courts to promote that objective. This common good is best advanced by cultivating the most extensive competition possible under the circumstances and municipalities should organize their efforts in that direction.
[Skakel v. North Bergen,
37 N.J. 369, 378 (1962) (citations
omitted)].
Requirements that needlessly limit and constrict competition can
compromise the integrity of the public bidding system. The
promotion of competition in public bidding on the awarding of
contracts serves the public interest by discouraging "favoritism,
improvidence, extravagance and corruption." Terminal Constr.
Corp. v. Atlantic County Sewerage Auth.,
67 N.J. 403, 410 (1975)
(quoting Hillside Tp. v. Sternin,
25 N.J. 317, 322 (1957)).
However, as important as competition in public bidding may
be, competition is not an end in itself. Other factors -
experience, responsibility, honesty and skill -- are all
important to assure that public work is properly performed in the
public interest. Consequently, there is no absolute mandate that
"an agency must, in every action it takes, promote competition at
the expense of all other concerns." Harms, supra, 137 N.J. at 44
(Handler, J., concurring). If soundness, efficiency, and
integrity can otherwise be assured, "[t]he ability to perform the
work required is of the very essence of any contract for public
work," Bil Jim Construction. v. Board. of Education,
236 N.J.
Super. 603, 605 (App. Div. 1989). Thus, a public body may impose
standards designed to ensure that bidders are able to perform the
work to the satisfaction of the contracting agency, and to
prescribe specifications based on those standards to determine
the eligibility of contractors to engage in public contracts.
Any standard governing capacity to perform the work, whether
set by the job specifications or inherent in the nature of the
job itself, will exclude from the bidding process parties that
are unqualified because they cannot meet that standard. The fact
that a specification "limits the number of bidders simply because
some potential bidders cannot satisfy the specification" does not
render that specification "unreasonable and invalid." Harms, 137
N.J. at 49 (Handler, J., concurring). Competition that is
circumscribed by a valid standard reasonably related to the work
is not "anti-competitive" within the purpose and intendment of
the public bidding laws. Ibid.
Given the importance of competition in bidding, it is clear
that any standard that restricts competition must be directly
related to the performance of the public work. The Local Public
Contracts Law, N.J.S.A. 40A:11-13, provides that
specifications for an acquisition under this
act, whether by purchase, contract, or
agreement, shall be drafted in a manner to
encourage free, open and competitive bidding.
In particular no specifications under this
act may:
(a) Require any standard,
restriction, condition, or
limitation not directly related to
the purpose, function or activity
for which the purchase, contract or
agreement is made
Under this statute and the prevailing case law,
specifications are deemed anti-competitive and invalid only when
they are not reasonably related to the proposed project.
Greenberg v. Fornicola,
37 N.J. 1 (1962); Wazsen v. Atlantic
City,
1 N.J. 272 (1942); 18 Eugene McQuillan, The Law of
Municipal Corporations, § 29.44 (3d ed. 1984). A restriction
that reduces competition and cannot be justified as reasonably
necessary for the completion of the work is one that in all
likelihood opens the door to favoritism, fiscal extravagance,
improvidence and corruption.
In this case, the critical inquiry should be not whether the
specification that requires a project labor agreement places a
limit on competition. Rather, the question must be whether such
a specification is reasonably related to the work proposed by the
public contract. "A specification that limits the number of
bidders should invite critical scrutiny, but it should not be
stigmatized as unreasonable without such scrutiny." Harms,
supra, 137 N.J. at 49 (Handler, J., concurring). Even though it
may reduce the number of parties eligible to compete for the
contract, the specification calling for a PLA is not an invalid,
anti-competitive standard, if the PLA is reasonably related to
the satisfactory performance and completion of the public job.
I think that the record in this case supports a finding that
the project labor agreement is reasonably related to the work
proposed. In the briefs and in oral argument, counsel for the
MCIA described the Authority's previous problems with delays,
work stoppages and cost overruns in the recent construction of
the Parkway School. The Authority adopted a resolution, Mercer
County Improvement Authority Resolution No. 95-154, which clearly
identifies its problems with its construction projects in the
past, and demonstrates the need for the requirement of a PLA to
prevent such problems in the proposed library construction.
It has been widely recognized and clearly established that
where the experience of a public contracting agency confirms the
risk that its project will be threatened by labor disputes,
interrupted by strikes or delayed by work stoppages, a valid and
effective method of addressing and preventing those contingencies
is through a project labor agreement. E.g., Building and Constr.
Trades Council v. Associated Builders and Contractors, Inc.,
U.S. ,
113 S. Ct. 1190,
122 L. Ed.2d 565 (1993) (hereinafter
Boston Harbor); New York State Chapter Inc. v. New York State
Thruway Authority,
620 N.Y.S.2d 855 (App. Div. 1994), appeal
granted,
631 N.Y.2d 607 (1995) (hereinafter Tappan Zee); General
Building Contractors of New York State, Inc. v. Dormitory
Authority of the State of New York,
620 N.Y.S.2d 859 (App. Div.
1994); Minnesota Chapter of Associates Builders and Contractors,
Inc. v. St. Louis County,
825 F. Supp. 238, 244 (D. Minn. 1993);
Associated Builders and Contractors, Inc. v. City of Seward,
966 F.2d 492, 499 (9th Cir. 1992), cert. denied, __ U.S. __,
113 S.
Ct. 1577,
123 L. Ed.2d 146 (1993); Phoenix Engineering, Inc. v.
MK-Ferguson of Oak Ridge Company,
966 F.2d 1513 (6th Cir. 1992),
cert. denied, __ U.S. __,
113 S. Ct. 1577,
123 L. Ed. 146 (1993);
cf. Glenwood Bridge, Inc. v. City of Minneapolis,
940 F.2d 367
(8th Cir. 1991) (indicating project labor agreement invalid if
superfluous in light of existing anti-strike conditions).
Further, the feasibility and utility of a project labor
agreement as a method to overcome the threat of labor strife,
stoppages and delays has been confirmed by two successive
executive administrations. Governor Florio's Executive Order No.
99 (dated September 13, 1993),
25 N.J.R. 4543 (October 4, 1994);
Governor Whitman's Executive Order No. 11 (dated March 21, 1994),
26 N.J.R. 1558-59 (April 18, 1994). Governor Florio's Order
mandated that all public projects proceed pursuant to a project
labor agreement. Governor Whitman's Order superseded the prior
Order, emphasizing that project labor agreements be applied to
public contracts on a project-by-project basis according to the
problems and needs of the particular public jobs. Both Orders
have recognized the necessity and reasonableness of such
agreements.
The majority does not impugn the reasonableness of project
labor agreements; nor does it invalidate the authority of the
executive branch of government, state and local, to determine if
a project labor agreement will assure the successful and
expeditious completion of a public project. Nevertheless, it
presumes that the judiciary is in a better position to determine
when a project labor agreement is reasonably called for. Thus,
it suggests that only large-scale projects should be eligible for
a project labor agreement. Ante at __ (slip op. at 8-9, 10).
Some of the cases that addressed the validity of project labor
agreements involved public contracts of a much greater scale than
the library improvement and expansion in this case. The Tappan
Zee project is certainly an example of a complicated project,
totalling $1 billion and requiring coordination of nineteen labor
unions. The Boston Harbor case is often cited for its huge size
and $6.1 billion cost. Nonetheless, I question the majority's
assertion that a project labor agreement is allowable in public
projects only or primarily when the project is of massive size,
scope or cost.
A standard that allows PLA's only in grand-scale projects of
great cost would leave local governments at a distinct
disadvantage in dealing with labor unrest and stoppages in their
public works. Therefore, I conclude that considerations of size
and cost must not be made in a vacuum; rather, the determination
of the need for a PLA must include a consideration of the size
and cost of the project relative to the need for the project, the
importance of timely completion, and the resources of the
contracting governmental agency. Although the project in this
case is modest in comparison to the undertakings in Boston Harbor
and Tappan Zee, there is still reason to find a project labor
agreement appropriate. This project calls for significant
improvements of the county library system; it involves three
major phases of work, each covered by separate contracts; its
anticipated costs are six million dollars for each contract
phase, for a total contract cost of eighteen million dollars.
The public work is clearly substantial, needed and important.
Further, there is a documented history of labor disputes on
prior projects that impelled the MCIA to address and confront the
threat of delays arising from labor strife. That experience
justifies the determination made by local government in this case
that the interests of efficiency and timely completion of the
entire project called for the use of a PLA.
I also disagree with the majority that this project does not
qualify under Governor Whitman's Executive Order, which allows
PLA's on a "project by project" basis. Ante at __ (slip op. at
10). When the county's history of labor problems is considered
in conjunction with the nature and the scope of the project
relative to the needs and resources of the contracting agency, it
is clear that this project passes muster under Governor Whitman's
Executive Order.
The majority also betrays, in this case, a distrust of local
government that goes beyond the obligation to demonstrate that a
PLA is reasonably related to the satisfactory completion of the
library project. The majority is unwilling to allow the use of a
PLA unless the agreement required by bidding specifications also
contains comprehensive and detailed terms and conditions that
will constitute a virtual iron-clad guarantee of labor peace.
The Court's detailed replication of the extensive provisions of
the Tappan Zee Bridge project agreement is offered as the
exemplar of an acceptable and valid PLA. Ante at __ (slip op. at
__). However, a valid specification for a project labor
agreement does not require the itemization of all of its
operative terms to satisfy the standard that it be reasonably
related to the work. It should suffice if the proposed
agreement, as the one in this case, requires the inclusion of not
only basic terms that will "establish the hours of work, wage
rates, fringe benefits, dispute and grievance procedures," but
also "any other terms that might be necessary to ensure a
harmonious relationship between the parties."
The majority's insistence on the necessity to detail the
terms of the agreement also recalls Justice O'Hern's opinion in
Harms, which briefly addressed the constitutional implications
of a project labor agreement. Justice O'Hern's constitutional
analysis included an assessment of the public need for a project
labor agreement measured against the availability of other
(presumably "better") means of achieving the goals of labor peace
and uninterrupted work, such as mediation agreements and no-strike clauses. Harms, supra, 137 N.J. at 32. Similarly, in the
present case, the majority once again seems to feel that a
project labor agreement should not be permitted where its
purposes might be accomplished by different means. Although
there may be more narrowly-drawn means to assure the
accomplishment of the goals of prevention of labor strife, the
efficient mediation of disputes, and the expeditious performance
of the work, there is no showing that the proposed agreement,
which must include terms necessary to assure labor peace, cannot
be fully carried out.
The majority, I believe, also uncritically characterizes the
project labor agreement in this case as being invidiously anti-competitive. It thus accepts the plaintiff's representations
that the PLA would restrict prospective contractors to a choice
of one of two labor organizations as the bargaining agent for all
workers on the project. Ante at __ (slip op. at 6). The
majority credits the plaintiff's allegations that the use of the
PLA would effectively prevent non-union contractors from using
non-union labor and thus preclude non-union contractors from
bidding on the job. However, according to amicus, the AFL-CIO,
the contractor is not limited by the proposed PLA to employing
union workers exclusively. The contractor would have certain
rights under the agreement, such as the right to retain key
employees as well as the right to turn to other sources of labor
if the supply of union labor is inadequate or unsatisfactory.
Thus the PLA provides sufficient flexibility to allow the
contractor to retain a measure of control over the job, even
though the union would be the overall source of labor for the
project. In addition, the majority fails to note that the MCIA
received ten bids on this contract, and does not demonstrate
whether participation in the bidding would have been measurably
enlarged without a restriction that would assure labor peace in
the performance of the contract.
I acknowledge that this case clearly raises important and
complex considerations of governmental policy and implicates a
number of controversial issues. Ultimately, those concerns, thus
far determined by the executive and judicial branches, should be
addressed by the Legislature, the branch of government most fit
and best able to weigh and resolve the policy consideration
implicated by the use of project labor agreements in public
contracts.
I am satisfied, however, on the basis of this record, that
the requirement of the project labor agreement is reasonable and
does not constitute an invalid anti-competitive standard.
I therefore dissent from the majority opinion.
Chief Justice Wilentz joins in this opinion.
NO. A-55 SEPTEMBER TERM 1995
ON APPEAL FROM
ON CERTIFICATION TO Law Division, Superior Court, Mercer County
TORMEE CONSTRUCTION, INC., etc., et al.,
Plaintiffs-Appellants,
v.
MERCER COUNTY IMPROVEMENT
AUTHORITY, a Body Politic of the
State of New Jersey
and the County of Mercer,
Defendant-Respondent.
DECIDED February 6, 1996
Chief Justice Wilentz PRESIDING
OPINION BY Justice Pollock
CONCURRING OPINION BY
DISSENTING OPINION BY Justice Handler