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Arthur Venneri Co. v. Housing Authority

Decided: March 10, 1959.


On appeal from Superior Court, Law Division, whose opinion is reported in 53 N.J. Super. 225.

For affirmance -- Chief Justice Weintraub, and Justices Heher, Burling, Jacobs, Francis and Proctor. For reversal -- None. The opinion of the court was delivered by Burling, J.


[29 NJ Page 396] This is a proceeding in lieu of prerogative writ commenced by plaintiff Arthur Venneri Company, a New Jersey corporation, against defendant Housing Authority of the City of Paterson (hereinafter referred to as the housing authority), and defendant B. J. Lucarelli & Co., Inc., a New Jersey corporation. The dispute involves the award of a contract for the construction of a public housing project by defendant housing authority to defendant Lucarelli. Plaintiff admittedly was the lowest bidder for the contract, its bid being $36,000 less than the bid of the

next lowest bidder, the defendant Lucarelli. The total amount of the contract ultimately awarded to defendant Lucarelli was $4,683,000 -- plaintiff's bid was $4,647,000. The housing authority refused to award the contract to plaintiff for the reason that, under the pertinent federal government regulations, plaintiff was ineligible to receive an award for the contract and that under the regulations of the Public Housing Administration (hereinafter referred to as the PHA) and the housing authority's contract with the PHA, the housing authority was obligated not to award the contract to an ineligible contractor.

Plaintiff filed its complaint with supporting affidavits in the Superior Court, Law Division, on November 3, 1958, seeking a judgment to set aside the award of the contract to the defendant Lucarelli as illegal and void and declaring that the contract should be awarded to plaintiff as lowest responsible bidder. Plaintiff further sought a preliminary restraint. Plaintiff moved for summary judgment, and in the course of the proceedings it was argued that the matter be considered by the trial court as though a motion had been made by the defendants for a judgment dismissing the complaint. See R.R. 4:12-2. The trial court permitted the United States Attorney, on behalf of the PHA, to appear and argue the cause as amicus curiae. Thereafter the trial court entered judgment in favor of the defendants. Plaintiff prosecuted an appeal to the Superior Court, Appellate Division, and while the cause was pending there this court granted the defendants' petition for direct certification. R.R. 1:10-1 A. [29 N.J. 62.]

The essential facts are as follows: On May 2, 1958 the plaintiff was barred from contracting with the Department of Defense for a period ending March 12, 1959. The debarment order was entered pursuant to a determination of the Army's Gratuities Clause Board, after hearing, which found that plaintiff was guilty of violating an anti-gratuities clause in contracts it held with the United States Army Engineers Division, in that its president, Arthur Venneri, "did give a gratuity of $1000 to Colonel George N. Kibler, an officer

of the United States Army, with a view toward securing favorable treatment with respect to the making of determination in the settlement of claims and disputes as to the performance of certain contracts." The matter had been previously and immediately reported by Colonel Kibler to his superiors. The $1,000 was subsequently ordered to be turned over to the Finance Officer, United States Army.

Thereafter, plaintiff's name appeared on a PHA circular, bearing the date August 1, 1958, the purpose of which was to inform local housing authorities of the persons and firms ineligible to receive awards for PHA projects. The circular indicated the nature of plaintiff's restriction to be "Type F" which, as explained by an earlier PHA circular dated April 12, 1957, meant: "Firms and individuals debarred by action of other Federal executive agencies."

The source of authority for plaintiff's name appearing on the PHA list is as follows: The General Service Administration (hereinafter referred to as GSA), pursuant to statutory authority, see 40 U.S.C.A., §§ 471, 481, adopted and issued Regulation 15 dated June 17, 1954, addressed to "Heads of Federal Agencies Subject: Debarment of Bidders." The regulation directed, inter alia, federal agencies to establish and maintain a consolidated list of firms and individuals to whom contracts will not be awarded.

Section 5 then provides in part:

"Each executive agency is authorized to debar in the public interest a firm or individual for any of the causes and under all appropriate conditions listed below:

a. Causes

(4) Debarment by some other executive agency."

PHA regulations promulgated pursuant to the authority granted by 42 U.S.C.A., §§ 1404 a, 1408, and standard contracts with local authorities deal exhaustively with the status and extent of disqualification of ineligible bidders. Regulation 213.1, section 4(a)(5), of the PHA "Low Rent Housing Manual," dated April 11, 1955, provides:

"a. Disqualification of Low Bidder. The low bid shall not be rejected unless it is clearly demonstrated that the bidder should be disqualified. The low bidder shall not be disqualified unless it is shown that:

(5) The bidder is ineligible to receive award under the provisions of any regulations issued by the Secretary of Labor of the United States, or his name appears on the PHA list of firms and individuals debarred for other causes. See Section 103.1."

Subsection 2(b) of section 103.1 referred to above provides:

"The PHA list of firms and individuals debarred for other causes in respect to awards of certain types of Federal contracts. The fact that the name of any contractor appears on this list shall be deemed to be prima facie evidence that such contractor is not a responsible bidder for the type of contract for which debarred. No award may be made to any such contractor except (1) where the list expressly excepts the purpose for which the proposed contract is to be let or (2) on prior approval by the PHA. Requests for such approval shall be fully documented. The Local Authority shall not approve any subcontractor or assignee of a contractor or subcontractor whose name appears on said list except under the same conditions as herein provided for the contractor." (Emphasis supplied.)

Thus, the inclusion of a contractor's name, as here, on a PHA list because he was debarred for "other causes" is deemed prima facie evidence that the contractor is not a responsible bidder. "Other causes" means debarment other than by the Secretary of Labor and including "debarment by some other executive agency." GSA Regulation 15:5(a)(4). And, unless the nature of the contract for which a bid is made is expressly excepted or unless appropriate waiver of ineligibility is obtained, no award may be made to such contractor. The procedure for obtaining a waiver is outlined in section 103.1A of the Manual as follows:

"Award To Ineligible Contractor

1. Mandatory Cases. Awards to contractors whose names appear on the Secretary of Labor's list (i.e. the list described in Section 103.1, paragraph 2a) shall not be approved in any ...

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