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Terminal Construction Corp. v. Atlantic County Sewerage Authority

Decided: June 12, 1975.


For affirmance -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford, and Schreiber and Judge Conford. The opinion of the court was delivered by Mountain, J.


This is an action seeking a declaratory judgment. The Atlantic County Sewerage Authority (Authority), after competitive bidding pursuant to the "Local Public Contracts Law," N.J.S.A. 40A:11-1 et seq., awarded to Terminal Construction Corporation (Terminal) five contracts substantially providing, in the aggregate, for the construction of a waste water treatment plant. Terminal brought this suit challenging the validity of the action taken by the Authority on the ground that its awards were so made as to vary from material conditions contained in the bidding specifications. The trial court sustained plaintiff's challenge, holding the awards to be invalid. The Authority appealed and subsequently sought certification while the case was pending unheard before the Appellate Division. We granted certification, 67 N.J. 91 (1975), because of the substantial public interest in a speedy and definitive resolution of the disputed issue so that construction might go forward.

The awards that were made relate to a 90-million dollar regional sewerage system presently under construction in Atlantic County. The project is 75% federally funded and 15% state funded, with the balance to be raised by the sale of bonds. The federal government, as a condition of its participation,

demanded a right of prior approval with respect to each contractor who was to perform work on the project, in order to insure that each such contractor presented a satisfactory "compliance position" with the equal opportunity provisions contained in federal laws and regulations applicable to contractors on federally assisted projects. Looking to this end, the federal government instructed the Authority to incorporate the following provision in its bidding specifications:

PRE-AWARD CONFERENCE: Application has been or may be made to the Federal Environmental Protection Agency of the Department of the Interior for financial assistance for the work proposed under this solicitation. The Department of the Interior, in implementation of Executive Order No. 11246 (Equal Employment Opportunity), of September 24, 1965, requires its constituent Agencies which provide financial assistance to construction, to conduct Equal Employment Opportunity Compliance Reviews prior to award.

Accordingly, the apparent low BIDDER under this solicitation should be prepared to attend a meeting that will be scheduled by the Federal Environmental Protection Agency after opening of bids, but before award, where he will be requested to specify what affirmative action he has taken or proposes to take to assure equal employment opportunity on the Project. Until a determination has been made by the Federal Environmental Protection Agency that a satisfactory compliance position exists on the part of the prospective CONTRACTOR, and the determination has been concurred in by the Department of the Interior, Office for Equal Opportunity, award of the Contract will not be authorized.

A pre-award conference to determine the lowest responsible BIDDER'S ability to fulfill the requirements of Executive Order No. 11246 is mandatory for all Contracts exceeding $1,000,000.

When the bids were opened, Terminal was found to be the low bidder on the five contracts. Its several bids totalled $37,880,000, a sum seven and a half million dollars less than the next lowest bidder. In a matter of days Terminal informed the Authority that it, the bidder, had made a six million dollar error in its cost estimates and that because of this serious discrepancy, Terminal sought to be relieved of its bid. While this Court has never considered whether a public bidder should be permitted to withdraw its bid upon

a proven claim of unilateral mistake made in good faith, or, if so, under what circumstances this should be permitted, at least two reported trial court decisions have afforded such relief. Cataldo Constr. Co. v. County of Essex, 110 N.J. Super. 414 (Ch. Div. 1970); Conduit & Foundation Corp. v. City of Atlantic City, 2 N.J. Super. 433 (Ch. Div. 1949). See also 10 McQuillin, Municipal Corporations, ยง 29.82 at 444-46 (3d ed. 1966). The Authority, however, was reluctant unilaterally to relieve the contractor from its bid. It suggested that a suit be instituted to consider the availability of this relief, but Terminal was concerned with the integrity of its bidding reputation and chose not to take that form of legal action.

Shortly thereafter Terminal filed this suit alleging that the attempt to award the contracts before the "mandatory" pre-award conference had been held, and before the federal agencies mentioned in the specifications had approved the contractor's "compliance position," amounted to a material variance from the bidding specifications and that accordingly the awards should be deemed invalid. Parenthetically it may be noted that subsequent to the commencement of this action the federal government did in fact approve Terminal's "compliance position." The Authority conceded that while prior federal approval, whether or not including attendance at the meeting, was a specified condition to the granting of the award, nevertheless this condition had been imposed for the benefit of the Authority, was essentially immaterial to the proposed contract, and hence could properly be waived. Thus the underlying issue for determination is whether or not the condition in the specifications requiring prior federal approval may be waived. We have concluded, as did the trial court, that it may not.

The problem that has really provoked the present controversy can be traced to the somewhat contradictory demands of, on the one hand, the federally imposed bidding specifications requiring prior approval of a contractor -- a process ...

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