Halpern, Botter and Davidson. The opinion of the court was delivered by Botter, J.A.D.
[150 NJSuper Page 33] The sole issue on this appeal is whether the Brick Township Municipal Utilities Authority (Authority) can legally establish minimum unit prices to be bid for certain items of work and materials of an indeterminate quantity which may be required in execution of contracts for the installation of a municipal sewerage collection system. The concepts involved are referred to as "unbalanced bids" and "pennying," that is, bidding nominal sums for certain items in public (and private) construction contracts. See Armaniaco v. Cresskill , 62 N.J. Super. 476 (App. Div. 1960); Frank Stamato & Co. v. New Brunswick , 20 N.J. Super. 340 (App. Div. 1952); Corbiscello Brothers, Inc. v. Fort Lee , 93 N.J. Super. 374 (Law Div. 1967); Phifer v. Bayonne , 105 N.J.L. 524 (Sup. Ct. 1929); Nelson v. New York City Mayor , 131 N.Y. 4, 29 N.E. 814 (Ct. App. 1892); New York Mayor v. Brady , 115 N.Y. 599, 22 N.E. 237 (Ct. App. 1889); Reilly v.
New York City Mayor , 111 N.Y. 473, 18 N.E. 623 (Ct. App. 1888); In Re Anderson , 109 N.Y. 554, 17 N.E. 209 (Ct. App. 1888); Abbett, Engineering Contracts and Specifications (4 ed. 1963) at 160-162; Cohen, Public Construction Contracts and the Law 53-56 (1961); Dunham & Young, Contracts, Specifications, and Law for Engineers (2 ed. 1971), at 262-264 and 271-272.
This case involves the solicitation of bids on Contracts S-5 and S-6 for the construction of a portion of the municipal sewerage system. The action was instituted in September 1975 by a property owner of Brick Township, Ocean County. The complaint asserted a violation of the Local Public Contracts Law, N.J.S.A. 40A:11-1 et seq. An order to show cause was issued with restraints to prevent the Authority from opening bids for the work and to allow contractors to withdraw bids previously submitted. After a hearing at which defendant's two expert witnesses testified, the trial judge held that fixing minimum unit prices that must be bid for certain items of work was inconsistent with the statutory goal of obtaining the lowest responsible bidder and was, therefore, illegal. A judgment was entered declaring the use of minimum price requirements unlawful as against public policy, restraining defendant from doing so in the future and allowing all bidders to withdraw their bids.
Although an appeal was filed, defendant was forced to readvertise and award the contracts in compliance with the trial judge's order because of time limits involved in the grant of Federal funding of the project.*fn1
The Authority engaged the services of Charles J. Kupper, Inc. (Kupper) as consulting engineers for the design of the sewerage collection system and the preparation of
plans, specifications and contract documents. This firm was involved in the installation of sewers in Brick Township since 1963 or 1964. The bidding and contract documents prepared by Kupper required contractors to bid at least certain fixed or minimum unit prices for so-called "discretionary" items.
Discretionary items are distinguished from "certain" items by the fact that the nature and extent of "certain" items can be measured by reference to plans and specifications. An example of a "certain" item is sewer pipe, whose size and length are shown on the plans.
Discretionary items are types of work and material which cannot be accurately measured or ascertained, in terms of quantity or need, in advance of the work actually being performed. Here, these fell generally into two categories, one pertaining to underground work and the other to restoration work. The underground work entailed laying sewer pipe in trenches ranging generally from 6 to 20 feet deep. Although interval borings were used in designing the project, it was impossible to determine all soil conditions that would be encountered. Some soil conditions might require the use of stone and select material or concrete cradles to support the sewer pipe. Also, timber or steel sheeting left in place might be needed to shore up the trenches and protect the completed work. Some uncertainty also existed in regard to the extent of restoration work, such as asphalt paving or landscaping, that would be required after the sewers had been installed.
The term "discretionary" is used because the final determination of need must be made by the engineer on the site while the work is being performed. But, for the purpose of comparing competing bids, the engineers must estimate in advance the kind and extent of these discretionary items. They do so as best they can based upon the borings, their knowledge of local conditions and their experience in such projects.
During the course of the work the judgment of the engineer, for example, as to the stability of soil conditions, may be questioned. A contractor who has "pennied" these indeterminate, discretionary items will be disinclined to accept the engineer's orders. That contractor will not want to incur the expense or loss in doing this work. As a result, according to ...