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November 16, 1978

In re CUBIC WESTERN DATA, INC., a California Corporation,
The NEW JERSEY TURNPIKE AUTHORITY, Francis G. Fitzpatrick, Chairman, William Flanagan, Executive Director of the N.J. Turnpike Authority

The opinion of the court was delivered by: BARLOW



 On October 5th, 1978, plaintiff, Cubic Western Data, Inc. (hereinafter "Cubic Western"), filed a verified complaint and an application for a temporary restraining order requesting that the defendant New Jersey Turnpike Authority (hereinafter "Authority") be prohibited from awarding a public contract for the installation of a toll revenue and computer system to S.C.I. Systems, Inc. (hereinafter "S.C.I."), which was the company submitting the lowest bid for this project. Cubic Western alleged that S.C.I."s proposal failed to comply with the bidding specifications set forth by the Authority and that, therefore, the Authority was precluded from accepting S.C.I."s proposal. On that same date, the Honorable Clarkson S. Fisher issued an order restraining the Authority from awarding the contract to any of the bidders until a final determination of the legality of S.C.I."s bid was made. *fn1" On October 17th, 1978, Cubic Western amended its complaint and sought to have the Authority further enjoined from rejecting any legal bids already submitted and from advertising for rebidding the contract in question. The Court heard the testimony of witnesses and the argument of counsel on October 17th and October 20th, 1978 regarding the instant application for a preliminary injunction.


 A. The Bidding Instructions

 On June 30th, 1978, the Authority issued an invitation for bids for the installation of a toll revenue and computer system. N.J.S.A. 27:23-6.1 requires the Authority to adopt standing operating rules and procedures involving the advertisement for bids. Accordingly, the invitation for bids was accompanied by a document called "Information for Bidders" (hereinafter "the Instructions", "the bidding specifications") which listed the steps to be taken by an applicant in order to properly file its bid. Section 1.05 of these Instructions states that a Letter of Surety shall be submitted with each bid. In the event that the low bidder on a project refuses to accept the contract awarded to it, this Letter of Surety obligates the surety to pay to the Authority the difference between the low bidder's proposal and the cost of having the work performed by the next lowest responsible bidder. The bidding specifications also require that corporate bidders not incorporated in the State of New Jersey submit a certificate from the Secretary of State of New Jersey certifying that the corporation is authorized to transact business in the state. See § 1.00, par. 4. This document also specifies the grounds upon which a proposal may be rejected by the Authority. For instance, a proposal may be set aside if the Letter of Surety, as part of the Proposal Guaranty, is not enclosed with the bid, See § 1.08(a), or if the prices of the bid are "obviously unbalanced", See § 1.08(b). However, the instructions do not list the failure to submit the Secretary of State's "transacting business" certificate as a ground for rejecting the proposal.

 At the same time, the instructions also provide that the Authority reserves the right to waive any and all irregularities and technicalities in the submission of the bidding documents. § 1.08, par. 3.

 B. S.C.I."s Bid

 On September 29th, 1978, the Authority opened the bids it had received for this contract. The lowest bid for project R-630b, the particular contract in question, was submitted by S.C.I. Systems Inc. for $ 6,235,597. Plaintiff Cubic Western Data, Inc. submitted the second lowest bid, for $ 7,500,216. The difference between these two proposals is $ 1,264,619. See Letter from D. L. Bertagna to Howard S. Heydon dated September 29, 1978, Plaintiff's Exhibit No. 6.

 On September 29th, 1978, the date the bids were opened, S.C.I. had not furnished the Authority with either the Letter of Surety or the "transacting business" certificate, as required by the bidding instructions. However, on October 3rd, 1978 the Hartford Accident and Indemnity Company issued a Letter of Surety on S.C.I."s behalf for the contract in question. The Authority received this letter on October 6th. Also, on October 17th, the Secretary of State issued to S.C.I. the "transacting business" certificate.

 C. Cubic Western's Application for Injunctive Relief

 This Court must now determine whether or not the Authority should be preliminarily enjoined from awarding the contract to S.C.I. Cubic Western contends that the Authority should continue to be precluded from taking such action because S.C.I."s bid did not conform to the Authority's Instructions in three respects; that is, that S.C.I. failed to submit the Letter of Surety as part of its bid by September 29th, 1978; that the bid also was not accompanied by the "transacting business" certificate; and that S.C.I."s bid is "obviously unbalanced." In light of the amendment made to the original complaint, we must also consider whether or not the Authority should be enjoined from rejecting any of the original bids which fully complied with the instructions and from reopening the bidding for the contract in question.


 The Third Circuit Court of Appeals has clearly identified the showing required of a moving party to establish his entitlement to a preliminary injunction. Initially, the movant must demonstrate both that he has a reasonable probability of eventual success in the litigation and that he will be irreparably injured Pendente lite if the relief requested is not granted. See Constructors Association of Western Pennsylvania v. Kreps, 573 F.2d 811, 814-15 (3d Cir. 1978). Moreover, even after such a showing has been made the Court must still consider both the possibility of harm to other interested persons from the grant or denial of the injunction, as well as the effect which the decision will have on the public interest. Id. We will consider each of plaintiff's contentions in light of the above standard.

 A. Enjoining the Authority from Awarding the Contract to S.C.I.

 N.J.S.A. 27:23-6.1 sets forth the requirement that the Authority publicly advertise for certain bids exceeding the sum of $ 2500 and that the public agency specify the terms upon which bids will be received and considered. The Authority established its bidding guidelines in the Information to Bidders document discussed previously. It is firmly established in New Jersey that material conditions contained in such bidding specifications may not be waived. Terminal Const. Corp. v. Atlantic County Sewerage Authority, 67 N.J. 403, 411, 341 A.2d 327 (1975). *fn2" However, it is also clear that this rule does not apply to minor or inconsequential conditions. Id. In fact, as we have noted, the Instructions provided to all bidders in this case specifically stated that the Authority reserved the right to waive any and all irregularities and technicalities in the submission of bidding documents. Thus, in order to decide if the Authority should be enjoined from awarding the contract to S.C.I. we must determine whether the alleged defects in S.C.I."s bid constitute irregularities or technicalities which may be waived by the Authority or whether they are a breach of material terms of the bid, and, hence, are non-waivable.

 1. Reasonable Probability of Success on the Merits

 (a) The Letter of Surety

 As previously noted, the requirement that each bid be accompanied by a Letter of Surety is designed to protect the Authority from incurring additional expense in having the computer system installed by a second bidder should the low bidder refuse to accept the contract awarded to it. Such a document is but one form of security which bidders on public contracts are required to submit with their proposals. *fn3" The type of security which is to be furnished is either expressly specified in the applicable statute, See, e.g., N.J.S.A. 40A:11-21 (hereinafter "the Local Public Contracts Law"), or, as in the instant case, the public entity is allowed by statute to determine what security, if any, it wishes to require as part of its bidding system. See N.J.S.A. 27:23-6.1. *fn4" These bidding statutes, of which the provisions setting forth the security requirements are an integral part, have a clearly-defined purpose:

Bidding statutes are for the benefit of the taxpayers and are Construed as nearly as possible with sole reference to the public good. Their objects are to guard against favoritism, improvidence, extravagance and corruption; their aim is to secure for the public the benefits of unfettered competition.

 Terminal Const. Corp., supra, 67 N.J. at 409-10, 341 A.2d at 330; Hillside Twsp. v. Sternin, 25 N.J. 317, 322, 136 A.2d 265 (1957). (Emphasis supplied.)

 A review of the case law of New Jersey dealing with these bidding statutes reveals that deviations from the terms of the bidding instructions arise in a variety of contexts. *fn5" Most importantly, New Jersey courts, on numerous occasions, have been confronted with the question of when a public entity may waive defects in the security submitted by a bidder. In Terminal Const. Corp., supra, a case that did not involve a defect in security, the New Jersey Supreme Court summarized the security cases as follows:

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