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Palamar Construction Inc. v. Township of Pennsauken

Decided: December 21, 1983.


On appeal from the Superior Court of New Jersey, Law Division, Camden County.

Michels, King and Dreier. The opinion of the court was delivered by King, J.A.D.


[196 NJSuper Page 243] This case presents the issue of whether a municipality may attach post-bid conditions adverse to the bidder to an award of a publicly-bid construction contract. The award of the contract was challenged by the second-lowest bidder, plaintiff Palamar

Construction, Inc. (Palamar). The award was also challenged because the low-bidder did not supply a required contractor's qualification statement until one and one-half hours after the bids were accepted.

This is the procedural framework of the dispute. The defendant, Township of Pennsauken, advertised a notice to bidders on July 15, 1983 inviting bids pursuant to the Local Public Contract Laws, N.J.S.A. 40A:11-1 et seq., for the construction of a new clubhouse facility for the Pennsauken Country Club, formerly a private club which had recently been acquired with State Greenacres funding assistance. The bids were opened on Friday, August 5, 1983 at 2 p.m. The defendant, Craig Taylor Construction Company (Taylor), was the lowest-bidder at $1,275,000. The plaintiff, Palamar was the second lowest bidder at $1,294,975.

Palamar challenged Taylor's bid on two grounds: (1) that defendant Taylor was not a responsible bidder and (2) that the absence of a contractor's qualification statement in the bid package was a material defect. Hearings on Palamar's challenge were conducted before the governing body of the Township of Pennsauken (Township Committee) on August 31 and September 14. At the conclusion of the hearings, the Township Committee rejected Palamar's challenge and awarded the contract to defendant Taylor by a vote of 3-1. A formal resolution accepting defendant Taylor's bid and awarding it the contract was adopted by the Township Committee on September 19.

Palamar filed a complaint in lieu of prerogative writ on October 3 with the Superior Court, Law Division challenging the decision of the Township Committee. On that date, the Law Division judge issued an order to show cause and an interlocutory restraint enjoining the execution of the construction contract with Taylor and the initiation of any construction on the project pending final resolution.

After argument on October 23, an order for judgment setting aside the award of the contract to Taylor issued. On October

28 Taylor filed a notice of appeal and a motion seeking a stay of the Law Division's order. A stay was granted by this court on October 31, 1983 and the appeal was accelerated for argument on December 6 because of the public interest involved. R. 2:9-2.

This is the factual background. On July 25, 1983 Pennsauken published a notice inviting bids for the construction of the new clubhouse facility. The notice to bidders stated that the bids would be opened in public at the municipal building on August 5 at 2 p.m. and that the plans and specifications were available at the office of the township clerk. The notice also stated that a prebid conference would be held on July 25 at 2 p.m.

Plaintiff Palamar and defendant Taylor both obtained copies of the specifications and plans. The specifications contained a contractor's qualification statement and stated that the statement "must be presented" to the Township at the prebid conference. The prebid conference was held as scheduled. The conference was attended by neither Palamar or Taylor, nor did either submit a contractor's qualification statement on that date. In fact, only two of the eight bidders actually submitted a contractor's qualification statement at the prebid conference. Carruth, the Township's administrator, stated that several contractors attending the prebid conference said that they were not aware of the requirement in the specifications for providing the contractor's qualification statement at the conference. Consequently, Carruth in August sent a registered letter to each bidder stating that the "contractor's qualification statement . . . must be removed from the specification packet or duplicated and submitted with your bid on Friday, August 5, 1983 at 2 p.m. in order for your bid to be considered." Defendant Taylor concededly received this letter.

The bids were opened by the administrator on October 5 at 2 p.m. Defendant Taylor's bid did not contain the required qualification statement. Craig Taylor, the principal of defendant

Taylor, was present at the bid opening and informed Carruth that the contractor's qualification statement had been inadvertently omitted due to a clerical error and asked if he could return to his nearby office to get the statement. Carruth told him to do so expediently. Carruth also informed Taylor that a decision as to whether his bid was acceptable would be reserved until Carruth reviewed the situation with the Township Committee and the solicitor. Taylor returned with the contractor's qualification statement to the township at approximately 3:30 p.m., one and one-half hours after the scheduled opening of the bids.

A public contract must "be awarded to the lowest responsible bidder." N.J.S.A. 40A:11-6.1. Defendant Taylor was the lowest bidder at $1,275,000; plaintiff Palamar was the second lowest bidder at $1,294,975. Palamar challenged Taylor's bid in a letter on August 8. Palamar asserted two grounds for disqualifying Taylor's bid: (1) that Taylor's failure to submit a contractor's qualification statement at the time designated was a material defect in the bid that could not be cured after the bids were opened and (2) that defendant Taylor was not a "responsible" bidder within the language of N.J.S.A. 40A:11-6.1. Hearings regarding Palamar's challenge were conducted before the Township Committee on August 31 and September 14, 1983.

The two hearings resulted in a 280-page transcript which is before us and was before the Law Division judge. Most of the testimony centered on whether Taylor was a "responsible" contractor. At the end of the second hearing session the Township solicitor advised the Committee that the omission of the qualification statement was material and could not be cured, relying on Hillside Township v. Sternin, 25 N.J. 317 (1957). Consequently he advised the Committee that Taylor was a disqualified bidder. The Township Committee rejected this advice and unanimously concluded that the defect was not material but trivial and that waiver would not threaten the competitive bidding process. This point was not treated by the

Law Division judge but has been briefed and argued on this appeal.

The factual testimony and documentary evidence of Taylor's "responsibility" as required by N.J.S.A. 40A:11-6.1 created a fact issue for resolution by the Committee. See Arthur Venneri Co. v. Paterson Housing Authority, 29 N.J. 392, 402 (1959). We see no need to review all of that testimony in detail here. While there was some dispute, we are satisfied from the record that there was a sufficient basis for the Township Committee's ultimate conclusion, by a 3-1 vote, that Taylor was a "responsible" bidder within the contemplation of the statute. Ibid. There was testimony that Taylor had never defaulted on a job, nor failed to complete a job, nor been denied an application for a bid bond or bonding. Taylor produced 11 favorable letters of recommendation from municipal officials, owners and architects for whom he had worked. The country club construction for Pennsauken was his costliest and most complex job to date. The Committee's main concern seemed to be supervision on the job. Taylor agreed that the job needed full-time supervision which he promised to furnish, eight hours a day, five days a week. The specifications had been silent on supervision. There was also some question raised about his break-out prices for subcontractor's services. But since the bid was in a lump-sum, the sums Taylor had planned to pay various subcontractors seems irrelevant. There was also a question about Taylor's corporate or individual status which was clarified satisfactorily and promptly.

After hearing the testimony and considering the documentation, the Committee, as noted, found Taylor "responsible" by a 3-1 vote. On the vote, the members of the Committee expressed themselves as follows

MR. MAROCCIA: Yes. The reasons that I am voting yes, are as follows:

I believe the law to be that a person who is the lowest bidder starts out with a presumption of his responsibility, and that the burden of challenging or showing the irresponsibility rest with other parties, certainly not with himself. So that therefore, he did not have the burden to prove that he is responsible,

but either the Township or the challenger, whoever that person may be, have the burden of going forward, and showing ...

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