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McCay Corp. v. Mount Laurel Township Council

Decided: November 26, 1984.


Haines, A.j.s.c.


This opinion addresses issues involved in public bidding for municipal insurance contracts. It concludes that public bidding is not required. It also concludes, however, that other statutory requirements relating to insurance coverage, as well as regulations (which sometimes require bidding notwithstanding the statutory exemption) must be followed, that they were not followed here and that an insurance contract was improperly awarded by Mount Laurel Township to the A. T. Galasso Agency.

Mount Laurel circulated "Insurance Specifications" among several insurance brokers requesting "quotations" for the cost of providing the township with insurance coverage. Public bidding procedures were not followed because it was believed that such coverage was not subject to New Jersey's bidding statutes. Four quotations were submitted, the lowest by plaintiff McCay Corporation, and the next lowest by defendant A. T. Galasso Agency. The difference between these bids was $4,872. After these quotations were received, one or more

members of Mount Laurel's governing body negotiated with the Galasso Agency and obtained an agreement to lower its quotation by $4,872. The governing body, by a three-two vote, then adopted a resolution awarding the insurance contract to Galasso. The resolution, omitting its preamble, provided, as follows:

NOW, THEREFORE, BE IT RESOLVED that the Township Council of the Township of Mount Laurel, County of Burlington, State of New Jersey hereby accepts a proposal submitted by A. T. Galasso Agency, 1868 E. Marlton Pike, Cherry Hill, New Jersey 08003, which meets the specifications of the Township, and authorizes A. T. Galasso Agency as its broker of record to place the insurance the Township requires in accordance with its proposal with the various underwriters; and

BE IT FURTHER RESOLVED that the Municipal Manager be and she is hereby authorized to sign all the necessary papers regarding the insurance program as authorized by the Township Council; and

BE IT FINALLY RESOLVED that the award of the contract be subject to one of the two following conditions:

1. Reduction of the premium by the sum of $4,872.00 or

2. Clarification of the workmen's compensation premium refund program, such that the entity to which the contract is awarded can support a refund equal to or greater than the above amount.

The McCay Corporation filed this suit seeking vacation of the award on the ground that its contracting procedures were defective. Cross-motions for summary judgment raise the issues addressed in this opinion. They do not involve factual disputes and are appropriately resolved without trial.

The general requirement of the Local Public Contracts Law, N.J.S.A. 40A:11-1 et seq., is that all municipal contracts involving a consideration of more than $4,500 shall be subjected to competitive bidding procedures. There are, however, exceptions. The one upon which the township relied in requesting "quotations" and not "bids" is found in N.J.S.A. 40A:11-5 which provides that contracts may be awarded without public advertising for bids and bidding if the subject matter consists of

(m) Insurance, including the purchase of insurance coverage and consultant services, which exception shall be in accordance with the requirements for extraordinary unspecifiable services. . . .

"Extraordinary unspecifiable services" [EUS] are defined in N.J.S.A. 40A:11-2(7) as "services which are specialized and qualitative in nature requiring expertise, extensive training and proven reputation in the field of endeavor." They are exempt from public bidding requirements. However, N.J.S.A. 40A:11-5(1)(a)(ii) provides:

The application of this exception [EUS] shall be construed narrowly in favor of open competitive bidding, where possible, and the Division of Local Government Services is authorized to adopt and promulgate rules and regulations limiting the use of this exception in accordance with the intention herein expressed. The governing body shall in each instance state supporting reasons for its action in the resolution awarding each contract and shall forthwith cause to be printed, in the manner set forth in sub-section (1)(a)(i) of this section, a brief notice of the award of such contract. . . .

The "brief notice" to which this part of the statute refers, in accordance with paragraph (1)(a)(i) thereof, must be "printed once, in a newspaper authorized by law to publish [the governing body's] legal advertisements" and must state "the nature, duration, service and amount of the contract, and that the resolution and contract are on file and available for public inspection in the office of the clerk of the county or municipality."

A contract which is not subject to competitive bidding is, however, subject to the following provisions of N.J.S.A. 40A:11-6.1:

All purchases, contracts, or agreements which require public advertisement for bids shall be awarded to the lowest responsible bidder.

Prior to the award of any other purchase, contract, or agreement, the contracting agent shall, except in the case of the performance of professional services, solicit quotations, whenever practicable, on any such purchase, contract or agreement, the estimated cost or price of which is $1,000 or more, and the award thereof shall be made, in accordance with sections 3 (C. 40A:11-3) or 4 (C. 40A:11-4), as the case may be, of the Local Public Contracts Law, on the basis of the lowest responsible quotation received, which quotation is most advantageous to the contracting unit, price and other factors considered; provided, however, that if the contracting agent deems it impracticable to solicit competitive quotations in the case of extraordinary, unspecified services or in the case of such or any other purchase, contract or agreement awarded hereunder, having sought such quotations determines that it should not be awarded on the basis of the lowest quotation received, the contracting agent

shall file a statement of explanation of the reason or reasons therefor, which shall be placed on file with said purchase, contract or agreement.

The Division of Local Government Services [Division] pursuant to the authority granted by N.J.S.A. 40A:11-5(1)(a)(ii), adopted regulations entitled "Restricting the avoidance of competitive bidding for extraordinary, unspecifiable ...

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