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Delta Chemical Corp. v. Ocean County Utilities Authority

Decided: August 12, 1991.


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

King, Long and Stern. The opinion of the court was delivered by King, P.J.A.D.


This is a local public bidding case in which the Ocean County Utilities Authority (OCUA) appeals from a money judgment in the amount of $10,427 entered in favor of a disappointed high bidder, Delta Chemical Corporation (Delta). The judgment was stayed pending appeal. We conclude that the judgment must be reversed. There is also a cross-appeal by Delta on which we affirm.

Many of the pertinent facts are contained in the Law Division judge's published opinion, 231 N.J. Super. 180, 554 A.2d 1381 (Law Div.1988), and we will not repeat all of them. The action was brought by an unsuccessful bidder, Delta, which claimed an entitlement to a contract to supply polymer, a chemical used for waste and sewage disposal, to OCUA pursuant to an advertisement to bid on July 15, 1987. Delta relied on the "Buy-American" statute in the Local Public Contracts Law, N.J.S.A. 40A:11-18,*fn1 and the Instructions to Bidders inviting

compliance with it.*fn2 Delta claimed that it was the only one of seven bidders in compliance with the "Buy-American" provisions of the statute and the Instructions. Delta sought equitable relief enjoining the award of the contract to Allied Colloids, Inc. (Allied), the low bidder, and an award of the contract to it as the "lowest responsible bidder." Delta also sought damages.

This is the critical chronology of events. The bids were received on July 15, 1987. The contract was awarded by OCUA to Allied on July 23, 1987. The complaint attacking the award was filed against OCUA and Allied on August 21, 1987. The judge heard arguments on the order to show cause on November 19, 1987 after affidavits and briefs had been filed. On December 2, 1987 the judge denied a temporary restraint of the award to and performance of the contract by Allied. The judge then invited briefing on the constitutionality of the statute, N.J.S.A. 40A:11-18.

After hearing testimony on "the historical pattern of implementation of N.J.S.A. 40A:11-18," see 231 N.J. Super. at 191-196, 554 A.2d 1381, the judge found the "Buy-American" statute susceptible of a constitutional construction if applied with a rule of "reason" engrafted upon it. Id. at 196, 554 A.2d 1381. This is the essence of his ruling:

The court concludes that, in some circumstances, the OCUA has discretion to buy a foreign product even if an American product is available. However, given the evident statutory intent to provide at least a preference for American products, the OCUA must demonstrate that it has acted reasonably. N.J.S.A. 52:33-2 and 3, which allow discretion in state purchases, require the State to justify the purchase of foreign materials. The OCUA has the same obligation.

Admittedly, this result brings uncertainty to the bidding process. Henceforth, the bidding agencies could be subjected to litigation testing the reasonableness of their exercise of discretion. The suppliers, whether American or foreign, can challenge the soundness of the bidding agency's judgment. Certainty is one of the key ingredients of an effective and credible bidding law. Pucillo & Sons, Inc. v. Mayor and Council of New Milford, 73 N.J. 349, 355 [375 A.2d 602] (1977). Therefore, it appears that legislative action would be desirable to address this issue and clarify the responsibility of local governmental bodies involved in public bidding. The policy determination belongs to the Legislature. It can choose to give an absolute preference to American products. However, if discretion is to be allowed, definitive guidelines are needed to put bidders on an equal footing and protect governmental bodies against unnecessary litigation. [ Id. 231 N.J. Super. at 196-197, 554 A.2d 1381.]

The judge then conducted a "plenary hearing to determine whether OCUA acted reasonably in awarding all three contracts to Allied." Id. at 197, 554 A.2d 1381.

The judge held this hearing on March 27, 1989 and on May 19, 1989 he rendered a letter opinion which is unpublished. The judge concluded that under N.J.S.A. 40A:11-18, Delta's American-made product was eligible for preference over Allied's foreign-made product. He then made these findings on the differentials in the bids of the parties on the three facilities:


Facility Cost per Dry Ton Total Cost Difference

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