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Intertech Associates Inc. v. City of Paterson

Decided: March 24, 1992.


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

Havey and Conley. The opinion of the court was delivered by Conley, J.s.c. (temporarily assigned).


CONLEY, J.S.C.(temporarily).

Following a non-jury trial, plaintiff obtained a judgment which: 1) set aside a resolution of the Municipal Council (Council) of the City of Paterson (City) that rescinded the award of a contract to plaintiff and, 2) ordered the Council to sign a contract with plaintiff. The City appeals. Execution of the contract has been stayed pending appeal. We now reverse.

In January 1990 the City solicited public bids on a contract for services in connection with the design and installation of a communications network system for its police and fire departments. The proposed network would include a radio system, cable consoles, base stations, satellite receivers, as well as an upgrading of the recording and telephone systems and a design for backup and uninterruptable power supply systems.

The original bids were to be received February 28, 1990. Prior to advertisement of this bid and during the fall and winter of 1989, plaintiff had sought to directly contract with the City without public bidding and had, at that time, submitted proposals. After the first bid was advertised, plaintiff objected to the necessity of a public bid because the services to be performed required a professional engineer and thus, it claimed, were exempt from the public bidding law. See N.J.S.A. 40A:11-5(1)(a)(i), N.J.S.A. 40A:11-2. At a bidders conference in February 1990, plaintiff objected to the requirement of a performance bond and a bid bond. It also objected to the remedies clause, Clause 14, in the form contract that accompanied the bid package and which the City expected the successful bidder to sign.

Subsequently, the bid specifications were amended to delete the requirement of a performance bond and the requirement that the bidder be a licensed engineer. The specifications, however, continued to require a bid bond and the form contract continued to contain the remedies clause. A second notice to bidders occurred in March 1990. Bids were to be received by March 14, 1990. The bid specifications continued to require a bid bond and the form contract expected to be signed by the successful bidder contained the remedies clause.

Plaintiff was the only bidder. However, it did not submit a bid bond and it excepted to the remedies clause. Specifically on an attached "Exhibit C", it included in its bid the following statements:

Intertech Associates is pleased to advise the City of Paterson that we take no exceptions to the Technical and Engineering aspects of this Request for Bid. However, we do take the following Exceptions to the Contract terms and requirements:

1. As a Licensed Professional Engineering service, Intertech Associates is providing evidence of Errors and Omissions Insurance in lieu of Bid and Performance bonds (See Exhibit C1, attached). These Bonds are not available for a design service and are therefore unreasonable to request of a New Jersey Licensed Professional; by association, so is the cash deposit. Our State License is your assurance of Intertech Associates providing the quoted services at the designated fee and will honor this fee for the 75 day period as requested. Intertech Associates, therefore, is taking an exception to a "Bid" Security for a Professional Engineering design service.

2. Intertech Associates takes exception to clause 14, page 15 of the Contract entitled "Remedies", as the clause does not limit the amount claimed as remedy for consequential damages. Intertech Associates will accept a clause limiting damages to that covered by our $1,000,000.00 Errors and Omissions Policy.

Pursuant to the City's practices and policies concerning bids, the bids are normally opened by the Director of Purchasing whose supervisor is the Business Administrator. If there are any exceptions or deviations, the bid documents are forwarded to the Law Department for review by Corporation Counsel and a determination as to whether the exceptions or deviations are material and thus non-waivable. See Terminal Constr. Corp. v. Atlantic Cty. Sewerage Auth., 67 N.J. 403, 341 A.2d 327 (1975). If a bid does not contain exceptions or deviations and is otherwise in order, and it is the low bid, the Director will prepare a resolution for Council to consider.*fn1 The resolution, under these circumstances will have a certification signed by the Director that the "bid was found to be in order." The resolution is then sent to Corporation Counsel. Because no problems appear with a bid of this type, neither the bid nor other bid documents are sent with the resolution. In these instances, Corporation Counsel, relying on the certification of the Director, will sign the certification and submit the resolution

to Council for its action. Under this procedure, where the bid does not contain exceptions or deviations and is otherwise in order, Council does not receive the bid documents themselves with the proposed resolution, but rather relies on the certification signed by the Director and Corporation Counsel.

At the time plaintiff's bid was opened, the Director's supervisor, the Business Administrator, had recently been designated Acting Mayor following the death of Mayor Frank Graves ten days before. The position of Business Administrator was, therefore, vacant. Only the Director and one other employee staffed the Division of Purchasing. Despite prior communications from plaintiff during which it expressed its objections and despite the specific exceptions contained in exhibit C of the bid, the exceptions were not noted. The normal procedures which would have triggered review by Corporation Counsel of the actual bid documents were not followed. Rather, because the exceptions were missed, the bid was treated as a bid conforming to the bid specifications. Accordingly, the Director prepared a resolution awarding the contract and signed a certification that the "bid was found to be in order."

In explaining the reasons for failing to note the exceptions, the Director testified:

Very unusual circumstances. We were down to two people in an office that normally has many more and the circumstances of the City with the loss of the Mayor, we had a Business Administrator that was acting in that capacity at the time. There was near chaos, if you will, in the Department of Administration in the Division of Purchasing.

The number of bids that we had received were; also, substantial so there was a lot of work -- to[o] much work and ...

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