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Meadowbrook Carting Co., Inc. v. Borough of Island Heights

Decided: December 7, 1994.

MEADOWBROOK CARTING COMPANY, INC., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT,
v.
BOROUGH OF ISLAND HEIGHTS AND CONSOLIDATED WASTE SERVICES, INC., DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by Stein, J. Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, and Garibaldi join in this opinion.

Stein

The opinion of the Court was delivered by

STEIN, J.

The issue before us is whether a municipality can award a contract to a low bidder that fails to include with its bid a required consent of surety to provide a performance bond. In an unreported opinion, the Appellate Division affirmed the trial court's ruling that the omission of a consent of surety from the bid is a defect that can be temporarily waived and subsequently cured. We granted certification, 136 N.J. 30 (1994), and now reverse.

I

The essential facts are undisputed. Defendant Borough of Island Heights (Borough) had a three-year contract with plaintiff, Meadowbrook Carting Company, Inc. (Meadowbrook), for the collection and removal of garbage, which was due to expire on February 1, 1993. Pursuant to the requirements of the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -49, the Borough advertised in November 1992 for bids on a new three-year contract commencing February 1, 1993. The advertisements notified potential bidders that they were required to submit a sealed bid in accordance with the specifications by January 29, 1993.

The bid specifications were consistent with various provisions of the Local Public Contracts Law. Pursuant to N.J.S.A. 40A:11-21, the bid specifications required "bid security in the form of a certified check, cashier's check or bid bond in the amount of 10% of the bid but not to exceed $20,000" to be submitted with the bid proposal. The specifications also required the party to whom the contract was awarded to furnish a "[performance] bond of any indemnity company authorized to do business in the State of New Jersey and satisfactory to the Borough for the full amount of the

bid, as accepted, and [to] pay all premiums due thereon." As required by N.J.S.A. 40A:11-22, the bid specifications mandated that bidders submit with their bid proposal a consent of surety guaranteeing that a bonding company will issue a performance bond in accordance with the bid specifications. The specifications defined a "consent of surety" as a "statement submitted with a bid, from a surety company duly authorized to do business in New Jersey and satisfactory to the governing body to the effect that said surety company will furnish a bond for the bidder, if awarded the contract." Each bidder was also required to provide a statement disclosing the identity of the owners of the bidding enterprise, and a Certificate of Insurance verifying that the bidder had in force insurance coverage with respect to the risks listed in the specifications and with the required amount of coverage.

The Borough reserved the right to reject a bid if the bidder failed to furnish any of the information or documents required by the specifications. The specifications further provided that an "award, if made, will be to the lowest responsible Bidder providing his bid complies in all respects with the requirements, as contained herein, of the Borough of Island Heights." However, the Borough "reserved the right to waive, in its sole discretion, any minor informalities, defects or non-conformities in any bid documents submitted if it is determined to be in the best interest of the Borough of Island Heights to do so."

The bids were opened on January 29, 1993, and Meadowbrook and defendant Consolidated Waste Services, Inc. (Consolidated) were the only bidders for the proposed contract. Consolidated's bid for the three-year contract was $556,300, while Meadowbrook's bid was $657,405. Consolidated's bid, however, failed to include either a consent of surety or a Certificate of Insurance as required by the bid specifications. Consolidated's bid also did not contain an adequate ownership-disclosure statement. Meadowbrook's bid, however, complied in all respects with the bid specifications.

Consolidated delivered the required Certificate of Insurance to Borough officials approximately one-half hour after the opening of

bids. Four days later, on February 2, 1993, Consolidated provided the Borough with a consent of surety in the form of a letter from Acstar Insurance Company (Acstar) that stated: "In the event that Consolidated Waste Services, Inc. should be awarded the contract for the Borough of Island Heights project, ACSTAR Insurance Company as Surety, will furnish a Payment and Performance Bond providing Consolidated Waste Services, Inc. continues to meet ACSTAR Insurance Company's underwriting and collateral requirements." Consolidated furnished to the Borough an ownership-disclosure statement complying with the specifications on February 8, 1992.

Although Meadowbrook objected to the award of the contract to Consolidated because of its failure to provide a consent of surety and an adequate ownership-disclosure statement with its bid, the Borough's governing body elected to waive those deficiencies and adopted a resolution awarding the contract to Consolidated.

Meadowbrook instituted this action challenging the validity of the resolution awarding the contract to Consolidated and seeking to compel the Borough to award the contract to Meadowbrook. The Law Division dismissed Meadowbrook's complaint, determining that the submission of the incomplete ownership-disclosure statement was a nonmaterial defect that had been cured, and that Consolidated's failure to submit a consent of surety with its bid had been cured by the furnishing of a consent of surety four days after the bid opening. The Law Division also concluded that the conditional terms of the consent of surety eventually furnished were commercially reasonable and therefore complied with the specifications.

On appeal, Meadowbrook again challenged Consolidated's failure to submit the consent of surety with its bid, and its submission of the inadequate disclosure statement. The Appellate Division affirmed substantially for the reasons stated by the trial court. In its petition for certification, Meadowbrook raises only the issue of Consolidated's failure to submit a consent of surety with its bid.

II

The competitive-bidding process is incorporated in the Local Public Contracts Law. N.J.S.A. 40A:11-3 and -4 require that municipalities and counties advertise for bids on public contracts that exceed the statutory threshold amount. The purpose of the Local Public Contracts Law is to "secure for the public the benefits of unfettered competition." Terminal Constr. Corp. v. Atlantic County Sewerage Auth., 67 N.J. 403, 410, 341 A.2d 327 (1975); see also Township of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207, 215, 316 A.2d 737 (Law Div. 1974) (stating that purpose of competitive bidding for local public contracts is not protection of individual interests of bidders, but rather advancement of public interest in securing most economical result by inviting competition in which all bidders are placed on equal basis). The statutes authorizing competitive bidding accomplish that purpose by promoting competition on an equal footing and guarding against "favoritism, improvidence, extravagance and corruption." Township of Hillside v. Sternin, 25 N.J. 317, 322, 136 A.2d 265 (1957); see also L. Pucillo & Sons, Inc. v. Mayor of New Milford, 73 N.J. 349, 356, 375 A.2d 602 (1977) (L. Pucillo) (stating that purpose of act is "'to guard against favoritism, improvidence, extravagance and corruption'") (quoting Terminal Constr. Corp., supra, 67 N.J. at 410)).

Accordingly, the statutory rule in New Jersey is that publicly advertised contracts must be awarded to "the lowest responsible bidder." N.J.S.A. 40A:11-6.1; see also Hillside, supra, 25 N.J. at 323, 326 (construing predecessor to Local Public Contracts Law). This Court has interpreted that requirement to mean that the contract must be awarded not simply to the lowest bidder, but rather to the lowest bidder that complies with the substantive and procedural requirements in the bid advertisements and specifications. Hillside, supra, 25 N.J. at 324 ("The significance of the expression ...


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