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Tormee Const., Inc. v. Mercer County Imp. Authority

September 20, 1995

TORMEE CONSTRUCTION, INC., A CORPORATION OF THE STATE OF NEW JERSEY; NEW JERSEY CHAPTER, ASSOCIATED BUILDERS & CONTRACTORS, INC., A NOT-FOR-PROFIT CORPORATION OF THE STATE OF NEW JERSEY; UTILITY & TRANSPORTATION CONTRACTORS ASSOCIATION OF NEW JERSEY, INC., A NOT-FOR-PROFIT CORPORATION OF THE STATE OF NEW JERSEY; THOMAS EMICK, INDIVIDUALLY; AND JOSEPH D. LANDOLFI, INDIVIDUALLY, PLAINTIFFS-APPELLANTS,
v.
MERCER COUNTY IMPROVEMENT AUTHORITY, A BODY POLITIC OF THE STATE OF NEW JERSEY AND THE COUNTY OF MERCER, DEFENDANT-RESPONDENT.



On certification to Superior Court, Law Division, Mercer County.

Opinion released February 6, 1996.

The opinion of the Court was delivered by Pollock, J. Justices O'hern, Garibaldi, Stein and Coleman join in Justice POLLOCK's opinion. Justice Handler filed a separate Dissenting opinion in which Chief Justice Wilentz joins.

The opinion of the court was delivered by: Pollock

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

TORMEE CONSTRUCTION, INC., ET AL. V. MERCER COUNTY IMPROVEMENT AUTHORITY (A-55-95)

Argued September 11, 1995 -- Decided September 20, 1995 -- Opinion released February 6, 1996

POLLOCK, J., writing for a majority of the Court.

On March 16, 1995, the Mercer County Improvement Authority (MCIA) solicited bids for a construction project captioned "Mercer County Library Phase One" (Phase One). Phase One involved a series of contracts for additions and alterations to the Ewing Township, Hopewell Township, and Lawrence Township branches of the Mercer County Library System. Thereafter, the MCIA advertised for bids for "Phase Two," involving similar renovations to other branches in the library system.

Included in the Phase One bid package was a copy of Executive Order 94-2, which directed that in "appropriate construction projects," each contractor and subcontractor was required to sign a project agreement to be negotiated between the construction manager or architect of the contractor and "the appropriate Building and Construction Trade Unions." The project agreement was to establish work hours, wage rates, fringe benefits, dispute and grievance procedures and other terms necessary to ensure "a harmonious relationship between the parties." The Order justified the "Project Agreement" provision as necessary to avoid "labor strife" and to ensure the timely and orderly completion of the library project.

The deadline for receipt of the bids was April 13, 1995. However, on April 6, 1995, in a letter addressed to MCIA's attorney, the Associated Builders & Contractors, Inc. (ABC), the Utility and Transportation Contractors Association of New Jersey (UTCA), and Tormee Construction, Inc. (Tormee), questioned the legality of the MCIA's PLA. Based on that letter, the MCIA, in a second addendum, extended the date for the receipt of bids.

On April 20, 1995, the MCIA sent prospective bidders Addendum No. 3, which made numerous changes to the bidding documents. One of the changes deleted the specific reference to the Building and Construction Trades Union and instead specified that the project labor agreement be negotiated with "an appropriate labor organization in the building and construction industry."

Motivated by concerns for labor peace, quality of work, and efficient construction schedules, the MCIA adopted Resolution 95-62 on April 24, 1995, declaring that the library projects were appropriate for PLAs. Under MCIA policy, a successful bidder had to enter into a PLA with "appropriate labor organizations." The PLA was to include a procedure for the resolution of grievances and jurisdictional disputes and for the elimination of the possibility of strikes, work stoppages, and lock-outs. Addendum No. 4 set April 27, 1995, as the date for the receipt of bids. The total contract price was approximately $6.03 million and the project was scheduled to last a maximum of 420 calendar days.

Tormee, ABC, UTCA, Thomas Emick (a non-union worker), and Joseph Landolfi (a resident and taxpayer of Mercer County) (collectively plaintiffs) filed an action in lieu of prerogative writ to restrain the MCIA from receiving bids and to declare the PLA invalid. On April 27, 1995, the Law Division found the PLA valid and dismissed the complaint, finding that the amended specification did not offend George Harms Construction Co. v. New Jersey Turnpike Authority, thus rendering the PLA requirement valid. The Appellate Division denied plaintiffs' request for a stay. The Supreme Court denied a stay but granted direct certification.

On May 22, 1995, the MCIA adopted Resolution 95-105, awarding the contracts for the library projects. The Supreme Court heard oral argument on September 11, 1995. On September 20, 1995, this Court issued an order declaring invalid the PLA specification in Phase Two and directing the removal of that specification from the bid documents. This opinion sets forth the Court's reasons for that decision.

HELD: The specification in the Mercer County Improvement Authority bid for the Mercer County library construction project that required contractors to enter into a "project labor agreement" with appropriate labor organizations" is invalid as inconsistent with public-bidding statutes.

1. The validity of PLAs is primarily a matter of state law. Although less restrictive than the PLA in Harms, the subject PLA still contravenes the underlying purposes of public-bidding laws. Under the specifications and definitions of the MCIA PLA, only two unions could qualify: the AFLCIO and the Building Trades Council. The restriction of project labor to two unions, like the restriction to a single union, fails to satisfy the statutory requirements for bidding on local public contracts. (pp. 6-7)

2. PLAs can contravene the goals of competitive bidding by lessening competition. PLAs also can increase labor costs by excluding or reducing the number of employable non-union workers. However, PLAs can serve useful purposes in some situations. By preventing the expiration of collective bargaining agreements of various unions during the term of a construction contract, a PLA can provide substantial public benefits and resolve disputes among the trades working on the project. The Appellate Division in New York State Supreme Court sustained a PLA in New York State Chapter, Inc. v. New York Thruway Authority. That case exemplifies the exceptional circumstances that would justify recourse to a PLA. The improvements to the MCIA library system lack the scope and complexity of the New York Thruway project. Furthermore, the MCIA's PLA did not permit contractors to hire a stated percentage of their non-union employees. The MCIA's PLA, in essence, is contrary to public bidding laws and impermissibly restricts contracts to a union-only work force. (pp. 7-10)

3. The PLA conflicts with the policy underlying Executive Order No. 11 signed by Governor Whitman on March 21, 1994. Although not binding on local public contractors, that Executive Order represents State policy and does not contemplate the use of PLAs on routine construction projects. The MCIA is such a routine project. Whether measured by dollars, estimated time for construction, or complexity of the project, the MCIA project does not justify a PLA limited to two unions. In reaching that result, the Court recognizes that the Legislature is better suited than the Judiciary to determine the size, complexity, and costs of projects that justify recourse to a PLA and to accommodate the interests of labor, management and the public. However, until such time as the Legislature acts, the Court must adjudicate such bid specifications on a case-by-case basis. (pp. 10-11)

4. The Dissenting colleagues repeat the same arguments originally advanced and rejected in Harms. The cases cited by the Dissent are of little help or are readily distinguishable. (pp. 11-12)

Judgment of the Law Division is REVERSED and the matter is REMANDED to it for entry of a judgment consistent with this opinion.

HANDLER, J., Dissenting, in which the CHIEF JUSTICE joins, is of the view that the critical inquiry in this case should not be whether the specification that requires a project labor agreement places a limit on competition, but must be whether such a specification is reasonably related to the work proposed by the public contract. Even though it may reduce the number of parties eligible to compete for the contract, the specification calling for a PLA is not an invalid, anti-competitive standard if the PLA is reasonably related to the satisfactory performance and completion of the public job. The record in this case supports a finding that the project labor agreement is reasonably related to the work proposed.

JUSTICES O'HERN, GARIBALDI, STEIN and COLEMAN join in JUSTICE POLLOCK's opinion. JUSTICE HANDLER filed a separate Dissenting opinion in which CHIEF JUSTICE WILENTZ joins.

The opinion of the Court was delivered by POLLOCK, J.

In George Harms Construction Co. v. New Jersey Turnpike Authority, 137 N.J. 8, 644 A.2d 76 (1994) (Harms), we declared invalid, as inconsistent with public-bidding statutes, the designation of a particular labor organization as the sole source of labor for a public-construction project. On the facts of the present case, we likewise find invalid a specification requiring contractors to enter into a "project labor agreement" (PLA) with "appropriate labor organizations."

-I-

On March 16, 1995, the Mercer County Improvement Authority (MCIA) solicited bids for a construction project captioned "Mercer County Library Phase One" (Phase One). Phase One involved a series of contracts for additions and alterations to the Ewing Township, Hopewell Township, and Lawrence Township branches of the Mercer County Library System. Subsequently, the MCIA advertised for bids for "Phase Two," which involved similar renovations to other branches in the system.

Included in the Phase One bid package, along with general project documents and specifications, was a copy of Executive Order 94-2, signed by the county executive. The executive order directed "that for appropriate construction projects, there be included in the bid specifications that each contractor, and subcontractor must sign a project agreement which will be negotiated by the construction manager, or the architect of the project, and the appropriate Building and Construction Trade Unions." This "Project Agreement" was to "establish the hours of work, wage rates, fringe benefits, dispute and grievance procedure, and any other terms that may be necessary to ensure a harmonious relationship ...


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