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CFG Health Systems, LLC v. County of Essex


September 25, 2007


On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-5751-06.

Per curiam.


Argued September 18, 2007

Before Judges Coburn, Fuentes and Grall.

The extraordinary proceedings leading up to this appeal began on October 3, 2006, when, pursuant to the Competitive Contracting in Lieu of Public Bidding Statute, N.J.S.A. 40A:11- 4.1 to -4.5, Essex County issued a public request for proposals to provide medical services for three years to the Essex County Correctional Facility. Two entities submitted proposals: plaintiff CFG Health Systems, LLC ("CFG"), and defendant Correctional Health Services, LLC ("CHS"). CFG's price was about $31.9 million and CHS's price was about $36.1 million. On December 13, 2006, the Director of the Essex County Department of Corrections issued a memorandum, to the County's Chief of Administrative Services, Office of Purchasing, recommending the CHS proposal notwithstanding its higher cost.

The memorandum analyzed the bids in the following manner:

Attached for your information is the completed Evaluation Score Sheets for the above reference Request for Proposal (RFP) for medical services at the Essex County Correctional Facility (CC 06-296). The criteria used to evaluate the two (2) responses [are] described on pages 112 and 113 of the original Request for Proposal.

Based upon the criteria of the RFP, the Correctional Health Services (CHS) proposal received a higher score (75.2) than CFG Health Systems, LLC (49.2). As a result, it is my recommendation and that of the Evaluation Committee to initiate the development of a contract to Correctional Health Services for medical services. It is also our recommendation to enter into this contract for three (3) calendar years (2007, 2008 and 2009) in order to take advantage of their reduced cost proposal with the option for two (2), additional one (1) year extensions if the County elects to exercise this. The costs for each of the next three (3) years will not exceed:

(1) CY 2007 -$11,394,504.00,

(2) CY 2008 - $12,024,480 and

(3) CY 2009 - $12,697,620

It should be noted that the Evaluation Committee is fully cognizant of the approximately $4.2 million difference in the CHS and CFG proposals over the life of the three (3) contract. In reviewing this significant cost disparity, it was unanimously agreed by the Evaluation Committee that there were very serious concerns with several aspects of the CFG's proposal, experience and presentation which resulted in the decision to consider and support the higher CHS cost proposal. These concerns include, but are not limited to the following:

· CFG had a weak transition plan with little Information Technology support and a questionable staffing/recruitment program;

· CFG has no experience with Electronic Medical Record (EMR) Systems staffing - none of their existing county jails use an EMR System;

· CFG could not identify technical staff who had experience with specific EMR software (Link Logic, Forms Editor) to continue the County's expedited development of their EMR System;

· CFG's pharmacy and costing proposal was found to be weak - particularly in their original assumptions for new admissions prescriptions, HIV/AIDS cases and psychotropic inmates. All three (3) areas were believed to be off by 45% - 50%. Additionally, their formulary was not as strong as CHS's;

· CFG's experience with Medical Consent Orders (MCO) and the deliberations and/or negotiations with the Federal Monitor was also found to be lacking. CFG purported to have experience with state level Federal Consent Orders but not on a county jail level which is required at the Essex County Correctional Facility.

For these and other reasons identified during the evaluation process it was agreed that the CHS proposal, although higher, was found to be more responsive to the RFP and best meets the overall medical needs of the Essex County Correctional Facility.

Additionally, it was strongly felt by the committee that the best proposal and medical provider to complete the EMR System, come out from under the Medical Consent Order in CY 2007 and provide the best comprehensive medical services to the Essex County Correctional Facility at a reasonable cost would be with the Correctional Health Services proposal.

I and the committee members would be glad to review the evaluations recommendations, and respond to any questions you may have.

CFG filed this action in lieu of prerogative writs about a week later. The complaint alleged that the scoring system employed by the evaluation committee "was a gross abuse of discretion under N.J.S.A. 40A:11-4.1-5," and that the committee's memorandum, quoted above, "indicates a gross abuse of discretion and bad faith pursuant [to] N.J.S.A. 40A:11-4.1- 5." Two days later, CFG obtained an order to show cause and a temporary injunction restraining Essex County from taking any action on the two proposals.

Further proceedings in the Law Division, which we need not describe, concluded with the June 1, 2007, order directing the county to give CFG the contract starting July 1, 2007. Defendants appealed and applied for a stay of the order pending appeal. We granted the stay by an order dated June 22, 2007, noting this:

Although the purchasing department of Essex County recommended acceptance of the bid submitted by [CHS], this lawsuit was filed before the Essex County Board of Freeholders had an opportunity to decide what action it should take. For that reason, and others, it appears likely that appellants will prevail on their claim that the [Essex County] Board [of Freeholders] would be entitled to consider rejecting both bids, and rebidding the contract.

[Emphasis added.]

We also made this observation:

CHS has been providing medical services at the [facility in question] for approximately fifteen years, and since its contract expired on December 31, 2006, it is presently doing so in a holdover capacity.

While retaining jurisdiction, and accelerating the appeal, we also remanded "to permit the Essex County Board of Freeholders to take such further actions as it deems appropriate . . ., subject however to the result of CFG's appeal." Apparently, the Freeholders decided not to take further action until we decided the case.

Plaintiff concedes that the process for issuance of the contracts at issue is set forth in N.J.S.A. 40A:11-4.5, the relevant portions of which read as follows:

d. The purchasing agent or counsel or administrator shall evaluate all proposals only in accordance with the methodology described in the request for proposals. After proposals have been evaluated, the purchasing agent or counsel or administrator shall prepare a report evaluating and recommending the award of a contract or contracts. The report shall list the names of all potential vendors who submitted a proposal and shall summarize the proposals of each vendor. The report shall rank vendors in order of evaluation, shall recommend the selection of a vendor or vendors, as appropriate, for a contract, shall be clear in the reasons why the vendor or vendors have been selected among others considered, and shall detail the terms, conditions, scope of services, fees, and other matters to be incorporated into a contract. The report shall be made available to the public at least 48 hours prior to the awarding of the contract, or when made available to the governing body, whichever is sooner. The governing body shall have the right to reject all proposals for any of the reasons set forth in section 21 of P.L.1999, c. 440 (C.40A:11-13.2).

e. Award of a contract shall be made by resolution of the governing body of the contracting unit within 60 days of the receipt of the proposals . . ..

f. The report prepared pursuant to subsection d. of this section shall become part of the public record and shall reflect the final action of the governing body.

[N.J.S.A. 40A:11-4.5(d), (e), (f).]

During the judicial proceedings, the County conceded that the purchasing agent's recommendation to the Board of Freeholders would have been identical to the above quoted memorandum from the evaluation committee. Although subsection (f) says that the final report of the purchasing agent "shall reflect the final action of the governing body," that obviously does not mean that the governing body is obligated to accept the recommendation. Rather, it means that the report would have to be amended to show the governing body's action. Any other reading of subsection (f) would be entirely inconsistent with the two preceding subsections that clearly require acceptance or rejection to be an act of the governing body, which in this case is the Board of Freeholders.

Since this is an action in lieu of prerogative writs, it is governed by R. 4:69. Generally, such actions cannot be brought "as long as there is available a right of review before an administrative agency which has not been exhausted." R. 4:69-5. Although the requirement for exhaustion of administrative remedies is neither jurisdictional nor absolute, it may not be ignored unless the interest of justice so requires. Bor. of Matawan v. Monmouth County Bd. of Taxation, 51 N.J. 291, 296 (1968). Furthermore, as Judge Skillman explained in Glynn v. Park Tower Apartments, Inc., 213 N.J. Super. 357, 361-62 (App. Div. 1986), legislative intent must be respected in determining whether exhaustion of administrative remedies should be required:

The exclusivity of an administrative remedy for vindication of a right created by legislative enactment is a question of legislative intent. Middlesex Cty. Sewerage Auth. v. Nat'l Sea Clammers Ass'n., 453 U.S. 1, 13-15, 101 S.Ct. 2615, 2622-2623, 69 L.Ed.2d 435 (1981); City of Hackensack v. Winner, 82 N.J. 1, 21-27 (1980); Lally v. Copygraphics, 173 N.J. Super. 162, 179 (App. Div. 1980), aff'd. 85 N.J. 668 (1981); Jalowiecki v. Leuc, 182 N.J. Super. 22 (App. Div. 1981). In seeking to ascertain such intent, a court should be mindful of the "elemental cannon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it." Transamerica Mortgage Advisors v. Lewis, 444 U.S. 11, 19, 100 S.Ct. 242, 246, 62 L.Ed.2d 146 (1979); accord Middlesex Cty. Sewerage Auth. v. Nat'l Sea Clammers Ass'n., supra, 453 U.S. at 14-15, 101 S.Ct. at 2623.

In this context, the governing body should be treated as an administrative agency. And here, the legislative intent is clear: the purchasing agent must submit an evaluation and recommendation to the Board of Freeholders, which then decides what course best serves the interests of the people of Essex County. Plaintiff's lawsuit prematurely interfered with the administrative process dictated by the Legislature. As a result of the temporary injunction, the Freeholders were unable to carry out their responsibilities under the statute. Until they resolved the issue, there was no warrant for judicial review. Therefore, the order is reversed, and the case is remanded for entry of an order dismissing the complaint with prejudice. We should emphasize that this opinion should not be read as reflecting any view whatsoever on the merits of plaintiff's claim that it is entitled to award of the contract, or on how the Freeholders should act. We hold only that the complaint must be dismissed because it was filed prematurely.

Reversed and remanded.


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