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Jen Electric, Inc. v. County of Essex

March 4, 2009

JEN ELECTRIC, INC., PLAINTIFF-APPELLANT,
v.
COUNTY OF ESSEX, DEFENDANT-RESPONDENT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 401 N.J. Super. 203 (2008).

SYLLABUS BY THE COURT

(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).

The primary issue in this appeal is whether the 2000 amendment to N.J.S.A 40A:11-13 limits the standing of those who wish to challenge a bid specification in a public contract, or whether it represents a limitations period within which such a challenge by an identified party -- a "prospective bidder" -- must perfect that challenge.

The County of Essex solicited bids and issued specifications for traffic signal operations in Newark. Plaintiff Jen Electric, Inc., a vendor of traffic control systems, objected to the specifications because they identified a specific brand of traffic control equipment, Econolite, which is distributed exclusively by a single vendor, Signal Control Products. Plaintiff asked the County to amend the specifications to allow bids that include equal but alternative traffic control systems. The County issued addenda to the specifications which allowed for bids using equal, alternate products, provided that they were pre-qualified.

Ultimately, the County rejected all of the bids, issued revised specifications, and re-bid the project. The revised specifications lifted the requirement of specific manufacturers for the controllers and other equipment, but provided that several portions of the project could be satisfied solely by a single manufacturer. Plaintiff objected, stating that only one vendor could supply the specified items to a contract bidder; and that, as "a supplier of a competing brand that can meet or exceed the specific brand listed, we feel this unfair practice is in direct violation of the public bid process." The County responded that it "ALWAYS accepts an equivalent" if the bidder proves the equivalent meets or exceeds the brand stated in the specifications.

Two days before the bids were to be opened, plaintiff filed a complaint in lieu of prerogative writs, claiming that the County violated the Local Public Contract Law and its implementing regulations by using a brand name in the specifications without first considering the use of a generic specification, and by requiring the pre-approval of an equivalent product. Plaintiff sought an order declaring the bidding specifications null and void, requiring the County to issue compliant specifications, and preventing the award of any contract until the specifications were revised.

The trial court determined that N.J.S.A. 40A:11-13 provides the relevant requirements for standing and allows only a prospective bidder to challenge a bid specification. Because plaintiff was not a prospective bidder on the project, the court found that plaintiff had no standing and dismissed the complaint.

The Appellate Division affirmed. Jen Elec., Inc. v. County of Essex, 401 N.J. Super. 203 (2008). The panel concluded that only taxpayers, bidders, and prospective bidders "may challenge the award of a contract to the successful bidder." Although plaintiff is a vendor that proposed to provide equipment to a bidder or prospective bidder, the panel reasoned that plaintiff had no standing to challenge the bid specifications because it was not a taxpayer in Essex County and did not submit or ever intend to submit a direct bid on the project.

The Supreme Court granted plaintiff's petition for certification. 196 N.J. 344 (2008).

HELD: The 2000 amendment to N.J.S.A 40A:11-13 is intended as a statute of limitations for bid specification challenges and does not limit or otherwise substitute for traditional notions of standing. In the circumstances presented, plaintiff has standing to challenge the bid specifications issued by the County.

1. In 2000, the Legislature amended N.J.S.A. 40A:11-13 to provide that "any prospective bidder who wishes to challenge a bid specification" must file a written challenge with the contracting agent at least three business days before the bids are to be opened. The Legislature's intent is to be found in the plain language of an enactment. If the language is clear, the interpretive process ends. On its face, the plain language of the statute makes clear that no "prospective bidder" may challenge a bid specification unless he does so in writing at least three days prior to the bid opening. Its sets forth limits on how and when a bid specification must be prosecuted. (pp. 17-21)

2. N.J.S.A. 40A:11-13 limits the actions of "prospective bidders." The plain meaning of "prospective bidder" in this context is self-evident. When contractors have not yet bid and are in the process of reviewing bid specifications, there simply are no "bidders" yet; there are only "prospective bidders." N.J.S.A. 40A:11-13 provides only a time-bar by which to gauge whether bid specification challenges are timely, and it is not a legislative declaration of who may challenge a bid specification. (pp. 21-22)

3. The question of who may bring a bid specification challenge requires resort to traditional notions of standing to complain. The Appellate Division correctly concluded that only taxpayers, bidders, and prospective bidders may challenge the award of a contract. The determination of who may challenge a bid specification, however, must be gauged differently than the determination of who may challenge a contract award. Under New Jersey's liberal standing rules, entitlement to sue requires a sufficient stake and real adverseness with respect to the subject matter of the litigation and a substantial likelihood of some harm visited upon the plaintiff in the event of an unfavorable decision. (pp. 22-25)

4. Applying those principles, plaintiff has standing to challenge the bid specifications in this case. As the provider of equal, alternative equipment that would be responsive to a generic bid, plaintiff possessed a sufficient stake in the outcome of this litigation. Through plaintiff's varied yet unsuccessful attempts to persuade the County to amend the bid specifications, plaintiff has demonstrated real adverseness between it and the County. Because plaintiff asserted that its equipment is significantly less expensive than the sole-source specified equipment, and thus the public fiscwould benefit from contractors that substitute plaintiff's equipment in their quest to secure the lowest responsive bid, plaintiff also has demonstrated a substantial likelihood of harm if its challenge is rejected. Finally, denying standing would preclude the court from addressing the significant issues raised, which address the bedrock of public contract bidding requirements: free, open and competitive bidding. (pp. 25-27)

5. Nothing in the Court's opinion shall be construed as subjecting bid specifications to challenge other than from those with a clear, identifiable, substantial, and real interest in the outcome of that challenge. (pp. 27-28)

The judgment of the Appellate Division is REVERSED, plaintiff's complaint is REINSTATED, and the case is REMANDED to the Law Division for further proceedings.

JUSTICE HOENS, DISSENTING, disagrees that the statutory language is merely a timing limitation, that it affects only prospective bidders, and that our standing rules permit one who could not have been a bidder and is not a taxpayer to prevent a contract from being awarded by challenging the bid specifications.

JUSTICES LaVECCHIA, ALBIN, and WALLACE join in JUSTICE RIVERA-SOTO's opinion. JUSTICE HOENS filed a separate, dissenting opinion. CHIEF JUSTICE RABNER and JUSTICE LONG did not participate.

The opinion of the court was delivered by: Justice Rivera-soto

Argued September 23, 2008

This appeal arises in the context of a bid specification challenge, a subset of public contracting. The primary issue presented is whether the provisions of the 2000 amendment to N.J.S.A. 40A:11-13 limit the standing of those who wish to challenge a bid specification in a public contract, or whether those provisions represent a limitations period within which such a challenge by an identified party -- a "prospective bidder" -- must perfect that challenge. The trial court determined that N.J.S.A. 40A:11-13 sets forth the standing requirements for those who wish to challenge a bid specification in a public contract, and that only "prospective bidders" are allowed to advance such a challenge. Importing concepts relevant to contract award challenges, the Appellate Division held that only bidders, prospective bidders and taxpayers could challenge a bid specification.

In light of the unique nature of public contracting and the traditional role the common law has retained in determining standing to contest governmental action, we arrive at a different result. We conclude that the 2000 amendment to N.J.S.A. 40A:11-13 is intended as a statute of limitations, requiring, in its plain language, that "[a]ny prospective bidder who wishes to challenge a bid specification shall file such challenges in writing with the contracting agent no less than three business days prior to the opening of the bids[,]" on pain that "[c]hallenges filed after that time shall be considered void and having no impact on the contracting unit or the award of a contract." We therefore find nothing in the 2000 amendment to N.J.S.A. 40A:11-13 that limits, restricts or otherwise substitutes for traditional notions of standing in this context. Applying those traditional notions of standing, we further conclude that, in the circumstances presented, the plaintiff in this action had standing to challenge the bid specifications issued by the governmental contracting entity.

I.

During 2007, defendant the County of Essex, through its Department of Public Works, planned certain infrastructure improvements along Central Avenue in Newark costing a total of approximately six million dollars. A significant part of these improvements consisted of the purchase and installation of new or replacement traffic signal and video detection systems that would establish a closed-loop operating system with central control monitoring; those systems were to be installed at ten separate locations on Central Avenue. As a result, in October 2007, the County issued specifications and bid documents in respect of the proposed traffic signal operations and roadway improvements on Central Avenue. However, by a letter dated October 23, 2007, plaintiff Jen Electric, Inc., a registered public works contractor that supplies, installs and maintains the "Peek Traffic Control" system manufactured by Quixote Corporation, objected to those specifications, claiming that the traffic control equipment listed in the specifications identified a specific manufacturer --- Econolite -- to the exclusion of the manufacturer plaintiff represented, and were distributed exclusively by a single vendor -- Signal Control Products -- other than plaintiff. Plaintiff, therefore, requested that the County amend the specifications to allow for bids that included equal but alternate traffic control systems.

In response, the County issued addenda to the specifications which allowed for bids using equal, alternate products in lieu of the brands specifically listed in the specifications. The first addendum issued by the County required that any proposed equal, alternate products be pre-qualified, a requirement that also drew a sharp objection from plaintiff. In response, the County issued a revised addendum, removing the requirement of pre-qualification for equal, alternative products. In the main, however, those efforts were for naught: the County ultimately rejected all of the bids received.*fn1

In December 2007, the County issued revised specifications and re-bid the project, with bids due by no later than January 10, 2008. In respect of the availability of equal, alternate products, the revised specifications were more restrictive than the original, modified specifications: while the original specifications listed specific manufacturers for the controllers and video detection equipment -- a limitation lifted by the addenda later issued by the County -- the revised specifications added the ITS cabinet enclosures, the battery back-up systems, the signal mounting hardware, and the central control software to the list of portions of the project that could be satisfied solely by a single source, that is the manufacturers identified in the specifications proper. Needless to say, these restrictions also drew a pointed objection from plaintiff. By a letter dated December 21, 2007, plaintiff advised the County's purchasing agent that plaintiff's initial objection to the form and content of the [project] specifications remains unchanged, in that all of the items specified are for a specific manufacturer (Econolite), with no approved equal provision. There ...


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