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Cioffi's Towing Service, Inc. v. Borough of Collingswood


October 26, 2009


On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3706-08.

Per curiam.


Argued October 15, 2009

Before Judges Axelrad and Fisher.

This appeal involves a dispute between two competing bidders for a municipal contract to provide towing services.

The successful bidder's proposal indicated it was in possession of two wreckers despite the specifications' mandate that three wreckers were required. We conclude the municipality could not waive this material nonconformity and, therefore, reverse the dismissal of the complaint and remand for judgment in favor of plaintiff, the next lowest bidder.

The critical facts in this case are neither complicated nor in dispute. Plaintiff Cioffi's Towing Service, Inc., and defendant Helmrich Transportation Systems, Inc., are operators of towing businesses. In 2008, defendant Borough of Collingswood (the municipality) sought bids on a three-year contract to provide towing services. The request for bids contained a list of "minimum standards" that all bidders "shall be required" to meet. Among those minimum standards was the mandate that the operator "must maintain" the following equipment:

-- "One heavy duty wrecker - over 10 ton capacity";

-- "One medium duty wrecker - 10 ton capacity";

-- "One light duty wrecker - 4 ton capacity"; and

-- "One flat bed truck"

The request for bids also indicated that the municipality reserved "the right to reject any or all proposals and to waive any immaterial informalities as may be permitted by law."

The municipality received three bids. The lowest bidder was disqualified for reasons not relevant here. Helmrich was the next lowest bidder. Helmrich's list of equipment, however, revealed it had only two wreckers, not the three wreckers required by the bid specifications. Notwithstanding this discrepancy, the municipality awarded the contract to Helmrich. Upon learning this, plaintiff immediately requested that the municipality rescind the award because Helmrich did not indicate it had the specified equipment, and did not supply a certified land survey and a certificate of good standing, as also required by the bid specifications. The municipality's administrator deemed the lack of a certified land survey and certificate of good standing to be immaterial and then sought out the chief of police's view regarding the adequacy of Helmrich's equipment. The chief of police concluded that "[a]lthough [Helmrich's] equipment list does not reference a medium duty towing vehicle, the equipment listed is sufficient to serve the [municipality's] needs for towing services based upon my familiarity with the frequency of calls for such services." As a result, the municipality rejected plaintiff's request that the contract with Helmrich be rescinded.

Plaintiff immediately filed this action, seeking a judgment invalidating the municipality's contract with Helmrich and awarding the contract to plaintiff. The matter was scheduled for a plenary hearing on the return date of an order to show cause, but the parties agreed upon a submission of the undisputed facts and no live testimony was presented. A week after hearing the argument of counsel, the trial judge rendered an oral decision in which she held that the discrepancies between the bid specifications and Helmrich's proposal were immaterial and that the municipality's waiver of those discrepancies did not adversely affect the goals of competitive bidding because there was no proof of "fraud, bad faith or collusion surrounding the bid." Judgment was entered dismissing the complaint.

Because there is no dispute that Helmrich's bid failed to conform to the municipality's stated equipment requirement,*fn1 we focus on whether the "specific noncompliance constitutes a substantial and hence non-waivable irregularity." Twp. of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207, 216 (Law Div. 1974). The Supreme Court has determined that the test of materiality requires a two-prong analysis: first, whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition. [Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 315 (1994) (internal quotation marks and citations omitted).]

Materiality is a question of law. Twp. of Hanover v. Int'l Fid. Ins. Co., 122 N.J. Super. 544, 548 (App. Div.), certif. denied, 64 N.J. 150 (1973).*fn2 In determining whether a condition is material or inconsequential, our Supreme Court has distinguished between requirements that lie at the heart of the undertaking and aspects of the bid that may be waived in "a sensible or practical way." Terminal Constr. Corp. v. Atlantic County Sewerage Auth., 67 N.J. 403, 411 (1975). For example, a bidder's submission of security for its performance is material, but the form of that security may "vary slightly" from that expressly requested. Ibid. Adhering to this approach, we conclude that Helmrich's departure from the three-wrecker requirement was not a mere irregularity but a material deficiency. Indeed, the Supreme Court has held that "conditions requiring detailed description of materials . . . [have] been found to be so material as not to be the subject of waiver." Ibid. (citing Case v. Trenton, 76 N.J.L. 696 (E. & A. 1909)). See also In re On-Line Games Prod. & Operation Servs. Contract, 279 N.J. Super. 566, 603 (App. Div. 1995) (holding that a bid to supply lottery machines was materially defective because the bidder failed to specify, as required, that the machines contained an electronic advertising screen that could be seen from fifteen feet away).

The materiality of this requirement is patently obvious. An operator's possession of the equipment deemed necessary to fulfill the municipality's towing requirements is essential to the undertaking. In inviting bids, the municipality expressly stated that the bidder would be required to have three wreckers, and made that known in mandatory terms, directing that the operator's bid "shall" meet the minimum requirement of three wreckers of the various sizes specified. This mandatory requirement could not be waived upon the municipality's later disavowal of its own specification. To invoke what the Court said in L. Pucillo & Sons, Inc. v. Mayor of New Milford, 73 N.J. 349, 356 (1977), we cannot "transform the mandatory requirement in [the] specifications into a polite request."

Consideration of the second prong leads to the same conclusion. The municipality's waiver of the three-wrecker requirement provided Helmrich with an advantage in the bidding process that strikes at the very heart of the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -51, which was intended to encourage competition and to guard against "favoritism, improvidence, extravagance and corruption." L. Pucillo & Sons, Inc., supra, 73 N.J. at 356. See also George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 36 (1994); Van Note-Harvey Assocs., P.C. v. N.J. Sch. Dev. Auth., 407 N.J. Super. 643, 648 (App. Div. 2009). In her decision, the judge found this prong did not apply because plaintiff failed to provide evidence of "fraud, bad faith or collusion surrounding the bid." That is not the test. Plaintiff was not required to show actual fraud or corruption but only that the municipality's waiver of the three-wrecker requirement was "capable of becoming a vehicle for corruption or favoritism, or capable of encouraging improvidence or extravagance, or likely to affect the amount of any bid or to influence any potential bidder to refrain from bidding, or which are capable of affecting the ability of the contracting unit to make bid comparisons." L. Pucillo & Sons, Inc., supra, 73 N.J. at 357 (emphasis added).

There can be no doubt that the three-wrecker requirement could well have discouraged others, who did not possess that necessary equipment, from bidding, or could have influenced the amount of the bids submitted by those that did. By permitting Helmrich to skirt the bidding specifications, the municipality created a bidding procedure that was capable of becoming a vehicle for corruption or favoritism that warrants our intervention. Meadowbrook Carting, supra, 138 N.J. at 324-25 (holding that by awarding the contract "to one who fails to submit bids on all terms necessarily creates an inequality in the bidding and an opportunity for favoritism"). We, thus, conclude that Helmrich's failure to meet the three-wrecker requirement constituted a material discrepancy that the municipality could not waive.

With Helmrich's disqualification, plaintiff assumes the position of lowest qualified bidder. As a result, plaintiff is entitled to what it would have received had the municipality properly recognized it was powerless to waive the nonconformity in Helmrich's bid. Neither Helmrich nor the municipality has argued that plaintiff is not entitled to this remedy or that the contract should be rebid.

Reversed and remanded for the entry of an order which invalidates Helmrich's contract and which directs the municipality to enter into a three-year contract with plaintiff on the terms contained in plaintiff's bid. We do not retain jurisdiction.

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