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CFG Health Systems, LLC v. County of Essex

January 25, 2010

CFG HEALTH SYSTEMS, LLC, PLAINTIFF-RESPONDENT,
v.
COUNTY OF ESSEX AND BOARD OF CHOSEN FREEHOLDERS OF THE COUNTY OF ESSEX, DEFENDANTS, AND CORRECTIONAL HEALTH SERVICES, LLC, DEFENDANT/INTERVENOR-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-8031-07.

The opinion of the court was delivered by: Skillman, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued December 8, 2009

Before Judges Skillman, Fuentes and Gilroy.

Intervenor-appellant Correctional Health Services (CHS) appeals from a final judgment of the Law Division, entered on January 25, 2008, which invalidated resolutions of Essex County Board of Freeholders, adopted on October 10, 2007, rejecting all proposals for a contract to provide medical services at the Essex County Correctional Facility (ECCF), and directing the County to "institute a new procurement process" for those medical services. This judgment also directed the County to award the contract for medical services at the ECCF to respondent CFG Health Systems (CFG). We reverse and consequently reinstate the October 10, 2007 resolutions.

In 2005, Essex County awarded a contract to provide medical services at the ECCF to CHS, which remained in effect until the end of 2006.

In September 2006, Essex County issued a request for proposals to provide medical services at the ECCF for the period from January 1, 2007 to December 31, 2009. CHS and CFG were the only two providers that submitted proposals in response to this request. Although CFG's proposal was approximately $4.2 million less than CHS's proposal, the County purchasing department gave a higher score to CHS's proposal than to CFG's proposal, and therefore recommended that the County, acting pursuant to the competitive contracting in lieu of public bidding sections of the Local Public Contracts Law, N.J.S.A. 40A:11-4.1 to -4.5, award the contract to CHS.

Before the Board of Freeholders acted upon this recommendation, CFG brought an action in lieu of prerogative writs in the Law Division against the County and CHS challenging the County purchasing department's evaluation of CHS's and CFG's proposals and recommendation that the contract be awarded to CHS. CFG also claimed that the County's request for proposals was defective because (1) the County had failed to obtain a resolution from the Board to utilize a competitive contracting methodology for the services in accordance with N.J.S.A. 40A:11-4.3(a), which requires such a resolution to be passed "each time" a public contracting agency desires specialized goods or services, and (2) the County had failed to protect against conflicts of interest by requiring compliance with N.J.A.C. 5:34-4.3(e) and (f), which require the filing of non-conflict of interest certifications prior to evaluation of proposals.

The trial court concluded in a written opinion that CHS's proposal was defective and that it would be arbitrary and capricious for the County to reject both proposals and rebid the contract. Based on these conclusions, the court entered final judgment enjoining the County from rebidding the contract and ordered the award of the contract to CFG.

On appeal, we reversed this judgment in an unreported opinion on the ground that the County purchasing department's recommendation to the Board of Freeholders to award the contract to CHS did not constitute final administrative action reviewable by the Law Division and therefore CFG's action had been brought prematurely. CFG Health Systems, LLC v. County of Essex, Nos. 5101-06T5 and A-5154-06T5 (Sept. 25, 2007).

On October 5, 2007, the County Administrator, who was also the acting County purchasing agent, issued a report to the Board of Freeholders recommending the rejection of all proposals submitted in response to the 2006 request for proposals for medical services at the ECCF and the conduct of a new procurement process. This recommendation was based on the following reasons:

a. The failure to obtain a resolution of the Board of Chosen Freeholders specifically authorizing the use of the Competitive Contracting Process for the medical services sought to be procured violated the provisions of [N.J.S.A. 40:11-13.2(e)] and therefore rendered the proposal process null and void ab initio.

b. The failure of the members of the Evaluation Committee to timely execute their non-conflict of interest certifications, and the failure of one member to execute a certificate also violated the provisions of [N.J.S.A. 40:11-13.2(e)] and N.J.A.C. 5:34-4.3 and therefore rendered the proposal process null and void ab initio.

c. The County wants to substantially revise the specifications for the medical services so as to delete therefrom the provision of pharmaceuticals and to separately award a contract for the provision of pharmaceuticals to the ECCF pursuant to the provisions of N.J.S.A. 40A:11-4 by resolution of the [Board] to the lowest responsible bidder after public advertising for bids and bidding therefor. This material change in the [RFP] specifications constitutes a basis for the rejection of all proposals pursuant to the provisions of [N.J.S.A. 40A:11-13.2(d)].

On October 10, 2007, the Board of Freeholders accepted the County Administrator's recommendation and adopted resolutions directing the rejection of all proposals and authorizing the use of a new competitive contracting process.

CFG then brought this action in lieu of prerogative writs, claiming that the County's rejection of all proposals was arbitrary and capricious. CFG also asserted in the third count of its complaint that CHS's proposal for the contract had been fatally defective and therefore CHS should be disqualified from submitting any proposals for consideration in the new competitive contracting process.

The trial court granted CHS's motion to dismiss the third count of CFG's complaint, and since that was the only count that sought relief against CHS, the court dismissed the complaint as against CHS, ...


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