March 4, 2010
IN THE MATTER OF THE CONTRACT FOR SCIENCE WING ADDITION AND ALTERATIONS (PUBLIC BID NO. P-1946) - SUBSTITUTION OF BROOKS MECHANICAL CONSULTANTS, INC. AS SUBCONTRACTOR, BEFORE THE BOARD OF TRUSTEES OF BERGEN COMMUNITY COLLEGE.
BROOKS MECHANICAL CONSULTANTS, INC., PLAINTIFF-APPELLANT,
DOBCO, INC., DEFENDANT-RESPONDENT.
On appeal from the Bergen Community College Board of Trustees, P-1946 (A-5395-07T2), and the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2560-08 (A-5548-07T2).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued telephonically December 4, 2009
Before Judges Carchman and Lihotz.
In these two separate appeals, which we consolidate for the purposes of this opinion, we address the issues of 1) whether the board of a community college has primary jurisdiction to adjudicate a contract dispute between a contractor and a subcontractor on a contract to provide improvements to the college; and 2) whether the board erred by permitting the substitution of a subcontractor by the general contractor after the bids have been awarded. We answer both questions in the negative. As a result, we reverse the June 6, 2008 order of the Law Division transferring jurisdiction of the contract dispute to the college board and affirm the determination of the same board permitting the substitution of the subcontractor.
These are the facts relevant to both appeals. In November 2007, defendant Bergen Community College (the College or the Board, as relevant) advertised a request for bid proposals (RFP) from general contractors for renovation of the College and construction of a science wing addition. The RFP required each bidding contractor to list all subcontractors in its bid, and stated that "[a]pproval by the engineer must be obtained for all subcontractors proposed[,]" and that "any legal challenges to the bidding process, the award or non-award of the contract . . . must be pursued before the Board . . . ."
The general contractor, defendant Dobco, Inc. (Dobco) submitted its bid, listing the contractor, plaintiff Brooks Mechanical Consultants, Inc. (Brooks), as both its HVAC and plumbing subcontractor. In January 2008, the College awarded the contract to Dobco.
The terms of the final contract between Dobco and the College allowed for substitution. It required Dobco to submit a list of subcontractors to the College's project architect, who could object along with the College:
5.2.1 Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the Owner through the Architect the names of persons or entities . . . proposed for each principal portion of the Work. The Architect will promptly reply to the Contractor in writing stating whether or not the Owner or the Architect, after due investigation, has reasonable objection to any such proposed person or entity.
Dobco could also reasonably object to a subcontractor and would not be required to contract with that subcontractor:
5.2.2 The Contractor shall not contract with a proposed person or entity to whom the Owner or Architect has made reasonable and timely objection. The Contractor shall not be required to contract with anyone to whom the Contractor has made reasonable objection. [Emphasis added.]
Substitutions were allowed in the following circumstances:
5.2.3 If the Owner or Architect has reasonable objection to a person or entity proposed by the Contractor, the Contractor shall propose another to whom the Owner or Architect has no reasonable objection. The Contract Sum shall be increased or decreased by the difference in cost occasioned by such change and an appropriate Change Order shall be issued. However, no increase in the Contract Sum shall be allowed for such change unless the Contractor has acted promptly and responsively in submitting names as required.
5.2.4 The Contractor shall not change a Subcontractor, person or entity previously selected if the Owner or Architect makes reasonable objection to such change.
By a March 5, 2008 letter to the College's project architect, Dobco sought to replace Brooks with other subcontractors for both the HVAC and plumbing work. Its review of Brooks's references and subcontract estimates had made it uneasy with regard to Brooks's ability to complete the project and of particular concern, Brooks had also refused to provide the performance and payment bond that Dobco required for the value of the subcontract. Dobco informed the College:
The reason for the request of substitution is due to the fact that Dobco Inc. is at an impasse with awarding any subcontract agreement to Brooks. For several weeks now, we have attempted to qualify the responsiveness of Brooks. The purpose to conduct [sic] qualification of a subcontractor is to be assured that they are capable of performing the project, inclusive of all other work on hand. One of the most essential qualifications is having a subcontractor provide a performance and payment bond for their subcontract value. Dobco Inc. requested additional information, including consent of surety, from Brooks in order to confirm their competence. Upon review of their list of references, evaluation of bid tabulation and reluctance to furnish a performance and payment bond, Dobco Inc. has reason to believe that Brooks may jeopardize the successful completion of this project.
Also, Dobco noted that it had recently experienced subcontractor default on another project, and it was only able to complete that project because those subcontractors had furnished bonds for their work. Unlike Brooks, the new subcontractors that Dobco wanted to substitute on the College's project had provided various qualification documents and performance and payment bonds corresponding to the value of their subcontract estimates.
Brooks objected to any substitution. It claimed that it was "a qualified and experienced contractor that is fully capable of performing both the plumbing work and the HVAC work on this project[,]" and that Dobco had been engaging in post-award bid shopping. That is, Dobco had been pressuring Brooks to lower its original price estimates.
Thereafter, the project architect advised Dobco by email that the College had no objections, and "that Dobco may proceed with the substitution."
Brooks then filed a complaint and jury demand against Dobco in the Law Division, seeking monetary damages. It alleged that Dobco had "violated the public bidding laws" and had breached its "contractual and statutory obligations to Brooks" when it had "bid shopped" the subcontract, that is, finding a lower quote from another subcontractor and then demanding that "Brooks either back out of the HVAC subcontract or that it reduce the amount of its quote to meet the amount of the lower quote that Dobco had received." The College, the Board, and the architect were not named or joined in the contract action, and Brooks did not seek injunctive relief to stop the project.
Dobco informed the Board about Brooks's complaint, and it "submit[ted] this dispute to the College for resolution in accordance with [N.J.S.A. 18A:3B-6f*fn1 of the Higher Education Restructuring Act of 1994, N.J.S.A. 18A:3B-1 to -38]."
On May 2, 2008, the College granted Dobco's request. The College expressed concern and was "troubl[ed]" that it may be implicated "in allowing a violation of the public bidding laws." It determined that the hearing would be "be an informal, non-adversarial proceeding" and would be "conducted in accordance with the College's bylaws that address hearings for public bidding matters."
On May 27, 2008, a hearing was conducted before a tribunal comprised of three Board members, whose stated purposes were: "one, to determine whether or not in fact there was a violation of those public bidding laws by the College and, secondly, the College's determination to grant permission for the substitution of the subcontractors to Dobco, whether or not that was a decision that was arbitrary and capricious."
There was no formal discovery, no swearing of witnesses, no cross-examination, and no adherence to the rules of evidence; instead, counsel for each party was "instructed to make a focus[ed] presentation of their respective positions." The record consisted of (1) written submissions with related attachments presented by Dobco and Brooks before the hearing, (2) non-privileged documents contained in the architect's files, which had been provided to Dobco and Brooks, and (3) written submissions presented after the hearing.
Various disputed facts were revealed at the hearing that had not been presented to the architect or to the College prior to its decision allowing Dobco to change subcontractors. Specifically, Dobco alleged that it had mistakenly listed Brooks as a subcontractor on its bid and had not realized the mistake until after the contract was awarded. Dobco had intended to list another HVAC subcontractor and had based its bid on that subcontractor's pre-bid oral estimate, which was $300,000 less than Brooks's $1.97 million written HVAC estimate that Dobco had not received until after its bid was enroute to the College. In fact, the HVAC price in Dobco's bid was $1.7 million, which was the other subcontractor's estimate of $1.6 million plus an upcharge.
Dobco had asked Brooks to withdraw from the awarded contract, but Brooks had refused and reduced its estimate by $100,000. After making inquiries in the industry about the reliability of Brooks's new management team, Dobco asked Brooks to procure a performance bond for the HVAC and plumbing work and to provide references. According to Dobco, the references demonstrated that Brooks did not have enough experience to timely complete large HVAC projects, and Dobco was concerned that the reduced profit margin in Brooks's revised estimate would also affect its performance.
In response, Brooks accused Dobco of bid shopping and of demanding that Brooks reduce its HVAC estimate by $273,711 after the contract was awarded. Brooks asserted that Dobco's intended HVAC subcontractor could not have provided any pre-bid estimate, as evidenced by the post-award dates on the price quotes from that subcontractor's suppliers. Also, Dobco's performance bond request came two months after the bidding process, and Brooks's original estimates had stated that they were based upon no bond being provided. In any event, Brooks's bonding agent confirmed that, based on Brooks's "present underwriting which includes analysis of [its] financial position and prior job experience," it was "a highly qualified and well respected contracting company," and "a preferred construction entity in good standing."
Despite those disputed facts, the parties agreed that Brooks had refused to procure the requested bond. In fact, in two February 2008 letters to Dobco, Brooks had declared that it "will NOT provide consent of surety . . . from my bonding company" because "[t]his was not requested, specified, or included in the original proposal dated 12/11/07" and that "[t]he Bond cannot be provided: Both the partners and Bonding company do not feel comfortable issuing a bond for a project that Brooks Mechanical is not a prime contractor."
The tribunal submitted to the College its "Recommended Findings of Facts and Conclusions of Law." It found that: (1) Brooks's claim of public bidding violations, i.e., illegal bid shopping, lacked merit; (2) the College's and architect's decision to allow the substitution was reasonable, and not arbitrary or capricious; and (3) the College lacked authority to resolve Brooks's private contract claim filed against Dobco. On June 4, 2008, the Board voted at its public meeting to approve the tribunal's decision.
In a thorough analysis of the facts and the law, the Board first "decline[d] Dobco's invitation to decide whether Brooks has an actionable contract claim against it because to do so would interfere with the Superior Court's Authority." The hearing was "not intend[ed] to ultimately resolve Brooks'[s] claim against Dobco[,]" because the Board has no authority under N.J.S.A. 18A:3B-6f to adjudicate private contract claims and interfere with the Superior Court's authority. The Board refused to read N.J.S.A. 18A:3B-6f broadly by finding a delegation of decision-making power for general purposes in N.J.S.A. 18A:3B-2e of the Higher Education Restructuring Act of 1994.
N.J.S.A. 18A:3B-2 states:
The Legislature finds and declares that:
b. the elimination of unnecessary State oversight and its accompanying bureaucracy will serve to unleash the creativity and innovation of these institutions; and
e. in order to provide institutions with the ability to fulfill their mission and Statewide goals, greater decision making and accountability must be placed at the institutional level . . . .
The Board declared that adjudicating the private contract claims here "would intrude upon the authority of the Superior Court of New Jersey[,]" which "has original general jurisdiction to resolve any claims in this State[.]" It cited Muise v. GPU, Inc., 332 N.J. Super. 140, 160 (App. Div. 2000), for the proposition that "'primary jurisdiction cannot be invoked when the claim is outside the agency's jurisdiction, or when the remedy for such a claim is outside the agency's power.'"
The Board next discussed Brooks's claims of illegal bid shopping, which it defined as the "illicit actions of a general contractor, following the award of a public contract, to pressure its subcontractors to lower their prices so to drive down the costs of the project and to increase the profits for the general contractor at the expense of the public contracting entity." Although the parties had relied on out-of-state cases to define "bid shopping," the Board stated that the parties need not look any further than the cases decided in New Jersey, which discuss the statutory provisions that require bidders to identify subcontractors in their bid documents; the purpose of those statutes is to avoid general contractors from securing lower prices after the submission of bids at the expense of the contracting party. See e.g., Clyde N. Lattimer & Son Construction Co. v. Township of Monroe Utilities Authority, 370 N.J.
Super. 130, 134 (App. Div. 2004) (quoting Statement of Governor Kean that accompanied his conditional veto to Senate Bill No. 1029, L. 1987, c. 48, which noted that if the public bidding laws permitted general contractors to name subcontractors after submitting their bids, the contracting entity would be unlikely to benefit from any cost savings realized by the general contractor in securing subcontractors).
In fact, the Board referred to N.J.S.A. 18A:64A-25.25 of the County College Contracts Law, N.J.S.A. 18A:64A-25.1 to -25.32, which expressly requires bid documents of general contractors to list subcontractors and provide evidence from those subcontractors of their performance security:
All bids submitted shall set forth the name or names of, and evidence of performance security from, all subcontractors to whom the bidder will subcontract the work described in the foregoing categories (a) through (e). [N.J.S.A. 18A:64A-25.25.] The listed categories are as follows:
(a) The plumbing and gas fitting work;
(b) The heating and ventilating` systems and equipment;
(c) The electrical work, including any electrical power plants;
(d) The structural steel and ornamental iron work; [and]
(e) All other work and materials required for the completion of the project. [Ibid.]
Although it would "not condone illegal bid shopping by its contractors[,]" the Board stated that a general contractor was not "forever precluded from substituting subcontractors on a public project. . . . For instance, it is quite possible that a subcontractor may file for bankruptcy during the course of a long-term public project, thereby precluding the subcontractor's ability to complete the project."
Distinguishing the facts here from various published bid shopping cases, the Board concluded that "the actions of Dobco do not constitute illegal bid shopping." It found: (1) Dobco submitted the required subcontractors list with its bid, "but mistakenly identified Brooks as the subcontractor for HVAC" and plumbing; (2) when Dobco listed the pre-bid estimates it received from its subcontractors, it "mistakenly, however, indicated that Brooks agreed to perform the HVAC portion of the Project for $1.6 million, an amount slightly less than the $1.7 million quote provided in Dobco's bid[;]" (3) "Brooks'[s] quote for the HVAC portion of the Project did not arrive at Dobco's office until after the bid was in transit to the College[;]" (4) "the estimate Dobco used in its bid was based on the verbal quote of one of the substituted subcontractors[;]" (5) "Dobco and Brooks tried to figure out a way in which Brooks could perform the HVAC subcontract[;]" (6) "[w]hile Dobco may have requested Brooks reduce its price, it only asked that it do so to bring Brooks'[s] bid proposal in line with the quote for the HVAC work contained within the bid and not to increase Dobco's profit margin[;]" (7) "Brooks would not perform the HVAC portion of the Project for less than $1.9 million[;]" and (8) "Dobco will suffer financially as a result of the substitutions for the HVAC and plumbing portions of the Project."
The Board also noted that Brooks's original HVAC estimate "exceeded" the HVAC line item in Dobco's bid, which meant that Dobco would not have profited if Brooks had not lowered its price. The Board concluded that there was no bid shopping here.
The Board acknowledged, however, that those facts were disputed and had not been presented by Dobco in its March 5 letter requesting substitution approval. In fact, neither Dobco nor Brooks had been "particularly candid with the College regarding the substitution request." However, the Board declared that the only fact "not in dispute is the fact that Brooks refused to provide Dobco with consent of surety." See N.J.S.A. 18A:64A-25.25. Brooks had not disputed its refusal, and the College had relied on that refusal when consenting to Dobco's substitution request.
Referencing "the well-developed case law" showing the importance of the consent-of-surety requirement, the Board was therefore "unable to conclude that Dobco [had] engaged in illegal bid shopping simply because it [had] required Brooks to provide a consent of surety and requested a substitution when Brooks refused to do so." While N.J.S.A. 18A:64A-25.25 does not specify how a subcontractor is to demonstrate performance security, the Board found that Dobco's requesting that Brooks provide a consent of surety after its review of the subcontractor's references and bid tabulation sheets "appears to fulfill the intent of this provision."
Furthermore, the Board found that Brooks's refusal violated "the spirit of the County College Contracts Law" in N.J.S.A. 18A:64A-25.25. Because bidding laws exist to protect taxpayers and are construed in the public good, the Board could not "overlook" Brooks's refusal. Since that refusal "was the primary reason offered to the College when requesting substitution," the Board concluded that "the actions of the architect and the College were not arbitrary or capricious, but instead were more than reasonable under the circumstances."
Finally, the Board rejected Dobco's claim that the College would be liable for damages for its agreeing to the substitution if Brooks prevailed. It pointed out that the College had relied on Dobco's representations in deciding whether the substitution request was reasonable and that the contract itself provided that general contractors would indemnify the College for any claims arising out of the contract.
As to the pending Law Division action, Dobco had filed a motion in the Law Division to dismiss Brooks's complaint with prejudice for lack of subject matter jurisdiction or, in the alternative, to transfer the action to the Board for resolution pursuant to N.J.S.A. 18A:3B-6f, since that statute gave the Board primary jurisdiction to resolve all bidding actions under the County College Contracts Law. Brooks opposed the motion, arguing: (1) the dispute was a private contract action and not a bidding matter involving the College; and (2) the Board has no authority or power to award damages against Dobco should Brooks prevail.
The judge denied Dobco's motion to dismiss the complaint, but granted its motion to transfer the contract action to the Board. Jurisdiction was not retained. The judge held that the Board was the appropriate forum for Brooks's contract action. He explained that [t]he issue manifestly presented in this motion is not whether N.J.S.A. 18A:64A-25.25 prohibits "bid shopping" [sic] and creates an independent cause of action for the aggrieved subcontractor. The issue is whether this cause of action can be maintained when jurisdiction can or should be before the Board of Trustees to hear the dispute pursuant to N.J.S.A. 18A:3B-2(f).
He concluded "that the central issues arise out of Title 18A" because the allegations in the complaint charged that Dobco and, implicitly the College, had violated public bidding laws when they replaced Brooks. He noted that the Higher Education Restructuring Act of 1994 was enacted by the Legislature (1) to eliminate unnecessary oversight of the State and its bureaucracy in order to "unleash the creativity and innovation of these institutions[,]" N.J.S.A. 18A:3B-2b, and (2) to give "[g]reater authority and accountability" to institutions of higher education, N.J.S.A. 18A:3B-2e.
Also, he found that the four factors in Muise, supra, 332 N.J. Super. at 160-61, "favor[ed] the exercise of jurisdiction by the Board of Trustees and that a hearing before the Board of Trustees is the appropriate forum for this action." He explained:
When the [sic] enacting the Higher Education Restructuring Act, the Legislature intended to give more autonomy to education institutions. Further, the Request of Bid/Approval gave notice to plaintiff and other potential subcontractors that disputes as to the award or non-award of bids must be pursued before the Board of Trustees.
Consequently, the judge found that because the basis of Dobco's motion for dismissal was "that primary jurisdiction lies with the Board[,] . . . the action should be transferred pursuant to R[ule] 1:13-4 rather than dismissed." Brooks appealed both the decision of the Board as well as the judge's transfer of the contract dispute to the Board.*fn2
We first address the issues raised by the appeal from the judge's transfer of the contract dispute to the Board. (A-5548 07T2).
Brooks asserts that the judge erred by transferring its private contract action against Dobco to the Board because:
(1) N.J.S.A. 18A:3B-6f does not grant "exclusive jurisdiction" on the College to hear the breach of contract action raised in the complaint; (2) the College's informal hearing process did not provide the necessary due process; and (3) the complaint alleged a viable claim against Dobco. As we agree that jurisdiction of the contract dispute was properly in the Law Division, we need only address Brooks's first argument.
Subject-matter jurisdiction rests upon the court or the agency having been granted such power by the Constitution or by valid legislation. It cannot be vested by agreement of the parties. State v. Osborn, 32 N.J. 117, 122 (1960). Where "the Legislature vests an administrative agency with exclusive primary jurisdiction, that agency may be the only forum in which a party initially may seek relief." Campione v. Adamar of N.J., Inc., 155 N.J. 245, 261 (1998). Essentially, the Legislature has preempted the court's original jurisdiction over the subject matter. Ibid. "A plaintiff may not seek relief in the trial court when the Legislature has vested exclusive primary jurisdiction in an agency." Town of Kearny v. Hackensack Meadowlands Dev. Comm'n, 344 N.J. Super. 55, 60 (App. Div. 2001) (citing Abbott v. Burke, 100 N.J. 269, 297 (1985)).
However, unlike exclusive jurisdiction, primary jurisdiction presumes that the claim is properly before a court but allows the court to defer its decision pending a decision from an administrative agency on "threshold issues, usually of a factual nature, which are placed within the special competence of the administrative body." Unalachtigo Band of NanticokeLenni Lenape Nation v. State, 375 N.J. Super. 330, 345 (App. Div.) (quoting Golden Hill Paugussett Tribe of Indians v. Weicker, 39 F.3d 51, 58-59 (2d Cir. 1994)), certif. denied, 184 N.J. 210 (2005). The doctrine of primary jurisdiction addresses the relationship between courts and agencies in cases where the claims asserted implicate issues within the scope of the agency's regulatory authority. Campione, supra, 155 N.J. at 263-64. Accord Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 303, 96 S.Ct. 1978, 1986, 48 L.Ed. 2d 643, 654 (1976); Abbott, supra, 100 N.J. at 300 n.5; Archway Programs, Inc. v. Pemberton Twp. Bd. of Educ., 352 N.J. Super. 420, 425-26 (App. Div. 2002). We have defined primary jurisdiction "as the circumstance in which a 'court declines original jurisdiction and refers to the appropriate body those issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.'" Muise, supra, 332 N.J. Super. at 158 (quoting Daaleman v. Elizabethtown Gas Co., 77 N.J. 267, 269 n.1 (1978)). The purpose of the doctrine is twofold: (1) to allow an agency to apply its expertise to questions that require interpretation of its regulations; and (2) to preserve uniformity in the interpretation and application of an agency's regulations. Id. at 159-60. In Muise, we set forth a four-pronged test to determine the application of the doctrine of primary jurisdiction:
1) whether the matter at issue is within the conventional experience of judges;
2) whether the matter is peculiarly within the agency's discretion, or requires agency expertise; 3) whether inconsistent rulings might pose the danger of disrupting the statutory scheme; and 4) whether prior application has been made to the agency. [Id. at 160.]
Contrary to Brooks's assertion, the judge did not find that N.J.S.A. 18A:3B-6f bestows exclusive jurisdiction on a college to hear all breach of contract claims arising from its bidding process. Instead, he concluded "that primary jurisdiction lies with the Board" for all actions brought pursuant to that statute and that "the central issues" in Brooks's complaint "arise out of Title 18A."
A review of the statutory language is instructive.
N.J.S.A. 18A:3B-6f (emphasis added) confers primary jurisdiction on College boards and gives them the "final authority to determine controversies and disputes concerning . . . issues arising under Title 18A involving higher education . . . ."
The issue before the Law Division and now before us is whether the dispute between Dobco and Brooks is an "issue arising under Title 18A involving higher education." Brooks asserts that the Board was not authorized to hear the private contract dispute because it does not involve higher education. Dobco counters that the Board was authorized to hear the dispute because it involves a bidding matter that arises under Title 18A in the County College Contracts Law, specifically, N.J.S.A. 18A:64A-25.25.
In our view, the action between Brooks and Dobco neither involves higher education nor arises under the County College Contracts Law, even considering the Legislature's broad intent in N.J.S.A. 18A:3B-2b to eliminate "unnecessary State oversight" of those institutions, and in N.J.S.A. 18A:3B-2e to give them "greater decision making and accountability." While the Board had primary jurisdiction under N.J.S.A. 18A:3B-6f to determine if Dobco's substituting another subcontractor for Brooks in its awarded contract was reasonable pursuant to the terms of that contract, that statute, even read broadly, grants the College no authority or special expertise to apply general contract law and determine if Dobco's private actions towards Brooks had breached an alleged contract between them that was outside the bidding process, the award, and the ultimate contract between the College and Dobco.
An action for damages on breach of contract is "a subject matter fully within the jurisdiction of the Superior Court." McKeeby v. Arthur, 7 N.J. 174, 181 (1951). See Normand v. Lindhaven Homes, 131 N.J. Eq. 470, 472 (E. & A. 1942) (noting that claims "amount to a breach of contract and a law court has exclusive jurisdiction"); Schweitzer v. Nat'l House & Farms Ass'n, 93 N.J. Eq. 644, 646 (E. & A. 1922) (indicating that "[b]ut for a breach of contract, and nothing more, the law courts have exclusive jurisdiction."). Furthermore, as Brooks correctly asserts, the Board has no authority to grant a damages award should Brooks prevail on its complaint against Dobco. "[A] court can consider all judicial remedies, including damages, which are beyond the agency's authority[.]" Muise, supra, 332 N.J. Super. at 163. Consequently, Brooks had never applied to the Board for any disposition of its contract claims; rather, it was Dobco who sought resolution from the Board.
We conclude that the Board has no jurisdiction to resolve any damages action for breach of an alleged contractor-subcontractor contract, and we reverse the judge's order transferring Brooks's complaint to the Board for resolution. As we have noted, our determination of this threshold jurisdictional argument precludes any necessity to consider the hearing procedures before the Board. On remand to the Law Division, Brooks will be afforded its opportunity to present the extant issues in dispute on the contract claim.
We now address the issues related to the Board's determination that Dobco could properly substitute a subcontractor in place of Brooks. (A-5395-07T2). On this appeal, Brooks contends that the Board erred by finding (1) that Dobco had not violated public bidding laws by bid shopping the HVAC and plumbing subcontracts after the contract was awarded; and (2) that Dobco's substitution request was reasonable.
Critical to our resolution of this appeal is our standard of review. The College "is a political subdivision established by Bergen County pursuant to legislative authorization, N.J.S.A. 18A:64A-1 [to -25], but serving a separate purpose and operating apart from the county government." Bd. of Trs. of Bergen Cmty. Coll. v. J.P. Fyfe, Inc., 192 N.J. Super. 433, 436 (App. Div. 1983), certif. denied, 96 N.J. 308 (1984). See N.J.S.A. 18A:64A-11 (noting that a board of trustees is "a body corporate"). As with other municipal bodies, a reviewing court cannot overturn the Board's decision unless it was arbitrary, capricious, or unreasonable. Palamar Constr., Inc. v. Twp. of Pennsauken, 196 N.J. Super. 241, 250 (App. Div. 1983). The court is "bound by the record" before the Board. Ibid.
Brooks first asserts that the Board erred by permitting the substitution. Brooks claims that the record supports a finding of Dobco's illegal bid shopping. It argues that N.J.S.A. 18A:64A-25.25 must be read strictly to preclude all post-award changes and substitutions to the list of subcontractors that any general contractor submits with its bid documents. It asserts that such changes must lead to a presumption of illegal bid shopping since they dilute the statutory bidding requirements and safeguards.
Our determination that Brooks's breach of contract claim must be considered in the Law Division is relevant to the consideration of the issues on this appeal, and the issues to be determined in the Law Division inform our determination.
While both parties focus on the impact of N.J.S.A. 18A:64A-25.25, our review leads us to conclude that we need only address the issue of Brooks's refusal to accede to Dobco's demand of performance surety, as this is sufficient to meet the statutory mandate of N.J.S.A. 18A:64A-25.25.
As we have noted, the hearing before the Board was non-adversarial and prompted numerous factual findings that supported the Board's determination of no bid-shopping and a proper substitution. The issues of whether or not there was bid shopping, which in Brooks's view is the critical factor in the substitution determination, will be subsumed and considered by the Law Division in determining the merits of the breach of contract action. The question, which is a mixed issue of law and fact and which is challenged factually by both parties, will warrant appropriate procedural safeguards, including the possibility of an adversarial hearing, that were not apparent in the hearing before the Board.
Here, the only undisputed fact before the Board was that Brooks had refused Dobco's post-award request that it provide a bond.
The ability to perform a public contract is critical to the welfare of the taxpayers funding the contract. Demanding performance security insures that result. A contractor's ability to perform the required work is of the very essence of any contract for public work. Donald F. Begraft, Inc. v. Borough of Franklin Bd. of Educ., 133 N.J. Super. 415, 417 (App. Div. 1975).
While the parties focus on general compliance with the bidding process, the true focus in this case should be on the ability to perform a public contract that has been awarded. Brooks's refusal to provide a bond compromises its ability to ensure performance.
Contractors can make changes to the subcontractors listed in their bids for performance reasons, especially when protecting the public interest. In O'Shea v. N. J. Schools Constr. Corp., 388 N.J. Super. 312, 315 n. 1 (App. Div. 2006), where we overturned a policy allowing substitution after the award of bids, we stated that our "opinion [did] not affect a general contractor's remedies if a subcontractor breaches after a contract between the general contractor and the subcontractor has been signed." In Stano, supra, 187 N.J. Super. at 534 n.3, we refused to hold that invalidation of a contract would follow in all instances "where a proposed subcontractor named in the bidding papers becomes unavailable for some reason after the award[.]" Finally, in Serenity Contracting Group, Inc. v. Borough of Fort Lee, 306 N.J. Super. 151, 157 (App. Div. 1997), certif. denied, 153 N.J. 214 (1998), we declared that there were no bidding statutes that "suggest a legislative design to supplant all exercises of principled business judgment by the contracting public entity that conform with the express provisions of the Law and its underlying policies."
We reject Brooks's reliance on Gaglioti Contracting, Inc. v. City of Hoboken, 307 N.J. Super. 421 (App. Div. 1997), and Prismatic Dev. Corp. v. Somerset County Bd. of Chosen Freeholders, 236 N.J. Super. 158 (App. Div.), certif. denied, 118 N.J. 205 (1989), overruled on other grounds by Meadowbrook Carting, supra, 138 N.J. at 320. Gaglioti involved a failure of a general contractor to furnish a list of its subcontractors in its bid proposal, while in Prismatic, we rejected the practice of identifying more than one subcontractor in a general contractor's bid proposal for individual specialty trades. Neither circumstance is present here.
Although we need not address the factual assertions submitted by Brooks in claiming that: (1) Brooks never received a copy of Dobco's March 5 letter requesting substitution until after the architect made his decision to allow the substitution; (2) Dobco never provided the architect with all of the correspondence that had been exchanged between the parties so that it could make an informed decision; (3) Dobco never told the architect that Brooks had just successfully performed a project for the North Haledon Board of Education or that Brooks's initial estimate to Dobco had provided for no bond to be submitted; and (4) the architect never did any investigation into the facts surrounding the actual contractor-subcontractor relationship, we note that the facts do not support the claims.
For example, Brooks's March 18 letter to the College indicated that it knew Dobco had requested to substitute another subcontractor. Finally and most important, it is undisputed that Brooks had refused to submit a performance payment bond. In sum we conclude that it was within the College's business judgment to approve Dobco's substitution request based on the failure to provide performance security, and that the Board's approving that decision was not unreasonable, arbitrary or capricious.
We reverse and remand in Docket No. A-5548-07T2; we affirm in Docket No. A-5395-07T2.