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In re Contract for Science Wing Addition and Alterations

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,
v.
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).

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.

I.

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 ...


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