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CFG Health Systems, LLC v. County of Hudson

May 14, 2010


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-5438-09.

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



Argued March 15, 2010

Before Judges Rodríguez, Yannotti and Chambers.

On December 18, 2009, the Law Division entered a judgment invalidating Resolution No. 296-8-2009, which was adopted by the Hudson County Board of Chosen Freeholders (Board) on August 13, 2009, and any contract entered into or awarded pursuant to the resolution. The County of Hudson (County) appeals from the trial court's judgment. Correctional Health Services, LLC (CHS) and CFG Health Systems, LLC (CFG) cross-appeal. We affirm on the appeal and the cross-appeals.


The following facts are pertinent to our decision. In September 2003, the County awarded a five-year contract to CHS to provide medical and mental health services to inmates at the Hudson County Correctional Center (HCCC) and the Hudson County Juvenile Detention Center (HCJDC). In July 2008, in anticipation of the expiration of the contract, the County issued a publicly-advertised request for proposals (RFP) on a new five-year contract for the services. Among other things, the RFP required the successful bidder to provide a minimum of 1653 hours of staffing in certain designated positions, locations and shifts per week.

Initially, the RFP required the bidders to submit prices for staffing separate and apart from prices for certain ancillary services. The County thereafter issued an addendum to the RFP, which required the bidders to submit a price for all staffing and ancillary services for each year of the contract. The price did not include a breakdown of hourly rates for each staff position. The RFP did not require the successful vendor to submit the breakdown of the hourly rates for staff until after the contract was awarded. The RFP was sent to nineteen vendors. As part of the bid process, five vendors participated in a tour of the HCCC.

On November 7, 2008, CFG and CHS submitted bids in response to the RFP. CHS's bid price was $29,697,216; CFG's bid price was $38,843,454. It appears that the amounts bid exceeded the County's budget expectations. The County established an evaluation committee to review the proposals. On December 12, 2008, the committee recommended that the contract be awarded to CHS.

While the award recommendation was under consideration, the County retained Dr. Ronald Shansky (Shansky) to review the staffing requirements of the HCCC. However, on April 23, 2009, before receiving Shansky's report, the Board adopted Resolution No. 144-4-2009 awarding the contract to CHS. Thereafter, CHS submitted the hourly rates for the required staff positions.

On May 5, 2009, the Director of the County's Department of Corrections instructed CHS to maintain the staffing levels established under the 2003 contract, which required only a minimum of 704 staffing hours per week rather than the 1653 hours per week required by the new contract. Shansky issued a report dated May 26, 2009, in which he addressed the staffing needs at the HCCC and HCJDC as well as the staffing requirements in the RFP. Shansky recommended a substantial reduction of the total number of staffing hours required under the contract.

The County and CHS thereafter agreed to changes to the contract's staffing requirements. In June 2009, CHS provided the County with an analysis of the changes to the contract price that would result from the reduction in staffing to 1056 hours per week. The staffing changes represented about a thirty-six percent reduction in the staffing requirements of the contract. The County and CHS also agreed to a reduction in the contract price of about twenty-six percent.

On August 13, 2009, the Board adopted Resolution No. 296-8-2009, awarding the contract to CHS, based on its bid proposal and the revised staffing requirements, for a total contract price of $21,990,892. The County published notice of the contract award on September 14, 2009.


On October 29, 2009, CFG filed an action in lieu of prerogative writs in the Law Division seeking, among other relief, a judgment: invalidating Resolution No. 296-8-2009; enjoining the County from entering into an amended contract with CHS; and requiring the County to re-bid the contract pursuant to the Local Public Contracts Law (LPCL), N.J.S.A. 40A:11-1 to -51. Judge Maurice J. Gallipoli issued an order dated November 4, 2009, requiring defendants to show cause why the relief sought in the complaint should not be granted. Expedited discovery was permitted prior to the return date.

Judge Gallipoli considered the matter on December 3, 2009. The parties advised the court that the case was ready for adjudication. On December 16, 2009, Judge Gallipoli filed a written opinion, in which he concluded that CFG had standing to challenge the Board's resolution and seek a re-bid of the contract; CFG's action in lieu of prerogative writs had been commenced within the time required by Rule 4:69-6; and Resolution No. 296-8-2009 was invalid because it represented a material and substantial post-award change to the RFP in violation of the LPCL. The judge rejected CFG's demand that the County be ordered to re-bid the contract. The judge entered a judgment dated December 18, 2009, memorializing the conclusions reached in its opinion, and staying its judgment through January 8, 2010.

The County and CHS filed a motion in the trial court for a stay pending appeal. The court denied the motion but stayed the judgment through January 15, 2010. The County and CHS then moved before us for a stay pending appeal. We denied the motion but ordered that the appeal be accelerated. CHS thereafter filed an emergent motion with Justice Barry T. Albin of the Supreme ...

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