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In re Failure to Award to the Lowest Responsible Bidder RFP 09-X-20513 Contract T0002

July 2, 2010


On appeal from the Division of Purchase and Property, Department of Treasury.

Per curiam.


Argued January 12, 2010

Before Judges Wefing, Messano and LeWinn.

In 2005, the Director of the New Jersey Division of Purchase and Property awarded plaintiff, Nestlé Waters North America, Inc. (Nestlé), a contract to sell and deliver its Deer Park brand of bottled water to State agencies located in fifteen counties for the period from January 1, 2006 through December 31, 2008. In October 2008, the Division issued a Request for Proposals, No. RFP 09-X-20513, for a three-year contract to provide bottled water (five-gallon bottles, referred to as "demijohns," and dispensers) statewide. Only Nestlé and its competitor, DS Waters of America, Inc. (DS Waters) submitted bids.

Nestlé bid $2.09 for delivery of each demijohn, no rental charge for unrefrigerated water coolers, and $7.96 per month for each refrigerated water cooler. Nestlé charged no deposit on the demijohns. Its bid was for fifteen of the State's twenty-one counties.

DS Waters also bid $2.09 for delivery of each demijohn and no rental charge for non-refrigerated water coolers. However, it bid $5.99 per month for refrigerated water coolers and included a $6 deposit for each demijohn which was fully refundable upon return.

On December 5, 2008, the Director gave public notice of her intent to award the contract to DS Waters, and simultaneously made both bids public pursuant to N.J.S.A. 52:34-12a. Nestlé filed a protest which asserted, in part, that DS Waters' bid was deficient for "fail[ing] to indicate the manufacturer, brand, model name and model number on all specified equipment for all counties[,]" and that pursuant to the RFP, the "'[f]ailure to submit all information required will result in the bid being considered non[-]responsive.'"

The Director agreed with this assertion and, in a letter decision issued on December 24, 2008, rescinded the notice of intent to award the contract to DS Waters. The Director "instruct[ed] the [Division] to consider re-bidding [sic] the entire . . . contract with textual and format changes to the RFP to facilitate the bidders' understanding and accomplishment of the requirements for effective bidding."

In a letter to the Director on January 8, 2009, Nestlé protested the decision to rebid the entire contract. It asserted that "the proper course of action is to award the contract to this company as the lowest qualified bidder which submitted a responsive bid which met all of the RFP's requirements."

On January 12, 2009, the Director issued a final decision denying Nestlé's protest, noting her statutory authority to reject "'[a]ny or all bids . . . when the . . . Director . . . determines that it is in the public interest so to do[,]" under N.J.S.A. 52:34-12, and adding:

I determined that, in light of the . . . results of the . . . bidding effort and the scrutinized review of the RFP provisions and configuration, it was apparent that various aspects of the . . . RFP were in need of modification to achieve the level of clarity and consistency that is essential for effective head-to-head competition among bidders, which would, in turn, enhance the likelihood that more favorable pricing could be achieved. . . . [T]o allow the award of a contract for water and water dispensers in 15 counties to [Nestlé] while I am firmly convinced that competition under a more sound RFP and contract will produce a better contract and more favorable pricing for the State would, of course, serve [Nestlé's] best interests, but would not, in my judgment, serve the best interests of the State and its citizens. Also, [the] determination to re-bid the entire contract was in recognition of and buttressed by the State's ongoing efforts to identify and implement stringent austerity measures in light of the budgetary concerns that the State is addressing on a daily basis as it seeks every opportunity to eliminate or curtail expenditures. Thus, I remain convinced that the rebidding [of] all 21 segments of the contract, with improvements to the RFP that include the elimination of provisions and price lines for deposits [sic] charges for demijohns, will produce results that will serve the State's best interests.

Simultaneously with filing its notice of appeal from this decision, Nestlé moved before the Division for a stay. The Director denied the stay request and, by order of March 9, 2009, we affirmed that denial. On that same date, the Division issued a second RFP for all twenty-one counties, leading Nestlé to seek a stay of bidding "on the fifteen counties for which [it] submitted the lowest bid that was most advantageous to the State." On April 7, 2009, we issued an order staying bidding under the second RFP for those fifteen counties.

The second RFP deleted price lines for deposits and credits; refrigerated coolers were also eliminated as a bid item. The RFP also contained a notice that "[d]ue to the State's fiscal constraints, the use of this contract will be limited to those State Agency locations that do not have potable water . . . ." On April 8, 2009, however, the Division cancelled this RFP and noted that "a new RFP will be reposted ...

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