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Vanas Construction Co., Inc v. City of Jersey City and Arco Electrical Contractors

December 23, 2010

VANAS CONSTRUCTION CO., INC., PLAINTIFF-RESPONDENT,
v.
CITY OF JERSEY CITY AND ARCO ELECTRICAL CONTRACTORS, INC., T/D/B/A ARCO CONSTRUCTION GROUP, DEFENDANTS-APPELLANTS.
JOGI CONSTRUCTION, INC., PLAINTIFF-RESPONDENT,
v.
CITY OF JERSEY CITY AND JOSEPH M. SANZARI, INC., DEFENDANTS-APPELLANTS.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket A-1650-10T2 A-1804-10T2

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 15, 2010

Before Judges Sapp-Peterson and Fasciale.

In these three accelerated appeals that have been consolidated, appellants Joseph M. Sanzari, Inc. (Sanzari), Arco Electical Contractors, Inc., t/d/b/a Arco Construction Group (Arco), and the City of Jersey City (the City), appeal from trial court orders entering judgment in favor of respondent Jogi Construction, Inc. (Jogi) and partial judgment in favor of Vanas Construction Co., Inc. (Vanas). The trial court found that bid proposals submitted by Sanzari for the Newark Avenue Roadway Improvement Project, Federal Project No. FS-7851(102) and Jersey City Project No. 09-006 (Newark Avenue Project), and by Arco for the West District Police Precinct, Project No. 2007-002 (West District Precinct Project), were materially defective and that the defects were non-waivable. The court permanently enjoined and restrained the City from implementing and effectuating the respective contracts as to Sanzari and Arco. We affirm.

I.

Jersey City advertised for bids in connection with the two projects in the spring of 2010. The bid specifications required that prospective bidders complete and submit numerous documents.

Two such documents were the "Certificate of Experience" of the general contractor and the "Plant and Equipment Questionnaire"

(Questionnaire) to be completed by the general contractor.

Additionally, the bid specifications required the separate submission of a Certificate of Experience and Questionnaire to be completed by each subcontractor required to be named pursuant to N.J.S.A. 40A:11-16.*fn2

It is undisputed that when the City opened bids for the Newark Avenue Project on May 6, 2010, Sanzari's bid was the lowest at $3,169,067.80, followed by Jogi at $3,348,789.94, and English Paving Company, Inc., at $3,399,133.73. However, Sanzari's bid proposal did not include a completed Certificate of Experience and Questionnaire for Kevco Electric Company (Kevco), listed as Sanzari's electrical engineer in the bid proposal. The City notified Sanzari of the deficiency, and either on May 6 or May 7, Sanzari provided the omitted documents. Similarly, when the City opened the bids for the West District Precinct Project on August 5, 2010, Arco's bid of $9,653,153 was the lowest, followed by Vanas at $9,750,000, and Onekey, LLC at $9,790,000. Arco also failed to include in its package completed Certificates of Experience and Questionnaires for K & D Contractors, LLC, its proposed plumbing and HVAC subcontractor; and Erection & Welding Contractors, its proposed structural steel and ornamental iron subcontractor. The City advised Arco that it could submit the requisite documents within twenty-four hours.

A. The Jogi Bid Protest

Jogi filed a bid protest for the Newark Avenue Project on May 7, the day following bid openings. Jogi contended the Sanzari bid proposal was non-responsive and thereby null and void. In a letter dated May 14, Jersey City notified Sanzari that "[p]ursuant to the terms and conditions of the City's bid specifications, the City must reject Sanzari's bid." The letter stated further:

The Certificates of Experience for the subcontractor named in the proposal pursuant to N.J.S.A. 40A:11-16 was discussed in two different sections of the bid specification. Section 8 entitled "Bid Documents" on page I-6 of the Information to Bidders advised bidders that Certificates of Experience for subcontractors required by law to be listed in the proposal were to be submitted with the proposal. It advised that a failure to do so would result in rejection of the bid. The Schedule of Required Submittals by Bidder on page SRS-1 advised that a failure to include the Certificates would result in rejection of the bid.

([C]ontracting authorities may not waive any material or substantial variation between the conditions under which the bids are invited and the proposal submitted). The Certificates of Experience for subcontractors that were required by law to be listed in the bid proposal were referenced in two different sections of the bid specifications. Bidders were clearly advised that the Certificates were mandatory documents that were to be submitted with the proposal. The City will proceed to evaluate the bid proposal of Jogi Construction, Inc. to determine if it is the lowest responsible bidder.

In correspondence dated May 20, Sanzari's attorney stated that the bid proposal was not materially defective and that the City was "legally bound under the Local Public Contracts Law to award the contract to Sanzari as the lowest responsible bidder."

He first argued as a threshold matter that N.J.S.A. 40A:11-16(b) did not apply because Kevco was the only electrical subcontractor named in the proposal and, therefore, Sanzari was only required to list the "names of the trade subcontractors required to be listed by N.J.S.A. 40A:11-16." Second, he argued that Kevco "is well-known to the City from other City public projects in which Kevco has performed or is performing electrical work." Third, he challenged the two provisions contained in the bid proposals cited by the City in its May 14 correspondence:

Neither Section 8 nor the Schedule state that the general contractor (i.e., the bidder) must provide a separate Certificate of Experience for its subcontractors, be they listed or unlisted subcontractors. Indeed, the Certificate of Experience itself does not state that it must be completed by the listed subcontractors. Rather, it states at pg. P-32 as follows: "IMPORTANT: THIS CERTIFICATION MUST BE FILLED IN BY BIDDER." (Emphasis in original).

Sanzari's next argument acknowledged that the Questionnaire expressly required the general contractor to provide duplicate copies of the proposal to its proposed subcontractors and required the subcontractors to complete the duplicate documents, but noted that this provision was "found a[t] the bottom of the second page of the Plant and Equipment Questionnaire, which is of course a different document that asks for information particular to plant and equipment." Finally, he argued that the City ignored "the equally important provisions of Section 29 ['SUBMISSION OF POST BID INFORMATION'] of the Information to Bidders[,]" that contemplated "the possibility of post-bid submissions specifically addressed to the responsibility of the proposed subcontractors."

Subsequent to its receipt of the correspondence from Sanzari's attorney, the City, in a letter dated May 27, 2010, notified Sanzari that after reviewing Tec Electric, Inc. v. Franklin Lakes Board of Education, 284 N.J. Super. 480 (Law Div. 1995), it reconsidered its rejection of Sanzari's bid proposal and concluded that "despite what the specifications stated, Sanzari's failure to include the Certificate [of Experience for Kevco] was a minor defect which could be and was cured[,]" and that under the Tec Electric, Inc. decision, it was required to permit "Sanzari to cure the defect."

B. The Vanas Bid Protest

On August 9, five days after bid opening, Vanas formally objected to the award of the contract to Arco. It first took "exception to the leniency the City has allowed Arco with respect to issuing this documentation within 24 hours as all of this documentation was to be 'submitted with the bid' as indicated in multiple locations in the bid form." Vanas next maintained that Arco's non-compliance "prevented the City from determining that legitimate, experienced subcontractors were being used." It additionally argued:

Furthermore, if the bid of Arco was substantially less tha[n] the second bid, they could adopt a position that their bid did not comply with the requirements of the bid form and therefore withdraw their bid without penalty and without being bound by the Bid Bond to the City of Jersey City[,] thereby giving them an advantage over every other bidder who submitted bids in accordance with the Contract Documents. Clearly, the intent of the Bid Form was that all the required documentation be submitted with the bid. The bid of Arco did not comply with this requirement.

In response, the City acknowledged that the failure to include the Certificate of Experience and Questionnaire documents for each of Arco's subcontractors was "clearly a bid defect." Specifically, the City concluded:

First, the submission of documents used to determine the responsibility of a bidder did not deprive the City of its assurance that the contract would be entered into, performed and guaranteed according to the specified requirements. Arco submitted a bid bond and consent of surety and would have suffered severe financial consequences if it had refused to provide the documents to the City. Second, allowing Arco to cure the defect did not give it a competitive advantage over the other bidders. The missing documents pertained to the experience and qualification of subcontractors. The document did not and could not influence the amount of the Arco[] bid or of any of the other bidders. See[] Tec Elec[.], Inc. v. Franklin Lakes Bd. of Educ[.], 284 N.J. Super. 480, 487 (Law Div. 1995).

In a resolution adopted on July 14, 2010, City Council awarded the Newark Avenue Project to Sanzari. In a resolution dated September 15, 2010, City Council awarded the West District Precinct Project to Arco. Jogi and Vanas, as the second lowest bidders on the respective contracts, filed verified complaints in lieu of prerogative writ seeking to set aside the action of the City. Jogi argued that the contract award to Sanzari was arbitrary, unreasonable, capricious, illegal, and in derogation of public policy. Vanas' complaint raised similar allegations but additionally alleged that "[a]ssuming a post-bid cure was even permissible, Arco's post-bid submissions still did not substantially meet the requirements of the bid invitation."

C. The Prerogative Writ Actions

The trial court conducted oral argument on the Sanzari/Jogi matter on September 28 and on the Arco/Vanas matter on October 7. The court reserved decision after each of the arguments and issued a written opinion on October 15, granting judgment in favor of Jogi and partial judgment in favor of Vanas. In reaching its decision, the court first considered the purposes for the Certificate of Experience and Questionnaire. To answer that question, the court referenced the City's explanation contained in its August 24, 2010 letter to Vanas in response to Vanas' challenge to the Arco award:

A Certificate of Experience and a Plant & Equipment Questionnaire are documents that the City uses to determine whether the low bidder, and its subcontractors that are required to be listed pursuant to N.J.S.A. 40A:11-16, are responsible. Responsibility involves a consideration of a bidder's experience, financial ability, moral integrity and availability of facilities necessary to perform the contract . . . .

With this language as the factual framework for analyzing the purposes of the two documents, the court next noted that in both bid proposals "all bidders were put on notice [by the express language of the bid information and specifications prepared by the City] that failure to include the Certificates and Questionnaires would result in 'automatic rejection . . . at the time of [b]id reception.'" The court then reasoned:

In both matters before me, the bid submissions from the lowest bidders included a list of subcontractors but failed to include the Certificates or other supporting documents as to the subcontractors named. As discussed above, the express purpose of the Certificate is to assist the City in determining whether the low bidder and its named subcontractors are sufficiently experienced, financially able, and in possession of the facilities and moral integrity necessary to perform the contracts in question. In the absence of these Certificates and other required documentation in both cases, the City was essentially provided with nothing more than the names and addresses of the subcontractors that would be responsible for performing portions of the work required under the contract. At the time of bid reception, the City therefore had no information regarding prior work performed by each subcontractor, the manner in which each subcontractor had inspected the proposed work, each subcontractor's plan for performing the proposed work, the supervisor responsible for overseeing each subcontractor, full information as to each subcontractor's other private or government contracts, each subcontractor's available equipment, or the status of each subcontractor's contracts for materials.

The court concluded that the action of the City in awarding the two contracts to the two lowest bidders violated N.J.S.A. 40A:11-23.2.

The court also considered the impact of the awards under the two-part test first enunciated by Judge Pressler in Township of River Vale v. R.J. Longo Construction Co., Inc., 127 N.J. Super. 207, 216 (Law. Div. 1974) and adopted by the Supreme Court in Meadowbrook Carting Co., Inc. v. Borough of Island Heights, 138 N.J. 307, 313 (1994):

[F]irst, whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition.

[River Vale, supra, 127 N.J. Super. at 216.]

The court noted the Court's recognition in Meadowbrook that notwithstanding the existence of the River Vale test, decisions applying the two-part test "have been somewhat inconsistent in articulating the difference between a material defect in a bid that cannot be waived and an immaterial defect that can be waived." Meadowbrook, supra, 138 N.J. 319.

Against this analytical framework, the court rejected the argument advanced that bid bonds were in place to prevent Sanzari and Arco from walking away from the contracts once the bids were opened and they were deemed non-compliant because the bid bonds for each project would only entitle the City to $20,000 in each case if the bidders walked away and the projects were valued in excess of $3 million and $9 million respectively.

Consequently, the court concluded "[t]he non[-]compliance by both [d]efendants precluded such commitment because the omission of Certificates effectively left nullification in the hands of the bidders." Based upon these findings, the court was satisfied that Jersey City, in both instances was "deprived of adequate assurance that [the] contracts would be entered into with the non[-]compliant [d]efendants."

Addressing the second prong, the court stated:

[B]oth [d]efendants were afforded an unfair bidding advantage insofar as they were not required to submit the subcontractor documentation in their initial bid submissions. Whether or not the burden of doing so is considered to be laborious, the requirement of obtaining Certificates and supporting documents from all subcontractors must surely lessen the pool of subcontractor candidates from which a bidding contractor can choose in preparing the final bid submission. I therefore find it indisputable that a general contractor who is not required to obtain these documents prior to bid submission is placed in a position of advantage over its competitors.

Moreover, in order to achieve the "common standard of competition" called for by the LPCL,*fn3 the conditions and specifications of the bidding process "must apply equally to all prospective bidders." Hillside [v. Sternin], 25 N.J. [317,] 322 [(1957)]. Were it otherwise, and were courts to freely permit individual bidders to follow or disregard bid specifications at their leisure, "the mandate for equality among bidders would be illusory and the advantages of competition would be lost." Id. at 323. The unambiguous language included in the packet submitted to bidders by the City is not, and cannot, be disputed by the parties; all bidders were put on notice that failure to include the necessary Certificates and Questionnaires would result in "automatic rejection . . . at the time of [b]id reception." In conformity with its rejection of a bid by A.J.M. Contractors just months earlier on the same grounds, the City initially enforced the clear language of its bid specifications by rejecting Defendant Sanzari's bid proposal for failure to include the Kevco Certificate in its initial bid submission. The City thereafter reversed course and permitted both [d]efendants the opportunity to cure the very same type of defect that had caused the rejection of the A.J.M. bid. I conclude that a "common standard of competition" cannot exist when the rules of the game are changed at the very moment that they are broken.

Subsequent to the court's rulings, the City awarded the contracts to Jogi and Vanas. The court thereafter entered an order staying its October 15 orders. Sanzari and Arco filed applications with this court seeking permission to file an emergent motion on short notice to continue the stay pending appeal. We denied the application by order dated November 18, 2010, and on appeal to the Supreme Court, our order was reversed. By order dated November 24, we granted the emergent application, extended the trial court's stay pending appeal, issued an accelerated briefing schedule and consolidated the two appeals for purposes of joint disposition. The City filed a separate appeal on December 1, 2010, which has been consolidated with the Sanzari and Arco appeals.

On appeal, Sanzari contends:

POINT I

THE CITY ACTED WITHIN ITS PERMISSIBLE DISCRETION WHEN IT PERMITTED SANZARI TO CURE AN IMMATERIAL AND WAIVABLE DEFECT IN FAILING TO INCLUDE THE CERTIFICATE OF EXPERIENCE.

A. THE CONFLICTING BID INSTRUCTIONS DID NOT EXPRESSLY REQUIRE THE CERTIFICATE

OR QUESTIONNAIRE FOR SUBCONTRACTORS BE SUBMITTED AT THE TIME OF BIDDING.

B. EVEN IF A CERTIFICATE AND QUESTIONNAIRE FOR KEVCO WERE REQUIRED AT THE TIME OF BIDDING, THEIR INADVERTENT OMISSION DID NOT CONSTITUTE A MATERIAL DEFECT.

C. THE LACK OF MATERIALITY OF THE LATE SUBMISSION OF THE DOCUMENTS IS FURTHER EVIDENCED BY . . . SANZARI'S COMPLETE COMPLIANCE WITH THE LPCL.

POINT II

IT IS IN THE BEST INTEREST OF THE PUBLIC THAT THE CONTRACT BE AWARDED TO SANZARI.

In its appeal, Arco contends:

POINT I

ARCO'S FAILURE TO SUBMIT THE REQUIRED SUBCONTRACTOR DOCUMENTATION WITH ITS BID DID NOT VIOLATE THE FIRST PRONG OF RIVERVALE/MEADOWBROOK MATERIALITY ANALYSIS BECAUSE IT DID NOT DEPRIVE JERSEY CITY OF ANY ASSURANCE THAT THE CONTRACT WOULD BE ENTERED INTO AND PERFORMED BY ARCO ACCORDING TO ITS SPECIFIED TERMS.

POINT II

JERSEY CITY'S AWARD OF THE CONTRACT TO ARCO DID NOT VIOLATE THE SECOND PRONG OF RIVERVALE/MEADOWBROOK MATERIALITY ANALYSIS BECAUSE ARCO GAVE NO COMPETITIVE ADVANTAGE OVER VANAS OR ANY OTHER COMPLIANT BIDDER.

POINT III

VANAS' DISCUSSION OF OTHER ALLEGED DEFICIENCIES IN ARCO'S POST-BID SUBMISSIONS IS INAPPROPRIATE AND SHOULD NOT BE CONSIDERED BY THIS COURT.

The City, in its appeal, contends:

POINT I

THE FAILURE OF SANZARI AND ARCO TO INCLUDE WITH THEIR BID PROPOSALS CERTIFICATES OF EXPERIENCE AND PLANT AND EQUIPMENT QUESTIONNAIRES FOR SUBCONTRACTORS NAMED PURSUANT TO ...


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