February 16, 2011
SUBURBAN DISPOSAL, INC., PLAINTIFF-APPELLANT,
BOROUGH OF CHATHAM, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3597-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 11, 2011 - Decided Before Judges Payne, Baxter and Koblitz.
This appeal by Suburban Disposal, Inc. raises issues regarding the bidding procedures adopted by the Borough of Chatham in connection with a five-year solid waste disposal contract commencing on January 3, 2011. The essentially uncontroverted facts of the matter give context to the legal discussion that follows.
On August 25, 2010, Chatham issued a bid document entitled Specifications for Solid Waste Collection Service that provided instructions to bidders and set forth bid submission requirements, work specifications and other matters relevant to the bidding process. The document commenced by stating:
Sealed proposals for SOLID WASTE COLLECTION SERVICE will be received by the Borough of Chatham in the Municipal Building, 54 Fairmount Avenue, Chatham, New Jersey on October 26, 2010 at 2:00 p.m. prevailing time, Room 212 at which time and place they will be publicly opened and read aloud. No sealed proposals will be accepted after this time.
The document also stated in paragraph 1.3:
All bid proposals will be publicly opened and read by the Borough Clerk at the time and place specified in the Notice to Bidders. All bid proposals will be date and time stamped upon receipt. Bidder is solely responsible for the timely delivery of the bid proposal and no bids shall be considered which are presented after the public call for the receiving bids [sic]. Any bid proposal received after the date and time specified will be returned, unopened, to the bidder.
An additional paragraph addressed changes to bid specifications, stating that notice of such changes would be provided no later than five days prior to bid opening, excepting Saturdays, Sundays and holidays, by publication in the Chatham Courier and The Star-Ledger.
In order to accommodate Robert Willis, the expert retained by Chatham to furnish advice in connection with the bids, the time for opening of bids was subsequently changed from 2:00 p.m. to 9:30 a.m. on October 26. Notice of that change was printed in the Florham Park Eagle, the Chatham Courier, and the Madison Eagle on September 30, 2010 and in The Star-Ledger on October 12, 2010.*fn1 Willis undertook to provide further notice of the change by faxed messages addressed, as he phrased it in his certification, to "all bidders for whom I had a legible address." A sheet bearing xeroxed copies of business cards was utilized by Willis in his notification efforts. However, he acknowledged that no notification was provided to Future Sanitation, Inc. "because Future's business card was not easily reproduced," and notification was not provided to Galaxy Carting "because the business card for Galaxy was cut off of the bottom right hand of the facsimile that was sent to me of all the business cards. Only a 'G' and an 'S' were on the page and I did not inquire as to whether a card was cut off of the page." Additionally, no faxed notification was supplied to Suburban, the company that was then providing waste hauling services to Chatham.
On October 26, two bidders, B&B Disposal and Suburban, submitted bids by the 9:30 a.m. deadline, and they were opened. At approximately 1:50 p.m., two additional prospective bidders appeared. One left when informed that the deadline had been missed. Galaxy's representative remained, and after being instructed to do so by Galaxy's counsel, he left Galaxy's bid with Chatham's deputy clerk, who forwarded it to Willis.*fn2 Willis tabulated all three of the bids. The chart prepared by him indicated that B&B Disposal had submitted a bid of $1,344,000; Suburban had submitted a bid of $1,223,000; and Galaxy had submitted a bid of $1,016,560. Galaxy's bid was thus substantially less than that of Suburban, the lowest bidder to have met the 9:30 deadline.
By letter dated October 27, counsel for Galaxy protested the notice procedures undertaken on Chatham's behalf, stating: "The information supplied to me by my client discloses that some of the potential bidders received written notification of the addendum changing the bid receipt date from the Borough, while others, such as my client, did not." Counsel then sought to be informed whether, as a result, the bids would be rejected pursuant to N.J.S.A. 40A:11-13.2(e).
On November 1, 2010, Chatham notified potential contractors that, at a meeting to be held on November 8, 2010, the Borough Council would consider a resolution rejecting all bids and a second resolution authorizing re-advertising on or about November 9, 2010 for a bid opening that would take place on November 19, 2010 at 2:00 p.m.
In a letter dated November 3, 2010, counsel for Suburban argued that no basis for rejecting all bids existed, because notice by publication had been properly provided pursuant to N.J.S.A. 40A:11-23c(3) and N.J.A.C. 7:26H-6.4(d). Counsel therefore requested that the contract be awarded to Suburban as the lowest timely responsible bidder.
On November 8, the Council conducted an open meeting, at which a presentation on behalf of Suburban was made, followed by an executive session at which Willis's tabulation was furnished to Council members. At the conclusion of the executive session, the Council voted to adopt the proposed resolutions rejecting all bids and soliciting bids anew. The minutes of the Council's executive meeting have not been furnished in connection with this matter. The resolution rejecting all bids stated as a reason for the rejection only that "the Mayor and Council of the Borough of Chatham, believe the purpose of the bidding statute has been violated."
On November 11, 2010, Suburban filed a verified complaint in lieu of prerogative writs challenging Chatham's action and claiming that notice by publication of the change in the time for bid submission was proper, and that the rejection of all bids was improper because neither the letter nor the purpose of the Local Public Contracts Law had been violated. Suburban therefore requested that the court enter an order enjoining Chatham from rebidding the contract and accepting new bids and requiring that the contract be awarded to Suburban as the lowest responsible bidder.
The entry of temporary restraints, as well as the other relief sought by Suburban, was opposed by Chatham in a letter to the judge dated November 12, 2010. Chatham justified the need to rebid on the basis of Willis's selective notification. However, it was Chatham's position that, if the contract was not awarded at either the Council's November 22 or December 13 meetings, the Borough's residents would face an interruption in garbage service. The fact that Galaxy had submitted the lowest bid was not mentioned.
However, in a brief opposing Suburban's application for a preliminary injunction Chatham disclosed that its actions were motivated, at least in part, by the existence of Galaxy's low bid. In discussing the Council's actions, counsel for Chatham stated: "Galaxy's bid is substantially lower than Suburban's. In fact, it is $206,440 lower over a five year period! The Borough could not ignore this fact." Further, Chatham argued that: "It is legally sufficient for the Borough to reject all bids if such rejection may result in a lower contract price." And it additionally argued that: "The Borough cannot completely ignore the fact that the one bidder that did not receive the facsimile notice came in with the lowest bid. Not just any lower bid, but one substantially lower."
The brief was accompanied by the November 11, 2010 certification of attorney Carolyn McGuire, who stated that she had distributed the bid tally sheet, including Galaxy's bid, to the Board while meeting in executive session on November 8. McGuire attached the tally sheet to her certification, thereby providing notice to potential bidders of the exact terms of the prior bids eight days before the new bids were due on November19.*fn3
A hearing on Suburban's application for an injunction was held on November 19, 2010. At its conclusion, the judge, ruling from the bench, denied relief and dismissed Suburban's action. In reaching his decision, the judge noted that N.J.S.A. 40A:11-13.2e permits a governing body to reject all bids if it determines that "the purposes or provisions or both" of the local public contracts law have been violated. In this case, Chatham claimed a violation as the result of the selective delivery of faxes notifying bidders of a change in the time that bids would be opened, thereby failing to secure the benefits of unfettered competition.
Whether Chatham properly exercised its authority, the judge held, would be determined by considering whether its exercise was arbitrary or capricious. Citing PENPAC, Inc. v. Morris County Municipal Utilities Authority, 299 N.J. Super. 288 (App.Div.), certif. denied, 150 N.J. 28 (1997), the judge found in this context, unless it is established, which it has not been here,that the Borough as the contracting agent acted in bad faith orabused its discretion in rejecting these bids, unless thatis proven, the court should not substitute its judgment for thatof the agency.
Relying on CFG Health Systems LLC v. County of Essex, 411 N.J.Super. 378 (App. Div.), certif. denied, 202 N.J. 44 (2010), the judge framed the issue as "not whether the failure to provide the uniform notice to bidders[,] which the Borough found . . . violated the purposes of the public contracts law[,] required the rejection of the bids," but rather, "whether it was reasonable and appropriate for the Borough under these circumstances to request re-bidding." The judge answered this question affirmatively, determining it was not arbitrary or capricious for the Borough to have done so.
Addressing Suburban's argument that statutory notice had been properly provided and that the faxed notices should be disregarded, the judge deemed Suburban's position to constitute too narrow a view of the public bidding law. "While certainly it is understandable that the Legislature wanted a more[,] let's say[,] structured requirement for addendums to be issued as opposed to a less structured [notice] in terms of faxes or letters, that does not in any way in the eyes of the court minimize or eliminate the overall requirement for a level playing field."
Although the judge dismissed the action and lifted a prior stay enjoining the opening of bids, he agreed to enter a stay on the award of the contract until December 13, 2010. Upon application to this court, a further stay was denied. However, Suburban's appeal was accelerated. We have been informed that Suburban continues to perform waste collection for Chatham, but we have not been informed of the terms under which it is operating.
Contrary to Suburban's argument before the trial judge and on appeal, if we were to consider only the issue of unequal notice in judging Chatham's determination to rebid the contract, we would find that circumstance provided reasonable grounds for Chatham's action. CFG Health Sys., supra, 411 N.J. Super. at 387. As we have previously held:
The purpose of public bidding laws is to provide the public with the "'benefits of unfettered competition.'" Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 313 (1994) (quoting Terminal Constr. Corp. v. Atlantic Cty. Sewerage Auth., 67 N.J. 403, 410 (1975)). The goal is that through competitive bidding the public interest in achieving the most economic result will be best served.
Township of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207, 215 (Law Div.1974). "The statutes authorizing competitive bidding accomplish that purpose by promoting competition on an equal footing and guarding against 'favoritism, improvidence, extravagance and corruption.'" Meadowbrook Carting Co., supra, 138 N.J. at 313 (quoting Township of Hillside v.Sternin, 25 N.J. 317, 322 (1957)). All bidders must be equally situated in their competition for a public contract. Ibid. [PENPAC, Inc., supra, 299 N.J. Super. at294.]
The selective notification to potential bidders of the change of time for submission of bids destroyed the equality that statutory notification procedures were designed to achieve and undercut the purposes of the public bidding statute.
The confounding circumstance in the case arises from the fact that Chatham opened and tabulated Galaxy's late bid, and in part premised its rejection of all bids upon the fact that Galaxy's bid was lower than either of those that were timely submitted. Chatham admits as much, arguing in its brief in opposition to Suburban's appeal:
[H]ad the expert reviewed Galaxy's bid and determined that Galaxy was not the lowest bidder and/or that it failed to comply with the bid specifications, either of which could have precluded Galaxy from being awarded the bid, the entire controversy surrounding the facsimile would have been moot.
There is no doubt but that the bid submitted by Galaxy was nonconforming because it was submitted after the bid receipt deadline. Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 313-15 (1994). New Jersey requires that publicly advertised contracts be awarded to the "lowest responsible bidder." N.J.S.A. 40A:11-6.1. A low bidder can be considered the lowest responsible bidder only if it complies with the substantive and procedural requirements of the bid advertisements and specifications. Id. at 313 (citing Twp. of Hillside v. Sternin, 25 N.J. 317, 324 (1957)). "Strict compliance is required, and a municipality generally is without discretion to accept a defective bid." Id. at 314 (citing L. Pucillo & Sons, Inc. v. Mayor of New Milford, 73 N.J. 349, 356 (1977) and 426 Bloomfield Ave. Corp. v. City of Newark, 262 N.J. Super. 384, 387 (App. Div. 1993)).
A specific noncompliance constitutes a substantial irregularity that cannot be waived if 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.'" Id. at 315 (quoting Twp. of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207, 216 (Law Div. 1974)). Clearly, acceptance of a late bid places the late bidder at a competitive advantage as the result of its ability to learn the terms of timely bids before submitting its own.*fn4
Further, it is clear that Chatham violated its own bid specifications when it opened Galaxy's nonconforming bid. As we have noted, the bid document provided that no sealed bid proposals would be opened after the time set for bid receipt and that: "Any bid proposal received after the date and time specified will be returned, unopened, to the bidder."
However, in this case, although Chatham opened and tabulated Galaxy's bid, it did not accept it, but instead, ordered rebidding to occur. Further, Chatham disclosed its bid tabulation prior to the time that the new bids were due. In that fashion, any unfair advantage that would have been possessed by Galaxy if its low bid had not been disclosed was obviated. Upon rebidding, Galaxy was free to raise its bid to more closely correspond to the prior bids of its competitors, and those competitors were free to lower their bids in an attempt to meet Galaxy's prior position. While it was likely that the new bidding process would result in the submission of bids lower than Suburban's initial bid, there was no guaranty that the process would result in the same savings that Chatham would have realized if Galaxy's initial bid had been deemed conforming.*fn5 In this respect, the competitive circumstances resemble those existing when a municipality rejects all bids as above cost estimates or appropriations for the services, processes permitted by N.J.S.A. 40A:11-13.2a and b.
We strongly disapprove of Chatham's conduct in opening Galaxy's nonconforming bid instead of returning it. However, after considering all the circumstances presented by this case, we find that it was reasonable and appropriate for the first bids to have been rejected and for the second round of bidding to have taken place.
The order of the trial court is affirmed.