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Allstate Office v. Division of Purchase and Property


July 5, 2011


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

Per curiam.


Argued Telephonically January 18, 2011

Before Judges Lisa and Reisner.

Appellant Allstate Office Interiors, Inc., is a seller of office systems and furniture. Appellant Office Furniture Dealers Alliance is an industry trade association representing sellers of office systems and furniture. Appellants seek review of the May 13, 2010 final decision of the Division of Purchase and Property (Division), in the Department of the Treasury.

The dispute involves the proposed purchase by another State agency, the Department of Health and Senior Services, of 250 stools for use in one of its buildings. State agencies are required to purchase any needed articles or supplies, when they are available, from an entity within the New Jersey Department of Corrections known as DEPTCOR, which are "manufactured or produced by institutional labor." N.J.S.A. 30:4-95. State agencies "shall not purchase any such supplies or articles from another source unless [DEPTCOR] shall first certify . . . that it cannot furnish the same or the equivalent thereof." Ibid. DEPTCOR purchased, through a public bidding process, component parts for the stools, which were then assembled by inmates. Thus, the Division deemed the desired items available from DEPTCOR for use by the Department of Health and Senior Services.

Appellants contend that the assembly of these component parts does not fall within the purview of N.J.S.A. 30:4-95, which requires that articles be "manufactured or produced" byinmates. The Division took a contrary view. In light of the legislative purposes of the statute and the common dictionary definitions of the words "manufacture or produce," the Division concluded that, in this context and with respect to the articles that are the subject of this dispute, "manufacture or produce" encompasses the assembly of the stools.

Appellants brought an action in the trial court seeking to prevent the sale of the stools from DEPTCOR to the Department of Health and Senior Services and to declare that assembly of component parts is not included in the statutory definition of "manufactured or produced." The matter was transferred to this court pursuant to Rule 1:13-4(a). The Division denied a stay of the proposed sale of the stools by DEPTCOR, and so did we. For the reasons that follow, we affirm the Division's determination.


On February 26, 2009, the Division issued a Request for Proposal (RFP) for "Furniture - Unassembled, Unfinished Including Components - DEPTCOR." The RFP sought to obtain "bid proposals for any and all furniture, which is offered in the manner of 'ready to assemble', 'ready to finish', and/or the components for same." Under the heading "BACKGROUND," the RFP explained the intended purpose of this procurement:

State Use Industries intends to operate 17 industrial shops utilizing inmate employeesfrom nine correctional institutions. To meet this objective, it is the State's intention to operate furniture production facilities at [several specified State prisons]. Items produced in this facility will be shipped to DEPTCOR's Central Warehouse and offered for sale to DEPTCOR's customer base. Initially, DEPTCOR shall procure the items in component/kit form, requiring elementary assembly labor. As the business develops and experience with the product, production, and marketing improves, DEPTCOR shall purchase component items in a form requiring more intricate assembly, thereby enlarging its production operation and providing a greater number of meaningful work opportunities for the inmate population. [Emphasis added.]

The RFP required bidders to include an example of a manufacturer's generated time study for the completion of the assembly process "with anticipated learning curves" for at least one complex product. The example was to include "at least siX (6) individual steps for assembly and completion with an exploded view of the product that will be suitable for use at the inmate level of manufacturing." (Emphasis added).

The record before the Division, and which is now before us, includes a step-by-step description of the assembly process of the stools. The components must be assembled in a particular manner and in a particular sequence. Several of the steps require the use of hand tools.

Appellants urged the Division to determine that this relatively minor assembly process did not fall within the statutory meaning of manufacturing or producing the stools. Appellants argued before the agency that to manufacture or produce requires the creation of articles from "raw materials," a term used in an accompanying statute, N.J.S.A. 30:4-98. More particularly, that provision confers on DEPTCOR the authority to "[p]rocure and install in each institution the machinery and equipment and furnish the tools, supplies, raw materials, seeds, fertilizers and articles necessary for the operation of the assigned industries and performance of the assigned occupations and vocations with relation to the determined standards of quality and quantity." N.J.S.A. 30:4-98c. Notably, items other than raw materials are encompassed within the anticipated operation, including "articles necessary" for the operation.

Appellants argued that DEPTCOR was engaging in the practice of reselling "pass-through" furniture items, meaning that after purchasing completed furniture items from other vendors, DEPTCOR was then selling them to State agencies without alteration. In appellants' view, the minor assembly process required for these stools was tantamount to a lack of alteration and did not constitute manufacturing. Accordingly, appellants argued that DEPTCOR's practice with respect to these stools violated N.J.S.A. 30:4-95.

Clearly, N.J.S.A. 30:4-95 does not define the key term "manufactured or produced," nor does any other provision in Title 30, and the Department of Corrections has not promulgated any regulations relating to this statute. Therefore, N.J.S.A. 1:1-1 instructs that words and phrases should be given their "generally accepted meaning, according to the approved usage of the language." Further, longstanding New Jersey case law indicates that where a term in a statute is not specifically defined in the context of that statute or its surrounding provisions, it is to be "taken in [its] natural, plain, obvious and ordinary signification." Jamouneau v. Harner, 16 N.J. 500, 513 (1954). Because the "best indicator" of the Legislature's intent in enacting a statute is the statutory language itself, the courts "ascribe to the statutory words their ordinary meaning and significance," and have held that it is not the function of the judiciary to "'presume that the Legislature intended something other than that expressed by way of [a statute's] plain language.'" DiProspero v. Penn, 183 N.J. 477, 492 (2005) (quoting O'Connell v. State, 171 N.J. 484, 488 (2002)). To determine the "ordinary meaning and significance" of a statutory provision, courts regularly turn to dictionary definitions. See e.g. In re Election Law Enforcement Comm'n Advisory Opinion No. 01-2008, 989 A.2d 1254, 1259 (N.J. 2010); State v. Froland, 193 N.J. 186, 195-96 (2007). Turning to the Merriam-Webster dictionary, I find that the primary definition of "manufacture" is "to make into a product suitable for use." Merriam-Webster Online Dictionary, "Manufacture" (visited April 29, 2010) . One definition of "produce" in the same dictionary is "to give being, form or shape to." Merriam-Webster Online Dictionary, "Produce" (visited April 29, 2010) . Turning to Black's Law Dictionary, I find that a "manufacturer" is "a person or entity engaged in producing or assembling new products." Black's Law Dictionary 781 (Abridged 7th ed. 2000) (emphasis added).

The Division rejected appellants' narrow reading of the statute, which would require articles to be constructed from "scratch," utilizing raw materials as a starting point. In its May 13, 2010 final decision, the Division held "that the plain meaning of the term 'manufacture or produce' includes assembling furniture." The Division set forth the following rationale for its conclusion:

Additionally, "manufacture" has been defined in very broad terms by the Legislature in other contexts, not specifically controlling of, but still instructive to this matter. See e.g., N.J.S.A. 2A:58C-8 ("'Manufacturer' means (1) any person who designs, formulates, produces, creates, makes, packages, labels or constructs any product or component of a product; (2) a product seller with respect to a given product to the extent the product seller designs, formulates, produces, creates, makes, packages, labels or constructs the product before its sale; (3) any product seller not described in paragraph (2) which holds itself out as a manufacturer to the user of the product; or(4) a United States domestic sales subsidiary of a foreign manufacturer if the foreign manufacturer has a controlling interest in the domestic sales subsidiary."); N.J.S.A. 2A:123-3 ("'Manufacture' means making, make or made, and includes converting, processing, altering, repairing, finishing, or preparing for sale any article of wearing apparel or fabric as wearing apparel and fabric are herein defined."); and N.J.S.A. 34:6-136.2(b)("'To manufacture' includes to prepare, alter, repair, finish or process in whole or in part, or handle in any way connected with the production, wrapping, packaging or preparation for display of an article or materials.")

Although the word "assemble" is not explicitly included in the statute, the activity it describes falls under the "natural, plain, obvious and ordinary" definition of the term "manufactured or produced." DEPTCOR's workforce receives boxes of parts, and puts those parts together to fashion finished items suitable for use as furniture. This labor is in a form highly similar to "manufacturing" performed in many other industrial contexts, where different components are obtained from various sources, and assembled into complex products for sale.

Based on the plain meaning of the term "manufacture or produce," the State's practice of purchasing furniture items assembled by DEPTCOR's institutional workforce is consistent with the mandate of N.J.S.A. 30:4-95.


Appellants argue that (1) the Division's decision is arbitrary, capricious and unreasonable, and inconsistent with the provisions of N.J.S.A. 30:4-95, (2) N.J.S.A. 30:4-95 isunconstitutionally vague, (3) the Division's decision constitutes impermissible de facto rulemaking, and (4) the award of the contract for the stools to DEPTCOR should be voided. We are unpersuaded by these arguments.

Appellants' arbitrariness argument has two components. First, they contend that the Division is entitled to no deference in its construction of the controlling statute because it did not merely construe the statute but impermissibly added new language to it. Second, appellants argue that the Division failed to develop a factual record containing "substantial evidence" to support the findings on which its decision was based.

Principles governing appellate review of final decisions of administrative agencies are well-settled. We will not upset the ultimate determination of an agency unless shown that it was arbitrary, capricious or unreasonable, or that it violated legislative policies expressed or implied in the act governing the agency, or unless the findings on which the decision is based are not supported by the evidence. Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963). As a general rule, decisions by the Division on bids will not be reversed by a reviewing court absent bad faith, corruption, fraud, or gross abuse of discretion. Keyes Martin & Co. v. Dir., Div. of Purchase & Prop., 99 N.J. 244, 253 (1985) (quoting Commercial Clearing Corp. v. Sullivan, 47 N.J. 539, 549 (1966)).

The determination of an agency charged with enforcing a statute is entitled to particular deference absent an interpretation that is "plainly unreasonable." Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313, 327 (1984). This is because courts must respect the agency's institutional expertise in its field. Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 10 (2009). "The meaning ascribed to legislation by the administrative agency responsible for its implementation, including the agency's contemporaneous construction, long usage, and practical interpretation, is persuasive evidence of the Legislature's understanding of its enactment." Cedar Cove, Inc. v. Stanzione, 122 N.J. 202, 212 (1991).

In its May 13, 2010 decision, the Division described the particular circumstances involved in the assembly of the stools that are the subject of this dispute. It was in that context that it rendered its analysis. Recognizing that the terms "manufacture or produce" are not defined in the statute, the Division appropriately determined that the plain language of the terms should prevail, and it referred to appropriate sources to divine that meaning. In doing so, it reached a reasonableconclusion that assembling component parts in a manner to fashion them into a finished and usable product, by the use of tools and particular procedures, fit within the definition in light of the purpose and intent of this statute.

Like the Division, we find unpersuasive appellants' contention that manufacturing requires a starting point of raw materials. Certainly, no one could argue that an automotive assembly plant is not a manufacturing operation. The assembly of items which were fabricated elsewhere is commonly understood in these times to constitute a manufacturing process.*fn1

We recognize, of course, that assembling these stools is not on the same level of complexity and magnitude as an automotive assembly plant. However, we think appellants overvalue the qualifications of the inmate workforce and undervalue the degree of difficulty those inmates are likely to encounter in assembling these stools and the benefits they will receive from doing so. Many inmates have little or no prior work experience. Placing them in a structured setting with the requirement to work with others, follow instructions, and perform tasks in a sequential and organized manner provides valuable lessons. If nothing else, it is a starting point for more advanced job training and for developing superior skills. Indeed, the RFP recognizes as much by stating that by incorporating these assembly projects in the inmate work program, it is appropriate to begin with relatively "elementary" projects, after which, with experience, inmates would be in a position to move on to "more intricate assembly," thus "providing a greater number of meaningful work opportunities for the inmate population."

This rationale comports with the statutory purpose and recognizes the limitations inherent in the inmate workforce. We cannot say that the Division exceeded the bounds of its authority in reading the statute in this manner and attributing this broad construction to the terms "manufacture or produce."

In its appellate brief, the Division has brought to our attention and furnished us with a copy of a July 21, 1976 Attorney General's opinion, addressed to the Department of Institutions and Agencies, which supports the Division's position. In it, the Attorney General said this:

Finally, you have asked whether the Bureau [of State Use Industries in the then Division of Correction and Parole] may, under N.J.S.A. 30:4-92 et seq., purchase component parts necessary for the assembly of a finished product to be sold to a purchasing agency. You have stated that not all components needed in the manufacture of certain finished products can be produced by the Bureau's industries because of limitations arising from the nature of the Bureau's operations. Insofar as assembly of purchased components into a finished product provides productive activity for inmates, you are advised that such purchase is permissible. [Informal Op. Att'y Gen. No. M 75-1974, from William F. Hyland, Attorney General, to David Einhorn, Special Assistant for Legal Aff., Dep't of Insts. & Agencies (July 21, 1976) (emphasis added).*fn2 ]

We acknowledge that in this Attorney General's opinion, the issue did not deal with prepackaged parts designed to be assembled into a single finished product. However, while not directly on point, the opinion negates appellants' raw materials theory and stands for the proposition that DEPTCOR is permitted to purchase component parts that are "needed in the manufacture of certain finished products." Thus, for at least thirty-five years, the prison work program has been operating under an established policy by which the assembly of component parts purchased from elsewhere has been authorized and has been deemed a manufacturing process within the meaning of N.J.S.A. 30:4-95.

This bolsters the Division's position that it is not adding a new and distinct term, namely "assembled" to the statute, but is reading the terms "manufactured or produced" in the same way as they have been applied for decades.

It is within the purview of the Division to construe and implement our State's procurement laws and procedures. See N.J.S.A. 52:25-6. Considering the agency's expertise, the longstanding policy in allowing the assembly of component parts in the prison work program, the purpose of the statute, and the practical considerations applicable to the unskilled inmate workforce and the conditions under which the work program operates, and our highly deferential standard of review, we are satisfied that the Divisions' construction of the statute is a reasonable one.

We are further satisfied that there is no need for the development of a factual record. The statutory terms speak for themselves. The nature of the component parts of the stools in question and their required assembly procedures are sufficiently described in the record. It was based upon these facts that the Division made its determination. We are satisfied that the facts support the determination.

Appellants contend that N.J.S.A. 30:4-95 is so vague that it violates constitutional principles of due process. Their challenge is both facial and as-applied. For the reasons we have already stated, we conclude that the terms of the statute are sufficiently clear to apprise the average reader of their meaning. See State v. Cameron, 100 N.J. 586, 591 (1985). This is particularly so when dealing with a civil statute, as opposed to a criminal one. See In re Raymour & Flanigan Furniture, 405 N.J. Super. 367, 385 (App. Div. 2009).

We next address appellants' argument that the Division has engaged in de facto rulemaking in violation of the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15, as explained in Metromedia, Inc., supra, 97 N.J. at 331-32. The APA defines a rule as follows:

"Administrative rule" or "rule," when not otherwise modified, means each agency statement of general applicability and continuing effect that implements or interprets law or policy, or describes the organization, procedure or practice requirements of any agency. The term includes the amendment or repeal of any rule, but does not include: (1) statements concerning the internal management or discipline of any agency; (2) intraagency and interagency statements; and (3) agency decisions and findings in contested cases. [N.J.S.A. 52:14B-2(e).]

In Metromedia, Inc., supra, 97 N.J. at 331-32, the Supreme Court identified six circumstances that will render an agency's determination an administrative rule:

[A]n agency determination must be considered an administrative rule . . . if it appears that the agency determination, in many or most of the following circumstances, (1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy.

Each factor need not be present to find an agency action is actually a de facto rule. "These relevant factors can, either singly or in combination, determine in a given case whether the essential agency action must be rendered through rule-making or adjudication." Id. at 332. A de facto rule will be held invalid unless the agency complied with the rulemaking requirements of the APA. Id. at 328, 331.

Applying the Metromedia factors to the matter before us, we conclude there has been no de facto rulemaking. In the overall scheme of public procurement by State and county governments, products provided through DEPTCOR undoubtedly constitute a very small portion. The practice of assembling component parts as a manufacturing process within the meaning of the statute has been an established policy for decades. Therefore, there is nothing new in the Division's determination and nothing to be implemented only in future cases. For the reasons we have explained, the Division's broad reading of the statutory terms complies with the purpose of the statute, and the application of that reading to the facts in this case is reasonably inferable from the statutory language. The common meaning of manufacture includes the kind of assembly process involved here. Even though the process for the assembly of these stools is relatively minor in nature, in the context of an inmate workforce, it is logical to include it within the concept of manufacturing. Indeed, even in traditional manufacturing processes, utilizing a private-sector workforce, repetitive and relatively simple steps along the assembly line by each worker are commonplace.

Based upon everything we have said thus far, it is clear that we must reject appellants' final argument, namely, that we should declare void the Department of Health and Senior Services' contract to purchase the stools from DEPTCOR. By its mandatory terms, N.J.S.A. 30:4-95 requires that these articles, which are available through DEPTCOR, must be purchased from DEPTCOR and not from any other source.


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