January 10, 2012
SECURITAS SECURITY SERVICES, U.S.A., INC., APPELLANT-APPELLANT,
NEW JERSEY DEPARTMENT OF TREASURY, DIVISION OF PURCHASE AND PROPERTY; AND PROTECTION PLUS SECURITY CORPORATION, RESPONDENTS-RESPONDENTS, AND SECURITY GUARD, INC., D/B/A TRI-COUNTY SECURITY, NJ, APPELLANT-RESPONDENT.
I/M/O BID SOLICITATION #11-X-21295 SECURITY GUARD SERVICES -- ARMED AND UNARMED, NEW JERSEY STATEWIDE. IN RE CONTRACT AWARD AND SOLICITATION FOR #11-X-21295 SECURITY GUARD SERVICES -- ARMED AND UNARMED, NEW JERSEY STATEWIDE.
On appeal from the Division of Purchase and Property, Department of Treasury.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 28, 2011
Before Judges Sabatino, Ashrafi, and Fasciale.
These related appeals, which we consolidate for purposes of this opinion, concern the State's award of a three-year contract for armed and unarmed security guard services. The security guards are to be provided to various State offices, as well as to other agencies and institutions that opt to obtain equivalent services as cooperative purchasing partners with the State under the same contract terms. Among other things, the contract specifications require the provider to compensate the guards at or above the minimum levels established by federal and state prevailing wage laws. After several rounds of public bidding, respondent Division of Purchase and Property ("the Division") of the State's Department of Treasury awarded the contract to respondent Protection Plus Security Corporation ("Protection Plus"), a company that had capably supplied security guard services to certain State agencies in the past.
A competing bidder, appellant Securitas Security Services U.S.A., Inc. ("Securitas"), protested the contract award to Protection Plus, as did another unsuccessful bidder, Security Guard, Inc., d/b/a Tri-County Security, NJ ("Tri-County").*fn1 The Division ultimately rejected the bid protests, reiterating its decision to award the contract to Protection Plus. Securitas appealed, essentially contending that the award must be set aside because Protection Plus bid the contract at too low a price to enable it to fulfill its obligation to pay the guards at the mandated prevailing wages.
On the day after the contract was fully executed in September 2011, the Division amended the contract at Protection Plus's request and awarded the company an increase in the hourly rates paid by the State, effective October 3, 2011. Securitas filed a separate appeal objecting to that price increase. It argued that the increase was a material change in the contract that invalidated the bidding process. Securitas also contended that the applicable statutory language and bidding specifications disallow such a price increase until after the contract has been performed by the vendor for a full year.
For the reasons stated in this opinion, we affirm the Division's award of the contract to Protection Plus but reverse the Division's amendment of the contract that granted Protection Plus a premature price increase.
We summarize the pertinent facts and chronology of events. We do so mindful that there was no adjudicative hearing*fn2 in this accelerated matter. Consequently, the record before us is not comprehensive or entirely clear in certain respects.
The State's Past Procurement of Security Guard Services and the Enactment of the State Building Services Contracts Act
Before the present award, the State procured armed and unarmed security guard services for State buildings through the use of multiple contracts. Those multiple contracts involved separate procurements and different contract numbers for the particular State agencies and departments they covered. Those service contracts were not subject to prevailing wage laws.
In 2006, the Legislature enacted a statute instituting wage and benefit standards for general contractors and subcontractors that supply "building services," such as security guard services, at properties owned or leased by the State. The new law, the State Building Services Contracts Act ("SBSCA"), N.J.S.A. 34:11-56.58 to -56.70, supplemented the New Jersey Prevailing Wage Act ("PWA"), N.J.S.A. 34:11-56.25 to -56.47. The SBSCA specifically extends prevailing wage requirements to State "building services" contracts created or renewed after March 13, 2006.
In particular, the SBSCA requires the contractors and subcontractors that it covers to pay certain prescribed wages and other fringe benefits to their employees working at State-owned or State-leased sites. At a minimum, such vendors must pay their workers at or above the hourly wages determined by the State Commissioner of Labor and Workforce Development ("the Commissioner") to be prevailing for their respective occupations in each county. See N.J.S.A. 34:11-56.60.
The county-specific prevailing wage rates and the associated required benefits (collectively known as the "PWR") promulgated by the Commissioner for New Jersey are based on, and mirror, federal prevailing wage rates and required benefits (collectively known as the "FPWR") by the United States Department of Labor ("USDOL"). The FPWR levels are used in all federal service procurements. They are periodically set by the USDOL under the Service Contract Act of 1965 ("SCA"), 41 U.S.C.A. §§ 351 to 358.*fn3 See N.J.S.A. 34:11-56.59; N.J.A.C. 12:64-1.1 to -4.6 (containing the regulations issued by the Commissioner under the SBSCA).
The public policy underlying the SBSCA is expressed in N.J.S.A. 34:11-56.58:
It is declared to be the public policy of this State to establish prevailing wage levels for the employees of contractors and subcontractors furnishing building services for any property or premises owned or leased by the State in order to safeguard the efficiency and general well-being of those employees and to protect them and their employers from the effects of serious and unfair competition based on low wage levels which are detrimental to efficiency and well-being.
Within the statute's definitional section, N.J.S.A. 34:11-56.59, "building services" are described to include, among other things, the "securing, patrolling, or other work in connection with the care, securing, or maintenance of an existing building[.]" (Emphasis added). That definition thus embraces the security guard services involved in this appeal. In addition, the definitional section denotes the "'prevailing wage for building services'" as "the wage and benefit rates designated by the [C]commissioner based on the determinations made by the General Services Administration pursuant to the federal 'Service Contract Act of 1965' (41 U.S.C. §351 et seq.), for the appropriate localities and classifications of building service employees." Ibid.
N.J.S.A. 34:11-56.60 specifically mandates that vendors of such building services to the State must pay their employees the minimum prevailing wages and benefits.
Every contract to furnish building services for any property or premises owned or leased by the State shall contain a provision stating the prevailing wage for building services rates that are applicable to the workers employed in the performance of the contract and shall contain a stipulation that those workers shall be paid not less than the indicated prevailing wage for building services rates. The contract shall provide for annual adjustments of the prevailing wage for building services during the term of the contract, and shall provide that if it is found that any worker employed by the contractor or any subcontractor covered by the contract, has been paid less than the required prevailing wage, the State Treasurer may terminate the contractor or subcontractor's right to proceed with the work, and the contractor and his sureties shall be liable to the State for any excess costs occasioned by the termination. [N.J.S.A. 34:11-56.60.]
The RFP and the Related Bidding Documents
The State's then-existing contracts for armed and unarmed security guard services, which were awarded before the adoption of the SBSCA, were scheduled to expire on or about June 5, 2010.*fn4
The Division decided to reprocure those services by transitioning all of the work into the same procurement and contract award process, which would now be subject to the SBSCA. Accordingly, on March 18, 2010, the Division issued a Request for Proposal, RFP #11-X-21295 ("the RFP"), for the statewide procurement of armed and unarmed security guard services. The award based upon the RFP submissions would become Contract T0900-A79768.
More specifically, the RFP solicited proposals for a three-year contract "to provide armed and unarmed security guards services to various State agencies and locations" throughout the State. Its stated intent was "to award contract(s) to those responsible bidder(s) whose bid proposals, conforming to th[e] RFP are most advantageous to the State, price and other factors considered." See also N.J.S.A. 52:34-12 (reciting the same criteria).
The RFP explicitly advised bidders that the procurement was subject to the prevailing wage laws. The discrete price amounts within each bid, the RFP explained, were to be based "on the county in which the service is being provided." The RFP divided the State into three geographical regions for contracting purposes: Northern, Southern, and Central. The bidders did not have to bid on all three geographic regions, but the regions they chose to compete for had to be bid in their entirety.
The RFP permitted the State to award the contract to multiple bidders or to one bidder, whichever was in the State's best interest, price and qualifications considered. See N.J.S.A. 52:34-12.1 (authorizing awards to multiple bidders). The security guard services and the corresponding prices of the successful bidder or bidders had to be accessible to all State agencies using those services ("the State using agencies"), as well as to all State "cooperative purchasing partners[.]" The cooperative purchasing partners would each have the option of procuring security guards for their own facilities under the terms of the State contract, but they would not be required to do so.*fn5
Under the RFP, any bidder awarded the contract must be "capable of providing security guard services to all counties listed within the awarded region[,]" and must furnish those guards "with uniforms and necessary equipment, including two-way radios as required by State Using Agencies." RFP, Section 3.9. The RFP also required that all bidders had to "be able to provide full time guards and part time guards to meet the present needs of the State for this contract and complete for all locations." RFP, Section 3.14.
The RFP noted that "[t]he specific number of guards" actually needed by any contracting agent, including "their principal posts and hours of duty[,]" would "be agreed upon in writing between the parties." Ibid. "As changes occur[,]" each site manager had to approve "a revised written agreement[.]" Ibid. In this respect, the RFP cautioned:
[i]t must be understood that the contract resulting from this RFP is for security guard services on an as needed basis for the present and future locations in the three regions; and that the locations served and the number of hours of security guard service will increase and decrease based on the State Using Agency's needs. [Ibid. (emphasis added).]
The RFP required that security guards be paid by the vendor at an "hourly rate of pay." RFP, Section 3.5. In particular, the RFP required bidders to propose all-inclusive hourly rates as listed on the price sheets of this RFP. Failure to propose hourly rates for each type of security guard specified will warrant the bid be deemed non-responsive. Separate hourly rates are specified: one for guards equipped with two-way radios, the other for guards not equipped with two-way radios.
Hourly rates proposed must be all-inclusive hourly rates. They must contain all direct and indirect costs including, but not limited to: overhead, wages, fee or profit, clerical support, travel expenses, safety equipment, materials, supplies, managerial support and all documents, forms, and reproductions thereof. Hourly rates shall also include portal to portal expenses.
Time spent in traveling to and from the work site or employee's normal work station shall not be billed to the State. Hourly rates for guards equipped with two-way radio shall also include [the] cost of being equipped with two-way radio. [RFP, Section 3.14 (emphasis added).]
Consistent with this overall arrangement, the RFP contained price sheets with individual price lines and wage rates for each county. The price lines were segregated between armed and unarmed security guard services. There were a total of 126 price lines on the bidding forms, divided into six categories. Bidders were required to submit an all-inclusive hourly rate in all categories per county in the regions they were bidding on. See RFP, Section 6.4.2. The RFP declared that "[f]or evaluation purposes, bidders will be ranked according to the total bid price located on the [p]rice [s]heet accompanying this RFP." Ibid. (emphasis added).
The two specific FPWR job categories covered by the RFP were Guard I (unarmed) and Guard II (armed). In addition to their distinctive armed status, Guard II officers generally have greater responsibilities than Guard I officers. Among other things, Guard II officers have greater authority and discretion in responding to security incidents and emergencies. They are also to receive specialized training in techniques and methods of protecting controlled areas.
Each bidder was required under the RFP to include, among other mandatory items listed in Section 3.14, several assurances of its capacity to fulfill the terms of the contract. First, descriptions of "its approach and plans for accomplishing the work outlined in the Scope of Work," including "its understanding of the requirements of this RFP and its ability to successfully complete the contract." RFP, Section 4.4.3 (emphasis added). Second, descriptions of "its overall technical approach and plans to meet the requirements of the RFP in a narrative format" in order to "convince the State that the bidder's detailed plans and approach proposed to complete the Scope of Work are realistic, attainable and appropriate and that the bidder's bid proposal will lead to successful contract completion." RFP, Section 220.127.116.11 (emphasis added).*fn6
Two sections of the RFP, Sections 5.18 and 5.19, addressed future changes in the law and in prevailing wage levels. Section 5.18 dealt with "unforeseen" changes, affording the contractor an opportunity to seek a price adjustment from the Division on that basis.
Whenever an unforeseen change in applicable law or regulation affects the services that are the subject of this contract, the contractor shall advise the State Contract Manager and the Director in writing and include in such written transmittal any estimated increase or decrease in the cost of its performance of the services as a result of such change in law or regulation. The Director and the contractor shall negotiate an equitable adjustment, if any, to the contract price. [RFP, Section 5.18 (emphasis added).]
Section 5.19, meanwhile, allowed the contractor to apply for prospective adjustments in the contract price "on the anniversary of the effective date of the contract," solely to take into account increases in the prevailing wage that occurred "during the prior year." Specifically, [i]f the Prevailing Wage Act (N.J.S.A. 34:11-56 et seq.) is applicable to the contract, the contractor may apply to the Director, on the anniversary of the effective date of the contract, for a contract price increase. The contract price increase will be available only for an increase in the prevailing wages of trades and occupations covered under this contract during the prior year. The contractor must substantiate with documentation the need for the increase and submit it to the Director for review and determination of the amount, if any, of the requested increase, which shall be available for the upcoming contract year. No retroactive increases will be approved by the Director.
[RFP, Section 5.19 (emphasis added).]
The RFP explained that the bid proposals would be evaluated by the Division using general evaluation criteria categories, such as technical evaluation factors and the price schedules. Those general criteria could be used by the Division "to develop more detailed evaluation criteria[.]" RFP, Section 6.4. The stated criteria included, among other things, the bidder's "documented experience" with similar past contracts, see RFP, Section 6.4.1(c) and (d), and its "overall ability . . . [to] successfully complete the contract," RFP, Section 6.4.1(e).
The RFP set forth several procedures to govern the procurement process. In particular, after the submission of the bidders' proposals, the Division may request clarifications concerning one or more of the proposals. The Division may also request oral presentations by one or more of the bidders at its discretion.
A request for clarification may be made in order to resolve minor ambiguities, irregularities, informalities or clerical errors. Clarifications cannot correct any deficiencies or material omissions or revise or modify a proposal, except to the extent that correction of apparent clerical mistakes results in a modification.
The bidder may be required to give an oral presentation to the State concerning its bid proposal.
Bidders may not attend the oral presentations of their competitors.
It is within the State's discretion whether to require the bidder to give an oral presentation or require the bidder to submit written responses to questions regarding its bid proposal. Action by the State in this regard should not be construed to imply acceptance or rejection of a bid proposal. [RFP, Section 6.3 (emphasis added).]
As we have noted, the RFP afforded the Division substantial flexibility in making an award. In fact, after receiving a recommendation from the Division's evaluation committee, the Director of the Division could "accept, reject or modify the recommendation." RFP, Section 6.4.4. The Director also had "the right to negotiate price reductions with the selected vendor." Ibid. The Director could also "waive minor irregularities," provided that:
(1) the requirement [in question] is not mandated by law;
(2) all of the otherwise responsive proposals failed to meet the mandatory requirement; or
(3) in the sole discretion of the Director, the failure to comply with the mandatory requirement does not materially affect the procurement or the State's interest associated with the procurement. [RFP, Section 6.1.]
Ultimately, the RFP declared that the [c]ontract award(s) shall be made . . . to that responsible bidder(s), whose bid proposal(s), conforming to this RFP, is (are) most advantageous to the State, price, and other factors considered. Any or all bid proposals may be rejected when the State Treasurer or the Director determines that it is in the public interest to do so. [RFP, Section 7.2.]
This standard tracked the applicable procurement statute, N.J.S.A. 52:34-12.
Seven addenda to the RFP were issued in April through June of 2010. Each of the addenda was made part of the contract to be awarded, along with the RFP, the bid proposal, and the notice of award. See RFP, Section 5.1. We mention some of the relevant details contained within those addenda.
Addendum #2 reaffirmed that the contract was subject to the vendor's payment of the federal prevailing wage, plus health and welfare benefits. Addendum #2 further noted that it was the vendor's "business decision" as to whether it could maintain the same wages and benefits at the time of the bid throughout the contract if the prevailing wage or other unforeseen figures increased. Additionally, Addendum #2 provided that "the using agency will notify [the Division's] Purchase Bureau with a formal complaint" when the vendor is "not in compliance" with the prevailing wage requirements.
Addendum #2 also emphasized that because this is a statewide contract, the Division could not estimate, determine, or identify exactly how many guards would be needed by region or facility, how many guards needed to be armed or have radios, the total hours involved, or the specific prevailing rate. The addendum further noted that "the anticipated hours per week, and what amount of revenue is anticipated for the Agreement, by region" could not be determined by the State in advance.
Addendum #4 authorized the Division's Purchase Bureau to conduct multiple rounds of negotiations, and to request some or all of the bidders to submit a "best and final offer" ("BAFO"). The negotiation process utilizing a BAFO was designed to enable the Division "to maximize the State's ability to obtain the best value[.]" Addendum #4 also stated that all correspondence with bidders would "remain confidential until a Notice of Intent to Award a contract is issued."
Addendum #6 deleted the requirement to submit a performance bond in RFP Section 7.4.*fn7 It also attempted to provide the bidders with a more detailed forecast of the State's needs under the contract by providing various tables of information. Among other things, the tables showed: (1) "the cumulative payment to date of both current armed and unarmed security guard requirements for the State"; (2) the "estimated number of hours, radios and mobile patrol per region for current usage by the State"; and (3) the estimated head count of service employees by region. However, Addendum #6 confirmed that "[t]he State make[s] no guarantee of the information provided," noting that the information "is the State's best estimate."
A set of the Division's "Standard Terms and Conditions" also was made part of the bidders' packet. Those generic terms and conditions are to be incorporated within awarded contracts and are applicable to all of the Division's advertised procurements unless instructed otherwise in an RFP. According to the Standard Terms and Conditions, if a bidder proposed changes or modifications or took exception to any of those "terms and conditions, the bidder must so state specifically in writing in the bid proposal. Any proposed change, modification or exception in the State's terms and conditions by a bidder will be a factor in the determination of an award of a contractor purchase agreement."
Section 4.1 of the Standard Terms and Conditions addressed the question of price fluctuations:
PRICE FLUCTUATION DURING CONTRACT - Unless otherwise noted by the State, all prices quoted shall be firm through issuance of contract or purchase order and shall not be subject to increase during the period of the contract.
In the event of a manufacturer's or contractor's price decrease during the contract period, the State shall receive the full benefit of such price reduction[.] [Emphasis omitted.]
That general language, however, is logically subject to the specific exceptions "otherwise noted by the State" for future price adjustments as set forth in Sections 5.18 and 5.19 of the RFP.
The Bidding Process, the Bid Protests, and the Award of the Contract to Protection Plus
The Division received twenty-one proposals in response to the RFP. Several bidders were promptly eliminated because their submissions did not conform, for a variety of reasons, to the bid requirements. The Division's Purchase Bureau then calculated an overall estimated annual price for each of the remaining bidders, applying usage projections and other assumptions. Based upon the initial bids, Tri-County was the apparent lowest bidder, at $9,297,666.56 per year; Protection Plus was second lowest at $9,797,482.24 per year; and Securitas was the third lowest bidder at $10,303,733.44 per year.*fn8
As part of its consideration of these bids, the Division was provided with background information concerning each bidder. Most relevant to our purposes is the background relating to Protection Plus and Securitas.*fn9
The record reflects that Protection Plus is a company founded in 1994 and headquartered in New York City. At the time of the bidding on the present contract, Protection Plus was providing security services to several State offices and agencies under a contract awarded in 2007. In particular, Protection Plus was providing armed security guards to the State under a 2007 contract to statewide agencies of the Motor Vehicle Commission. Additionally, Protection Plus was providing armed guards equipped with radios statewide to the Department of Labor & Workforce Development and to the Workers' Compensation courts.
Protection Plus's bid on the RFP included proposed price lines for all three geographic regions and for all security guard services. The company proposed using a brand of two-way radio, having a manufacturer's list price of $235 per radio, that it claimed would equal or exceed the performance of the equipment outlined in the RFP. Protection Plus's bid also confirmed that its guards would wear "standard issue" uniforms while on duty. The company agreed to procure all vehicles needed for mobile patrols once each using agency provided written notification of the number of vehicles it required. Protection Plus did not specify prices for the uniforms or vehicles because Section 3.14 of the RFP required "all-inclusive" hourly rates.
According to its own bid submission, Securitas is a subsidiary of an international firm that employs more than 260,000 people in forty countries. Its parent company has been listed on the Stockholm Stock Exchange since 1991. Securitas has provided security services to more than 24,000 customers in the United States. The company maintains headquarters in New Jersey, as well as five more fully-staffed offices that house the ten branch operations in this State. At the time of its bid, Securitas employed over 2500 security officers in New Jersey, although none of them pursuant to a contract with the State.
Securitas presented its bid in a somewhat different fashion than Protection Plus. In particular, Securitas identified separate hourly costs of $0.10 for radios and $1.51 for vehicles, using certain usage assumptions.
Following the initial bid submissions, the Purchase Bureau requested five of the bidders, including Protection Plus, to make forty-five minute "[o]ral [p]presentation[s] and/or [c]clarification[s]" of their respective proposals, as contemplated under Section 6.3 of the RFP. Securitas was not one of the five bidders requested to make such an oral presentation, although Securitas had indicated on its bid that it "respectfully request[s] the right to negotiate terms and conditions."
Thereafter, pursuant to Section 6.5 of the RFP, the Purchase Bureau offered bidders an opportunity to lower their original bids by submitting a BAFO. Tri-County declined to lower its bid in a BAFO, but Protection Plus and Securitas each submitted a BAFO with new price sheets showing lower rates.
Following the initial BAFO, the Purchase Bureau then ranked the three bidders. As a result of that recalculation, Tri-County remained the lowest bidder at $9,297,666.56 per year. Protection Plus was the second lowest bidder at $9,379,269.54 per year, representing a four percent decrease from its original bid. Securitas was the third lowest bidder at $10,191,242.88 per year, which was a one percent decrease from its original bid.
Protection Plus and Securitas were then offered an opportunity to submit a second BAFO. Both firms submitted new price sheets ("BAFO #2"), once again lowering each of their proposed all-inclusive hourly rates. In particular, Protection Plus dropped its overall bid by approximately another one percent, for a combined five percent decrease from its original bid. Securitas reduced its bid by approximately another three percent, for a combined four percent decrease from its original bid. The Purchase Bureau then ranked those two bidders with Tri-County. This final ranking after the BAFO #2 submissions resulted in Protection Plus moving to the rank of the lowest bidder, at a projected $9,295,191.36 per year, followed second by Tri-County at a projected $9,297,666.56 per year, and trailed by Securitas at $9,927,823.36 per year.
After further investigation, the Purchase Bureau learned that the Treasury Department had received eight formal complaints against Tri-County*fn10 about that company's services under its prior State contracts. Six of those complaints had been resolved against Tri-County. By comparison, no complaints had been filed against Protection Plus, which had just returned $134,544.60 to the State in overpayments it had received under its armed security guard contract.
Given this additional information and the ultimate price rankings generated after BAFO #2, the Purchase Bureau recommended that the contract be awarded to Protection Plus. The Purchase Bureau deemed Protection Plus to be a responsible bidder whose bid proposal conformed to the requirements of the RFP and was ranked lowest in price. Following that recommendation, the Acting Director announced in November 2010 her intent to award the contract to Protection Plus.
The Bid Protests and the Ensuing Appeals
Securitas filed a bid protest with the Acting Director. It claimed that the all-inclusive hourly prices proposed by Protection Plus and Tri-County were too low in relation to the minimum prevailing wage rates. Securitas contended that if either bidder was awarded the contract, it would be compelled either to perform the contract at a financial loss, resulting in eventual default, or to pay its employees less than the minimum rates mandated by the RFP and applicable laws. According to Securitas, the bids of its two higher-ranked rivals were so low that they could not possibly cover all of the costs and charges directly or indirectly associated with each worker while still reaping a profit on the contract. Those other associated costs, in addition to the PWR, included workmen's compensation and liability insurance, holiday and vacation pay, uniform costs, background check expenses, firearm costs, recruitment and training costs, automobile maintenance expenses, fuel costs, battery costs, radio expenses, performance bond, and administrative and management overhead. Securitas particularly faulted Protection Plus for not differentiating in its bid the costs of guards equipped with radios and vehicles and those without them.
In a later submission to the Division, Securitas stated that it had calculated $9,026,384.64 per year as the statutorily-mandated amount that will "account for the 125 positions in the RFP." According to Securitas, when non-statutory charges for uniforms, insurance, overtime, training and a performance bond are added to the statutory costs, the total projected amount is higher than the estimated overall annual total proposed by Protection Plus. Securitas further pointed out that Protection Plus had only $121,000 in cash, according to its financial statements. Therefore, Protection Plus presumably had "no ability to float those costs" not covered by its bid.
Securitas requested the Division to provide it with an informal hearing and an opportunity to make an oral presentation. At such a session, Securitas would demonstrate more fully that the bid proposals of Protection Plus and Tri-County were "non-responsive," or alternatively, that those two competitors were not "responsible" bidders.
Protection Plus responded in detail to Securitas's protest in a written submission to the Division. In its response, Protection Plus explained how it had arrived at its BAFO #2 and the various assumptions that it had applied. Among other things, Protection Plus noted that it had assumed that 25.1% of the guards would be armed and 74.9% unarmed; 35% of the guards would be assigned to the Northern region, 39% in the Central region and 25% in the Southern region; and that only 6.6% of the guards would require radios.
Protection Plus further explained that it anticipated an annual gross profit of about $600,000, and an annual net profit of approximately $300,000, even factoring in its obligation to pay its workers at the prevailing wage and benefit levels. Among other things, Protection Plus projected that it would achieve savings on a number of facets of the contract, including not having to provide vacation pay to new hires, certain insurance savings, and overhead savings. Protection Plus also represented that if its performance of the contract did not "for some unforeseen reason," turn out to be profitable, the company nevertheless stood "ready and able to honor its contract for the length of the award."
On December 29, 2010, the Acting Director denied Securitas's protest, in what she classified as a final agency decision. The Acting Director found that the all-inclusive hourly rates proposed by Protection Plus and Tri-County, respectively, had not been shown to be insufficient to enable their payment of federal prevailing wages as well as other statutorily-mandated charges. The Acting Director also found the submissions did not "suggest that either [Protection Plus or Tri-County] is not financially viable or that either company is otherwise incapable of satisfactorily providing the required services."
The Acting Director noted that the Division is not concerned with the amount of a bidder's overhead and profit reflected by its bid proposal. Instead, the Acting Director stated that the allocation of overhead and profit is generally within "the discretion of the business entity," and was subject to "business factors unique to each bidder[.]" The Acting Director consequently rejected Securitas's claim that the bids of Protection Plus and Tri-County were non-responsive, or that either bidder was not responsible on that asserted basis.
Meanwhile, Tri-County objected to the initial contract award on a different basis, contending that a mathematical error had incorrectly identified Protection Plus as the lowest bidder. The Acting Director agreed that such a miscalculation had occurred. She therefore rescinded her notice of intent to award the contract, and remanded the procurement to the Purchase Bureau for reconsideration.
Securitas objected to the Acting Director's denial of its bid protest. It asserted that the Division had not performed a proper analysis of whether Protection Plus's proposed prices would, in practice, be compliant with the prevailing wage and benefit laws. As a procedural matter, Securitas also requested copies of Protection Plus's response to its bid protest.*fn11
While the Purchase Bureau's reexamination of the bids was pending, Securitas filed an appeal with this court (A-2608-10) in January 2011 of the Acting Director's December 2010 denial of its bid protest. That appeal is the first of three related appeals that Securitas has filed in this matter.
Meanwhile, in a new report dated March 8, 2011, the Purchase Bureau again recommended that the contract be awarded to Protection Plus, even though the recalculations had reverted Protection Plus back to second lowest bidder. In particular, the Purchase Bureau estimated Protection Plus's overall annual total as $9,299,384.64, making it the second bidder behind Tri-County, with a difference of $1,747.20. Securitas was still the third lowest bidder, with a price $628,438.72 higher than Protection Plus. In reaffirming its recommendation to award the contract to Protection Plus, the Purchase Bureau noted among other things, Protection Plus's favorable past performance and the fact that the firm had returned money to the State under its current contract, which the Bureau described as "evidence of [its] honesty." Subsequently, the Acting Director again announced her intent to award the contract to Protection Plus. Securitas filed a second bid protest and requested a hearing.
On July 27, 2011, the Acting Director denied Securitas's second protest and its hearing request. She readopted the findings from her prior decision of December 2010, again concluding that the price levels submitted by Protection Plus "adequately cover the Federal Prevailing Wage, the Health and Welfare Supplement, and all other required payments to employees." The Acting Director noted that Protection Plus had capably performed its obligations under its existing contract, and that there was no evidence to suggest that the firm "will not provide similar reliable service under the new contract as well."
Securitas requested the Acting Director to stay the award of the contract to Protection Plus. The Acting Director denied the stay application in a written decision dated August 31, 2011. In the meantime, Securitas filed a second appeal (A-5965-10), contesting the agency's July 27, 2011 decision rejecting its second bid protest.
Consistent with the agency's decision to make the award to Protection Plus, the Acting Director executed the three-year contract on September 7, 2011, awarding the company all 126 lines of the procurement.
The Price Increase Awarded in September 2011
Before the contract was executed, Protection Plus filed a request with the agency, seeking two price increases after the effective date of the contract. In particular, on August 18, 2011, Protection Plus requested a wage increase from $17.35 per hour to $17.98 per hour (an increase of 63 cents), because the prevailing wage rate for Guard I, unarmed, for Central and Northern Regions had increased on January 14, 2011. Protection Plus also requested an increase from $3.50 per hour to $3.59 per hour (an increase of 9 cents for health and welfare benefits), because the rate for such benefits for building service workers had increased on June 17, 2011. On August 26, 2011, Protection Plus amended its request and asked that the increases apply to all twenty-one counties, noting that "the price increases occurred during the protest periods, prior to the award of [the] contract[.]"
On September 8, 2011, the Division agreed to Protection Plus's request for a price increase and issued Amendment #1 to Contract T0900-A79768, which stated: "[p]lease note that beginning October 3, 2011 the hourly rates under term contract T0900, contract A79768, held by Protection Plus Security Corporation will be increased in accordance with section 5.19 'Contract Price Increase (Prevailing Wage)' of the contract." (Emphasis omitted). The price increase did, in fact, become effective on October 3, 2011.
Securitas objects to the price increase on several grounds. First, it contends that the increase is not allowed under Section 5.19 of the RFP, nor under the applicable statutes, which only authorize "annual adjustments" of the contract price to take into account intervening changes in the prevailing wage. Second, Securitas maintains that the price increase is a material change in the terms of the contract, thereby tainting the procurement process because Securitas and other bidders would not have reasonably expected that the winning bidder could receive such an immediate price adjustment at the outset of the contract. Securitas accordingly filed a separate appeal (A-0894-11) of the Division's award of a price increase and lodged a protest with the Division.
After the Acting Director denied its request for an administrative stay of the contract award, Securitas filed an emergent application for a stay with this court. We denied the stay application, but accelerated the appeal. In the meantime, the Division denied Securitas's administrative protest of the price increase.
We begin our analysis with certain fundamental principles of procurement under the State's public bidding laws. N.J.S.A. 52:34-12 prescribes that when the State advertises a contract and accepts bids, award of the contract "shall be made . . . to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the State, price and other factors considered[.]" "Any or all bids may be rejected when the . . . Director of the Division . . . determines that it is in the public interest to do so." Ibid.
Ultimately, the objective of the State's bidding laws is to serve the public interest, both in obtaining quality goods and services for the public's use and in securing those goods and services at a reasonable cost to the taxpayers. "Public bidding statutes exist for the benefit of taxpayers, not bidders, and should be construed with sole reference to the public good." Nat'l Waste Recycling, Inc. v. Middlesex Cnty. Improvement Auth., 150 N.J. 209, 220 (1997). To serve that public interest, the Legislature has conferred on the Division broad discretion in making decisions in public contracting matters. See In re Jasper Seating Co., 406 N.J. Super. 213, 222 (App. Div. 2009).
One of the key functions of the Division is ascertaining whether each bidder on a contract is a responsible bidder and whether each bid submitted conforms to the requirements of the RFP. Through bid conformity and bidder responsibility "the contracting unit is assured of equality among bidders, of the financial and ethical ability of the bidders to perform, and of performance of the contract in accordance with the RFP." In Re Protest of the Award of the On-Line Games Prod. and Operation Servs. Contract, 279 N.J. Super. 566, 592-93 (App. Div. 1995).
Our scope of review of the Division's determinations concerning bidder responsibility and bid conformity is limited. "[D]ecisions as to responsibility of the bidder and bid conformity are to be tested by the ordinary standards governing administrative action[.]" Id. at 593; see also DGR Co. v. State, Dep't of Treasury, 361 N.J. Super. 467, 474 (App. Div. 2003).
"[T]he judicial role is restricted to four inquiries: (1) whether the agency's decision offends the State or Federal Constitution; (2) whether the agency's action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors." [On-Line Games, supra, 279 N.J. Super at 593 (quoting George Harms Constr. Co. v. N.J.
Tpk. Auth., 137 N.J. 8, 27 (1994)).]
"The preliminary inquiry [of the procurement agency] is whether the bid deviates from the RFP. If there is no deviation, the bid must be deemed conforming. If there is a deviation, a decision must be made as to whether it is material and can be waived." Id. at 594. The inquiry is whether "[t]he effect of a waiver would be to deprive [the agency] 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." [Id. at 594-95 (quoting Twp. of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207, 216 (Law Div. 1974)).]
If the deviation is material and non-waivable, "the inquiry is over because the bid is non-conforming and a non-conforming bid is no bid at all." Id. at 595.
We also accord considerable deference to the Division in choosing to award the contract to a particular responsible bidder that has submitted a conforming bid. The applicable statute does not require the division to award the contract to the lowest bidder, but instead to the bidder whose performance "will be most advantageous to the State, price and other factors considered[.]" N.J.S.A. 52:34-12. In general, our courts do not interfere with the agency's selection of a conforming bid unless there is proof of "bad faith, corruption, fraud, or gross abuse of discretion." Commercial Cleaning Corp. v. Sullivan, 47 N.J. 539, 549 (1966); see also State v. Ernst & Young, L.L.P., 386 N.J. Super. 600, 619 (App. Div. 2006).
We now examine Securitas's arguments to set aside the Division's award of the contract to Protection Plus with these deferential principles in mind.
As a threshold procedural matter, Securitas contends that the Division considered its bid protest in an unfair manner by denying it an opportunity for a hearing or to make an oral presentation, and in not disclosing Protection Plus's response to its bid protests until Securitas resorted to making an OPRA request for those responses. Securitas also complains that the Division's review of its bid protests was merely cursory. On the whole, Securitas asserts that the Division's handling of its protest in this case was not only contrary to the statutory procurement scheme but also violated Securitas's rights of due process. We disagree.
The applicable regulations spell out the Division's procedures for entertaining bid protests. In particular, N.J.A.C. 17:12-3.3(a)(2) provides that "[a] vendor, after submitting a proposal in response to an advertised RFP administered pursuant to N.J.S.A. 52:34-6 et seq., may submit a written protest to the Director concerning . . . [the] intent to award contract(s) pertaining to the subject procurement." The protest must "be filed within 10 business days following the vendor's receipt of written notification that its bid has not been accepted or of notice of the award decision." N.J.A.C. 17:12-3.3(b). The protest must "set forth, in detail, the [unsuccessful vendor's] specific grounds for challenging the award[,]" ibid., and must contain "[a] statement as to whether the protester requests an opportunity for oral presentation and the reason(s) for the request," N.J.A.C. 17:12-3.3(b)(1)(iii).
Any protest accepted by the Director shall be resolved by written decision on the basis of the Director's review of the written record including, but not limited to, the written protest, the terms, conditions and requirements of the RFP, the proposals submitted in response to the RFP, the evaluation committee report and/or the award recommendation document, pertinent administrative rules, statutes and case law, and any associated documentation the Director deems appropriate. [N.J.A.C. 17:12-3.3(d).]
N.J.A.C. 17:12-3.4 declares that "the Director is entitled to request, receive and review copies of any and all records and documents deemed appropriate and relevant to the issues and arguments set forth in the protest." He or she may request "the protesting vendor" to "promptly provide the requested records and documents," and "may also consider relevant information requested and received from other parties deemed appropriate[.]" Ibid.
Moreover, "[t]he Director, or the Director's designee from within or outside the Division, may perform a review of the written record or conduct an oral presentation[.]" N.J.A.C. 17:12-3.3(d)(2) (emphasis added). The Director, however, "has sole discretion to determine if an oral presentation by the protester is necessary to reach an informed decision on the matter(s) of the protest. Oral presentations are fact-finding for the benefit of the Director." N.J.A.C. 17:12-3.3(d)(1) (emphasis added). "In cases where no oral presentation is held, such review of the written record shall, in and of itself, constitute an informal hearing." N.J.A.C. 17:12-3.3(d).
Based on the considerable amount of information before the Acting Director, she needed no further fact-finding to issue her comprehensive decisions on December 29, 2010 and July 27, 2011, addressing each of Securitas's respective bid protests. The Acting Director manifestly considered the Division's detailed claims, Protection Plus's comprehensive response, the bidders' proposals, the current FPWR and PWR determinations, the RFP and its addenda, and the Purchasing Bureau's reports. It was not necessary for the Division to hold an informal hearing to allow Securitas to make an oral presentation or to permit Securitas to rebut Protection Plus's response.
Securitas relies on Commercial Cleaning Corp., supra, 47 N.J. at 550, in which the Supreme Court declared that "as a matter of good practice and fair procedure, an informal hearing or conference should be granted, if requested by a dissatisfied rejected bidder, particularly if he is the low bidder, prior to the execution of the contract with another bidder." (Empahsis omitted). Here, however, Securitas was never the lowest bidder. Moreover, it received a fair and ample opportunity to present its arguments and the facts that supported them in its numerous protest letters submitted to the Acting Director. A hearing need not be afforded so long as a protestor has "a fair opportunity . . . to present the facts and law supporting the protest." Nachtigall v. N.J. Tpk. Auth., 302 N.J. Super. 123, 143 (App. Div.), certif. denied, 151 N.J. 77 (1997).
Securitas further argues that it was unfairly denied an opportunity to make an oral presentation on its bid before the the Purchasing Bureau and that the oral presentations given by other bidders, including Protection Plus, were improperly broad in scope.
There is no statute, regulation, or case law mandating that a bidder be offered an opportunity to address the evaluation committee during a public solicitation. Section 6.3 of the RFP in this case stated that the evaluation committee may ask one, some or all of the bidders to clarify certain aspects of their proposals.
A request for clarification may be made in order to resolve minor ambiguities, irregularities, informalities or clerical errors. Clarifications cannot correct any deficiencies or material omissions or revise or modify a proposal, except to the extent that correction of apparent clerical mistakes results in a modification. [Emphasis added.]
In addition, Section 6.3 declared that a bidder "may be required to give an oral presentation to the State concerning its bid proposal." (Emphasis added). However, it was "within the State's discretion whether to require the bidder to give an oral presentation or require the bidder to submit written responses to questions regarding its bid proposal," and "[a]ction by the State in this regard should not be construed to imply acceptance or rejection of a bid proposal." Ibid.
Securitas never requested an oral presentation to support or clarify its own bid proposals. During its protests, Securitas only requested "an opportunity for a hearing . . . and to make an oral presentation . . . pertaining to the defective nature of the price amounts submitted by the two lowest bidders[,]" who Securitas alleged had submitted non-conforming bids with "artificially low prices." Hence, Securitas's requests to amplify its objections were not within the scope of Section 6.3 because they were not advanced to clarify Securitas's own bids, but rather to attack the bids submitted by two of its competitors.
Moreover, the record shows that the Division provided Securitas with an ample opportunity to express its objections.
Securitas transmitted numerous detailed letters to the Division expounding upon its prediction that Protection Plus and Tri-County would be unable to pay their workers the prevailing wages and benefits required by law. The Division's ultimate rejection of those contentions addressed the substance of those arguments. We detect no procedural unfairness or denial of due process in the manner in which the Division dealt with Securitas's objections. The Division did not misapply its discretion in declining to convene a formal hearing to permit Securitas to give an oral presentation. The law does not constrain the Division in choosing how to entertain protests from competing bidders, provided that the process on the whole is fair. Although reasonable minds might differ on the wisdom of withholding from Securitas Protection Plus's response to its protest, the procurement laws do not compel such an informational turnover. In that vein, we recognize the Division's interest in not having the bid protest process turn into a marathon of litigious formality, while a vital statewide contract is delayed.
For all of these reasons, we reject Securitas's procedural arguments.*fn12
We turn to Securitas's argument that the Division erred by not rejecting Protection Plus's bid proposals as materially defective and non-responsive. The thrust of this argument is that the all-inclusive price levels bid by Protection Plus are so low that Protection Plus will not obtain sufficient revenue under the contract to fulfill its obligation to pay its employees the required prevailing wages and other prescribed benefits. Securitas hypothesizes either that Protection Plus is likely to default on the contract and have to be replaced by a different company, or that Protection Plus will have to short-change its workers on their wages and benefits. The Acting Director was not persuaded by these gloomy prognostications about Protection Plus's ability to perform the contract, and neither are we.
It is undisputed that the all-inclusive price levels contained in Protection Plus's final bid submission, BAFO #2, each exceed the prevailing wage and benefit levels that existed at the time. Securitas maintains, however, that those price levels in its rival's bid do not adequately take into account other incidental expenses such as radios, vehicles, uniforms, and other items. To illustrate that contention, Securitas has presented, both in its submissions to the agency and now on appeal, a chart originally designated as "Exhibit B" to its counsel's November 16, 2010 correspondence to the Acting Director supplementing its bid protest. The chart assumes that the successful bidder would be responsible for an overall "required cost" of $9,026,384 annually to pay its employees the required wages and benefits. The chart further projects that the contractor would also need to pay annually an estimated $323,927 in certain additional costs, including $38,250 for uniforms, $139,457 for insurance, $92,970 in overtime, $38,250 in training costs, and $15,000 for a performance bond.*fn13 The chart further shows that Protection Plus's final bid in BAFO #2 projected payments from the State of $9,295,191.36, which is only $268,806.72 above the presumed annual minimum expense of $9,026,384.64 for prevailing wages and benefits. Securitas infers from that comparison that Protection Plus will be unable to perform the contract at a profit, because its $268,806.72 estimated "cushion" above the $9,026,384.64 prescribed minimum will be insufficient to cover the $323,927 (less the $15,000 performance bond) in annual expenses for uniforms, insurance, overtime, training, and other anticipated costs of performing the contract. By contrast, the chart indicates that Securitas's final bid in BAFO #2 would generate $9,927,823.36 in payments from the State, a margin of about $900,000 above the projected prevailing wages and benefits of $9,026,384.64.
Securitas's argument is somewhat akin to the common law doctrine of anticipatory breach: a predictive claim that a party to a contract will be unable to perform its end of the bargain, based upon conduct or statements by that party indicating its prospective inability to perform. The common law doctrine is triggered where "reasonable grounds support the obligee's belief that the obligor will breach the contract." Spring Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158, 179 (App. Div.) (quoting Danzing v. AEC Corp., 224 F.3d 1333, 1337 (Fed. Cir. 2000), cert. denied, 532 U.S. 995, 121 S. Ct. 1656, 149 L. Ed. 2d 638 (2001)), certif. denied, 196 N.J. 85 (2008). Although the circumstances here are different because Securitas is not a party to the contract between the State and Protection Plus, Securitas did not make a sufficient comparable showing of such anticipated failure here.
It cannot be overlooked that the actual contours of the contract for guard services were not known with certainty at the time of the procurement process. The precise number of guards needed at each facility owned or leased by the State was not conclusively established. In fact, the vendor must be prepared to increase or decrease the level of staffing flexibly at each site as the contract progresses. Some locations may be expanded in occupancy or have additional security needs for a variety of reasons. Other locations may have a reduced security need, or have a different mix of tenants and visitors.
The number and size of the State's cooperative purchasing partners also were unknown variables. An expansion of either could produce economies of scale with respect to the contractor's overhead and administrative costs. Additionally, the actual experience levels of the guards hired by the successful bidder were not known in advance. In that regard, Protection Plus represented that it expected to achieve significant savings on projected vacation pay by staffing with about seventy-five percent new hires who would not be eligible for vacation pay in their first year of service. The actual number of radios, vehicles, and other equipment necessary to perform the contract was also indefinite. Although Securitas correctly points out that any underpayment of health insurance costs by Protection Plus must be allocated to the employees pursuant to 41 U.S.C.A. § 6705, that does not preclude Protection Plus, as it has suggested, from obtaining other forms of insurance for the contract at more advantageous premium rates than Securitas has predicted.
Given these many variables, the apparent spread between the actual costs of performing this statewide contract and the revenue paid by the State may be considerably different from that predicted by Securitas. The Division evidently was comfortable in awarding the contract to Protection Plus with these inevitable uncertainties, and Protection Plus reciprocally expressed its commitment to honor the contract terms even if it had to do so without making a profit. The Division did not act arbitrarily or capriciously in choosing to make the award in that context in an effort to save the public money. Similarly, the Division recognized the State's prior favorable history with Protection Plus under a smaller contract.
We agree with the Division that the applicable bidding laws should not be construed to assure that the winning bidder turns a profit. The statutes and regulations do not require such an assurance. It is conceivable that a vendor may rationally want to obtain the State's business, even without an assured profit, because having a large contract with a public entity may well enhance its reputation and its ability to retain or attract other clientele. The bidder might also be able to borrow funds to meet its expenses if it does not have sufficient cash on hand to do so. The public has no obligation to subsidize a profit for a private enterprise. The law has long recognized that "[e]very contractor may apply [its] own business judgment in the preparation of a public bid[.]" Riverland Constr. Co. v. Lombardo Contracting Co., 154 N.J. Super. 42, 47 (App. Div. 1977), aff'd, 76 N.J. 522 (1978). The RFP similarly noted in Addendum #2, that the bidder's continued ability to deal with future increases in the prevailing wage involved a "business decision that should be made by the bidder." A contractor's willingness to receive less profit than a competitor or no assured profit at all is part of that business judgment. Because the record does not show that the Division's approach to this question was unreasonable, we should not second-guess it.
For these reasons, we affirm the Division's award of the contract to Protection Plus, and its rejection of Securitas's bid protests.
We reach a different conclusion with respect to Securitas's challenge in A-0894-11 to the Division's award of a price increase to Protection Plus at virtually the outset of the contract.*fn14
The relevant background is as follows. After the Acting Director initially announced in December 2010 her intention to award the contract to Protection Plus, the federal and state prevailing wage levels were increased in January 2011 and then again in June 2011. Protection Plus did not seek immediate relief from the Division arising from the prevailing wage increases. Instead, Protection Plus waited until August 2011, shortly after it had been awarded the contract, to request a price increase from the Division because of the intervening hikes in the prevailing wage levels. In its request, Protection Plus invoked Section 5.19 of the RFP. The Acting Director granted the price increase on September 8, 2011, one day after she executed the contract. The price adjustment, which became effective as of October 3, 2011, results in an increase of approximately $111,000 in the first year of the three-year contract.
Securitas filed a protest of the price increase with the Division, arguing that it was unauthorized by the applicable statutes as well as the bid specifications in the RFP. Securitas further maintained that the price increase, in effect, constituted a material change in the terms of the procurement. According to Securitas, had it and the other bidders known in advance that such an immediate price increase would be obtainable in the first year of the contract, that could have affected their strategy in submitting their bids.
The applicable statutory provision, N.J.S.A. 34:11-56.60, authorizes the Division to grant "annual adjustments of the prevailing wage for building services during the term of the contract[.]" There is no useful legislative history shedding light on the intended meaning of that phrase. However, in construing a statute, courts afford the words used in the legislation their ordinary and usual meaning and "read them in context with related provisions so as to give sense to the legislation as a whole[.]" DiProspero v. Penn, 183 N.J. 477, 492 (2005), see also N.J.S.A. 1:1-1. Where the language is "'clear and unambiguous,'" the statute is enforced as written. Middletown Twp. PBA Local 124 v. Twp. of Middletown, 193 N.J. 1, 12 (2007) (quoting Comm. to Recall v. Casagrande, 304 N.J. Super. 496, 510 (Law Div.), aff'd, 304 N.J. Super. 421 (App. Div. 1997)).
To be sure, the public policies embodied in the SBSCA strive to assure that building service workers on State-owned or State-leased properties receive appropriate wages and benefits and thus are protected "from the effects of serious and unfair competition based on low wage levels which are detrimental to efficiency and well-being." N.J.S.A. 34:11-56.58. That policy also protects employers who pay the workers at prevailing wage levels from unfair practices by their competitors. Ibid. These objectives do not, however, require the Division to make immediate, dollar-for-dollar price adjustments on outstanding contracts. Instead, the statute's explicit allowance for "annual" adjustments inherently contemplates some lag time in increasing the contract prices when the prevailing wage rises.
Section 5.19, the RFP provision relied upon by Protection Plus when it sought the price adjustment in August 2011, reinforces the conclusion that the term "annual adjustments" in the statute contemplates that a vendor must wait until the end of a contract year before seeking a price increase on this basis from the State. In fact, Section 5.19 is expressed in a clearly-prospective manner:
If the Prevailing Wage Act (N.J.S.A. 34:11-56 et seq.) is applicable to the contract, the contractor may apply to the Director, on the anniversary of the effective date of the contract, for a contract price increase. The contract price increase will be available only for an increase in the prevailing wages of trades and occupations covered under this contract during the prior year. The contractor must substantiate with documentation the need for the increase and submit it to the Director for review and determination of the amount, if any, of the requested increase, which shall be available for the upcoming contract year. No retroactive increases will be approved by the Director. [RFP, Section 5.19 (emphasis added).]
The process outlined in this RFP provision clearly envisions that the contractor must await the completion of the first year of the contract before seeking a price increase. Moreover, any such price increase approved by the Division is not applied retroactively, but instead only is "available for the upcoming contract year." Ibid.
The plain language of the statute and the RFP, therefore, required Protection Plus to wait a full year before applying for a price increase based on interim increases in the federal and state prevailing wage. Instead, Protection Plus's request came only one week after the effective date of Protection Plus's designation as the State vendor for the contract; one week after the contract's ordering period began; and three weeks after the Acting Director denied Securitas's second protest to her intent to award the contract to Protection Plus. The request was thus premature, both under the statute and the bidding specifications. Securitas's complaint about the increase is justified.
Protection Plus and the Division defend the October 2011 price adjustment by emphasizing that the delay in the start date of the contract was largely the result of the bid protests by Tri-County and Securitas. That may be so, but it does not allow the agency to deviate from the plain terms of the statute and the bidding specifications, which require that as a predicate to relief, the contractor perform the contract for a full year.
Notably, despite the two announced increases in prevailing wage rates in January 2011 and June 2011, Protection Plus took no action before the commencement of the contract to revise its bid accordingly. In particular, Protection Plus did not invoke Section 5.18 of the RFP, which authorizes the Division to make "equitable adjustment[s]" of the contract as the result of changes in laws or regulations. Such a request under Section 5.18 conceivably might have triggered protests from other bidders before the contract started. Instead, Protection Plus waited until the bid protests were administratively denied by the Division and its contract award had been finalized. Although we do not judge whether such possibly-strategic timing by Protection Plus was improper, the timing does not enhance Protection Plus's claim of inequity.
Consequently, we reverse the price adjustment granted by the Division on September 8, 2011 and require Protection Plus to wait a full year before seeking an "annual adjustment" of its contract prices.*fn15 To allow for an orderly implementation of our decision, the rescission of the adjustment will not be effective until March 1, 2012. If prior to that date, either respondent files a petition or cross-petition for certification with the Supreme Court, our ruling on this issue is automatically stayed pending Supreme Court review unless and until the Court otherwise directs.
The Division's final agency decisions in A-2608-10 and in A-5965-10 respecting the contract award to Protection Plus are affirmed, and its decision in A-0894-11 granting a price adjustment is reversed.