January 17, 2012
IN THE MATTER OF BID SOLICITATION NO. 10-X-21024, AIRPORT OPERATOR FOR SOUTH JERSEY REGIONAL AIRPORT.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 14, 2011
Before Judges A. A. Rodriguez, Ashrafi and Fasciale.
On appeal from the Division of Purchase and Property, Department of Treasury.
Arthur L. Porter, Jr. argued the cause for appellant South Jersey Regional Airport, LLC (Fischer Porter Thomas & Reinfeld, P.C., attorneys; Mr. Porter, of counsel; Aaron E. Albert and Albert O. Kwon, on the brief). Kimberly A. Sked, Deputy Attorney General, argued the cause for respondent Division of Purchase and Property, Department of the Treasury (Paula T. Dow, Attorney General, attorney; Beth Leigh Mitchell, Assistant Attorney General, of counsel; Ms. Sked, on the brief).
South Jersey Regional Airport, LLC, (SJRA) appeals from the June 29, 2010 decision of the Division of Purchase and Property (the Division) to award Cave Flight School, LLC, (Cave) a contract to operate a State-owned airport, and the Division's September 24, 2010 decision rejecting SJRA's protest. We affirm.
In late 2007, the Division published a request for proposals on a long-term contract to operate the State's regional airport located in Lumberton, Burlington County. SJRA was the operator of the airport at the time of the request for proposals. SJRA, Cave, and one other bidder submitted bids in 2007. The Division rejected all three bids based upon a 2008 report by an evaluation committee that found flaws in each bid. The 2008 committee rejected SJRA's bid because it did not conform to the mandatory pricing terms of the request for proposals. It rejected Cave's bid because the committee perceived a potential conflict of interest in Cave's plan to intermingle the State's resources and personnel with those of the Flying W Airport, a private regional airport located two miles from the State's airport and owned by Cave. The 2008 committee found that the two airports were competitors and that the Flying W Airport had increased its aircraft tenants through defections from the State's airport.
In June 2009, the Division again published a request for proposals, calling for bids on a twenty-year contract to operate the State's airport. The 2009 request instructed bidders to propose a plan to increase airport services and improve its infrastructure. Six bids were submitted, including bids by SJRA and Cave.
The new bids were reviewed in 2010 by an evaluation committee of five voting members who had experience either with complex procurement contracts or with airport operations. None of the 2010 committee members were voting members of the 2008 committee. Each committee member was required to assess the merits of a bid in five categories: the general approach of the proposal, a detailed technical plan, the bidder's experience in performing similar contracts, the qualifications of personnel who would operate the airport, and the bidder's ability to mobilize and execute the contract. Unlike 2008, the 2010 assessment weighted the five categories differently, adding importance to the qualified personnel component and deemphasizing the detailed technical plan component.
After opening the bids but before scoring them, the committee allowed two bidders to submit additional documentation. Cave was permitted to submit a missing subcontractor set-aside form and an attachment required with the ownership disclosure form.
Subsequently, the committee scored the bids in accordance with the scoring rubric stated in the request for proposals and concluded that SJRA and Cave had submitted the two best bids. Both were invited to make oral presentations and to submit a best and final offer. The committee then issued a report recommending Cave be awarded the contract because it offered better pricing, personnel, plan to improve services, and track record in operating a regional airport. The report found SJRA's bid was technically sound but offered inferior pricing, personnel, and plan for developing the airport.
The Director issued a notice of intent to award the contract to Cave. SJRA filed a formal protest pursuant to N.J.A.C. 17:12-3.1 and -3.3, arguing that Cave's bid should be rejected because it would be a conflict of interest for Cave to operate simultaneously the State's airport and its privately-owned airport. SJRA also alleged the committee overlooked various technical errors in Cave's bid. It urged the Director to award the contract to SJRA.
The Director issued the final agency decision on September 24, 2010, rejecting SJRA's arguments and awarding the contract to Cave. In a comprehensive letter, the Director explained why Cave's bid conformed to the State's specifications, demonstrated technical superiority, and met the taxpayers' best interests. The Director also found that Cave's simultaneous operation of the two airports did not pose a conflict of interest.
SJRA filed a notice of appeal from the Director's decisions. We denied SJRA's motion for a stay, and Cave took control of the airport operations on January 1, 2011.
In purchasing articles and services for the State: "award 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 . . . ."
N.J.S.A. 52:34-12a(g). The Division's Director is given great flexibility and deference in determining which responsive bid is most advantageous to the State. Keyes Martin & Co. v. Dir., Div. Of Purchase & Prop., 99 N.J. 244, 253 (1985); Commercial Cleaning Corp. v. Sullivan, 47 N.J. 539, 548-49 (1966).
As an appellate court, we apply a strictly limited standard of review to a decision by the Director to award a public contract. George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994); Keyes Martin & Co., supra, 99 N.J. at 253; Commercial Cleaning Corp., supra, 47 N.J. at 548-49. Generally, decisions preceding the Director's final business judgment in awarding a contract, such as whether a bid conforms to specifications, are governed by the usual standard of review for administrative action, that is, whether the governmental action is arbitrary, capricious, or unreasonable. In re On-Line Games Prod. & Operation Servs. Contract, Bid No. 95-X-20175, 279 N.J. Super. 566, 593 (App. Div. 1995); accord State v. Ernst & Young, L.L.P., 386 N.J. Super. 600, 619 (App. Div. 2006). As to the Director's ultimate judgment in awarding the contract or rejecting a bid, the standard of review is even more restricted. We will not interfere with the decision "in the absence of bad faith, corruption, fraud or gross abuse of discretion." In re On-Line Games, supra, 279 N.J. Super. at 592 (quoting Commercial Cleaning Corp., supra, 47 N.J. at 549); accord DGR Co. v. State, 361 N.J. Super. 467, 474 (App. Div. 2003).
SJRA argues that the Director erred by not rejecting Cave's bid in 2010, as was done in 2008, because operating both the State's airport and Cave's privately-owned airport creates a conflict of interest. The Director was not bound by the finding of a conflict of interest by the 2008 committee. The Director must exercise business judgment "based on all available data, expertise, and advice . . . from all available sources." In re Honeywell Info. Sys., Inc., 145 N.J. Super. 187, 200 (App. Div. 1976), certif. denied, 73 N.J. 53 (1977).
Different individuals on the 2010 committee evaluated a different bid in 2010. The 2010 committee questioned Cave on the joint operation of the two airports and was persuaded that Cave's new plan would allow the airports to operate without conflict and competition and did not involve pooling of the two airports' resources. The 2010 committee concluded that Cave could achieve the State's goal of increasing the customer base for its airport by marketing the State's longer runway to larger aircraft operators, which the runway at the Flying W Airport could not accommodate. The Director did not abuse his discretion when he gave more weight to the findings of the 2010 committee than the 2008 committee. We are not at liberty to disregard administrative fact finding and discretionary decisions when supported by the record. See George Harms Constr., supra, 137 N.J. at 27.
SJRA also fails to point to any provision in the request for proposals, or to any legal authority, that supports its assertion that a conflict of interest as in the circumstances in this case disqualified Cave. All public contracts prohibit bids when there is a conflict between the bidder and a government employee. N.J.A.C. 12:3-1.6. Public contracts also require bidders to disclose any individual who owns a ten percent or greater interest in the bidder to ensure potential conflicts can be readily identified. N.J.S.A. 52:25-24.2; see N.J.A.C. 12A:4-9.1 (Director "may" reject bid for failing to disclose ownership interest). Here, Cave's ownership of a nearby airport was disclosed so that a potential conflict could be considered, and there is no allegation of a conflict with a government employee.
We are not persuaded by SJRA's argument that the Director's decision frustrates the legislative policies of public bidding laws. "Bidding statutes . . . guard against favoritism, improvidence, extravagance and corruption . . . . To achieve these purposes all bidding practices which are capable of being used to further corrupt ends or which are likely to affect adversely the bidding process are prohibited." Keyes Martin & Co., supra, 99 N.J. at 256 (quoting Terminal Const. Corp. v. Atl. City Sewerage Auth., 67 N.J. 403, 409-10 (1975)). SJRA does not claim that Cave's alleged conflict undermined an open and competitive bidding process.
Nor was the Director arbitrary, capricious, or unreasonable in declining to disqualify Cave because of an appearance of a conflict. See Keyes Martin & Co., supra, 99 N.J. at 252-60; Nachtigall v. N.J. Tpk. Auth., 302 N.J. Super. 123, 140-43 (App. Div.), certif. denied, 151 N.J. 77 (1997). Should a conflict of interest in fact prevent Cave from performing its contract to the advantage of the State, the State Department of Transportation can file a complaint under N.J.A.C. 17:12-4.3b(7) with the Division's contract compliance unit to protect the taxpayers' interests.
Next, SJRA contends that Cave's bid was nonconforming because it deviated from technical specifications in the request for proposals. As the Director thoroughly explained in his decision letter, however, Cave's bid contained the mandatory technical specifications.
A bid that deviates from specifications must be rejected unless the deviation is a waivable, immaterial term. Meadowbrook Carting Co. v. Bor. of Island Hts., 138 N.J. 307, 314-15 (1994). "The preliminary inquiry is whether the bid deviates from the [request for proposals]. 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." In re On-line Games, supra, 279 N.J. Super. at 594; accord In re Jasper Seating Co., Inc., 406 N.J. Super. 213, 223-24 (App. Div. 2009). We review the Director's decision as to deviation and materiality under the arbitrary, capricious, or unreasonable standard of review. DGR Co., supra, 361 N.J. Super. at 474.
Here, Section 4 of the request for proposals sets forth the form and substance of a conforming bid. It explicitly distinguishes between mandatory and recommended specifications. Those that include the word "shall" or "must" are defined as "mandatory requirements" and "[f]ailure to meet a mandatory requirement . . . result[s] in the rejection of a bid." By contrast, specifications that include the word "may" or "should" are defined as "not mandatory" requirements. Cave included all mandatory specifications but omitted many of the recommended specifications. The Director reasonably concluded that Cave's bid did not omit mandatory technical specifications.
SJRA also argues that Cave's bid was nonconforming because it omitted the subcontractor set-aside form and an attachment required with the owner disclosure form, both of which were submitted after the bids were opened.
The Supreme Court has observed that: "Settled principles of public bidding dictate that no material element of a bid may be provided after bids are opened . . . to prevent any possibility of favoritism." George Harms Constr., supra, 137 N.J. at 37 (citations omitted); see N.J.A.C. 17:12-2.2(a)-(b) (failure to include required forms and attachments results in automatic rejection of bid). The request for proposals in this case authorized the reviewing committee to allow a bidder to "clarify" a proposal to "resolve minor ambiguities, irregularities, informalities or clerical errors," but not to "correct any deficiencies or material omissions" and "except to the extent that correction of apparent clerical mistakes results in a modification." Cf. In re On-Line Games, supra, 279 N.J. Super. at 595-97; In re Jasper Seating Co., supra, 406 N.J. Super. at 223-24 (clarification of bid post-opening permissible if modified term was immaterial).
Here, the committee permitted supplementing of the documents to correct the equivalent of a clerical error. The purpose of the missing form was to indicate whether subcontractors would be used. The purpose of the missing attachment was to describe a criminal conviction of Cave's principal. In other parts of its bid, Cave indicated it would not use subcontractors and disclosed the prior conviction of its owner. Both pieces of information were already contained in the bid. By allowing Cave to submit the omitted form and attachment, the committee allowed Cave to amplify information, not to alter its proposal. See In re On-Line Games, supra, 279 N.J. Super. at 597 (distinguishing between a bidder explaining or amplifying "what is already there" from "alter[ing] what is there").
Next, SJRA contends that even if Cave's bid was conforming, the Director's decision constitutes a gross abuse of discretion because he relied upon a flawed committee recommendation. It argues the 2010 committee's assessment of the bids was arbitrary and unreliable because of the drastic difference in scoring of the bids by the 2008 and 2010 committees.
The Director's reliance upon the 2010 committee's scoring does not constitute a gross abuse of discretion. The committee members individually assessed and scored each bid, applying the rubric provided in the later request for proposals. The scoring rubrics were not identical in 2008 and 2010. The categories used for scoring were weighted differently and may have favored Cave's bid in 2010.
After consideration of the record and arguments presented, we conclude that SJRA's allegations of bias and misleading pricing projections lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We reject those arguments for the reasons stated in the Director's September 24, 2010 decision.
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