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A&A Industrial Piping, Inc v. County of Passaic and Tomar Construction L.L.C


April 25, 2012


On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-1206-11.

Per curiam.


Argued March 7, 2012

Before Judges Fuentes, Koblitz and Haas.

Appellant A&A Industrial Piping, Inc. (A&A) appeals from the May 10, 2011 order authorizing Passaic County to reject all bids for installation of upgrades to the heating, ventilation and air conditioning (HVAC) and fire protection systems for the Passaic County Jail, Phase II (Project), and allowing a rebid. A&A maintains that the re-bid is not statutorily permitted, and thus as the lowest responsible bidder, A&A must be awarded the contract. After reviewing the record in light of the contentions advanced on appeal, we affirm.

In December 2010, a Notice to Bidders for the Project advised that sealed bids would be accepted on January 5, 2011. Part I of the Notice is divided into three sections. The first section contains the specifications as prepared by the Passaic County Procurement Center. The second section consists of the Instructions to Bidders and General Conditions issued by the State of New Jersey Department of Treasury, Division of Property Management and Construction (DPMC Specifications), advising bidders of the requirements for state contracts. The third section contains the County's Supplementary Specifications (County Specifications), which includes amendments and revisions to the DPMC Specifications, including the elimination of the section requiring pre-qualification of bidders and subcontractors.

Tomar Construction (Tomar) was the lowest bidder by more than $1,000,000 at $4,245,000. A&A was the second lowest bidder. Tomar's bid, as required, included the names of subcontractors it intended to use on the Project. Tomar identified itself as the contractor to perform the project's HVAC and structural steel work. Although Tomar provided licensing documentation for its plumbing and electrical subcontractors,*fn1 and a business permit for the sprinkler system installer, it failed to provide any evidence that it was qualified to perform HVAC or structural steel work. A&A's bid indicated its intention to use a subcontractor for the structural steel portion of the project. Its bid listed its subcontractors and included documentation from the DPMC and other state agencies and trade organizations to evidence its subcontractors' qualifications.

On January 10, 2011, A&A protested the County's consideration of Tomar's bid, asserting the bid was materially defective under N.J.S.A. 40A:11-23.2. Specifically, A&A challenged Tomar listing itself as the structural steel contractor because it was not qualified by the DPMC to perform such work.*fn2 A&A also advanced a related argument that Tomar violated N.J.S.A. 40A:11-16 by listing itself as the structural steel contractor when it likely intended to use a subcontractor to perform the work.

Tomar responded on January 13, 2011. Tomar's letter referred A&A to the portion of the County Specifications that eliminated the bidder pre-qualification requirement found in the DPMC Specifications. Tomar also indicated it was "well qualified to carry out structural steel work." Tomar provided evidence of its capacity to perform such work and its experience.*fn3

Pursuant to the recommendation of the Passaic County Engineer, the Passaic County Board of Chosen Freeholders adopted a resolution on February 8, 2011, that rejected all bids, authorized a re-bid and announced the project specifications would be revised in accordance with the engineer's recommendation "to include pre-qualification requirements for contractors and subcontractors which were inadvertently omitted previously[.]"

On March 15, 2011, A&A filed an order to show cause contesting the resolution's legality. The trial judge denied the order to show cause, dismissed the accompanying complaint and approved the resolution authorizing a re-bid.*fn4

The judge determined that the County's project specifications mistakenly omitted a bidder pre-qualification requirement and that Tomar relied on this omission in preparing and submitting its bid. The judge concluded that the County's decision to incorporate the DPMC's pre-qualification requirement justified a rejection of previously received bids and a re-bid under N.J.S.A. 40A:11-13.2(d).

"A municipality has a well-recognized right to reject all bids received for a public project." PENPAC, Inc. v. Morris Cnty. Mun. Utils. Auth., 299 N.J. Super. 288, 295 (App. Div.), certif. denied, 150 N.J. 28 (1997) (citations omitted). While this right is a "discretionary privilege," it is "not without limit." Id. at 296 (quoting Bodies by Lembo, Inc. v. Cnty. of Middlesex, 286 N.J. Super. 298, 308 (App. Div. 1996)).

When assessing the validity of bid rejections, the scope of appellate review is limited. Id. at 297. A municipal body's decision may not be overturned unless the reviewing court finds "the decision was arbitrary, capricious and unreasonable." Ibid. (quoting Palamar Constr., Inc. v. Twp. of Pennsauken, 196 N.J. Super. 241, 250 (App. Div. 1983)). "'Even when doubt is entertained as to the wisdom of the action, or as to some part of it, there can be no judicial declaration of invalidity in the absence of clear abuse of discretion by the public agencies involved.'" Palamar, supra, 196 N.J. Super. at 250 (quoting Kramer v. Sea Girt Bd. of Adj., 45 N.J. 268, 296 (1965)).

N.J.S.A. 40A:11-13.2(d) provides that a public entity is permitted to reject bids to "substantially revise the specifications for the goods or services . . . ." A&A contends that the pre-qualification of certain specialty subcontractors is statutorily mandated for public bids, regardless of whether or not the bid specifications explicitly require such pre-qualification. See N.J.S.A. 40A:11-16(a). Therefore, in A&A's view, a re-bid is unwarranted because the inclusion of such language in the new project specifications merely confirms an existing statutory requirement, and is therefore neither "substantial" nor a "revision" under N.J.S.A. 40A:11-13.2(d).

N.J.S.A. 40A:11-16(a) does require that certain subcontractors be qualified to perform the work for which they are listed by the bidder. In pertinent part, N.J.S.A. 40A:11-16(a) reads as follows:

The contracting agent shall advertise for and receive, in the manner provided by law, either (a) separate bids for each of said branches of work, or (b) bids for all the work, goods and services required to complete the building to be included in a single overall contract, or (c) both. In the case of a single bid under (b) or (c), there shall be set forth in the bid the name or names of all subcontractors to whom the bidder will subcontract the furnishing of plumbing and gas fitting, and all kindred work, and of the steam and hot water heating and ventilating apparatus, steam power plants and kindred work, and electrical work, structural steel and ornamental iron work, each of which subcontractors shall be qualified in accordance with P.L.1971, c.198 (C.40A:11-1 et seq.). [N.J.S.A. 40A:11-16(a) (emphasis added).]

Subsection 1.1.24 of the DPMC Specifications defines a subcontractor as "[t]he person or persons, partnership, or corporation that enters into a contract with the contractor for the performance of work under this contract, or the subcontractors or any tier of such individual or corporation."*fn5

Tomar did not list itself as a "subcontractor" for the structural steel work. Instead, its bid stated the work would be "self-performed by [b]idder." Because Tomar was not a subcontractor, it was not bound by N.J.S.A. 40A:11-16(a). The County's bid specification explicitly eliminated the DPMC pre-qualification requirement for bidders, stating "[t]he County does not require the [b]idder to be pre-qualified." Thus, under the specifications, Tomar was not required to submit its qualifications to perform the structural steel portion of the contract.

Tomar, as a prime contractor, is prohibited from hiring subcontractors not named in the bid after receiving the award of a public contract. See, e.g., O'Shea v. N.J. Schs. Constr. Corp., 388 N.J. Super. 312, 322 (App. Div. 2006); Gaglioti Contracting, Inc. v. City of Hoboken, 307 N.J. Super. 421, 431, (App. Div. 1997). The County maintains that it never intended to have structural steel work performed by either a prime or subcontractor without DPMC certification. N.J.S.A. 40A:11-13.2d permits a contracting unit to reject all bids if it "wants to substantially revise the specifications for the goods or services[.]"

"Goods or services" is defined by N.J.S.A. 40A:11-2 as "any work, labor, commodities, equipment, materials, or supplies of any tangible or intangible nature, except real property or any interest therein, provided or performed through a contract awarded by a contracting agent[.]" In its original bid, the County explicitly stated that bidders need not be pre-qualified. The County now seeks to amend its bid specifications to provide for the exact opposite, that all work performed is done by pre-qualified prime and subcontractors. This change constitutes a substantial revision to "the specifications for the goods or services" related to the project.*fn6

Rather than award the contract to Tomar under the bid's previous terms, the County elected to reject all bids, revise the bid specifications to incorporate the DPMC prime and subcontractor pre-qualification requirement, and re-bid the project.*fn7 This course of action is reasonable in light of the goals of public bidding laws to maintain an equal playing field and to achieve the most economically beneficial result. See CFG Health Sys., LLC v. Cnty. of Essex, 411 N.J. Super. 378, 389 (App. Div.), certif. denied, 202 N.J. 44 (2010); PENPAC, supra, 299 N.J. Super. at 294 (quoting Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 313 (1994)).

Tomar submitted the lowest bid by over one million dollars. The County's elimination of a bidder pre-qualification requirement may have influenced Tomar's overall bid price. The County's decision to incorporate the State DPMC's pre-qualification requirement corrects that error and places potential bidders on an equal footing. At the very least, a rebid (1) guarantees the work will be performed by pre-qualified prime and subcontractors and (2) levels the playing field by ensuring that bidders are guided by a uniform understanding of the County's bid requirements and are not misled by mistakes or omissions in the specifications. See CFG Health Sys., supra, 411 N.J. Super. at 389 (noting the public bidding laws are designed "to promot[e] competition on an equal footing . . . .") (alteration in original). Thus, the County's decision to reject all bids received on January 5 and re-bid the project was not arbitrary, capricious or unreasonable. See PENPAC, supra, 299 N.J. Super. at 297 (quoting Palamar, supra, 196 N.J. Super. at 250).

A&A asserts that the County sought a re-bid to have Tomar awarded the contract as a "favorite son." This assertion is entirely unsupported by the record. A&A presented no evidence whatsoever to demonstrate any "'favoritism, improvidence, extravagance [or] corruption.'" Id. at 294 (quoting Meadowbrook Carting Co., supra, 138 N.J. at 313) (internal quotation marks omitted).

A&A also contends on appeal that Tomar's bid is materially defective under N.J.S.A. 40A:11-16 "due to its failure to name qualified subcontractors to perform required work at the Project." A&A further asserts that its own bid was in full compliance with both the law and the County's specifications. For these reasons, A&A maintains that it should be awarded the contract pursuant to the January 5, 2011 bid opening.

Publicly advertised contracts must be awarded "to the lowest bidder that complies with the substantive and procedural requirements in the bid advertisements and specifications." Meadowbrook Carting Co., supra, 138 N.J. at 313. "Strict compliance is required, and a [county] generally is without discretion to accept a defective bid." Id. at 314. "'[A]ll bids must comply with the terms imposed, and any material departure invalidates a nonconforming bid . . . .'" CFG Health Sys., LLC v. County of Hudson, 413 N.J. Super. 306, 315 (App. Div. 2010) (quoting Meadowbrook Carting Co., supra, 138 N.J. at 313).

N.J.S.A. 40A:11-16 states that a bidder must set forth the names of the qualified subcontractors it intends to use on a project. When the bid specifications require bidders to submit a list of subcontractors and a bidder fails to comply, a fatal defect in the bid arises under N.J.S.A. 40A:11-23.2. Thus, A&A is correct in asserting that a bid is materially defective if a bidder fails to adhere to those terms. See N.J.S.A. 40A:11-16(a); N.J.S.A. 40A:11-23.2. The County does not dispute this.

Notably, however, A&A attempts to extend the requirements of N.J.S.A. 40A:11-16(a), which govern subcontractors in public bids, to situations where a prime contractor enlists itself to perform structural steel work. As the previous section explained, Tomar is not a subcontractor for purposes of this bid. Thus, the qualification requirement of N.J.S.A. 40A:11-16(a) does not, on its face, apply to Tomar.

A&A cites to three cases, all of which deal with facts distinguishable from those here. A&A first cites to Star of Sea Concrete Corporation v. Lucas Brothers, Inc., 370 N.J. Super. 60 (App. Div. 2004). In that case, the bid specifications explicitly required bidders to include a list of subcontractors they intended to use on the project. Id. at 65. The low bidder altogether failed to include such a list in its bid. Ibid. The Appellate Division found this oversight constituted a material defect under N.J.S.A. 40A:11-23.2. Id. at 70. A&A's argument equating a bidder's alleged lack of qualifications to perform certain work with a bidder's complete failure to provide a list of its subcontractors is unpersuasive.

In Stano v. Soldo Construction Company, 187 N.J. Super. 524 (App. Div. 1983), Soldo was awarded a public contract as the low bidder. Id. at 529. Soldo's bid set forth the names of its subcontractors, one of which was named as the subcontractor for electrical, plumbing, and heating work on the project. Ibid. That particular subcontractor, however, was pre-qualified by the State's Department of Building and Construction*fn8 only as an electrical contractor. Id. at 529-30. Stano challenged Soldo's bid on the basis that its listed subcontractor was unqualified to perform the plumbing and heating work, which rendered its bid defective. Id. at 530. The court determined that this subcontractor "was not licensed to do such work, [which, combined with] the lack of evidence that it had ever done such work," was sufficient grounds to conclude "that it was not in the best interest of the municipality to award the contract to a bidder employing such a subcontractor." Id. at 535. Tomar is itself not a subcontractor on this bid; nor did Tomar list an unqualified subcontractor to perform the structural steel work.

A&A next cites to O'Shea v. New Jersey Schools Construction Corporation, 388 N.J. Super. 312 (App. Div. 2006). A&A relies on this case for the proposition that a material requirement of all bids on public contracts is that the bidder name its subcontractors. In O'Shea, we were asked to assess whether a prime contractor may "substitute major trade subcontractors for those listed in the [prime] contractor's bid documents after the bid has been awarded," or whether such conduct violated N.J.S.A. 40A:11-16. Id. at 315. After a review of the relevant case law, we determined that "[t]he statute is [to be] strictly construed to require the prime contractor to use the subcontractors listed in [its] bid documents." Id. at 322. O'Shea is also inapplicable to the facts here.

Unlike in the cases cited by A&A, Tomar did not fail to list its subcontractor for the structural steel work, Star of Sea, supra, 370 N.J. Super. at 70; it did not list an unqualified subcontractor, Stano, supra, 187 N.J. Super. at 529-30; and it did not attempt a post-award subcontractor substitution, O'Shea, supra, 388 N.J. Super. at 320-22. It enlisted itself, as the bidder, to perform the structural steel work. The County explicitly eliminated any bidder pre-qualification requirements. Thus, Tomar's bid was in compliance with the County's bid specifications.

We agree with the judge that Passaic County did not abuse its discretion in determining that it needed to rebid the Project to ensure only DPMC-qualified contractors and subcontractors performed the job.


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