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Cfg Health Systems, L.L.C v. County of Hudson

July 19, 2012


On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-6428-10.

Per curiam.


Argued January 18, 2012

Before Judges Yannotti, Espinosa and Kennedy.

Defendant Correctional Health Services, LLC (CHS) appeals from a judgment entered by the trial court on April 1, 2011, which ordered the Board of Freeholders (Board) of the County of Hudson (County) to adopt a resolution awarding a medical services contract for the County's correctional system to plaintiff CFG Health Systems, LLC (CFG). We affirm.


This appeal arises from the following facts, which we draw from the record before the trial court.

A. First Procurement Process.

In September 2003, the County awarded a five-year contract to CHS to provide medical and mental health services to inmates at the Hudson County Correctional Center (HCCC) and the Hudson County Juvenile Detention Center (HCJDC). Prior to the expiration of the contract, the County issued a publicly-advertised request for proposals (RFP) on a new five-year contract for the services. In November 2008, CFG and CHS submitted bids in response to the RFP.

The County established an evaluation committee, which reviewed the proposals and recommended that the contract be awarded to CHS. Thereafter, the County had an expert review the staffing needs for the correctional facilities. Before receiving the expert's report, the Board adopted a resolution awarding the contract to CHS.

Thereafter, the County received the report, which recommended a substantial reduction in the number of staffing hours required under the contract. The County and CHS agreed to change the contract's staffing requirements and in August 2009, the Board adopted a resolution awarding a revised contract to CHS based on its bid and the agreed-upon revised staffing requirements.

CFG filed an action in the Law Division challenging the award of the modified contract. On December 16, 2009, the trial court filed an opinion in which it concluded that the revised contract was invalid because it reflected material, post-award changes to the RFP in violation of the Local Public Contracts Law (LPCL), N.J.S.A. 40A:11-1 to -51. The court rejected, however, CFG's demand for an order requiring a re-bid of the contract, noting that the County had the discretion to terminate the original contract awarded in April 2009 and re-bid the contract.

The trial court entered an order memorializing its decision. CHS and the County appealed, and CFG cross-appealed. We affirmed the trial court's order on the appeal and cross-appeal. CFG Health Systems, LLC v. County of Hudson, 413 N.J. Super. 306, 322 (App. Div. 2010).

B. Second Procurement Process.

The County subsequently elected to terminate the original agreement and seek new bids on the contract. On March 2, 2010, the County issued a publicly-advertised RFP. Thereafter, CFG and CHS submitted proposals. The CFG bid was $21,326,472, and the CHS bid was $21,406,008. The County established an evaluation committee, which reviewed the proposals and recommended an award to CHS, noting that CHS had received a total score of 567 in the evaluation, while CFG received a score of 535.

The Committee's recommendation was presented to the Board on August 10, 2010. One Board member expressed concerns about the recommendation. The Board took no action on the contract and instead referred the matter to the Board's Contract Review Committee (CRC) for further consideration.

The CRC met on September 8, 2010, to discuss the recommendation. Three members of the evaluation committee were in attendance: the Deputy County Administrator, the County Director of Corrections, and Dr. Francis Molinari (Dr. Molinari), the Physician Liaison to the County Corrections Department.

At the meeting, two members of the Board inquired as to the possible bias of members of the evaluation committee, in view of the fact that CHS had been providing medical health services to the County's correctional facilities for the previous nineteen years. Dr. Molinari stated that he had "intimate contact" with CHS and it was hard for him to make a decision on the contract award when he was working with the company. Dr. Molinari said his "decision was basically tainted because [he] was working in the system."

An Assistant County Counsel stated that Dr. Molinari's statements came as a surprise to her because they were contrary to the advice the doctor had given the evaluation committee. The Assistant County Counsel said she had informed the evaluators that if they felt at any point that there was going to be a conflict, they should not participate in the evaluation. Dr. Molinari commented that a bidder seeking the contract would be at a disadvantage in competing against a bidder that had been providing the services.

County Counsel stated she was concerned about whether the purpose and intent of the LPCL had been violated by Dr. Molinari's participation in the evaluation. County Counsel directed the Assistant County Counsel to review the contracting process to determine whether Dr. Molinari's apparent bias had tainted the process.

County Counsel considered the results of that review. He concluded that Dr. Molinari had been involved in the entire contracting process and his admitted bias in favor of CHS undermined its integrity. He recommended to the County Administrator that the County reject all bids, award a one-year contract to CHS, and seek new proposals on either a three-year or five-year contract.

The Board considered the recommendation in executive session on October 12, 2010. At the Board's October 26, 2010 "caucus" meeting, the County recommended the award of a one-year professional services contract to CHS. The Board reduced the term to eight months and approved the agreement for placement on the agenda for its October 28, 2010 meeting. At that meeting, the Board adopted Resolution 467-10-2010, rejecting all bids on the contract, and Resolution 468-10-2010, awarding an eight-month contract to CHS.

C. Trial Court Proceedings.

On November 29, 2010, CFG filed an action in lieu of prerogative writs in the trial court, seeking a judgment invalidating the County's decision to reject all bids on the contract, declaring CHS's proposal materially deficient, and compelling the award to CFG as the lone responsive bidder. On December 9, 2010, the court issued an order requiring CHS to show cause why the relief sought should not be granted. CHS filed an answer and counter/cross-claims, seeking a judgment rescinding the decision to reject all bids, rejecting CFG's bid, and awarding the contract to CHS.

The trial court heard oral argument in the matter on March 18, 2011. On March 25, 2011, the court filed a written decision in which it concluded that: the County had abused its discretion by rejecting all bids, any deficiencies in CFG's proposal were minor and inconsequential, and CHS's deviation from the RFP requirements was material and non-waivable.

Accordingly, the court entered an order dated April 1, 2011, which invalidated Resolutions 467-10-2010 and 468-10-2010, and directed the Board to award the contract to CFG as the ...

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