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Applied Landscape Technologies, Inc. v. Borough of Florham Park

Superior Court of New Jersey, Appellate Division

June 3, 2013

APPLIED LANDSCAPE TECHNOLOGIES, INC. and BERNADETTE STONE, individually, Plaintiffs-Appellants,
v.
BOROUGH OF FLORHAM PARK, and ROCHELLE CONTRACTING COMPANY, INC., Defendants-Respondents.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 7, 2013

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-0608-13.

Adrienne L. Isacoff argued the cause for appellants (Lowenstein Sandler LLP, attorneys; Ms. Isacoff, on the brief).

John P. Inglesino argued the cause for respondent Borough of Florham Park (Inglesino, Pearlman, Wyciskala & Taylor, LLC, attorneys; Mr. Inglesino, of counsel and on the brief; Grace Chun, on the brief).

Paul E. Griggs argued the cause for respondent Rochelle Contracting Company, Inc. (Lindabury, McCormick, Estabrook & Cooper, PC, attorneys; Mr. Griggs, on the brief).

Before Judges Messano, Lihotz and Ostrer.

PER CURIAM

Plaintiffs Applied Landscape Technologies, Inc. (Applied) and Bernadette Stone, a resident and taxpayer of the Borough of Florham Park (the Borough), appeal from the Law Division's order of March 21, 2013, that denied plaintiffs' request for permanent injunctive relief and dismissed their complaint with prejudice.[1]We granted plaintiffs' application for a stay pending appeal and entered an order expediting the appeal. We now affirm.

I.

Before reciting the essentially undisputed facts giving rise to the litigation, we briefly set forth the statutory framework that defines the legal issues before us.

N.J.S.A. 40A:11-16 (Section 16) is commonly referred to as the Anti-Bid Shopping Law. Clyde N. Lattimer & Son Constr. Co., Inc. v. Twp. of Monroe Utils. Auth., 370 N.J.Super. 130, 133 (App. Div. 2004). Section 16 provides in relevant part:

a. (1) In the preparation of plans and specifications for the construction, alteration or repair of any public building by any contracting unit, . . . the architect, engineer or other person preparing the plans and specifications may prepare separate plans and specifications for branches of work in the following categories:
(1) The plumbing and gas fitting and all kindred work;
(2) Steam power plants, steam and hot water heating and ventilating and refrigeration apparatus and all kindred work;
(3) Electrical work, including any electrical power plants, tele-data, fire alarm, or security system;
(4) Structural steel and ornamental iron work; and
(5) General construction, which shall include all other work required for the completion of the project.
(2) With regard to the branch work categories in paragraph (1) . . ., the contracting agent shall advertise for and receive . . . either (a) separate bids for each of said categories, or (b) single bids by general contractors for all the work, goods and services required to complete the public building to be included in a single overall contract, or (c) both. In the case of separate bids under (a) or (c) of this paragraph, contractors for categories (1) through (4) shall not be required to name subcontractors in their bid. 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 general contractor will subcontract for categories (1) through (4). Subcontractors who furnish general construction work pursuant to category (5), or subcontractors who furnish work to named subcontractors pursuant to categories (1) through (4) shall not be named in the bid.
[N.J.S.A. 40A:11-16a (emphasis added).][2]

In Gaglioti Contracting, Inc. v. City of Hoboken, 307 N.J.Super. 421, 431 (App. Div. 1997), we succinctly set forth the public policy that undergirds Section 16. "The requirement that a bidder submit a list of subcontractors with each bid prevents a general contractor from negotiating or renegotiating with subcontractors after it is awarded the contract." Ibid. "If a bidder were able to substitute unlisted subcontractors, he could wait until after being awarded the bid and negotiate for a lower price, the savings from which would accrue to him and not to the public." Stano v. Soldo Constr. Co., 187 N.J.Super. 524, 535 (App. Div. 1983).

Pursuant to N.J.S.A. 40A:11-23.2, "[w]hen required by the bid plans and specifications, " certain "requirements shall be considered mandatory items to be submitted at the time specified . . . for the receipt of the bids." "[T]he failure to submit any one of the mandatory items shall be deemed a fatal defect that shall render the bid proposal unresponsive and that cannot be cured by the governing body[.]" Ibid. One such requirement is "[a] listing of subcontractors pursuant to section 16 . . . ." N.J.S.A. 40A:11-23.2d.

In November 2012, the Borough issued a notice to bidders, contract documents and specifications for "Contract No. FP12-05[, ] 2012 Elm Street Recreational Fields" (the Project). The notice and instructions to bidders respectively described the Project and the "work included":

The work generally consists of earthwork excavation, rough and final grading, backfilling; installation of storm drainage pipe, inlets, and structures; construction of surface detention basin, installation of underground utilities, bituminous concrete pavement, granite block curbing, concrete sidewalks, and bituminous sidewalks; installation of synthetic turf multi-purpose athletic field; installation of natural turf multi-purpose and baseball athletic fields; construction of a basketball court; installation of dog park with appurtenances; installation of chain link fencing, arch backstops, baseball dugouts, and bleachers; installation of sport field lighting and site lighting fixtures; installation of parking area and roadway reflective traffic striping; installation of ADA compliant ramps; installation of landscape plantings and trees; topsoiling, fertilizing, seeding, and mulching; and other incidental work . . . .

The word "plumbing" was never used.

The bid documents included a "Submission Checklist" advising each bidder that "[f]ailure to submit the following documents [was] a mandatory cause for the bid to be rejected[, ] []N.J.S.A. 40A:11-23.2[]." Among other things, the checklist obligated each bidder to submit a "listing of subcontractors as required by [Section 16]." The bid package, however, did not supply a list, nor did it otherwise indicate, those "branches of work, " N.J.S.A. 40A:11-16a(1), that the Borough deemed necessary components of the project.

The Borough intended to award the contract based upon the "total base bid" submitted. Although "separate plans and specifications" for plumbing were not part of the bid package, see ibid., the general plans noted the locations of water fountains and fire hydrants, and included detailed drawings for their installation, as part of the Project.

The bid package contained "Technical Specifications" for "Site Water Distribution" and "Potable Water System Disinfection." A "unit price schedule" that bidders were required to complete included requested unit prices for each "[w]ater [f]ountain, " and per linear foot prices for one-inch copper water lines and two-inch copper water service.

On December 20, 2012, the Borough received eight sealed bids. Defendant Rochelle Contracting Company, Inc. (Rochelle) submitted the lowest bid -- $4, 250, 000. Applied submitted the second lowest bid -- $4, 353, 800.

On a pre-printed form that was not part of the Borough's bid package, Rochelle listed its subcontractors. The space on the form next to "[p]lumbing and gas fitting and all kindred work" was blank. Rochelle struck out the next category listed on the form, "[s]team and hot water heating . . ., " inserted the word "[p]aving" and listed its subcontractor as Tilcon Paving New York, Inc. On the form, next to "[e]lectrical [w]ork, " Rochelle listed "Quality Electrical Const." Rochelle struck out the next category, "[s]tructural steel . . ., " inserted the word "[i]rrigation" and listed National Lawn Sprinklers Inc. (National Lawn). In the space provided next to the fifth category, "[s]ynthetic [t]urf, " Rochelle listed Field Turf USA, Inc., as its subcontractor.

As part of its bid package, Applied provided on letterhead its "[l]isting of [s]ubcontractors." Applied listed three categories -- plumbing, electric and structural steel -- with the names of its subcontractors after each.

On January 3, 2013, Applied submitted a protest challenging Rochelle's bid. Noting specifications for "potable water, ground hydrants, backflow preventor, etc., " Applied argued that the Project "require[d] the use of a N.J. Licensed Plumber, " and Rochelle had not listed any, in violation of Section 16.

On February 26, 2013, Applied's counsel submitted a "formal bid protest" to the Borough. She argued that Rochelle's bid was "nonresponsive and materially deficient" because some of the work required by the specifications must be performed by a licensed plumber. Citing the Landscape Irrigation Contractor Certification Act, N.J.S.A. 45:5AA-1 to -11, she further argued that "an irrigation system may be installed by a plumber, but plumbing work may not be installed by someone who is licensed only as a landscape irrigation contractor, but not as a licensed plumber."

In a letter dated February 27 that followed a phone conference with the Borough's attorney, counsel for Applied rejected any claim that National Lawn could, as Rochelle's plumbing subcontractor, use a licensed plumber in its employ or a separate licensed subcontractor to perform the plumbing work. Applied reiterated its position that Rochelle's bid must be rejected because it failed to "identify a plumbing subcontractor in its bid proposal."

On February 28, the Borough adopted a resolution awarding the contract to Rochelle. The Borough acknowledged Applied's protest but concluded "there [wa]s no legal requirement that National Lawn . . . identify employees or subcontractors that it may use for the 'plumbing and gas fitting and all kindred work' portion of the [p]roject." Furthermore, the Borough Engineer had "estimated that the portion of the [p]roject requiring a licensed plumber . . . cost approximately $9, 700[], " which "constitute[d] approximately 0.2% of the entire [p]roject." The Borough concluded Rochelle's bid was "responsive and valid."

On March 5, plaintiffs filed their verified complaint in lieu of prerogative writs and sought an order to show cause with temporary restraints. Judge Thomas L. Weisenbeck entered an order setting a date for a hearing but denied a temporary injunction.

The Borough filed its answer along with the supporting certification of Borough Engineer Michael Sgaramella, P.E. Sgaramella stated that the "portion of the Project involving the need for a licensed plumber is de minimis relative to the entire Project and incidental to the scope of work intended." Rochelle filed its answer, along with the supporting certification of National Lawn's manager, Gordon Holmes. Holmes claimed that National Lawn provided Rochelle with an estimate to "complete the irrigation and plumbing work" on the Project, and that National Lawn intended to subcontract the plumbing work to a licensed master plumber, Peter Hywel, of Peter Hywel Plumbing and Heating, Inc. Hywel filed a separate certification stating that he owned 100% of his company and had no "legal affiliation, connection, or ownership interest in National [Lawn]."

The parties orally argued their positions before Judge Weisenbeck on March 13. Applied contended that the plumbing work was not "de minimis, " but, even if it was, Rochelle was required to list the subcontractor performing the work pursuant to Section 16. Applied argued that, because Rochelle failed to list any plumbing subcontractor, its bid was fatally defective.

Notably, before Judge Weisenbeck, Applied argued that National Lawn itself could not be listed as the plumbing subcontractor because it was not a licensed plumber. Applied contended that, if National Lawn intended to subcontract out the plumbing portion of the work, Rochelle needed to identify in its bid the sub-subcontractor, a licensed plumber, who was actually doing the work.

On March 19, 2013, Judge Weisenbeck issued a comprehensive statement of reasons denying plaintiffs' request for preliminary injunctive relief. Citing the standards set forth in Crowe v. De Gioia, 90 N.J. 126, 132-34 (1982), the judge "conclude[d] that plaintiffs ha[d] failed to demonstrate a reasonable probability of success on the merits."

In this regard, Judge Weisenbeck looked to the text of Section 16 and concluded that "the statute . . . is clear -- general contractors who submit a single bid for a public works project need only list the names of all subcontractors to whom they will directly subcontract for work categories (1) through (4) of the statute." He fortified this conclusion by taking note of the legislative history accompanying the recent amendment to Section 16. See S. Cmty. and Urban Affairs Comm., Statement to A. 2741, 215th Leg. 1, (N.J. June 7, 2012) ("This bill . . . clarifies[] that when a local unit requests bids for the . . . project, the bid documents need only set forth the name or names of all subcontractors to whom the bidder will subcontract the furnishing of plumbing and gas fitting work, . . . when the local unit requires a single bid from a general contractor . . ."

Distinguishing several cases relied upon by plaintiffs, Judge Weisenbeck also rejected the argument that, pursuant to Section 16, Rochelle was prevented "from utilizing unlisted prime sub-subcontractors to complete performance of its bid." He reasoned that National Lawn was "locked into the contract price it quoted Rochelle." Therefore, "[t]here [we]re no potential financial savings that c[ould] accrue to Rochelle post-bid[, ] and Rochelle ha[d] not been provided with any advantage over its bidding competition."

On March 21, Judge Weisenbeck conducted a case management conference via telephone. Plaintiffs had submitted a written request asking "the Court [to] enter a final judgment denying application for permanent injunctive relief and dismissing [the] case." After considering arguments from both sides, Judge Weisenbeck entered final judgment denying plaintiffs' request for permanent injunctive relief and dismissed the complaint with prejudice.[3]

II.

Before us, plaintiffs have further distilled their argument. They concede the Borough had discretionary authority to request further information from National Lawn identifying its licensed plumbing sub-subcontractor, and, therefore, Rochelle's failure to list Hywel was not a fatal defect. Plaintiffs also concede that there would have been no violation of Section 16 had Rochelle simply listed National Lawn as its "plumbing" subcontractor, for example, by inserting National Lawn on the form document in the appropriate space instead of, or in addition to, listing National Lawn as the "irrigation" subcontractor.

The Borough argues that Rochelle complied with Section 16 because "the installation of the landscape irrigation system is kindred to plumbing, " and Rochelle listed National Lawn as its irrigation subcontractor. The Borough also contends that Section 16 does not require the general contractor to supply the name of a subcontractor for every statutory "branch of work" when, as is the case here, the actual work to be performed in that "branch of work" is de minimis in relation to the entire scope of work.

Rochelle contends that Section 16 only requires a general contractor to identify "all subcontractors to whom the general contractor will subcontract" for the statutory branches of work. N.J.S.A. 40A:11-16a(2) (emphasis added). Since Rochelle was not subcontracting the plumbing work, it had no duty "to list a plumbing subcontractor nor list the plumbing subcontractor of its (Rochelle's) subcontractor."

"Although decisions relating to injunctive relief are normally reviewed for abuse of discretion, our review is de novo where the disputed issue is a question of law." Stoney v. Maple Shade Twp., 426 N.J.Super. 297, 307 (App. Div. 2012) (internal citations omitted). This case presents solely a legal issue.

The main purpose of the Local Public Contracts Law (the LPCL), N.J.S.A. 40A:11-1 to -50, is "'to secure for the public the benefits of unfettered competition'" through competitive bidding. Muirfield Constr. Co., Inc. v. Essex Cnty. Improv. Auth., 336 N.J.Super. 126, 132 (App. Div. 2000) (quoting Meadowbrook Carting Co., Inc. v. Borough of Island Heights, 138 N.J. 307, 313) (1994) (in turn quoting Terminal Constr. Corp. v. Atlantic Cnty. Sewerage Auth., 67 N.J. 403, 410 (1975))). "[A] public contract award is not determined simply by the lowest bid, but rather by the lowest bid that '"complies with the substantive and procedural requirements in the bid advertisements and specifications."'" Ibid. (quoting Gaglioti, supra, 307 N.J.Super. at 431 (App. Div. 1997) (in turn quoting Meadowbrook, supra, 138 N.J. at 313)). As a result, "bidding requirements[, ] particularly those involving material items, should be unmistakably clear. Vague, ambiguous and conflicting terms may seriously affect the purpose of competitive bidding." L. Pucillo & Sons, Inc. v. Mayor and Council of Borough of New Milford, 73 N.J. 349, 355 (1977).

"The Supreme Court has stressed that '[s]trict compliance [with the LPCL] is required, and a municipality generally is without discretion to accept a defective bid.'" Gaglioti, supra, 307 N.J.Super. at 432 (quoting Meadowbrook, supra, 138 N.J. at 314). "[A]ny material departure invalidates a nonconforming bid as well as any contract based upon it." Meadowbrook, supra, 138 N.J. at 314.

To "determin[e] whether a particular noncompliance with bidding requirements is material, and therefore non-waivable, " Muirfield, supra, 336 N.J.Super. at 133 (citing Meadowbrook, supra, 138 N.J. at 315), the Supreme Court has adopted a two-part test first set forth by Judge Pressler in Twp. of River Vale v. R.J. Longo Constr. Co., Inc., 127 N.J.Super. 207, 216 (Law Div. 1974):

[F]irst, whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether [the noncompliance] 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.
[Ibid.]

We have said that "[t]he intent of N.J.S.A. 40A:11-23.2 was to 'circumscribe[] the authority of local contracting agencies to waive bid defects by designating five kinds of defects that cannot be waived under any circumstances.'" Star of the Sea Concrete Corp. v. Lucas Bros., Inc., 370 N.J.Super. 60, 68 (App. Div. 2004) (quoting P & A Constr., Inc. v. Twp. Of Woodbridge, 365 N.J.Super. 164, 176-77 (App. Div. 2004)). "N.J.S.A. 40A:11-23.2, which is the only section of [the] Local Public Contracts Law that deals with the waiver of bid requirements, is purely prohibitory; it requires rejection of any bid that does not include all of the mandatory items set forth therein." P & A Constr., supra, 365 N.J.Super. at 176.

Thus, in Star of the Sea, supra, 370 N.J.Super. at 68-69, we concluded that, pursuant to N.J.S.A. 40A:11-23.2, the lowest bidder's failure to include a list of its subcontractors as required by the bid specifications was a material, non-waivable defect. In Gaglioti, supra, 307 N.J.Super. at 428, a case decided before the 1999 amendments to the statute, we reached a similar result, concluding that the low bidder's failure to supply its list of subcontractors pursuant to Section 16 was fatal to its bid.

We have deemed non-waivable other failures to strictly comply with Section 16. See, e.g., Prismatic Dev. Corp. v. Somerset Cnty. Bd. of Chosen Freeholders, 236 N.J.Super. 158, 163-66, (App. Div.) (concluding that the prime contractor's listing of multiple subcontractors, some of which it did not intend to use, violated Section 16), certif. denied, 118 N.J. 205 (1989)[4]; Stano, supra, 187 N.J.Super. at 534-35 (concluding that substitution of subcontractor after disqualification of listed subcontractor violated Section 16). As we more recently said in O'Shea v. N.J. Schools Constr. Corp., 388 N.J.Super. 312, 322 (App. Div. 2006):

A common thread is woven through the fabric of the case law interpreting N.J.S.A. 40A:11-16. The statute is strictly construed to require the prime contractor to use the subcontractors listed in the bid documents. This construction gives meaning to the statutory language, fosters competition and decreases the chance of bid shopping.

As Judge Weisenbeck noted, the facts of this case are entirely distinguishable from Gaglioti. Here, Rochelle named "all subcontractors to whom" it, as "the general contractor[, ] w[ould] subcontract for [work] categories (1) through (4)" of Section 16. N.J.S.A. 40A:11-16a(2). It did not, therefore, violate N.J.S.A. 40A:11-23.2d, because it did not fail to supply a "listing of subcontractors pursuant to section 16." As a result, we do not deem the list Rochelle actually submitted to be "a fatal defect that . . . render[s] the bid . . . unresponsive and that cannot be cured . . . ." N.J.S.A. 40A:11-23.2.

The only issue, therefore, is whether Rochelle failed to identify National Lawn as its subcontractor for "plumbing and gas fitting and all kindred work, " N.J.S.A. 40A:11-16a(1)(1), or, perhaps more precisely, whether the manner by which Rochelle identified National Lawn rendered its bid defective.

In this regard, we initially reject Rochelle's overly broad construction of Section 16. It argues that a general contractor only need identify the subcontractors it engages, regardless of the actual work any particular subcontractor performs. We believe that if a project's scope of work clearly identifies the need for services in those "branches of work" identified by categories (1) through (4) of Section 16, a bidder must identify the subcontractor it will engage to do that work. The fact that the subcontractor retains a sub-subcontractor to actually perform the work is of no moment. As noted by Judge Weisenbeck, the name of the sub-subcontractor need not be included; however, under the clear language of the statute, the name of the bidder's subcontractor must be included.

The scope of the work as outlined by the Borough made no mention of plumbing work. The bid package did not supply any form upon which each bidder must list its subcontractors. The absence of such a form, in this case, only enhanced the uncertainty of the exact nature of the scope of the work required within each of Section 16's "branches of work." In other words, the Borough did not advise any bidder that the scope of work for the Project required the listing of subcontractors in any particular "branch[] of work."

Indeed, Applied's submission listed its "[s]tructural steel and ornamental iron work" subcontractor. See N.J.S.A. 40A:11-16a(1)(4). However, it is apparently conceded by Applied and the Borough that the plans and specifications did not require any of the work be performed by a structural steel subcontractor. At oral argument before us, counsel for Applied stated this was done out of an abundance of caution to ensure compliance with Section 16.

We think that, in naming National Lawn as its "irrigation" subcontractor, Rochelle sufficiently alerted the Borough that National Lawn would be responsible for the "plumbing . . . and all kindred work" associated with the Project. Because the amount of work that actually required a licensed plumber was proportionately insignificant to the entire award, and clearly incidental to the irrigation system being installed, the failure to specifically list National Lawn as the "plumbing" subcontractor was an immaterial omission.

We are firmly convinced the public policy served by Section 16, and referenced throughout our decisional law regarding the LPCL in general, was not undermined in this case. There is nothing to suggest that by naming National Lawn as the "irrigation" subcontractor, and not the "plumbing" subcontractor, Rochelle "deprive[d] the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements[.]" Meadowbrook, supra, 138 N.J. at 315 (quoting River Vale, supra, 127 N.J.Super. at 216. As Judge Weisenbeck noted, National Lawn was "locked into the contract price it quoted Rochelle[, ]" and, Rochelle could not shop around, post-award, for another subcontractor to do the minimal "plumbing" work associated with the Project. See Clyde N. Lattimer, supra, 370 N.J.Super. at 137-38 (explaining that the bidder cannot substitute an unnamed contractor and any dispute over pricing is a risk "assumed by" the general contractor). Nor did identifying National Lawn in this manner "plac[e Rochelle] in a position of advantage over other bidders or . . . otherwise undermin[e] the necessary common standard of competition." Meadowbrook, supra, 138 N.J. at 315 (quoting River Vale, supra, 127 N.J.Super. at 216).

The Borough concluded that Rochelle's bid was responsive and contained no material defects. It noted the relatively minor proportion of work requiring a licensed plumber, and that any plumbing work was inextricably "kindred" to the lion's share of work associated with the Project, i.e., installation of irrigation to service the newly-constructed ball fields. We do not express any approval of a general proposition that compliance with the LCPL can be waived based upon the de minimis nature of the violation in monetary terms. Such a general rule is contrary to established precedent holding that "[s]trict compliance is required . . . ." Meadowbrook, supra, 138 N.J. at 314 (citations omitted).

Nevertheless, under all the facts presented, Rochelle's use of the term "irrigation" instead of "plumbing" to identify National Lawn was insignificant. We therefore conclude that Rochelle's bid did not violate Section 16.

Affirmed.


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