Case Name: GEORGE ARMANIACO, PLAINTIFF-RESPONDENT, v. BOROUGH OF CRESSKILL, DEFENDANT, AND D. STAMATO & CO., INC., A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT
Court: New Jersey Superior Court, Appellate Division
Jurisdiction: New Jersey
Decision Date: 1960-07-11
Citations: 62 N.J. Super. 476
Docket Number: 
Parties: GEORGE ARMANIACO, PLAINTIFF-RESPONDENT, v. BOROUGH OF CRESSKILL, DEFENDANT, AND D. STAMATO & CO., INC., A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT.
Judges: 
Reporter: New Jersey Superior Court Reports
Volume: 62
Pages: 476–491

Head Matter:
GEORGE ARMANIACO, PLAINTIFF-RESPONDENT, v. BOROUGH OF CRESSKILL, DEFENDANT, AND D. STAMATO & CO., INC., A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT.
Superior Court of New Jersey Appellate Division
Argued May 31, 1960 —
Decided July 11, 1960.
Before Judges Conford, Freund and Haneman.
Mr. Eugene L. Dinallo argued the cause for appellant (Messrs. Heller & Laiks, attorneys; Mr. Eugene L. Dinallo, of counsel).
Mr. William V. Breslin argued the cause for plaintiff-respondent (Mr. Francis B. Rusch, on the brief).
Mr. William E. Bannon argued the cause for defendant-respondent, Borough of Cresskill.

Opinion:
The opinion of the court was delivered by
Haneman, J. A. D.
Defendant D. Stamato & Co., Inc. (Stamato) appeals from a judgment of the Law Division in favor of plaintiff, a citizen and taxpayer of the Borough of Cresskill (borough), setting aside a resolution of said borough awarding a contract for the construction of a section of a municipal sewer system to it.
Prior to October 7, 1959 the borough advertised for bids for the sewer project. Under the terms of the specifications, each bidder was required to submit unit price bids on 34 of the 35 items involved in the work to be done. The quantities required for the items were estimated. The total price, computed by multiplying the estimated quantities by the unit price bid, formed the basis for a comparison to determine the low bidder. The "Information for Bidders" provided:
"If so ordered by the Engineer, timber sheeting and bracing shall be left in place to avoid undermining or otherwise endangering the work or adjacent structures."
And again:
"Well-points are to be used only with the written approval of the Engineer."
In relation to balanced bidding it was provided that:
"Balanced Bidding
Any bid which, in the opinion of the Engineer, is obviously unbalanced, may be rejected. Where such unbalanced bids are not rejected the Borough may at its discretion for purpose of partial payment pay actual cost plus 15%, the difference between the partial payment price and the bid price shall become payable at the time of the final payment."
Ono of the items included in the specifications, rock excavation, was estimated to require the removal of 2,100 cubic yards for which, unlike the other 34 items listed in the specifications, a predetermined unit price of $20 per cubic yard was fixed by the borough. Hence, all bids submitted necessarily included the figure of $42,000 for rock excavation.
On October 7, 1959 Stamato submitted an overall total bid of $668,774.67. M.Q.M. Construction Co. (M.Q.M.) submitted the second lowest bid of $680,349.50. For two of the items on which unit price bids were required, i. e., timber sheeting to be left in place, and for well-pointing, Stamato and M.Q.M. bid as follows:
Item Description D. Stamato Unit-Amount M.Q.M Oonstr. Unit-Amount
3 Timber sheeting left in place (417 MFBM) ,01-$4.17/ $200-$83,400
14A Trench, Well-Pointed 0'-12' deep (9700 lin. ft.) .01-97.00/ 2- 19,400
14B Trench, Well-Pointed 12.0P-16' deep (1100 lin. ft.) .01-11.00/ 6- 6,600
It is admitted that the actual unit cost of these items is substantial and the bids by Stamato merely nominal.
On October 13, 1959, M.Q.M. sent a letter to the Mayor and Council of Cresskill protesting the award of the contract to Stamato. When, on October 20, 1959, all bidders were granted the opportunity to be heard on the protest, only counsel for defendant and M.Q.M. appeared. Eollowing the hearing, the mayor and council, by resolution, awarded the contract to defendant. M.Q.M. originally joined with the plaintiff herein in an effort to set aside the municipal action. However, in recognition of the fact that it is now well settled that an unsuccessful bidder has no standing to attack the specifications, Camden Plaza Parking v. City of Camden, 16 N. J. 150 (1954), M.Q.M. consented to a dismissal as to it.
Plaintiff's complaint contested the validity of the award of the contract upon the grounds that (1) Stamato's bids for sheeting and well-pointing constituted unbalanced bidding, and (2) the fixed price for rock excavation was violative of N. J. S. A. 40:50-l. The pretrial order does not mention the well-pointing.
Plaintiff conceded that there was no fraud or collusion between Stamato and any of the borough officials.
The trial court found for plaintiff principally upon a conclusion that the specifications did not set up a common standard for competition in relation to the sheeting to be left in place and the well-pointing, adverting to the difference iii the unit prices bid for these items by Stamato and M.Q.M.
Plaintiff argues for affirmance upon the grounds that, (1) Stamato furnished an unbalanced bid, by its prices for sheeting left in place and well-pointing, which is of such a nature as to be conducive to fraud and collusion, and (2) the set price for rock excavation violates N. J. 8. A. 40:50-l. (Defendant municipality asks that all issues briefed be disposed of so that the legality of the contract may be settled in all respects).
At the outset it should be recognized that the basic policy of the bidding statute, N. J. S. A. 40:50-1, which requires contracts for the performance of public work involving the expenditure of money in excess of $2,500 to be let upon competitive bidding solicited through public advertisement, is the encouragement of competition, which in turn works to protect the public coffers and prevent chicanery and fraud in public office. Any stifling of competition undermines the policy of the act. Arthur Venneri Co. v. Paterson Housing Authority, 29 N. J. 392, 403 (1959). The bidding statutes should be construed with sole reference to the public good, and they should be rigidly adhered to by the courts. Hillside Twp. v. Sternin, 25 N. J. 317, 322 (1957).
We shall proceed to consider the arguments in the order above set forth.
I.
Where the types of construction are largely standardized and where a variety of operations is required which make it impracticable to break down the work required under a construction contract into units, it is generally customary to award contracts on a lump sum bid. On the other hand, when the work requires large quantities of relatively few types of construction and the volume of work cannot be determined in advance, resort is had to the unit price form of bid. The advantage of the unit type bid under the circumstances referred to is that a contractor and municipality are not obliged to gamble on uncertain conditions and know in advance the price they will, respectively, receive and be obligated to pay for various extra items. See Engineering Contracts and Specifications, Robert W. Abbott (2d ed. 1948), p. 53.
An unbalanced unit price bid is one where one or more of the items bid does not carry its share of the cost of the work and the contractor's profit. Such bids are admittedly susceptible of fraud and collusion and carry the additional danger of placing an irresponsible bidder in a position of bidding higher on the earlier work to be done under the contract and lower on the latter work. Such a bidder could, after having taken his profit out of his early payments on a job, fail to complete the work called for. One control of such dangers is by including a provision in the specifications, as here, for the permissive rejection of unbalanced bids.
The justification of the unbalanced bid lies in the fact that the expenses of mobilizing the construction plant, bringing equipment and materials to the site, and the general costs of getting the work started are appreciable. These items usually do not appear in the bid and, therefore, are liquidated only as the work on the bid items progresses. This causes a hardship to the contractor in that his working capital is unnecessarily tied up in the work, without compensation, and may result in a failure to bid, thus reducing competition.
In Frank Stamato & Co. v. City of New Brunswick, 20 N. J. Super. 340, 344 (App. Div. 1952), the facts were remarkably similar to those here present. The specifications there provided that:
"Rock excavation shall comprise such ledge rock as in the opinion of the Engineer requires Masting, and boulders of one-half cubic yards or more in volume."
And again:
"When, in the opinion of the Engineer, timber sheeting and bracing, furnished and placed under Items 1, 5 or 6 should be left in place to avoid undermining, or otherwise endangering the work or adjacent structures, payment will be made under this Item for such timber sheeting and bracing as is ordered left in place at the price bid per thousand board measure under this Item."
The prices bid for these two items were as follows:
"Item 7 — Bock Excavation Unit Price Per Cu. Yd. Bid on Estimated 5000 Cu. Yds.
A. Oestone Company . $ .01 $50.00
Frank Stamato & Co. . 5.00 2,500.00
Bidder M . . 3.00 15.000. 00
A 20.00 100,000.00
L _ 1.00 5,000.00
Y . 10.00 50.000. 00
Item 8 Timber Sheeting Left in Place
Unit Price Per M f. B.M. Bid on Estimated 50 M ft. B.M.
A Cestone Company .01 .50
Frank Stamato & Co. 20.00 10.000. 00
Bidder II . .01 .50
" A . 3.50 17,500.00
" L . 50.00 25,000.00
" Y . .01 .50"
In sustaining the award of the contract to A. Cestone Company, the court said, at p. 344:
"An unbalanced bid comprehends a bid based on nominal prices for some work and enhanced prices for other work. The mere fact that a bidder has submitted an unbalanced bid, does not automatically operate to invalidate an award of the contract to such bidder. There must be proof of collusion or of fraudulent conduct on the part of such bidder and the city or its engineer or other agent, or proof of other irregularity of such substantial nature as will operate to affect fair and competitive bidding. Phifer v. Bayonne, 105 N. J. L. 524 (Sup. Ct. 1929) ; Walter v. McClellan, 113 App. Div. 295, 99 N. Y. S. 78 (App. Div. 1906), affirmed 190 N. Y. 505, 83 N. E. 1133 (Ct. App. 1907). In the absence of fraud, corruption or abuse of discretion, the determination of the proper officers in making an award of a contract will not be disturbed by the court. Fisher v. Longport, 136 N. J. L. 217 (Sup. Ct. 1947) ; 10 McQuillin, Municipal Corporations (3rd ed. 1950), § 29.83.
The' only provision in the specifications concerning unbalanced bids is: 'Bids which are obviously unbalanced may be rejected.' This is not a prohibition against unbalanced bids."
None of these elements which would mitigate against Stamato's bid being here present, we conclude that the award was not invalid because the bid was unbalanced.
II.
There was considerable testimony that it has been common practice among municipal engineers in the section of the State where the borough is located, to fix the unit price for rock excavation where, as here, the exact amount that will be required is practically impossible to determine. Custom, however, cannot be relied upon to vary the terms of an uambiguous statute. Weinacht v. Board of Chosen Freeholders of Bergen County, 3 N. J. 330 (1949). Although fraud and collusion were not alleged in the instant case, their absence does not preclude judicial remedy, i. e., municipal action can be vacated when it amounts to a fraud on the bidding statute even in the presence of good faith. Asbury Park Press v. City of Asbury Park, 23 N. J. 50 (1956).
This rationale intends to enforce the statutory provisions designed to minimize the possibilities of fraud or collusion. See Hillside Twp. v. Sternin, 25 N. J. 317, 325 (1957).
Defendants maintain that the municipality must fix the unit price of an item as uncertain as rock excavation or face the possibility of financial catastrophe. The argument proceeds as follows: Unit price bidding and unbalanced bidding are now permitted by law; the risk is that a successful overall low bidder will submit an extremely high unit price for rock excavation, compensating therefor with low bids on other items; if the amount of rock actually encountered greatly exceeds the amount estimated, the result will be serious financial loss to the municipality.
Even if the above argument is conceded to be meritorious, the remedy advocated is nevertheless in conflict with the policy of the bidding statute — unstifled competition. The adoption of the established custom urged herein must come from the Legislature and not from the courts.
It is conceded by all parties, and properly so, that if the rock excavation were the sole item involved in the contract, the fixing of a unit price therefor clearly would violate the terms of N. J. S. A. 40:50-l. Defendants, however, argue that in the instant case the 34 additional items for which no unit price was fixed provide sufficient room for public competition for the job as a whole. The predetermined price for the rock excavation totaled $42,000.
10 McQuillin, Municipal Corporations, § 29.30, p. 271, n. 61 (1950) reads:
"The municipality, if required to let contracts on competitive bids, cannot fix a definite price for a substantial part of the work to be let to the lowest bidder."
See also 63 C. J. S., Municipal Corporations, § 998, p. 574 (1950).
In Matter of Merriam, 84 N. Y. 596 (Ct. App. 1881), the price for rock excavation had been fixed by the commissioner of public works. Appellant's counsel therein claimed, as is claimed in the ease sub judice, that the competitive bidding statute only required that the work as a unit should bo submitted to competition, and when this is done in good faith the fact that certain prices for certain items, less than the whole, have been fixed does not destroy competition; it simply transfers it to such items which are directly submitted to competition. It was further urged that such had been the uniform practice for many years in those instances where it would be difficult to ascertain the quantity of rock excavation beforehand. The Now York court held, at page 603, that:
"These suggestions are not without force, and while there is strong ground for claiming that when the price fixed for one or more items is fair and reasonable and there is no evidence of fraud or extravagance, and the quantity could not be ascertained without a considerable expenditure of money, and that this could be done in some instances consistently with the interests of the public in view, and with the statute and ordinances we are, upon the whole, of the opinion that to carry out the intention of the law to award contracts to the lowest bidder, it is requisite that the quantity of rock excavation, as near as possible, should be stated in the proposals, and that fixing the price for the same was in disregard of the law and in violation of the statute and the ordinance
The court in Merriam, after referring to several prior New York cases, concluded that they stood for the proposition that when the price was fixed for rock excavation, a material and important part of the work, it was withheld from competition in violation of the statute. (See Matter of Mahan, 20 Hun (Sup. Ct. N. Y.) 301 (1880), affirmed 81 N. Y. 621 (Ct. App. 1880); Matter of the Manhattan Savings Institution, 82 N. Y. 142 (Ct. App. 1880). In conclusion, the court said, 84 N. Y., at p. 605:
"[T]he intention of the law-makers was to enforce a submission of every important item for competition, naming the quantity so far as it could reasonably be ascertained." (Emphasis supplied)
It cannot be said that the $42,000 item for rock excavation was not an important part of the entire job. For a case distinguishable upon its facts, but in point on the application of the policy considerations provoked by our bidding statutes, see State, Hampson, Pros v. Mayor and Aldermen of Paterson, 36 N. J. L. 159 (Sup. Ct. 1873).
It is interesting to note that if submitted to free competition, the testimony disclosed that the price of rock excavation could vary from $10 to $28 per cubic yard. One of defendants experts, Ronald B. Brown, admitted that if there were competitive bidding for the rock excavation, the price probably would have been less than $20 per cubic yard.
Moreover, again assuming the validity of defendants' argument in justification of the fixing of a unit price for rock excavation, there are at least two alternative solutions, both within the statutory framework, which would avoid the catastrophic results anticipated by the borough. First, the municipality could have set $20 per cubic yard as the maximum price it would consider, leaving the entire range up to the $20 open for competitive bidding. Second, it could have reserved, as it did herein, the right to reject unbalanced bids. The rejection of a bid with an extremely high unit rock excavation price would have precluded the feared evil. The provision for a set price for rock excavation under the facts here present is invalid.
The result attained by the trial judge was correct, although not for the reasons he stated. We therefore affirm the judgment. Leitner v. Braen, 51 N. J. Super. 31 (App. Div. 1958).