Court Opinion

ID: 4526994
Source: CourtListenerOpinion
Date Created: 2020-04-20 15:09:09.122092+00
Date Added: 2024-06-11T12:17:00.420569
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-1762-19T3

PACT TWO, LLC,

          Plaintiff-Respondent,

v.

TOWNSHIP OF HAMILTON,

          Defendant-Respondent,

and

QUAD CONSTRUCTION
COMPANY,

     Defendant-Appellant.
__________________________

                   Submitted March 23, 2020 – Decided April 20, 2020

                   Before Judges Messano, Ostrer and Vernoia.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Mercer County, Docket No. L-1717-19.

                   Walter S. Zimolong, attorney for appellant.

                   Elissa Grodd Schragger, Township Attorney, attorney
                   for respondent Township of Hamilton.
            Florio Perrucci Steinhardt Cappelli Tipton & Taylor
            LLC, attorneys for respondent Pact Two, LLC (Teresa
            M. Lentini, on the brief).

PER CURIAM

      Defendant Quad Construction Company (Quad) appeals from Judge Mary

C. Jacobson's order reversing defendant Hamilton Township's (Hamilton) award

of a wastewater treatment construction contract to the second-lowest bidder,

Quad, and directing the contract be awarded to the lowest bidder, plaintiff Pact

Two, LLC. Hamilton rejected plaintiff's bid because it deviated from the bid

specifications. Judge Jacobson determined the deviation was not material, and

Hamilton's decision not to waive the deviation and award the contract to plaintiff

constituted an abuse of discretion because it was not based on sound business

judgment and is inconsistent with the policies underlying the Local Public

Contracts Law (LPCL), N.J.S.A. 40A:11-1 to -49. We agree and affirm.

                                        I.

      The pertinent facts are not disputed. Hamilton published a notice to

bidders for the award of a contract for the rehabilitation of the gravity thickener

collector mechanism and existing digester floating cover at its wastewater

treatment plant. Hamilton provided bid specifications detailing the work and

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equipment to be supplied under the contract, and the requirements for the bid

submissions.

      The specifications required installation of a domed "guided gas holder

cover" (cover) over the existing digester tank. The cover is an important and

integral part of the rehabilitation project for which the bids were requested.1

Section 11661 of the specifications required bidders supply information

concerning "the furnishing, installation, . . . [and] testing" of the cover.

      Part 2 of Section 11661 detailed the cover's requirements.                 More

particularly, Part 2.3(D) required an analysis, "using a finite element model with

all applied loading" (finite model analysis), of the cover the bidder proposed to

install. The specifications also required "[t]he analysis . . . be performed using

recognized software which is commercially available with verification problems

and complete documentation and instructions."

      Most pertinent to this appeal, Part 2.3(G) specified the cover manufacturer

"must have provided [a finite model analysis] on no less than [ten] covers in the

1
   The specifications explained the cover is "for installation in the existing
[d]igester which is [forty-five] feet in diameter"; is dome-shaped; must be
designed by a professional engineer; and "shall all be made of structural steel."
The specifications further required the cover "have a radius 1.5 times the tank
diameter" and its "framework shall consist of arched radial erection beams held
in position by a center compression ring and peripheral thrusting ring."
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past [five] years." Part 2.3(G) further directed that "[e]vidence" the cover

manufacturer performed a finite model analysis "on no less than [ten] covers in

the past [five] years . . . be provided with the bid package," including the

"location of [the] projects and [the] software used."

      On July 31, 2019, Hamilton opened the seven bids it received for the

contract. Plaintiff's $1,945,000 bid was lowest, and Quad's $2,048,850 bid was

second lowest.2 Plaintiff's and Quad's bids included deviations from Part 2.3(G).

Plaintiff did not include evidence its intended cover manufacturer performed

finite model analyses on no less than ten covers in the past five years, or the

location of the projects and software used to perform such analyses , as required

under Part 2.3(G). Quad's bid included evidence of its cover manufacturer's

performance of the finite model analyses, but it did not include evidence

concerning the software used.

      In a July 31, 2019 letter to Hamilton, Quad "formally protest[ed]"

plaintiff's bid. Quad asserted the bid was "non-responsive to the solicitation"

because it did not include evidence concerning the cover manufacturer's finite

2
   The remaining bids included: Eastern Environmental Contractors, Inc.,
$2,194,200; Stonehill Contracting Co., Inc., $2,331,549; BR Welding, Inc.,
$2,332,500; Spectraserv, Inc., $2,335,750; and GMH Associates of America,
Inc., $2,425,204.

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model analyses as required by Part 2.3(G). Quad asserted the omission "was a

material defect which cannot be waived . . . in accordance with the [LPCL]."

      On August 20, 2019, Hamilton adopted a resolution awarding the contract

to Quad. The resolution listed the amount of each bid, noted plaintiff was the

lowest bidder, and stated plaintiff's bid "was non-compliant missing required

documentation [and] therefore deemed a no[-]bid."

      Plaintiff filed a complaint and order to show cause challenging Hamilton's

rejection of its bid and award of the contract to Quad, and requesting injunctive

relief. At the order to show cause hearing, Judge Jacobson noted Hamilton

rejected plaintiff's bid because it found the failure to include evidence

concerning the cover manufacturer's finite model analyses constituted a material

bid deviation it lacked the authority to waive. The judge, however, found the

record did not permit a determination whether plaintiff's failure to include the

evidence constituted a non-waivable material bid deviation under the standard

established in Township of River Vale v. R.J. Longo Construction Co., 127 N.J.

Super. 207 (Law Div. 1974), as adopted by our Supreme Court in Meadowbrook

Carting Co. v. Borough of Island Heights, 138 N.J. 307 (1994), or a deviation

Hamilton had discretion to waive under the principles addressed in Serenity

Contracting Group, Inc. v. Borough of Fort Lee, 306 N.J. Super. 151 (App. Div.

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1997). The judge further observed Hamilton failed to consider Quad's bid

deviated from Part 2.3(G)'s requirements because Quad did not provide evidence

of the software used by its cover manufacturer to perform the finite model

analyses.

      Judge Jacobson entered an order granting plaintiff's application for a

preliminary injunction barring implementation of the contract.        The judge

remanded the matter for Hamilton to determine whether plaintiff's bid deviation

deprived Hamilton of assurance the contract would be performed as expected;

placed plaintiff in a position of advantage over other bidders; or otherwise

undermined competitive bidding. The court ordered Hamilton to make the same

determinations concerning the deviation in Quad's bid. The court also required

that Hamilton consider whether other bid requirements provided Hamilton with

adequate assurance the contract would be performed as expected if plaintiff and

Quad supplied the evidence missing from their bids after the bid opening. 3

3
  The court directed Hamilton to consider the following provisions in Section
11661 of the bid specifications to determine if they provided adequate assurance
the contract would be performed as expected even in the absence of the evidence
required under Part 2.3(G): Part 1.3(C), requiring a certification from the cover
manufacturer attesting to a stated minimum number of manufactures and
installations of gas holder covers; Part 1.4(E), requiring gas cover
manufacturer's provision of a performance bond; and Part 2.1, identifying three
approved cover manufacturers.
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      Judge Jacobson also directed that if on remand Hamilton determined the

bid deviations were not material, it must notify the court of the bidder chosen to

perform the contract. Moreover, the court required that if Hamilton rejected

plaintiff's or Quad's bids after finding their respective bid deviations were not

material, it must "provide reasons to support [its] decision." The order required

Hamilton to supply the court with a report of its determinations.

      Counsel for Hamilton subsequently advised the court by letter he had

conferred with Hamilton's business administrator, purchasing agent, and

director of water pollution control pursuant to the court's remand order, and it

was determined the contract should be awarded to Quad. Counsel referred the

court to a certification and memorandum from Carrie D. Feuer, Hamilton's

Director of Water Pollution Control, and a certification from Michele Bado,

Hamilton's purchasing agent.

      Feuer's certification described the process Hamilton followed to address

the issues in the court's remand order, and it included her opinion that, due to

the relatively close range of the seven bid amounts, "all of the bids were

competitive and . . . there would be no benefit to [Hamilton] to re-bid the

project." Feuer also opined a re-bid of the contract would "delay the start of the

desperately needed rehabilitation project" and "run counter to the intent of the

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time limitation and liquidated damages for the completion of the project. " She

further asserted the bids "were within the engineer's cost estimate" and "thus

[Hamilton] should not be required to re-bid the project and thus acted properly

in awarding the contract to the second[-]lowest bidder[,]" Quad.

      In Feuer's memorandum, which was addressed to Hamilton's business

administrator, attorney, and purchasing agent, she "summarize[d] [her] position"

taken during a meeting held pursuant to the remand order. She noted Part

2.3(G)'s requirements and described the cover's function—the containment of

methane gas during the digester process. She further noted Part 2.3(G) required

the submission of evidence concerning the cover manufacturer's finite model

analyses experience with a bid, and she explained the information was requested

to "show proof of [the manufacturer's] experience, which is an indicator of

ability to complete quality work."

      Feuer also addressed Part 2.3(G)'s requirement of evidence of the software

used to conduct the cover manufacturer's prior finite model analyses. She noted

the software was required "to show [the cover manufacturer] used a software to

conduct    the    required    analyses,"    but    opined    "[t]he    software

information . . . should only be required if the proposed cover manufacturer is

not listed [as pre-approved] in the specifications." She noted Quad identified a

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pre-approved manufacturer of its cover in its bid, and plaintiff's bid did not

identify its proposed cover manufacturer in its bid. 4

      Bado's certification added little.     She also generally described that

Hamilton's representatives had the meetings concerning the bids following the

remand order. She explained the representatives discussed the "importance and

necessity of" the omitted evidence in plaintiff's and Quad's bids, as well as

plaintiff's "failure to provide the information regarding the digester cover."

Bado noted "all of the bids . . . were within the anticipated budget cost for the

project," and Hamilton "acted properly in awarding the contract to the second

[-]lowest bidder despite the higher cost [because] the bids were all significantly

lower than the anticipated project cost."

      Judge Jacobson held a second hearing, summarized Hamilton's

submissions following the remand in a detailed and thorough opinion from the

bench, and determined Hamilton appeared to have concluded plaintiff's and

Quad's deviations from the Part 2.3(G) requirements were not material. Judge

4
    The specifications did not expressly require bidders identify the cover
manufacturer, although a bidder would presumably identify the manufacturer in
the course of disclosing evidence of finite model analyses on at least ten covers,
and the location of the projects. Following the opening of the bids, plaintiff
identified its proposed cover manufacturer, naming the same pre-approved
manufacturer Quad identified in its bid.
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                                        9
Jacobson also considered and made detailed findings under the River Vale

standard, and she determined, based on her review of the record and all of the

bid specifications, provision of the cover manufacturer's finite model analyses

and the software used to perform them was not required to assure plaintiff's

performance of the contract as expected and did not either place plainti ff in a

competitive advantage over other bidders or otherwise undermine the

competitive bidding process. See River Vale, 127 N.J. Super. at 215-16. Judge

Jacobson concluded plaintiff's failure to provide the Part 2.3(G) evidence did

not constitute a material deviation from the bid specifications, and, therefore,

Hamilton had discretion to waive plaintiff's deviation from Part 2.3(G)'s

requirements.5

      The court explained that, although Hamilton has discretion to reject bids

based on non-material deviations from the bid specifications, the discretion must

be exercised in a manner that is not arbitrary. The judge found Hamilton's

5
  Neither Quad nor Hamilton challenges the court's finding plaintiff's failure to
provide evidence of its cover manufacturer's finite model analyses and software
is not a material deviation from the bid specifications. Indeed, the parties
concede plaintiff's deviation from the bid specifications is not material. We
therefore do not detail the court's thorough findings and analysis supporting its
determination or address the merits of the court's conclusion. An issue not
briefed on appeal is deemed waived. Sklodowsky v. Lushis, 417 N.J. Super.
648, 657 (App. Div. 2011).
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discretion to reject bids containing non-material deviations did not provide it

with "carte blanche . . . to reject any and all bids that [it] wants to when there is

a non-material defect." Judge Jacobson noted that in Serenity, we explained the

discretion to reject a bid for a non-material omission must be based on valid

reasons, must reflect sound business judgment, and may not bespeak avoidance

of the underlying purposes of the LPCL.

      Judge Jacobson further found plaintiff demonstrated "there was

no . . . sound business rational[e] for" Hamilton's decision not to waive what

was conceded to be a non-material bid deviation and award the contract to Quad

for an amount more than $100,000 higher than plaintiff's bid. The court noted

the decision on remand was made by employees of Hamilton who "do not vote

on the budget," and they declined the opportunity to a waive a non-material

deviation in plaintiff's bid and obtain for the taxpayers the $100,000 in savings

the bid provided over Quad's bid. The court also noted the inconsistency in

Hamilton's decision to ignore Quad's deviation from Part 2.3(G)'s requirements

and, at the same time, rely solely on plaintiff's deviation to reject its bid. Judge

Jacobson concluded Hamilton's decision "undercut the underlying purpose of

the public bidding requirement that you award the bid to the lowest responsible

and responsive bidder."

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      Judge Jacobson entered a final judgment directing Hamilton vacate its

award of the contract to Quad, requiring the contract be awarded to plaintiff, and

denying Quad's motion for a stay pending appeal. Quad appealed, and, in a

January 7, 2020 order, we granted Quad's motion for a stay pending appeal.

                                       II.

      Quad argues that in Serenity, we held a municipality "retains broad

discretion to reject [any] bid that is defective, even if that defect is non -

material," and the court incorrectly usurped Hamilton's exercise of that

discretion. Quad claims the issue presented on appeal is "when a [municipality]

is compelled to waive a defect," and it asserts the court erred by finding

Hamilton was required to ignore the non-material defect and award the contract

to plaintiff. Quad also argues Hamilton exercised its sound business judgment

by rejecting Hamilton's bid following a deliberative process by its professionals.

Last, Quad contends the court applied the wrong standard of review to

Hamilton's decision by remanding for Hamilton to determine if the bid deviation

was material under the River Vale standard; by requiring Hamilton demonstrate

the deviation was material; and by failing to review Hamilton's decision under

an abuse of discretion standard. In its brief on appeal, Hamilton contends the

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court erred because its decision to reject plaintiff's bid and accept Quad's bid did

not constitute a clear abuse of discretion.

      Our standard of review of the court's decision is guided by our recognition

that in the context of public bidding the "function of [the c]ourt is to preserve

the integrity of the competitive bidding process and to prevent the

misapplication of public funds." Marvec Constr. Corp. v. Twp. of Belleville,

254 N.J. Super. 282, 288 (Law Div. 1992); see also Barrick v. State, 218 N.J.
247, 261 (2014); In re Jasper Seating Co., 406 N.J. Super. 213, 226 (App. Div.

2009). Here, the court was required to review Hamilton's decision to reject

plaintiff's bid and award the contract to Quad "under the ordinary standard

governing judicial review of administrative agency final actions." Barrick, 218
N.J. at 259 (citing In re Protest of the Award of the On-Line Games Prod. &

Operation Servs. Contract, Bid No. 95-X-20175, 279 N.J. Super. 566, 593 (App.

Div. 1995)); see also Marvec Constr. Corp., 254 N.J. Super. at 288. The court

could not properly reverse Hamilton's decision unless plaintiff demonstrated the

decision was "arbitrary, capricious, or unreasonable, or . . . not supported by

substantial credible evidence in the record as a whole." Barrick, 218 N.J. at 259

(quoting In re Stallworth, 208 N.J. 182, 194 (2011)).

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      "The purpose of the [LPCL] is to 'secure for the public the benefits of

unfettered competition.'" Meadowbrook Carting Co., 138 N.J. at 313 (quoting

Terminal Constr. Corp. v. Atlantic Cty. Sewerage Auth., 67 N.J. 403, 410

(1975)). "[T]he statutory rule in New Jersey is that publicly advertised contracts

must be awarded to 'the lowest responsible bidder.'" Ibid. (citation omitted); see

also N.J.S.A. 40A:11-4(a). A bidder is considered responsible if it "complies

with the substantive and procedural requirements in the bid advertisements and

specifications." Ibid.

      A governmental entity is without authority to award a contract based on a

bid containing a material deviation from the bid specifications. Id. at 314; see

also Terminal Constr. Corp, 67 N.J. at 411. In Serenity, we observed "a public

entity may not waive any material departure from bid specifications or

requirements of law, and is bound to reject a non-conforming bid with such

defects." 306 N.J. Super. at 156.

      On the other hand, a governmental entity has discretion to waive non-

material deviations—"minor or inconsequential discrepancies and technical

omissions"—from the bid specifications. Meadowbrook Carting Co., 138 N.J.

at 314. "It does not follow, however, that where the bid defect is non-material

the public entity must accept the bid." Serenity, 306 N.J. Super. at 156. A

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governmental entity has discretion "to accept or reject, for valid reasons, a bid"

containing a non-material deviation. Ibid.   "[T]o be considered valid," a

governmental entity's reasons for accepting or rejecting a bid containing a non-

material deviation "must be non-pretextual," "reflect sound business judgment,

and may not bespeak any avoidance of the underlying purposes of public bidding

requirements." Id. at 156-57.    Thus, where a bid contains a non-material

deviation from the specifications, "the next step is the specific decision to grant

or deny waiver [of the deviation] which is then subject to review under the

ordinary abuse of discretion standard." On-Line Games, 279 N.J. Super. at 595.

      We reject Quad's claim the court erred in its application of the Serenity

standard. The record shows otherwise. At the initial hearing, Judge Jacobson

noted Hamilton appeared to have determined plaintiff's bid included a material

deviation requiring rejection of the bid, but she found Quad's bid also contained

a deviation from the same specification, and the record did not permit an analysis

of whether the deviations—by both plaintiff and Quad—were material under the

River Vale standard.

      Judge Jacobson did not shift the burden to Quad to prove the deviation

was not material. As the governmental entity awarding the contract, Hamilton

was required, in the first instance, to determine whether the deviations were

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material or non-material. Without making that determination, Hamilton could

not properly decide if it was required to reject the bids because one or both

contained a material defect, see Meadowbrook Carting Co., 138 N.J. at 313, or

if it had discretion to accept or reject one or both bids because one or both had

non-material deviations, Serenity, 306 N.J. Super. at 156.

      By remanding the matter, Judge Jacobson did nothing more than afford

Hamilton the opportunity to create the appropriate record supporting its decision

concerning the materiality of the deviations it, as the contracting party, had the

responsibility to make before it awarded the contract. A record did not exist

supporting Hamilton's initial decision to reject plaintiff's bid based on a

purported material defect that Quad's bid, at least in part, shared.

      Following the remand, Judge Jacobson did not place any burden on Quad

or Hamilton to prove the validity of Hamilton's decision to reject plaintiff's bid

and award the contract to Quad. Judge Jacobson accepted Quad's concession

the deviation was not material and separately determined the deviation in

plaintiff's bid was not material.6 The court also considered whether the decision

rejecting plaintiff's bid and awarding the contract to Quad constituted an abuse

6
   We observe, as did Judge Jacobson, Quad's bid also deviated from Part
2.3(G)'s requirements, and Hamilton implicitly waived that deviation by
awarding the contract to Quad.
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of discretion. The court recognized plaintiff bore the burden of establishing

Hamilton's decision constituted an abuse of discretion; Judge Jacobson

expressly found plaintiff "[met] [its] burden of proof" of establishing Hamilton's

abuse of discretion. We therefore find no merit to Quad's claim Judge Jacobson

did not apply the appropriate standard of review of Hamilton's decision and

impermissibly shifted any burden to Hamilton or Quad.

      Judge Jacobson correctly recognized Hamilton's decision whether to

waive a non-material deviation constituted an exercise of discretion, and she

engaged in an exhaustive review of the record to determine if Hamilton's

decision constituted an abuse of discretion under the Serenity standard. See 306
N.J. Super. at 156; see also On-Line Games, 279 N.J. Super. at 595; Tec Elec.,

Inc. v. Franklin Lakes Bd. of Educ., 284 N.J. Super. 480, 488 (Law Div. 1995)

(finding a decision not to waive a non-material bid defect is reviewed under an

abuse of discretion standard). The court did not, as Quad claims, find Serenity

required Hamilton waive the non-material bid deviations and award the contract

to plaintiff. The judge considered the bid specifications, plaintiff's submissions

to Hamilton, and Hamilton's reasons for declining to waive the non-material

deviation and awarding the contract to Quad; and she determined rejection of

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                                       17
plaintiff's lowest bid was not supported by any reasoned business judgment and

conflicted with the policies underlying the LPCL.

      We discern no basis to reverse Judge Jacobson's thoughtful and detailed

findings or her conclusion that Hamilton's refusal to waive the non-material

deviation in plaintiff's bid and award the contract to Quad, at a price more than

$100,000 higher than plaintiff's bid, was not founded on valid reasons reflecting

a sound business judgment and constituted an abuse of discretion. See Serenity,
306 N.J. Super. at 157-58. We therefore affirm Judge Jacobson's findings and

conclusion substantially for the reasons set forth in her decision from the bench.

      Affirmed. We vacate our January 7, 2020 order staying the court's final

judgment pending appeal.

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