Court Opinion

ID: 4677517
Source: CourtListenerOpinion
Date Created: 2021-04-15 14:09:35.582829+00
Date Added: 2024-06-11T08:03:38.761274
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NOT FOR PUBLICATION WITHOUT THE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-3730-19
                                                                   A-3754-19

MONTANA CONSTRUCTION,
CORP.,

          Plaintiff-Appellant,

v.

JERSEY CITY MUNICIPAL
UTILITIES AUTHORITY and
SPINIELLO INFRASTRUCTURE
WORLDWIDE,

     Defendants-Respondents.
______________________________

RAVI MEHTA,

          Plaintiff-Appellant,

v.

JERSEY CITY MUNICIPAL
UTILITIES AUTHORITY and
SPINIELLO INFRASTRUCTURE
WORLDWIDE,

     Defendants-Respondents.
______________________________
            Argued January 21, 2021 – Decided April 15, 2021

            Before Judges Sumners and Mitterhoff.

            On appeal from the Superior Court of New Jersey, Law
            Division, Hudson County, Docket Nos. L-1687-20 and
            L-1895-20.

            George E. Pallas argued the cause for appellants
            (Cohen, Seglias, Pallas, Greenhall & Furman, PC,
            attorneys; George E. Pallas and Michael F. McKenna
            on the briefs).

            Benjamin Clarke argued the cause for respondent
            Jersey City Municipal Utilities Authority (DeCotiis,
            Fitzpatrick, Cole & Giblin, LLP, attorneys; Benjamin
            Clarke and Gregory J. Hazley, on the brief).

            Edward B. Deutsch argued the cause for respondents
            Spiniello Infrastructure Worldwide (McElroy, Deutsch,
            Mulvaney & Carpenter, LLP, and Lydia K. Deutsch
            (McElroy, Deutsch, Mulvaney & Carpenter, LLP) of
            the New York bar, admitted pro hac vice, attorneys;
            Edward B. Deutsch, Edward J. DePascale, and Lydia K.
            Deutsch, on the brief).

            Adrienne L. Isacoff argued the cause for amicus curiae
            Utility and Transportation Contractors Association of
            New Jersey, Inc. (Florio, Perrucci, Steinhardt, Cappelli,
            Tipton & Taylor, LLC, attorneys; Adrienne L. Isacoff,
            on the brief).

PER CURIAM

      In these consolidated appeals, we must determine whether the Law

Division orders of May 26, 2020 and June 1, 2020 correctly upheld the decision

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                                       2
by defendant Jersey City Municipal Utilities Authority (JCMUA or Authority)

to award a publicly bid contract for repairs and improvements to Jersey City's

sewer and water lines to defendant Spiniello Infrastructure Worldwide

(Spiniello). JCMUA rejected the lowest bid by plaintiff Montana Construction

Corp. (Montana) as non-responsive and awarded the contract to the next lowest

responsible bidder, Spiniello. We affirm.

                                         I.

      A. Public Bid Invitation/Specifications

      On March 3, 2020, the JCMUA advertised and solicited bids for the Phase

1 & 2 Infrastructure Rehabilitation Project (hereinafter "project") of its sewer

and water lines in accordance with the Local Public Contracts Law, N.J.S.A.

40A:11-1 to -52. Relevant to this dispute are several provisions of the bid

specifications.

      In Section 00100 00116A of the bid specifications, JCMUA reserved the

right to reject all materially unbalanced bids, stating:

            The amount bid for each pay Item in the Bid shall
            reflect the actual cost the Bidder reasonabl[y]
            anticipates that performance of that pay Item will
            entail, together with a proportional share of the cost to
            perform Work for which no separate pay Item is
            provided and a proportional share of the Bidder’s
            anticipated overhead and profit. Bids that are, in the

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           sole discretion of the Owner, materially unbalanced,
           will be considered unresponsive.

           [(emphasis added).]

This same provision defined materially unbalanced as when:

           the Bid is structured on the basis of nominal prices for
           some items and [] inflated prices for other items
           creating, in the sole judgment of the Owner, reasonably
           exercised, the possibility that: 1) progress payments for
           items completed early may result in the unpaid project
           balance being insufficient to complete . . . the Work
           and/or 2) award to the Bidder will not result in the
           lowest ultimate cost to the Owner, taking into
           consideration the reasonable potential for adjustment of
           quantities including, but not limited to, "If and Where
           Directed" items and quantities.

           [(emphasis added).]

     Regarding the listing of subcontractors, the bid specifications provided:

           Before submitting his bid, the Bidder shall completely
           familiarize himself with Section 40A:11-16 of the New
           Jersey Local Public Contracts Law (New Jersey
           Statutes Annotated 40A:11-16). On contracts for the
           erection, alteration or repair of any public building, if
           the Bidder will use subcontractors for the plumbing
           work and gas fitting and all kindred work, steam and
           hot water heating and ventilating apparatus, steam
           power plants and kindred work, electrical work,
           structural steel and ornamental iron work[,] he shall list
           below the name and address of each subcontractor to be
           used for these respective and kindred categories of
           work.

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                                       4
            All potential bidders who intend to use "in-house"
            plumbers to perform the plumbing work on the contract
            are required to comply with N.J.S.A. 45:14C-2 and
            N.J.A.C. 13:32-1.3.       These provisions restrict a
            licensed master plumber from being utilized as a
            company employee and applying for a plumbing
            permit, unless that licensed master plumber holds not
            less than 10% of the issued corporate stock, or 10% of
            the partnership capital of a partnership.

            In the event the General Contractor will furnish work
            within the four (4) Specialty Trade Categories listed
            below with his own salaried non-subcontracted work
            force, the General Contractor must complete the
            appropriate space(s) on the Bid form, and submit the
            required information establishing his own or
            employee(s)' qualifications in such specialty trade
            categories.

      B. Bid Award

      On March 18, 2020, JCMUA received three bids for the project: Montana,

$89,367,053; Spiniello, $114,273,300; and J. Fletcher Creamer & Sons, Inc.,

$128,738,325.    Spiniello promptly submitted two letters to the JCMUA

protesting Montana's bid, contending it was non-responsive to the bid

specifications because it was materially unbalanced due to its nominal bids.

After JCMUA provided Montana a copy of Spiniello's protest, Montana

submitted a rebuttal to the Authority.

      JCMUA's project engineer and outside counsel reviewed the protest

submissions and advised the Authority that they agreed with Spiniello that

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Montana's bid should be rejected as materially unbalanced. The engineer gave

a detailed analysis of Montana's bid, opining that its bid was materially

unbalanced because it "[wa]s [f]ront [l]oading" and would "create an

unpredictability of costs[.]" Outside counsel joined the engineer's opinion,

adding that Montana's bid was "in violation of an express prohibition set forth

in the bid specifications, [and] has undermined fair and competitive bidding for

the [p]roject . . . ."

       At its public meeting on April 23, 2020, 1 the JCMUA Board of

Commissioners (Board) solicited public comment but did not accept the

invitation by Montana's counsel to question him concerning his client's bid. The

Board did not publicly discuss Spiniello's protest and went into executive

session under N.J.S.A. 10:4-12(b)(7), to discuss matters relating to "pending or

anticipated or contract negation . . . in which the public body is, or may become,

a party, or matters falling within the attorney-client privilege." While in closed

session, the Board heard the opinions of the project engineer, and JCMUA's

general counsel, general consulting engineer, and executive director. Upon

returning to public session, the Board– without any commissioners stating their

reasons – unanimously voted to reject Montana's bid as materially unbalanced

1
    Conducted telephonically due to Covid-19.
                                                                            A-3730-19
                                        6
and to award the contract to the "lowest, responsible and complying" bidder,

Spiniello.

       C. Montana's Litigation

        On May 1, 2020, Montana filed a verified complaint in lieu of prerogative

writs and order to show cause against defendants seeking to temporarily stay the

contract award and to overturn the bid award to Spiniello.2 Montana contended

JCMUA's decision rejecting its bid was arbitrary and capricious and violated the

Open Public Meetings Act (Sunshine Law), N.J.S.A. 10:4-6 to -21, by

discussing the project bid award in executive session. JCMUA agreed not to

award the contract until the litigation was resolved. Spiniello filed a Rule 4:6-

2(e) motion to dismiss in lieu of answer, or, in the alternative, a Rule 4:46

motion for summary judgment. JCMUA cross-moved for summary judgment.

       On May 26, Assignment Judge Peter F. Bariso, Jr. entered an order,

together with a fifty-four-page written decision, denying Montana's application

for preliminary injunction; granting Spiniello's motion to dismiss; granting

JCMUA's cross-motion for summary judgment; and dismissing Montana's

verified complaint with prejudice. The judge found that Section 00100 00116A

UNBALANCED BIDS of the bid specifications plainly stated: "[t]he amount

2
    Mehta's motion to intervene was denied on May 22, 2020.
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                                        7
bid for each pay Item in the Bid shall reflect the actual cost the Bidder

reasonabl[y] anticipates that performance of that pay Item will entail . . . Bids

that are, in the sole discretion of the Owner, materially unbalanced, will be

considered unresponsive." (First and third alterations in original). Thus, the

judge rejected Montana's interpretation that the bid specifications allowed

bidders "to set bid values as they deemed appropriate based on their business

judgment, if and where JCMUA did not state minimum required values."

      The judge pointed out JCMUA stressed at oral argument that Montana's

material deviation from the bid specifications was evidenced where it "used

nominal bids on, at least, 46 of the 232 pay items[.]" As an example, the judge

stated:

            Montana bid $1[] on forty-six-unit price items.
            Additionally, Montana bid $500[] on ten manhole
            covers, which is also considered to be a nominal bid for
            this item. For example, the Engineer’s Estimate for bid
            item 4H stated the estimated quantity to be 10,000 with
            a unit price of $225[] for the total amount of
            $2,250,000[]. Montana bid a unit price of $1[] for a
            total amount of $10,000[]. Spiniello bid a unit price of
            $290[] and a total amount of $2,900,000[]. [J. Fletcher
            Creamer & Sons] bid a unit price of $315[] for a total
            amount of $3,150,000[]. Accordingly, Montana bid
            $2,240,000[] less than the lowest estimate for this pay
            item. Montana’s $1[] bids clearly do not reflect the
            actual cost that Montana reasonably anticipated those
            pay items to entail.

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                                       8
Finding Montana's bid "unresponsive," the judge decided it lacked standing to

challenge the bid award. See William A. Carey & Co. v. Borough of Fair Lawn,

37 N.J. Super. 159, 169 (App. Div. 1955).

      Despite finding Montana's bid unresponsive for including nominal bids,

for the sake of completeness, Judge Bariso determined whether Montana's bid

was materially unbalanced. The judge noted there were minimal discrepancies

between the respective analyses by engineers for JCMUA and Montana,3 but

found there was a substantial difference, $15 million, between the estimated

actual values of Montana's fifty-six nominal bids and what Montana bid for

them.4 The judge also noted that Montana's bid included inflated prices for some

bid items amounting to "at least a $15 [million] difference between the estimated

3
  The judge recognized that he was not required to consider a certification by
Montana's independent professional engineer because it was not before the
JCMUA when it awarded the contract. See Palamar Constr., Inc. v. Pennsauken
Twp., 196 N.J. Super. 241, 250 (App. Div. 1983). He considered it, nonetheless.
4
   The report by JCMUA's engineer stated Montana's fifty-six nominal bids
totaled $119,672 with actual values of $15,267,950. Montana's engineer
certification stated these bids totaled $160,928 with actual total of $16,535,500.

                                                                            A-3730-19
                                        9
value of these items and what Montana bid for them, [thus] it is clear that

Montana's bid does contain nominal prices for at least fifty-six items." 5

      Due to these inflated prices and because Section 00290 (Scope of

Contract) of the bid specifications provide that the sequence of work is

determined by JCMUA, the judge concluded Montana's bid was "front-

loaded[.]"   For example, he explained that for items related to Blockage

Removal and Inspection, "some of the earliest work to be performed under the

Bid Specifications[,]" JCMUA's engineer opined the estimate was $1,414,400

in contrast with Montana's $3,088,250 bid. Also, for the first five on JCMUA's

schedule, "Montana bid $19,186,550[] for the five bid items that correspond to

pipe installation for these streets." JCMUA's engineer found "Montana’s bid for

those five items was about 21.45 [percent] of the total bid which does not include

excavation, backfill, paving and manhole structures." Another concern cited by

the judge was the contract end work related to trees and green infrastructure;

JCMUA's engineer's estimated cost was $2,170,000, for which Montana only

bid $423,400.

5
  The report by JCMUA's engineer stated the inflated bid items in Montana’s
bid totaled $40,706,500 with an estimated cost of $22,150,050. Montana's
engineer's certification stated Montana’s bid totaled $34,530,000 with an
estimated cost of $19,321,250.
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                                       10
      The judge next examined Section 00100 00116A (Unbalanced Bids) of

the Bid Specifications. The first subpart provides that a materially unbalanced

bid exists where "nominal prices for some items and inflated prices for other

items" leading to a situation where "progress payments for items completed

early may result in the unpaid project balance being insufficient to complete

early [and] may result in the unpaid project balance being insufficient to

complete [sic] the Work[.]"6 Given his conclusion that Montana's bid was front-

loaded, the judge found it was materially unbalanced and, thus, non-responsive.

      In sum, because a governmental entity is without discretion to accept a

non-responsive bid, the judge determined JCMUA was legally obligated to

reject Montana's bid. See Meadowbrook Carting Co. v. Borough of Island

Heights, 138 N.J. 307, 314 (1994).7

6
  Based on this finding, the judge determined it was not necessary to determine
the alternative second subpart under Section 00100 00116A defining a
materially unbalanced bid: if the "award to the Bidder will not result in the
lowest ultimate cost to the Owner, taking into consideration the reasonable
potential for adjustment of quantities including, but not limited to, 'If and Where
Directed' items and quantities."
7
 The judge denied Montana's motion to stay the order as did this court and our
Supreme Court, Mont. Constr. Corp. v. Jersey City Mun. Utils. Auth., 244 N.J.
287 (2020).

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                                       11
        D. Mehta's Litigation

        On May 21, 2020, Mehta, represented by Montana's attorneys, filed a

verified complaint in lieu of prerogative writs and order to show cause against

defendants seeking to temporarily stay the contract award and to overturn the

bid award to Spiniello. His interest was as a taxpayer and resident of Jersey

City.     Mehta claimed Spiniello's bid failed to designate a plumbing

subcontractor as required by the bid specifications.          JCMUA disagreed,

revealing that its professionals found Spiniello's bid was responsive to the

specifications. Defendants filed a Rule 4:6-2(e) motion to dismiss in lieu of

answer, or, in the alternative, a Rule 4:46 motion for summary judgment.

        On June 1, Judge Bariso granted summary judgment to defendants

dismissing Mehta's complaint with prejudice. The judge began his legal analysis

noting that he would not consider certifications by Mehta's experts because their

opinions were not before JCMUA when it decided to award the contract to

Spiniello. See Palamar, 196 N.J. Super. at 250. Given his prior decision

rejecting Montana's bid as non-responsive, the judge determined that JCMUA

did not abuse its discretion in waiving clerical errors in Spiniello's bid, thereby

making it the lowest bidder. See Meadowbrook, 138 N.J. at 314; Spina Asphalt

Paving Excavating Contractors, Inc. v. Borough of Fairview, 304 N.J. Super.

                                                                             A-3730-19
                                       12
425, 428-30 (App. Div. 1997); Thomas P. Carney, Inc. v. City of Trenton, 235

N.J. Super. 372, 381 (App. Div. 1988); Pub. Constructors, Inc. v. N.J.

Expressway Auth., 43 N.J. 545, 546-548 (1965).

      Next, the judge determined that Spiniello's bid was the lowest responsive

bid. He rejected Mehta's argument that Spiniello's bid was non-responsive

because it did not list its subcontractors.      The judge noted that the bid

specifications' Prefatory Note does not require bidders to list their

subcontractors but expressly refers to N.J.S.A. 40A:11-16, which requires that

bidders must list subcontractors if they use them and must be read in conjunction

with the requirements of N.J.S.A. 40A:11-23.2 that states that bid plans and

specifications requiring the listing of subcontractors are mandatory items. The

judge then determined the bid specifications did not require bidders to list

subcontractors.

      As for plumbing subcontractors, the judge looked at Addendum No. 2 of

the bid specifications, which indicate that a licensed plumber is possibly needed.

The Addendum states:

            SC24.00 Item 24, Allowance for Replacement of Land
            Services

            In the event an existing lead service is encountered
            during the course of the replacement of water services.
            This Allowance will cover labor, material, equipment

                                                                            A-3730-19
                                       13
            and profit/overhead that will be required to replace lead
            services from the valve box to the individual water
            meter in accordance with EPA and NJDEP Guidelines.
            This work will be performed on a case by case basis and
            the Contractor will be provided with the scope of work
            accordingly.

A licensed plumber is only needed when a lead pipe extends beyond JCMUA's

right-of-way. The judge found this work is "purely speculative" because "the

bid specifications did not include an identifiable scope" of such work, it would

be up to "JCMUA [to] exercise[] its discretion to assign the work on a case-by-

case basis." Because "JCMUA opted to provide a uniform allowance to cover

this work for all bidders[,]" the judge found "the [b]id [s]pecifications did not

require the designation of a plumbing subcontractor."

      The judge determined Spiniello's failure to list a plumbing subcontractor

for speculative work was not a material deviation from the bid specifications as

it did not deprive JCMUA of any assurances that the contract would not be

performed in accordance with the bid specifications.        Since there was no

identifiable scope of plumbing work to be performed and JCMUA would not be

performing work beyond its right-of-way, the judge reasoned Spiniello would

not need a licensed plumbing subcontractor to perform the contract.

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                                      14
      Similarly, the judge rejected Mehta's contention that Spiniello's bid was

non-responsive because it failed to list an electrical subcontractor. Declining to

consider "Mehta's experts['] [certifications] because it was bound to the record

before . . . JCMUA when it awarded the contract[,]" the judge determined it was

"speculative [electrical] work pertaining to loop detectors and grounding of

water service [and thus] . . . bidders [were not required to] designate an electrical

subcontractor." The judge also dismissed as speculative Mehta's contention that

a licensed electrician was needed to install a temporary on-site Engineer's Office

because it may "already have outlets, fixtures, and wiring to code." 8

                                         II.

      When reviewing an order granting summary judgment, we apply "the

same standard governing the trial court . . . ." Oyola v. Xing Lan Liu, 431 N.J.

Super. 493, 497 (App. Div. 2013). A trial court should grant summary judgment

when the record reveals "no genuine issue as to any material fact" and "the

moving party is entitled to a judgment or order as a matter of law." R. 4:46-

2(c). The facts are viewed "in the light most favorable to the non-moving party

[.]" Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We accord

8
  The judge denied Mehta's motion to stay the order as did this court and our
Supreme Court, Mont. Constr. Corp. v. Jersey City Mun. Utils. Auth., 244 N.J.
287 (2020).
                                                                              A-3730-19
                                        15
no deference to the trial judge's legal conclusions. Nicholas v. Mynster, 213

N.J. 463, 478 (2013) (citations omitted). Like the trial court, we must determine

whether JCMUA's rejection of Montana's bid as non-responsive was arbitrary,

capricious, or unreasonable and that Spiniello had the lowest responsible bid.

See In Re Award of the On-Line Games Prod. & Operation Servs. Cont., 279

N.J. Super. 566, 590 (App. Div. 1995) ("The standard of review on the matter

of whether a bid on a local public contract conforms to specifications . . . is

whether the decision was arbitrary, unreasonable or capricious.").

      A. Due Process Claim

      Citing Sellitto v. Cedar Grove Twp., 132 N.J.L 29, 32 (Sup. Ct. 1944),

plaintiffs argue JMCUA was obligated to hold a hearing before awarding the

contract to Spiniello. They also contend that under Nachtigall v. N.J. Tpk.

Auth., 302 N.J. Super. 123, 143 (App. Div. 1997) and several other earlier

decisions, the JCMUA was required to give them "adequate notice, a chance to

know opposing evidence, and the opportunity to present evidence and argument

in response[.]" 9

9
   Normally, we would not consider these contentions because they were not
raised below. However, we choose to do so because the public bidding issue
involves "a concern matters of great public interest." Zaman v. Felton, 219 N.J.
199, 226-27 (2014) (quoting Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234
(1973)).
                                                                           A-3730-19
                                      16
      Montana was not entitled to a "plenary quasi-judicial hearing. . . ." Id. at

143; see also Entech Corp. v. City of Newark, 351 N.J. Super. 440, 461 (App.

Div. 2002), (holding that a bid protestor was not entitled to a trial -type hearing

and that a "challenge to a bid specification need not be so formal" as long as a

public entity provides a "fair opportunity" for challenges to be heard, "either

before or after a bid award"). Montana was given a fair opportunity to be heard.

After receiving Spiniello's bid protest, Montana submitted its opposition to

JCMUA.      At JCMUA's public meeting, Montana's counsel was given the

opportunity to address the body prior to the contract award vote.

      B. Sunshine Law Claim

      Plaintiffs argue JCMUA violated the Sunshine Law because its decision

and deliberations of the contract award were not made in public but in executive

session. They point to Oughton v. Bd. of Fire Comm'rs, Fire Dist. No. 1,

Moorestown Twp. Burlington Cnty., 178 N.J. Super. 633, 641 (Law Div. 1980),

aff’d in part, rev’d in part, 178 N.J. Super. 565 (App. Div. 1981), which held

that N.J.S.A. 10:4-12(b), "requires meetings of public bodies to be open to the

public at all times, except in certain designated" instances, anticipated litigation

being one of the exceptions. They argue the judge erred in determining that

JCMUA could have considered legal issues in executive session as Spiniello's

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                                        17
protest and Montana's response did not equate to a legal claim evidencing

threatened litigation. We are unpersuaded.

      The Sunshine Law provides, "[a] public body may exclude the public only

from that portion of a meeting at which the public body discusses any . . .

pending or anticipated litigation . . . in which the public body is, or may become,

a party . . . ." N.J.S.A. 10:4-12(b)(7) (emphasis added). We have recognized

for this exception to apply "the public body must be discussing its strategy in

the [pending or anticipated] litigation, the position it will take, the strengths and

weaknesses of that position with respect to the litigation, possible settlements of

the litigation or some other facet of the litigation itself." Burnett v. Gloucester

Cnty. Bd. of Chosen Freeholders, 409 N.J. Super. 219, 236-37 (App. Div. 2009)

(quoting Houman v. Pompton Lakes, 155 N.J. Super. 129, 145 (Law Div. 1977)).

N.J.S.A. 10:4-12(b)(7) allows a public body to exclude the public to protect any

"material covered by . . . the attorney-client privilege and work-product

doctrine[,]" Payton v. N.J. Tpk. Auth., 148 N.J. 524, 558 (1997), and "to meet

privately with counselors and advisors in order to discuss policy, formulate

plans of action and generally to have an exchange of ideas[,]" Burnett, 409 N.J.

Super. at 238 (quoting Houman, 155 N.J. Super at 154-55).

      Applying these principles, we agree with Judge Bariso's ruling that:

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                                        18
            JCMUA did not violate the [Sunshine Law] because no
            formal action was taken during the [e]xecutive session.
            [JCMUA's representative] has attested to the fact that
            no votes were held during the [e]xecutive [s]ession and
            no straw polls were taken. Rather, after . . . JCMUA
            finished the deliberations in [e]xecutive [s]ession, the
            public portion of the meeting resumed . . . .
            Accordingly, . . . JCMUA did not violate the [Sunshine
            Law] by meeting in [e]xecutive [s]ession during the
            April 23, 2020 public meeting.

            [(Internal citation omitted).]

      JCMUA properly exercised its authority under N.J.S.A. 10:4-12(b)(7) to

go into executive session to discuss with its counsel and other professionals

Spiniello's bid protest that Montana's low bid should be rejected. It anticipated–

and correctly so–that the award of the contract to either Montana or Spiniello

would result in litigation by the non-prevailing party. JCMUA did not take

formal action rejecting Montana's low bid as non-responsive and awarding the

contract to Spiniello until it returned to public session.

      C. Dismissal of Plaintiffs' Substantive Claims

      Plaintiffs argue that the judge failed to consider facts contrary to

JCMUA's position granting summary judgment. They argue the court did not

consider their certifications but did consider defendants' certifications. They

and UTCA also argue that the court misinterpreted the "pertinent" bid

specifications and misapplied relevant law. We disagree.

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      In the context of public bidding, the "function of [the trial 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., Inc., 406 N.J. Super. 213, 226 (App.

Div. 2009). The court could not properly reverse a governmental entity's

decision unless the 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)).

      "[T]he statutory rule in New Jersey is that publicly advertised contracts

must be awarded to 'the lowest responsible bidder.'" Meadowbrook, 138 N.J. at

313 (quoting N.J.S.A. 40A:-11:6.1); see also N.J.S.A. 40A:11-4(a).           New

Jersey's Local Public Contracts Law (LPCL) defines "[l]owest responsible

bidder" as the bidder: "(a) whose response to a request for bids offers the lowest

price and is responsive; and (b) who is responsible." N.J.S.A. 40A:11-2(27). A

bidder is considered the "lowest responsible bidder" if it is the "lowest bidder

that complies with the substantive and procedural requirements in the bid

                                                                            A-3730-19
                                       20
advertisements and specifications." Meadowbrook, 138 N.J. at 313 (citation

omitted).

      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. v. Atl. Cnty. Sewerage Auth., 67 N.J. 403, 411

(1975). Thus, "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." Serenity Contracting Grp., Inc. v. Borough of Fort Lee,

306 N.J. Super. 151, 156 (App. Div. 1997).

      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, 138 N.J. at 314. "[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." Serenity, 306 N.J. Super. at 157.

(citation omitted). 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

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discretion standard." On-Line Games Prod., 279 N.J. Super. at 595 (citation

omitted). "If the non-compliance is substantial and thus non-waivable, the

inquiry is over because the bid is non-conforming and a non-conforming bid is

no bid at all." Ibid.

      The primary issue here is unbalanced unit price bids. "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." Armaniaco v. Borough of

Cresskill, 62 N.J. Super. 476, 482 (1960). An example is "a front-end loaded

bid [which] contains inflated bid items for work to be completed at the beginning

of a contract and subsequent offsetting, understated bid items for work to be

completed later in the contract." M.J. Paquet, Inc. v. N.J. Dep't of Transp.

(Paquet II), 171 N.J. 378, 399 (2002). This type of unbalanced bid poses the

             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.

             [Armaniaco, 62 N.J. Super. at 482.]

      The type of unbalanced bid here is not directly related to the timing of the

work but is "based on nominal prices for some work and enhanced prices for

other work." Frank Stamato & Co. v. City of New Brunswick, 20 N.J. Super.

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340, 344 (App. Div. 1952). The bidder overprices items that could be used in

greater quantities than estimated in the proposal, while underpricing those bid

items that might be used in significantly lesser quantities. See Boenning v. Brick

Twp. Mun. Utils. Auth., 150 N.J. Super. 32, 36-37 (App. Div. 1977). A public

risk occurs with this form of unbalanced bidding: post-contract collusion or

fraud between the contractor and subcontractors. See id. at 36 (recognizing

unbalanced bidding creates a risk of "collusion or fraud between the contractor

and the engineer whose discretion will be invoked"). Even absent collusion,

where the quantity of an item is uncertain and subject to significant swings, an

extremely high unit price for that item, although offset by nominal bids for other

items, could present an exceptionally large cost impact, if the highly priced item

is required in great quantities. Armaniaco, 62 N.J. Super. at 486-87. The risk

is heightened if the contractor has the discretion to allocate the unit-priced items.

However, a governmental entity's ability to reject unbalanced bids, prevents the

risks to public funds. Ibid.

      We are mindful that unbalanced bids are not per se illegal. See Riverland

Constr. Co. v. Lombardo Contracting Co., Inc., 154 N.J. Super. 42, 45-48 (App.

Div. 1977), aff'd o.b., 76 N.J. 522 (1978). A bid that front-loads costs may be

justified by a bidder's need to cover mobilization costs and "general costs of

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getting the work started[,]" which are not otherwise included in the bid.

Armaniaco, 62 N.J. Super. at 482. A bidder may purposely propose nominal or

below-market prices because of a desire to secure a foothold in a market and

underbid its competition. Riverland, 154 N.J. Super. at 47.

      Nonetheless, an unbalanced bid may be problematic when: (a) nominal

bids on some items are offset by excessive bids on others; (b) the unbalanced

bid relates to fraud or collusion; or (c) the unbalanced bid undermines fair

competition. Ibid. "[T]he submission of unbalanced bids distorts the public

bidding process and may make a mockery of fair competition between bidders."

Paquet II, 171 N.J. at 400 (internal quotation marks and citation omitted).

Although unbalanced bids are not per se illegal, a governmental entity may

expressly prohibit them "in the . . . entity's bid specifications or proposal." M.J.

Paquet, Inc. v. N.J. Dep't of Transp. (Paquet I), 335 N.J. Super. 130, 139 (App.

Div. 2000), aff'd in part, rev'd in part on other grounds, 171 N.J. 378 (2002); see

also Armaniaco, 62 N.J. Super. at 487 (stating that a municipality could reserve

the right to reject unbalanced bids to guard against the "catastrophe[e]" of

greater than anticipated quantities of a high unit-priced item).

      In Riverland, the specifications for a sewer construction contract included

a "reservation . . . that proposals may be rejected if the prices are obviously

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unbalanced." 154 N.J. Super. at 44 (emphasis added). The municipality rejected

two low bidders on a contract exceeding $300,000 because the lowest bidder,

Lombardo Contracting, bid one cent a cubic yard for fill; and the second lowes t

bidder, Riverland Construction, bid $1 a cubic yard for fill. "Since the exact

amount of fill could not be ascertained in advance of the work, the township

sought a unit price based on the engineer's estimate of a required quantity of

8,078 cubic yards." Id. at 45. The engineer estimated that a reasonable cost for

fill was $5 per cubic yard. Ibid. The trial court affirmed the rejection of

Lombardo but ordered the award to Riverland.

      We reversed the trial court's award to Riverland and directed the award to

Lombardo as the low bidder. Id. at 48. We noted that the bid for fill was for

one of thirty-eight items in the bidders' proposals and consisted of "an item

which [was] relatively minor in comparison with the total contract price of over

$300,000." Id. at 45, 46. We acknowledged that "a nominal bid under such

circumstances is not inherently evil or destructive of fair and competitive

bidding[,]" but held that "[t]he pejorative connotation of the phrase 'unbalanced

bid' comes into play only when the nominal bid on one item is unbalanced

because of an excessive bid on other items, or because of other elements pointing

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to fraud, collusion, unfair restriction of competition, or other substantial

irregularity." Id. at 46, 47.

      Armaniaco involved a taxpayer's challenge to a contract award for

construction of a municipal sewer.      62 N.J. Super. at 478.     The taxpayer

complained that the low bidder's bid was unbalanced, contrary to a specification

providing that "[a]ny bid which, in the opinion of the Engineer, is obviously

unbalanced, may be rejected." Id. at 479. The plaintiff also complained that the

municipality set a fixed price for rock excavation rather than subject it to

competitive bidding. Id. at 480.

      The successful bidder, D. Stamato & Co. (Stamato) submitted nominal

bids for two items—timber sheeting left in place, and well-pointing. Id. at 479-

80.   It was acknowledged that the actual unit costs were substantial, and

Stamato's price was nominal. Id. at 480. Nonetheless, we found no basis to

invalidate the bid as unbalanced, on those grounds, as there concededly was no

evidence of fraud or collusion, or proof of other substantial irregularity. Id. at

484. In reaching that conclusion, we relied on a similar finding in Frank Stamato

& Co. Id. at 482-84.

      However, in Armaniaco, we held that the municipality was prohibited

from setting a unit price for rock excavation in a municipal sewer. Id. at 485-

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86. We recognized that the amount of rock excavation was indeterminate, and

the municipality was concerned that unusually high unit bids posed a financial

risk to the municipality if greater than expected excavation was required. Id. at

484. We held that the municipality could set a maximum price for the unit. Id.

at 487. Alternatively, "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." Ibid.

      Applying these principles, we agree with Judge Bariso's finding that the

board's rejection of Montana's bid and the award to the Spiniello, the lowest

responsible bidder, was not arbitrary, capricious, or unreasonable. Judge Bariso

reviewed and considered all the information that was before JCMUA when it

made its decision: the bid specifications, the bids submitted by Montana and

Spiniello, the bid protests, the responses to bid protests, and the analyses of the

protests by JCMUA's professionals. The JCMUA's bid specifications provide

that materially unbalanced bids "will be considered unresponsive." This differs

from the bid specifications in Riverland, 154 N.J. Super at 44, Armaniaco, 62

N.J. Super. at 479, Frank Stamato & Co., 20 N.J. Super. at 342, which used the

more permissive language that an unbalanced bid "may be rejected." Moreover,

the extent of nominal bids in two of those cases were minor: In Riverland,

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apparently only one category pertaining to a relatively minor item, involved a

nominal bid, 154 N.J. Super. at 45-46; in Armaniaco, nominal bids were

submitted only for two unit prices, 62 N.J. Super. at 479-80.

      As noted above, Judge Bariso clearly set forth in his written decision that

Montana's submitted bid was materially unbalanced due to the significant

number of nominal bids: fifty-six of the 232-unit price items. JCMUA thus had

legitimate concerns that Montana's bid posed a risk that Montana could distort

its deployment of equipment and labor, to increase utilization of the high-priced

labor categories and increase costs to the Authority.

      The judge was correct in rejecting plaintiffs' and UTCA's contentions that

Spiniello's bid was non-responsive because they did not list licensed plumbing

and electrical subcontractors.   The bid specifications expressly stated that

bidders did not have to list subcontractors but refers to N.J.S.A. 40A:11-16,

which details the requirements when bidders list subcontractors or when a public

body requires subcontractors be listed in a bid. Because subcontractors were

neither required by the bid specifications nor included in Spiniello's bid, there

was no basis for the JCMUA to reject its bid for not listing plumbing and

electrical subcontractors. The fact that Allowance Work Item 24 of the bid

specifications may involve plumbing work to replace lead pipes does not dictate

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that a plumbing contractor need be listed in Spiniello's bid because no scope of

work was provided in the bid specifications for this uncertainty. And there was

no work to be performed under the bid specifications requiring the work of a

licensed electrician. The bid requirement to have an Engineers Field Office on-

site does not warrant a corresponding requirement to list an electrician

contractor to install the office. Moreover, even if Spiniello should have listed

an electrical subcontractor, this was a non-material waivable deviation because

it did not deprive JCMUA of Spiniello's assurance that it could perform the

contract, nor "adversely affect[s] competitive bidding by placing [Spiniello] in

a position of advantage over other bidders[.]" River Vale Twp. v. R. J. Longo

Constr. Co., 127 N.J. Super. 207, 216 (Law Div. 1974).

      In sum, the Authority's rejection of Montana's bid and award of the

contract to Spiniello was not arbitrary, capricious, or unreasonable.

Consequently, Montana's challenge has no merit.

      Affirmed.

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