EPIC MANAGEMENT, INC. VS. NEW JERSEY SCHOOLS DEVELOPMENT AUTHORITY (NEW JERSEY SCHOOLS DEVELOPMENT AUTHORITY) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE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-3818-16T3
EPIC MANAGEMENT, INC.,
Appellant,
v.
NEW JERSEY SCHOOLS
DEVELOPMENT AUTHORITY, and
HALL CONSTRUCTION CO., INC., and
ERNEST BOCK & SONS, INC.,
Respondents.
Argued July 2, 2018 – Decided July 18, 2018
Before Judges Carroll and Rose.
On appeal from the New Jersey Schools
Development Authority.
Patrick T. Murray argued the cause for
appellant (Peckar & Abramson, PC, attorneys;
Gerard J. Onorata and Patrick T. Murray, on
the brief).
William Harla argued the cause for respondent
New Jersey Schools Development Authority
(DeCotiis, FitzPatrick, Cole & Giblin, LLP,
attorneys; William Harla and Thomas A. Abbate,
of counsel; Gregory J. Hazley, on the brief).
Robert T. Lawless argued the cause for
respondent Hall Construction Co., Inc.
(Hedinger & Lawless, LLC, attorneys; Robert
T. Lawless, on the brief).
PER CURIAM
Appellant Epic Management, Inc. (Epic), the second-ranked
bidder, appeals from the April 27, 2017 final agency decision of
the New Jersey Schools Development Authority (SDA) awarding a
contract to Hall Construction Co., Inc. (Hall), the first-ranked
bidder, for the design and construction of an addition and
renovations to Millville Senior High School (the Project). In its
decision, the SDA rejected bid protests filed by Epic and Ernest
Bock & Sons, Inc. (Bock),1 the third-ranked bidder.
The SDA concluded that Hall's chosen electrical contractor,
R. Palmieri Electrical Contractors, Inc. (Palmieri), did not
exceed its aggregate rating limit set by the Treasury Division of
Property Management and Construction (DPMC). The SDA also found
Hall's alleged failure to indicate it would be self-performing
electrical work on the Project not to be a material defect that
warranted rejection of its bid because Hall's purchase of
electrical equipment did not constitute the performance of
electrical work.
On appeal, Epic contends the SDA violated its own
administrative regulations, and that its final decision is
1
Bock is not involved in this appeal.
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arbitrary, capricious, and unreasonable. We conclude otherwise,
and affirm substantially for the reasons expressed by the SDA in
its April 27, 2017 decision.
I.
The record establishes that on September 30, 2016, the SDA
solicited bids for the Project. The SDA received five price
proposals, which were publicly opened on March 2, 2017. Price and
non-price scores were then weighted and tabulated to arrive at a
final ranking of the bidders. Hall was ranked first, while Epic
and Bock were ranked second and third, respectively.
As required by N.J.S.A. 52:18A-243(b) and the SDA's bid
specifications, each bidder was required to identify any
subcontractors it intended to use for the plumbing, HVAC,
electrical, and structural steel work components of the Project.
Section 1.3 of the bid specifications further required a design
builder to indicate whether it intended to self-perform any of
those four component services.
Hall's bid designated Palmieri as its electrical contractor.
Hall did not identify itself as self-performing any of the
electrical work.
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Palmieri was DPMC classified and SDA prequalified for an
aggregate contract limit of $15 million.2 As part of Hall's bid,
Palmieri submitted a DPMC Form 701 certifying that its unfinished
work totaled $5,420,508. Palmieri's quote to Hall for the
electrical subcontract work was $9,168,000. Together, Palmieri's
subcontract quote and the value of its unfinished work fell within
its $15 million aggregate limit.
On March 17, 2017, Epic lodged a formal protest with the SDA
seeking a rejection of Hall's bid. Epic argued that Hall's bid
was materially defective because it named an unqualified
subcontractor. Specifically, Epic contended the value of the
electrical work on the Project exceeded the approximately $9.5
million Palmieri had remaining under its aggregate limit and hence
Palmieri was ineligible to perform the Project's electrical work.
Hall subsequently explained that it intended to directly
purchase certain electrical supplies, and therefore Palmieri's
pre-bid proposal to Hall excluded some of the required electrical
equipment and materials for the Project. In turn, Epic argued
that Hall's bid was defective because Hall failed to disclose its
2
This meant that the amount of any subcontract to Palmieri, plus
the value of Palmieri's unfinished work on other projects, public
and private, could not exceed $15 million.
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decision to purchase materials and equipment as self-performing
work.
The SDA received extensive written submissions from the
parties and addressed in detail each of the issues they raised in
its thorough April 27, 2017 decision. Initially, the SDA rejected
Epic's contention that Hall was precluded from purchasing the
materials used in the electrical phase of the Project. Citing the
statutory language of N.J.S.A. 52:18A-243, the SDA explained:
A plain reading of these provisions
reveals that the work and materials for
[school] facilities construction projects may
be performed by a single contracting party.
In other words, these provisions expressly
authorize one contractor to provide all of the
work and materials. However, these provisions
also require that, to the extent another
subcontractor will be used to provide "any"
of the work and materials in the plumbing,
HVAC, electrical or structural branches, then
that subcontractor must be identified.
Accordingly, there is nothing in the
cited statute that precludes Hall from
performing any of the work in the various
branches or from obtaining any of the
materials for that work. N.J.S.A. 52:18A-
243(b) merely requires Hall to identify any
of the subcontractors to whom it will
subcontract for the furnishing of "any of the
work and materials" for the applicable
branches. Here, Hall has identified Palmieri
as the subcontractor it will subcontract with
to perform the electrical work. While there
may be an inherent assumption that Palmieri
will also purchase the associated materials,
the statutory provision at issue here does not
mandate that that be the case.
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Next, the SDA rejected Epic's argument that if Hall purchased
the electrical supplies, it was required by both the statute and
Section 1.3 of the bid specifications to disclose itself as "self-
performing" the specified electrical work, and that Hall's failure
to do so was a material defect in its bid. The SDA found it
"plainly evident" that
the terms of the [request for proposals] only
impose the self-performing identification and
DPMC classification and [SDA]
prequalification for the performance of any
"work" in the applicable branches. There is
absolutely no reference to the provision of
materials in the context of the above
requirements. As such, there was no
requirement for Hall to identify itself as
"self[-]performing" in the context of
purchasing or obtaining materials for work
relating to the four branches.
. . . .
This analysis is entirely consistent with
common sense. As noted by Hall in its
submissions, anyone can purchase electrical
equipment from a supplier. Put another way,
one need not be licensed as an electrical
contractor to obtain such equipment.
Furthermore, simply because the
electrical subcontractor might not be
purchasing the equipment does not mean that
the electrical subcontractor can disclaim
responsibility for the electrical work.
N.J.S.A. 45:5A-9(a) provides that an
electrical contractor "shall assume full
responsibility for inspection and supervision
of all electrical work to be performed by the
permittee in compliance with recognized safety
standards." As such, even if the electrical
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equipment is purchased by another entity, the
electrical contractor retains the statutory
duty to ensure that the electrical work is
performed in compliance with recognized safety
standards.
We would also note that N.J.S.A.
2A:52:18A-243(a) makes explicit reference to
"materials" when discussing plumbing and gas
fitting, steam and hot water heating and
ventilating apparatus, steam power plants,
structural steel and miscellaneous ironwork.
Significant by its omission is the absence of
a similar reference to materials in the
context of electrical work. As such, the
terms of the statute itself suggest an
intentional exclusion of the provision of
electrical materials from the scope of
electrical work.
II.
On appeal, Epic argues that Hall's bid should have been
disqualified because (1) it did not disclose its intention to
self-perform work and the SDA's definition of "work" includes the
providing of materials to a project; and (2) Hall's arrangement
with Palmieri is an "improper sidestep" to the DPMC aggregate
rating system. We disagree.
The general purpose of all public bidding laws is to "secure
for the taxpayers the benefits of competition and to promote the
honesty and integrity of the bidders and the system." In re
Protest of the Award of On-Line Games Prod. & Operation Servs.
Contract, Bid No. 95-X-20175, 279 N.J. Super. 566, 589 (App. Div.
1995). The laws are to be "construed as nearly as possible with
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sole reference to the public good. Their objects are to guard
against favoritism, improvidence, extravagance and corruption;
their aim is to secure for the public the benefits of unfettered
competition." Ibid. (quoting Keyes Martin & Co. v. Dir., Div. of
Purchase & Prop., 99 N.J. 244, 256 (1985)). The conditions and
specifications of a bid "must apply equally to all prospective
bidders; the individual bidder cannot decide to follow or ignore
these conditions . . . ." Hall Constr. Co. v. N.J. Sports &
Exposition Auth., 295 N.J. Super. 629, 635 (App. Div. 1996).
Moreover, any material departure from the bid specifications
renders a bid non-conforming and invalid. Ibid. Although minor
or inconsequential discrepancies and technical omissions can be
waived, material conditions cannot be waived by the contracting
authority. Meadowbrook Carting Co. v. Borough of Island Heights,
138 N.J. 307, 314 (1994).
Hence, in cases involving public bidding, the trial court
must review a public body's determination as to whether a bid was
conforming to determine whether its decision was arbitrary,
unreasonable, or capricious. On-Line Games, 279 N.J. Super. at
590. One legitimate inquiry in reviewing a public body's decision
on whether a bid was conforming is whether there is substantial
evidence in the record to support the conclusion. Waste Mgmt. of
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N.J., Inc. v. Union Cty. Utils. Auth., 399 N.J. Super. 508, 525-
26 (App. Div. 2008).
When either a contractor or a subcontractor submits a bid for
a project, it must also submit a certification that the award of
"the subject contract would not cause the firm to exceed its
aggregate rating . . . ." N.J.A.C. 17:19-2.13(a). Along with
this certification, the firm must submit a statement of its current
"backlog of uncompleted construction work, including public and
private contracts." N.J.A.C. 17:19-2.13(a). "A firm shall not
be awarded a contract which, when added to the backlog of
uncompleted construction work [as shown on Form DPMC 701] would
exceed the firm's aggregate rating." N.J.A.C. 17:19-2.13(c). This
regulation applies to both contractors and subcontractors in
school building bidding situations under N.J.S.A. 18A:18A-18.
Advance Elec. Co., Inc. v. Montgomery Twp. Bd. of Educ., 351 N.J.
Super. 160, 176 (App. Div. 2002).
The aggregate rating limit laws ensure that a bidder is
financially qualified to perform the work in addition to its other
contracts. See Brockwell & Carrington Contractors, Inc. v. Kearny
Bd. of Educ., 420 N.J. Super. 273, 280 (App. Div. 2011); Seacoast
Builders Corp. v. Jackson Twp. Bd. of Educ., 363 N.J. Super. 373,
378 (App. Div. 2003) ("[T]he plain intent of the regulation was
to insure the bidder's financial responsibility to undertake the
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work by requiring aggregate-rating compliance both when the bid
is submitted and when the contract is awarded."). Significantly,
it is a material, non-waivable defect of a bid for a contractor
to name a subcontractor who is not qualified by reason of failure
to comply with its aggregate rating limit. Brockwell & Carrington,
420 N.J. Super. at 282.
That said, N.J.S.A. 18A:18A-18(b) does not require the
submission of a pre-bid quote from a subcontractor before awarding
a contract to a contractor. While there is no obligation to submit
such a quote, a contractor may not execute a contract with a public
entity that will place it over that limit, and a public entity is
not authorized to execute that contract. Brockwell & Carrington,
420 N.J. Super. at 282. Thus, if Palmieri's quote put it over its
$15 million limit, it would be a material breach of the bid
specifications.
Applying these well-established principles to this case, we
affirm substantially for the reasons expressed by the SDA in its
April 27, 2017 administrative determination, which is supported
by sufficient credible evidence. R. 2:11-3(e)(1)(D). We conclude
that, for purposes of calculating its aggregate rating limit,
Palmieri was not required to include on its DPMC disclosure form
the value of the electrical equipment supplied by Hall, which was
not within the scope of Palmieri's subcontract. Accordingly,
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Palmieri's quote, when coupled with the value of its uncompleted
work, did not exceed its $15 million aggregate rating limit.
Further, N.J.S.A. 52:18A-243 did not prohibit Hall from purchasing
the electrical supplies for the project, nor did its purchase of
such supplies in its capacity as general contractor constitute
self-performance of the Project's electrical work.
Affirmed.
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