PACT TWO, LLC VS. TOWNSHIP OF HAMILTON (L-1717-19, MERCER COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE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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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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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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