The New Jersey Appellate Division recently affirmed the rejection of a low bidder’s bid because the proposed prices were inconsistent with the solicitation’s mandate that submitted bids comply with the New Jersey Prevailing Wage Act. Sal Elec. Co. v. Plainfield Bd. of Educ., 2020 N.J. Super. LEXIS 2283 (App. Div. Nov. 25, 2020). Although the decision is based on a unique set of facts, public bidders should avoid submitting bids with prices that call into question their ability to satisfy requirements set forth in a solicitation.
This case arises out of a public owner’s (“Owner”) solicitation of bids (“Solicitation”) for electrical upgrades and repairs to certain schools (“Project”). The Solicitation specifically directed bidders to submit proposed material markup and hourly rates for foremen, journeymen and electrician helpers as part of the bid. Notably, the Solicitation directed that “bids shall be based upon compliance with requirements of the State of New Jersey Prevailing Wage Act (“PWA”).”
Plaintiff, Sal Electric Co., Inc. (“Low-Bidder”), submitted the apparent low bid (“Low Bid”) in response to the Solicitation. The Low Bid, however, included proposed labor rates less than those required by the PWA. Based on the inconsistency, the Owner rejected the bid and awarded the Contract to the second lowest bidder, Magic Touch Construction, Inc. (“Second Low-Bidder”), whose bid contained PWA compliant labor rates.
Low-Bidder filed a lawsuit challenging the award of the Contract to the Second Low-Bidder on the basis that: (i) it submitted the lowest responsive bid; and (ii) notwithstanding
its bid price, it intended to comply with the PWA. Specifically, the Low-Bidder argued that its bid price had no bearing on the wages the Low-Bidder intended to pay its own employees, and, rather, only reflected the amounts it would be charging the Owner. Low-Bidder further argued that it fully intended to pay prevailing wages to its employees but that – for bidding purposes only – it needed to vary the bid items (including labor rates) to compete with the other bidders.
The trial court rejected Low-Bidder’s arguments and refused to reverse the Owner’s award. The court specifically held, among other things, that the Solicitation contained a mandatory requirement that all bidders comply with the PWA, and Low-Bidder’s failure to meet this obligation was a material, non-waivable defect. Low-Bidder subsequently appealed the trial court’s decision.
On appeal, the Appellate Division affirmed, holding that the Solicitation’s requirement that all bidders comply with the PWA was mandatory and non-waivable. Moreover, in rejecting the Low-Bidder’s argument that its bid price was not reflective of its intent or obligation to abide by the PWA, the Appellate Division reasoned that the Owner’s determination that the Bidder’s dubious pricing increased the risk of PWA non-compliance and work stoppages was not “unreasonable, arbitrary or capricious.” In other words, the Owner’s concern that a potential deviation from the Solicitation would result in PWA non-compliance was sufficiently reasonable to justify its rejection of the Low Bid.
Takeaway: This case reaffirms the settled rule that public owners may reject bids that fail to comply with mandatory requirements set forth in a solicitation. Remarkably, however, the decision also empowers public owners to reject bids where the proposed price reasonably suggests a potential deviation from the solicitation.