The Appellate Division recently held that public owners must evaluate responsive bids consistently and by the same standards. Pact Two, LLC v. Twp. of Hamilton, 2020 N.J. Super. Unpub. LEXIS 701 (App. Div. Apr. 20, 2020). When a public owner does not abide by these principles, its awarding decision can be challenged and ultimately vacated. In other words, a public owner’s discretion is not without bounds.
This case arises out of a public owner’s (“Owner”) solicitation of bids (“Solicitation”) for construction of a portion of a wastewater treatment plant in the Township of Hamilton (“Project”). The Solicitation included bid specifications (“Specifications”) detailing the work and equipment to be supplied in connection with the contract (“Contract”). Part 2.3(G) of section 11661 of the Specifications (“Part 2.3(G)”) specifically required each bidder to identify certain information with respect to the equipment the bidder intended to use for the Project.
Plaintiff, Pact Two, LLC (“Low-Bidder”), submitted the apparent low bid in response to the Solicitation, but failed to fully comply with the requirements set forth in Part 2.3(G). Specifically, the Low-Bidder neglected to provide required information related to the proposed equipment manufacturer’s performance of a “finite model analysis.” Importantly, the second lowest bidder, Quad Construction Company (“Second-Low Bidder”), also failed to fully comply with Part 2.3(G) by failing to include information related to its proposed equipment manufacturer’s software.
Ultimately, the Owner awarded the Contract to the Second-Low Bidder after the Second-Low Bidder successfully challenged the Low-Bidder’s failure to comply with Part 2.3(G). Thereafter, the Low-Bidder filed a lawsuit challenging the award of the Contract on the basis that: (i) it submitted the lowest responsive bid, and; (ii) to the extent its bid was defective, such defect (failure to comply with Part 2.3(G)) was also present in the Second-Low Bidder’s bid.
After considering the parties’ arguments, the trial judge temporarily restrained the Owner from awarding the Contract to the Second-Low Bidder, and directed the Owner to determine, with sufficient reasoning, whether the Low-Bidder and Second-Low Bidder’s deviations from Part 2.3(G) were material and non-waivable. In response to the Court’s directive, the Owner determined that the Second-Low Bidder should be awarded the Contract because: (i) the Second-Low Bidder’s equipment manufacturer was “pre-approved” whereas the Low-Bidder’s proposed equipment manufacturer was not; and (ii) the Second-Low Bidder’s price was below the anticipated budgeted cost for the Project.
The trial court rejected the Owner’s decision to award the Contract to the Second-Low Bidder because the Owner failed to apply the same standards to both bids. Specially, the trial judge found, among other things, that: (i) the Low-Bidder and Second-Low Bidder’s deviations from Part 2.3(G) is non-material since the Owner awarded the Contract to the Second-Low Bidder; (ii) the Owner’s rejection of the Low-Bidder’s bid was not grounded in “sound business rationale” because it was $100,000 lower than the next lowest bid; and (iii) the Owner’s decision to award the Contract to the Second-Low Bidder was arbitrary because it waived the Second-Low Bidder’s immaterial deviation from Part 2.3(G) but refused to do so for the Low Bidder. Based upon these findings, the trial court vacated the award and ordered the Owner to award the Contract to the Low-Bidder.
On appeal, the Appellate Division affirmed, reiterating the parameters within which a public owner may accept or reject, for valid reasons, a bid containing non-material deviations. Specifically, the Appellate Division noted that a public owner may waive non-material defects if the decision is “non-pretextual, “reflects sound business judgment,” and does circumvent the underlying purposes of public bidding laws (i.e., awarding the contract to the lowest responsible bidder). Upon applying this standard, the Appellate Division agreed that the Owner wrongfully awarded the Contract to the Second-Low Bidder because: (i) the Owner should have waived the immaterial defect in the Low-Bidder’s bid just as it had determined to do for the Second-Low Bidder; and (ii) the Low-Bidder’s bid was more than $100,000 more than the next lowest bid.
Takeaway: This case reaffirms that a public owner’s awarding decisions are not absolute. Courts will readily vacate awards that result from a public owner’s inconsistent or erroneous application of relevant standards.