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New Jersey Public Bidding: Bid Defects That Are Likely Fatal

  

By Anthony L. Byler and Joseph L. Sine of Cohen Seglias

 

Every contractor who bids on public projects in New Jersey knows the gut-wrenching feeling of spending weeks reviewing project specifications and drawings, performing site visits, attending mandatory bid meetings, and submitting a detailed bid, only to find out that they are the second-lowest bidder when bids are opened. Even worse is being declared the lowest bidder at bid opening only to find out that the second-lowest bidder is protesting your bid, claiming it defective, and demanding it be thrown out. Under either scenario, a careful pre-bid review of your bid documents and a post-bid review of your competitor’s bid documents for bid defects can be decisive in determining who is awarded the project.

 

The general purpose of New Jersey’s competitive bidding laws is to ensure fair competition and to place all bidders in an equal position. As a result, New Jersey courts have determined that a public entity may waive only immaterial or minor irregularities in a bid. This begs the question: which irregularities are “material” and which ones are “immaterial?”

 

Determining which bid defects are material, and therefore non-waivable, requires a fact-sensitive inquiry guided by frequently changing statutes and case law. In an effort to provide contractors with a guidepost as they assemble their bids and review competitors’ bids, we have identified a number of bid requirements that the New Jersey legislature and courts have found to be mandatory under the facts presented in those cases. Defects concerning these mandatory requirements are likely to be viewed as material and non-waivable and may serve as the basis for a bid’s rejection.

 

The New Jersey legislature identifies five requirements that are non-waivable, fatal defects when required by the bid plans and specifications in N.J.S.A. 40A:11-23.2. The five requirements are:

 

  1. A bid guarantee (commonly referred to as a bid bond) in the amount of 10% of the bid, but not in excess of $20,000 in compliance with N.J.S.A. 40A:11-21
  2. A certificate of a surety company stating that the surety will provide the contractor with any required performance bond or guarantee bond in compliance with N.J.S.A. 40A:11-22
  3. A statement of corporate ownership as required by N.J.S.A. 52:25-24.2
  4. A list of subcontractors in compliance with N.J.S.A. 40A:11-16 for the following categories of work:
    1. Plumbing and gas fitting and all kindred work
    2. Steam power plants, steam and hot water heating and ventilating and refrigeration apparatus, and all kindred work
    3. Electrical work, including any electrical power plants, tele-data, fire alarm, or security system
    4. Structural steel and ornamental ironwork
    5. General construction
  5. An acknowledgment that the bidder received any notice or revisions or addenda to the bid documents

 

To the extent that the lowest bidder fails to submit any of the foregoing documents or fails to fill them out properly, a court may determine that the bid is fatally defective and reject it as unresponsive.

 

For bid defects not specifically identified in N.J.S.A. 40A:11-23.2, New Jersey courts have adopted a two-part test to determine whether a bid requirement is material and non-waivable. First, if waiving the bid defect would deprive the municipality of its assurance that the contract would be entered into, performed, and guaranteed according to the specified requirements, the bid requirement may be deemed mandatory. Second, if a waiver of the bid defect would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or otherwise undermine the necessary common standard of competition, the bid requirement may be deemed mandatory.

 

By applying this standard, New Jersey courts have found several additional bid requirements to be mandatory and non-waivable when, under the facts presented in those cases, the bid invitation sought information that the bidder failed to provide, including:

 

  • Failing to submit a statement of compliance with N.J.S.A. 45:14C-2(h) (requiring a licensed master plumber that holds at least 10% of the outstanding shares of stock in the corporation to perform plumbing work)
  • Failing to submit a certificate of experience describing the work performed by the contractor and its identified subcontractors for the previous three years
  • Failing to submit a plant and equipment questionnaire describing, among other things, the type of equipment the bidder or its subcontractors owned and intended to use for the project and the bidders’ plan for performing the work
  • Failing to submit a certified financial statement prepared within the last twelve months
  • Failing to submit separate bids for different time periods (g., one-year, two-year, three-year, and five-year options) as required by the bid specifications
  • Submitting a bid that fails to disclose all of the contractor’s ongoing projects to ensure that the contractor would not exceed its aggregate rating provided by the Division of Property Management and Construction if awarded the project
  • Failing to submit subcontractors’ business registration certificates as required by the bid specifications
  • Failing to submit separate, non-contingent pricing for different line items as required by the bid specifications
  • Failing to provide bids for alternates as required by the bid specifications

 

This list is certainly not exhaustive, and, as mentioned previously, the courts’ determinations that these requirements were mandatory were made after fact-intensive inquiries, including a detailed review of the bid specifications and instructions to bidders and evaluating the magnitude of the bidders’ errors. Future legislative amendments and court decisions could easily add to, or subtract from, the list above.

 

The important takeaway for public bidders is to comply neatly with the requirements of the bid invitation because a failure to provide the requested information may result in a deficiency that falls within the foregoing examples and is determined by the court to be a basis for bid rejection. Nevertheless, when an error is made, the foregoing examples illustrate the types that may prove fatal to the bid.

 

An equally important takeaway is that second-lowest bidders should carefully scrutinize the lowest bidder’s bid package to determine whether there are any fatal defects that would subject that bid to a good faith protest. This exercise could make the difference between being awarded the project or not.

 

 

Anthony L. Byler is a partner with Cohen Seglias. He can be reached at tbyler@cohenseglias.com or 267.238.4708.

 

Joseph L. Sine is an associate with Cohen Seglias. He can be reached at jsine@cohenseglias.com or 267.238.4775.









 

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