NJ Appeals Court Denies Protest that Winning Bid was Deficient

NJ Appeals Court Denies Protest that Winning Bid was Deficient

July 20, 2018

In a recent decision, the appellate division of the New Jersey Superior Court rejected a competing bidder’s challenge that the winning bid was deficient, finding that the bid’s deficiencies were immaterial and therefore waivable.  H&S Constr. and Mech., Inc. v. Westfield Pub. Sch., No. A-3696-17T4, 2018 WL 3282287, at *1 (N.J. Super. Ct. App. Div. July 5, 2018).

The case arose out of a three million dollar award to Your Way Construction, Inc. ("Your Way") for the renovation and repair of a New Jersey high school football stadium.  H&S Construction and Mechanical, Inc. ("H&S") challenged the award, asserting that a provision of the New Jersey Public Schools Contract Law, N.J.S.A. 18A:18A-32, requires proposed subcontractors to submit a Certification of No Material Change of Circumstances ("CNMCC") certifying that they remain eligible to perform the work.  Further, H&S asserted that the contract’s bidding instructions also required subcontractors to provide CNMCCs.  Your Way's bid included CNMCCs from only five of its eight proposed subcontractors.  

The court ruled that New Jersey law does not require subcontractors to provide CNMCCs.  The court held that while the statute cited by H&S provides that every bidder must certify that there has been no material change in its eligibility, there is no such requirement for subcontractors.  

The court then turned to H&S' contention regarding the language of the bidding instructions, which  required CNMCCs from both bidder and subcontractor.  The court ruled that in this instance the failure to include subcontractor CNMCCs was immaterial and therefore waivable.  In reaching this conclusion, the Court applied New Jersey’s two-prong River Vale test, which looks to (1) whether waiver of a request for proposal’s requirement would deprive the municipality of assurance that the contract would be executed and (2) whether waiver would provide one bidder with an unfair advantage.  River Vale Twp. v. R. J. Longo Const. Co., 316 A.2d 737, 741 (N.J. Super. Ct. Law. Div. 1974).  The court concluded that the first prong was satisfied because Your Way had certified that it was qualified for the job.  It further concluded that the second prong was satisfied because, among other reasons, there was no evidence that waiver of the requirement to submit CNMCCs had any effect on the award decision and the bidders had no notice that a failure to submit CNMCCs would result in rejection.

This case is a classic example of the fact that a deficiency in a bid does not necessarily render a bid invalid—something that might be understandably difficult to accept when on the losing end of an award.  But there is also another takeaway: read requests for proposals carefully—though a deficiency may not render a bid invalid, it may still subject your company to expensive litigation.