IN RE: THE COMMUNICATIONS WORKERS OF AMERICA, LOCAL 1033, CHALLENGE TO AWARD OF CONTRACT 12–X–21940 FOR FRONT–END MAIL RECEIPT AND PRE–PROCESSING SERVICES, AND CONTRACT 12–X–21802 FOR DATA ENTRY AND VERIFICATION SERVICES, BY THE DIRECTOR OF THE DIVISION OF PURCHASE AND PROPERTY, DEPARTMENT OF TREASURY.
Plaintiff, Communication Workers of America, Local 1033 (CWA or the union) appeals from a September 20, 2011 final agency decision of the Director of the Division of Purchase and Property (Division) that rejected the arguments CWA presented in a protest letter challenging the Division's award of contracts to two private firms. The bid awards in question resulted in CWA members being denied the opportunity to perform work they had previously been paid to do. While we disagree with the Director's conclusion that CWA lacked standing to protest the bid awards, our disagreement with that conclusion is of no moment, as the Director addressed CWA's substantive claims nonetheless.
We agree with the Director's ultimate conclusion that the commitment made to CWA by the State in a document entitled “Side Letter of Agreement # 13” (Side Letter 13), to ease the effects of privatization on CWA members, was not a valid basis for CWA's challenge to the two bid awards. In particular, the provisions of Side Letter 13 have no bearing on the State's public bidding and procurement laws, and nothing in Side Letter 13 calls into question the selection of the successful bidder on each of the two projects. We affirm.
On January 19, 2011, the Division announced its intention to privatize Division of Revenue functions formerly performed by state employees represented by CWA. The Division subsequently issued two Request for Proposal (RFP) documents intended to solicit bids from private companies to perform the Division of Revenue's 1) “front end mail and receipt and pre-processing services” (“the first contract”) and its 2) “data entry/verification services” (“the second contract”). We need not set forth the particulars of the bid specifications, as those facts are not pertinent to the issues on appeal.
On May 13, 2011, the Division opened the five bids submitted for the first contract. A five-member evaluation team then judged the relative merit of the bidders on the basis of their performance in relation to two broad categories: technical competence and price. The team proceeded by first winnowing the five bidders to a group of three on the basis of their respective technical capabilities. The committee next considered the surviving bidders' initial price proposals and invited each to submit a Best and Final Offer—essentially “a revised price proposal.” After conducting this process, the evaluation team on June 20, 2011 recommended that PRWT Services (PRWT) be chosen for the job, as the company offered competent technical capability and the lowest price. The Division adopted the evaluation team's recommendation and offered PRWT the first contract on July 15, 2011. The Division followed an identical process for the second contract, ultimately awarding it to respondent The Data Entry Company (TDEC).
Local 1033 of CWA represents approximately 300 “intermittent” 1 Division workers affected by the privatization of the revenue-collection functions that were the subject of the two contracts at issue. On July 29, 2011, CWA filed a protest letter, pursuant to N.J.A.C. 17:12–3.3(a)(2), characterizing the Division's bid solicitation process as inadequate because it neither announced the price of the bids “when the bids were opened” nor considered whether a private company could adequately safeguard “personal information and tax records.” A supplemental submission by the union added three contentions to its protest: PRWT, the winning bidder on the first contract, had a conflict of interest stemming from its political connections; the Division violated the Contracts Clause of the New Jersey Constitution, see N.J. Const. art. IV, § 7, ¶ 3; and the privatization of Division functions is a violation of the Fifth Amendment Takings Clause.
On August 26, 2011, representatives from CWA and both companies appeared before Division Director Jignasa Desai–McCleary, who characterized the hearing as an opportunity for both parties “to be heard by me.” In a September 20, 2011 letter opinion, Director Desai–McCleary rejected each of CWA's eight arguments. CWA raises only two on appeal—whether CWA has standing to file a protest letter and whether Side Letter 13 requires the invalidation of the two bid awards at issue.
In her September 20, 2011 decision, the Director first found the union can claim neither “taxpayer” standing, Jen Elec., Inc. v. Cnty. of Essex, 197 N.J. 627, 644 (2009), nor “bidder” standing, N.J.A.C. 17:12–3.3(a), and is thus unable to file a protest letter. She reasoned CWA cannot establish the former because it is “an unincorporated association [and] not a taxpayer of New Jersey, though its members likely are.” She concluded the union cannot prove the latter because it “did not submit a bid proposal for the challenged contract.” In addition, she distinguished the instant dispute from In re Protest of Award of New Jersey State Contract A71188 for Light Duty Auto. Parts, 422 N.J.Super. 275, 291–92 (App.Div.2011), a recent case in which the State's former automobile parts supplier—though not recognized by the court as a “taxpayer” or “bidder” under N.J.A.C. 17:12–3.3(a)—had standing to challenge the State's decision to obtain the parts elsewhere. Because here, unlike in Light Duty, other bidders were able to challenge the Division's contract award, the Director viewed Light Duty as inapposite. Despite finding CWA lacked standing, Director Desai–McCleary proceeded to address the union's substantive arguments.
On the issue of Side Letter 13, Director Desai–McCleary noted that Side Letter 13 is an agreement that “sets forth the parties' understanding about ‘some of the efforts the State ․ will undertake to lessen the impact of future privatization initiatives or the closing of State facilities[.]’ ” Side Letter 13, entitled “Job Security,” requires the State to afford the union an opportunity to “demonstrate that unit employees can do the same work more efficiently than a private contractor” when layoffs would result from the State's decision to “privatize a function.” The Side Letter also obligates the State to provide the union with notice of the impending bid, and details of the contemplated privatization.
The Director concluded that the measures to which the State agreed in Side Letter 13 lay outside the permissible scope of a protest letter because nothing in Side Letter 13 has any bearing on “public bidding and
procurement laws of the State” or “the selection of this particular bidder.”
CWA appealed the Director's September 20, 2011 decision not only to us, but also filed a grievance with the Department of Treasury; CWA also claimed before the Public Employment Relations Commission (PERC) that the Division engaged in an unfair labor practice. On appeal, CWA argues that the Director erred when she concluded CWA lacked standing to file a protest letter, and when she rejected CWA's claim that because the bid awards violated Side Letter 13, the bid awards must be rescinded.
We first address the Director's conclusion that CWA lacked standing to file a protest letter challenging the bid awards. The union contends its status as representative of the intermittent state workers, who qualify as taxpayers, entitles it to standing here. The union also argues that, absent its ability to protest the instant contract award, “the State's broken commitment to demonstrate the cost-effectiveness of privatization before awarding contracts would not be addressed.”
N.J.A.C. 17:12–3.1 to –3.3, the regulations governing protest letters, allow for a challenge to both “a term, condition or requirement of a specification contained within an advertised RFP” and “a contract award decision made by the Director.” But “the determination of who may challenge a bid specification must be gauged differently than the determination of who may challenge a contract award.” Jen Elec., supra, 197 N.J. at 644. While prospective bidders or “vendor[s] intending to submit a proposal in response to an advertised RFP” may challenge a bid specification, N.J.A.C. 17:12–3.2, only “taxpayers and bidders” may challenge the award of a public contract to the successful bidder, Light Duty, supra, 422 N.J.Super. at 289.
We conclude that CWA had standing as an association whose members are taxpayers. See Jen Elec., supra, 197 N.J. at 644. In denying CWA standing, the Director noted that the union, “an unincorporated association, is not a taxpayer of the State of New Jersey, though its members likely are.” But as we explained in O'Shea v. New Jersey Schools Construction Corp., 388 N.J.Super. 312, 318 (App.Div.2006), in the context of a public bidding dispute, associations have standing “to litigate on behalf of their constituencies.” Indeed, just as the association in O'Shea had “an interest in the litigation ․ as [the] representative[ ] of the organization's constituent members,” who themselves had a personal stake in the relevant bidding procedure, ibid., here CWA represents the intermittent workers, whose taxpayer status gives them a “sufficient stake” in the contract awards to justify CWA's standing. Jen Elec., supra, 197 N.J. at 645. We reject the Director's decision to the contrary.2
In its second point, CWA argues that the Division abused its discretion by deeming the union's Side Letter 13 argument to be outside the scope of a protest letter. CWA further argues that the Division's “technical compliance with bidding procedures” does not obviate the Director's responsibility to ensure “the lawfulness of [the] proposed contract subject to bid,” especially because the Division's non-compliance with Side Letter 13 harmed the public interest by preventing the “public from knowing whether politics or economics [drove]” the procurement process.
Our review of an agency decision in the area of public procurement is limited, Van Note–Harvey Assocs., P.C. v. N.J. Sch. Dev. Auth., 407 N.J.Super. 643, 648 (App.Div.2009), as
New Jersey “jurisprudence recognizes that the Legislature purposefully conferred broad discretion on the Director of the Division of Purchase and Property to determine ‘which bid will be most advantageous to the State,’ ” In re Jasper Seating Co., Inc., 406 N.J.Super. 213, 222 (App.Div.2009) (quoting Commercial Cleaning Corp. v. Sullivan, 47 N.J. 539, 548 (1966)). “Broad latitude and discretion is afforded to the agency, and the court ‘will not interfere in the absence of bad faith, corruption, fraud or gross abuse of discretion.’ ” Van Note, supra, 407 N.J.Super. at 648 (quoting Commercial Cleaning, supra, 47 N.J. at 549).
Here, the Division's bidding process was lawful. The Division fully complied with the two-step process when it promulgated both RFP 12–X–21940, which culminated in the first contract, and RFP 12–X–21802, which culminated in the second contract. The Division's process can therefore be distinguished from Van Note, supra, 407 N.J.Super. at 646, 650, in which the School Development Authority's decision to award an “environmental site closure services” contract to several firms “[could not] stand” because, in wholly disregarding technical competency scores in its bidding process, the Authority failed to follow its own regulations. Here, in contrast, none of the eight bidders whose conforming offer was rejected by the Division challenged the propriety of the bidding process. There is also no indication in the record of the “ ‘bad faith, corruption, fraud or gross abuse of discretion’ ” that must be present for the Director's approval of a bidding process to be vacated. Jasper Seating, supra, 406 N.J.Super. at 222 (quoting Commercial Cleaning, supra, 47 N.J. at 549).
Moreover, the procurement process that was used here is comparable to matters in which the Director was found not to have abused her discretion. In Sevell v. New Jersey Highway Auth., 329 N.J.Super. 580, 587–88 (App.Div.), certif. denied, 165 N.J. 488 (2000), for example, we approved a New Jersey Highway Authority decision to accept a “zero bid”—or, a bid to provide towing services to motorists free of charge—because the bidding process did not create an opportunity for fraud or corruption and the bidding process ensured that the successful bidder would be able to perform the required services. Similarly, the Division's procurement process here was transparent and effectively examined the technical capabilities of the respective bidders. In short, Director Desai–McCleary did not abuse her discretion in
approving the Division's bidding process.
In reaching that conclusion, we are mindful that CWA's appeal does not challenge the Division's bidding process. Instead, it challenges, in reliance on Side Letter 13, only the State's decision to privatize selected functions. CWA does not protest, for example, the Division's conclusion that PRWT and TDEC should be awarded the contracts, rather than one of the other bidders. Indeed, the union representative claimed before Director Desai–McCleary that “there should have never been a bid allowed out in the first place because the [Side Letter 13] contract was violated.” CWA's claim is consequently outside the scope of an N.J.A.C. 17:12–3.3(a)(2) protest letter, which is a mechanism designed to ensure that “the public will obtain all that is due it in the procurement process ” and encourage competition among bidders. Trap Rock Indus. v. Kohl, 59 N.J. 471, 480 (1971) (emphasis added), cert. denied, 405 U.S. 1065, 92 S.Ct. 1500, 31 L. Ed.2d 796 (1972). Because CWA's challenge was unrelated to the discrete procurement processes used in relation to the RFPs, the Director correctly concluded that the union's Side Letter 13 argument should be rejected.
Although CWA is not entitled to challenge the privatization
decision through the mechanism of a N.J.A.C. 17:12–3.3 protest letter, CWA is not foreclosed from other opportunities to challenge the Division's privatization decision. As Director Desai–McCleary noted, CWA filed an unfair labor practice charge on June 13, 2011, with PERC, addressing the applicability of Side Letter 13.
1. FN1. “Intermittent” employees work on specific projects rather than working a consistent thirty-five hour week.
2. FN2. TDEC's argument that CWA's protest is disqualified because it was filed more than ten business days “following the bidder's receipt of written notification ․ of notice of the intent to award” lacks merit. CWA filed its protest letter on July 29, 2011, the tenth business day after the State's July 15, 2011 written notice of intent to award the contracts to PRWT and TDEC, respectively.