JOHNSON BARAN CORP v. OCEAN COUNTY BOARD OF FREEHOLDERS OCEAN COUNTY ENGINEERING DEPARTMENT SWIFT PAVING CO INC (2011)

This is an appeal by the second lowest bidder plaintiff, Johnson Baran Corp., from an award of a county construction project to the lowest responsible bidder, defendant ¹ Swift Paving, Inc. Plaintiff maintained that statements made by defendant in the winning bid submission regarding ownership of necessary equipment, a milling machine, were erroneous and, as such, the bid was defective and should have been rejected.   The trial court found that any alleged defect in the bid documents was waivable by the county and upheld the bid award to defendant.   We agree and affirm.

The essential facts are not in dispute and are as follows.

In February 2010, the County of Ocean (the County) circulated an invitation to bid entitled “Bid Specifications for Hiring of a Pavement Profiler—Bid Category:  Public Works, Park Equipment, and Construction Services” (the Project).   The twenty-eight page listing of bid specifications (the bid packet) included a number of provisions governing the submission of bids and acceptance thereof by the County, as well as forms that were to be completed and returned by bidders.

Section 1008 of the bid packet set forth a description of the machinery required for the Project—namely, a “milling machine,” described as “a self-propelled and self-loading planing, grinding or cutting machine ․ capable of removing bituminous concrete without the use of heat․”  No specific model of milling machine was required.

Section 1008 also included a form, titled “Plan and Equipment Questionnaire” (the Questionnaire), listing several questions relating to the equipment required for the Project:

7.  What equipment do you own that is available for and intended to be used on the proposed project?

8. What equipment do you intend to purchase or lease for use on the proposed work, should the contract be awarded to you?

9. Have you made contracts or received firm offers for all materials within prices used in preparing your proposal?   Do not give names of dealers or manufacturers.

Bidders were required to answer either or both of Questions 7 and 8 by filling in the quantity, description, and condition of equipment either owned or intended to be purchased or leased.   The form then required the bidder to sign, date, and notarize a statement indicating that:

The undersigned hereby declare that the items of equipment [listed in response to Question 7] are owned by [name of company], and are available for and intended to be used on the Project, if awarded the contract, and that [name of company] propose to purchase or lease for the Project the additional items of equipment stated in [response to Question 8].

Both plaintiff and defendant submitted bids on the Project.   Defendant's bid submission, dated February 8, 2010, included the following response to Question 7 on the Questionnaire:

7.  What equipment do you own that is available for and intended to be used on the project?

QUANTITY—1

DESCRIPTION, SIZE, CAPACITY, ETC.—2003 Wirtgen W2000 Milling Machine with 2.2m Type 3 drum

CONDITION—Excellent

Defendant did not fill in anything in response to Question 8, regarding equipment intended to be purchased or leased, and responded “yes” to Question 9, stating that contracts or firm offers had been made or received for materials to be used in the proposal.   Defendant then signed, dated, and notarized the form, including the notation “N/A” next to all portions of the statement referring to Question 8.

On February 9, 2010, defendant was publicly announced as the lowest bidder by approximately $30,000, with plaintiff's bid second.   On February 12, 2010, plaintiff's president, James E. Johnson, II, sent a letter to the County, protesting the validity of defendant's bid on the basis that defendant did not actually own a Wirtgen milling machine as indicated in defendant's response to Question 7 on the Questionnaire.   For that reason, Johnson claimed that defendant was “not a qualified bidder” and that such a “falsified bid” should not be accepted.

On February 18, 2010, the County responded to plaintiff, stating that it had contacted defendant following the receipt of plaintiff's letter to “request additional information pertaining to the equipment ownership in question.”   The County indicated that “Swift Paving Co., Inc. responded with a letter dated February 17, 2010, which included proof of procurement (occurring before the receipt of bids) of a 2003 Wirtgen W2000 Milling Machine with 2.2m Type 3 Drum.” The County concluded that “[i]n light of the information provided and in agreement with County Counsel, the County finds that Swift Paving Co., Inc. is in compliance with the bid specifications and will be recommended to the Board of Chosen Freeholders for award of this contract as the lowest responsible bidder.”

The letter from defendant referenced by the County was sent by Thomas Swift, president of Swift Paving, and stated:

Enclosed is a copy of our Sales Agreement with D. Storey Inc. for purchase of the Wirtgen W2000 milling machine as described in our bid of Feb. 9, 2010.   The options given in the County's Bid Documents only allowed owning, leasing, or going to purchase if low bidder.   We felt the accurate answer was that we owned the machine as D. Storey Inc. would sue us for breach of contract if we did not take delivery of said machine as per our sales agreement.

A form titled “Sales Order Form,” dated February 5, 2010, was enclosed with the letter.   The form described the Wirtgen milling machine in question and indicated pricing as follows:

Sale Price of machine:  $157,000.00

Freight to deliver machine:  $7,200.00

Cost of repairs and labor:  $19,425.00

Unpaid cash balance:  $184,225.00

The form further noted, under a section titled “Terms”:  “[n]et balance due via wire transfer prior to shipment and subject to completion of new machine agreement completion.”   The form was signed by both a seller from D. Storey and a representative of defendant.

On March 3, 2010, plaintiff's attorney sent a letter to counsel for the County, reiterating the allegations from the letter of February 12 and arguing that “[t]he attachment [to the letter from Thomas Swift to the County] was merely a ‘sales order’ which was not a complete purchase․”  Plaintiff contended that “the Wirtgen machine that was being purchased in the future by Swift was a used machine that was being traded in by a contractor who was buying a new Wirtgen machine and therefore ․ there was never a ‘complete contract’ by the terms with the condition which was ‘subject to’.”   The letter further indicated plaintiff's intention to seek an order to show cause enjoining the County from awarding the bid to defendant.

On March 24, 2010, the trial court entered an order enjoining any further action on the bid contract pending further court order, and scheduled a plenary hearing for April 9, 2010.   The matter was argued on that date before Judge E. David Millard, and testimony was taken from a number of witnesses.   Plaintiff maintained that defendant was not a “responsible bidder” because the information provided in the Questionnaire regarding ownership of the Wirtgen machine was “false,” and argued that, as such, plaintiff should be awarded the contract as the second lowest bidder.   Defendant responded by asserting that the bid specifications did not require ownership of the necessary equipment and allowed for either ownership or intent to purchase or lease.   Any alleged “defect” in the manner in which defendant filled out the Questionnaire, it was argued, was not material and did not require rejection of the bid.

By order dated April 23, 2010, the trial court held that the temporary restraints entered on March 24 should be vacated and dismissed plaintiff's complaint with prejudice.   In a written decision, Judge Millard analyzed both the relevant statutory provisions of the Local Public Contracts Law (LPCL) ( N.J.S.A. 40A:11–1 et seq.) and the relevant case law to determine whether any alleged “defect” in defendant's bid submission was non-material and thus waivable by the County.

The trial court determined that the pertinent documents—the Questionnaire and accompanying certification form—were not mandatory bid submission items as required under N.J.S.A. 40A:11–23.2, and were, therefore, not material per se.   The court next considered the two-prong test for materiality set forth in Township of River Vale v. R.J. Longo Construction Co., 127 N.J.Super.   207 (Law Div.1974), which requires consideration of

first, whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition.

[Id. at 216.]

The trial court then applied the two prong test of River Vale to the facts as previously described.   We quote the trial court's extended analysis:

The first prong to consider under River Vale is “whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements.”  P & A Constr., Inc. v. Twp. of Woodbridge, 365 N.J.Super. 164, 173 (App.Div.2004), citing River Vale, 127 N.J.Super. at 216.   The Plan and Equipment Questionnaire required bidders to answer a number of questions to assess the ability and resources of each bidder to complete the project.   It has since been established that Swift did not in fact own the Wirtgen Milling Machine as indicated under question seven.   However, the bid specification did not require ownership of the milling machine.   If Swift had filled in question eight instead, “[w]hat equipment do you intend to purchase for use on the proposed work, should the contract be awarded to you[,]” the bid would have been proper. (emphasis added).

Possession of the equipment versus intent to purchase or lease was not considered in determining the bid award.   A bidder with a contract to purchase the milling machine and a bidder with ownership and possession of the machine were on equal playing field under the terms of the bid specifications.   The Court finds the effect of waiver here is negligible at most, as the County would have accepted Swift's bid had it been shown in the bid specifications he intended to purchase the machine from D. Storey and had signed a sales agreement.   The reason for requiring a bidder to show that it owns, leases or controls whatever equipment is necessary to perform the contract is to provide assurance to the contracting agency that the bidder will be able to complete performance if it is awarded the contract.   But in the instant bid package, the County did not require advance ownership or possession of the milling machine.

Plaintiff further argued that the defect negatively impacted the likelihood that the project will be completed and guaranteed as Swift was not in possession of the machine and could not ensure he would have possession on the date the County determined the project should commence.   Swift's conflict for expected delivery of the machine was within the time parameters for the job.   Additionally, Swift testified that if the machine had not been available in time, he would have leased a machine to commence the project.   Such a lease would have been permissible under this bid package.

The second River Vale criteria for determining whether a bid requirement is material and hence nowwaivable is “whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition.”  P & A Constr., 365 N.J.Super. at 173.   The Court does not find waiver in this case would have the effect of encouraging or dissuading potential bidders, as would be the case if the County had originally required ownership and control of the equipment at the time of bid and then permitted waiver of same.   Here it cannot be argued that companies were unfairly discouraged from bidding because they did not have ownership and control of the equipment.   By not requiring ownership of the milling machine at the time of the bid submission, the Court is broadening the number of prospective bidders, with the anticipation of increased competition and a lower bid award.

Plaintiff further argues that Swift was advantaged in the bidding process because he had the ability to walk away from the agreement to purchase the milling machine if not awarded the bid.   This argument would be persuasive if the bid required more than the intent to lease or purchase.   However, those requirements were not present in the bid specifications, and it is clear that the County did not intend to exclude potential bidders who had the ability and means to obtain a milling machine but were not in possession of same at the time of bidding.   Further, any breach by Swift, whether owning or not owning the milling machine would be actionable by the County.

․

The Court is satisfied that the bid defects are not material defects under River Vale, or non-waivable defects under N.J.S.A. 40A:11–23–2.   The County reasonably exercised its discretion in connection with the Plan and Equipment Questionnaire specification and award of the contract to the lowest responsible bidders, Swift Paving, Inc.

On appeal, plaintiff raises the following issues for our consideration:

POINT I

THE COURT COMMITTED REVERSIBLE ERROR BY NOT OVERTURNING THE BID THAT OCEAN COUNTY AWARDED TO SWIFT PAVING, INC. BASED ON A MATERIAL DEFECT IN THE BID AND A FALSE CERTIFICATION BY THE BIDDER, SWIFT PAVING, INC.

POINT II

DEFENDANT, SWIFT PAVING, INC. HAS BEEN UNJUSTLY ENRICHED BY BEING AWARDED A CONTRACT THROUGH SWIFT'S FALSE SWEARING TO THE DETRIMENT OF JOHNSON BARAN.

We have considered plaintiff's argument in Point I in light of the briefs submitted and the record and we reject it.   We affirm substantially for the reasons expressed in Judge Millard's well-reasoned written opinion of April 16, 2010.   Because we have concluded that the bid was properly awarded to defendant as the lowest responsible bidder, Point II of plaintiff's argument is mooted and need not be addressed.

Affirmed.

FOOTNOTES

FN1. Plaintiff voluntarily dismissed its claim against co-defendant County of Ocean at a Civil Appeal Settlement Conference (CASP) held on July 27, 2010, before Judge Michael Patrick King.Further references to “defendant” refer only to Swift Paving..  FN1. Plaintiff voluntarily dismissed its claim against co-defendant County of Ocean at a Civil Appeal Settlement Conference (CASP) held on July 27, 2010, before Judge Michael Patrick King.Further references to “defendant” refer only to Swift Paving.

PER CURIAM