Sean E. Regan Secures Victory in Contract Bid Case

May 8, 2013 | No Comments
Posted by Sean Regan

On April 24, 2013 Sean E. Regan, Esq. obtained an order from the Essex County Superior Court, confirming the award of a $17,900,000 sanitary sewer improvement contract to Cruz Contractors, LLC.  The contract was awarded by the Passaic Valley Sewer Commission (“PVSC”) for various sanitary sewer main improvements.  The second lowest bidder at $18,400,000 had protested alleging, among other things, that Cruz failed to name an electrical subcontractor and a general construction subcontractor for installation of CIPP lining.

The court found that as an independent contractor Cruz was entitled to make the means and methods determination that it did not need an electrical subcontractor to complete the work.  The court specifically noted that even though the statute requires a bidder to provide the name of electrical subcontractors in its bid, the statute only required such if there was an intent to use the same.

The court also found that the PVSC’s assessment of its own bid specifications as to the need for an electrical subcontractor per N.J.S.A. 40A:11-16 was held to an abuse of discretion, and arbitrary and capricious standard.  The court decided that the PVSC had the authority to evaluate its own bid specifications and the bidders’ responsiveness to the same, and such was within the discretion of the PVSC.

Also at issue, but not specifically ruled upon by the court were the recent 2012 amendments to N.J.S.A. 40A:11-16 which preclude the naming of general construction subcontractors in a bid.

The project at issue was governed by Local Public Contracts Law (“LPCL”), N.J.S.A. 40A:11-1 et seq., and the PVSC’s conduct in awarding the bid was deemed correct absent arbitrary and capricious conduct.  As the lowest responsive and responsible bidder Cruz was entitled to have the contract awarded to it.  See N.J.S.A. 40:11-16.  The PVSC accepted Cruz’s lowest bid and awarded the contract to Cruz.

A small portion of the work, less than 15%, required a cured in place liner (“CIPP”) to be used.  The bid specifications required the bidder that was awarded the contract to use one of the CIPP manufacturers identified in the bid specifications.  The bid specifications also required the bidder that was awarded the contract to use a CIPP installer that was “licensed” by one of the CIPP manufacturer.  There were five bidders.  One of the bidders was one of the two CIPP manufacturers and installers identified in the bid instructions.  This called into question of just how a bidder could negotiate with another bidder without running afoul of anti-collusion rules.  Cruz submitted the lowest responsive and responsible bid of $17,891,176.  Plaintiff submitted a bid of $18,365,111.  The CIPP manufacturer bid $20,646,750.

Plaintiff asserted that Cruz failed to name an “electrical work subcontractor” in its bid pursuant to N.J.S.A. 40A:11-16.  As indicated above, although Cruz did not name an electrical work subcontractor pursuant to N.J.S.A. 40:11-16, Cruz demonstrated it needed none to complete the Project work.  Cruz proved that the work to be performed was not of the nature that would require the bidder, Cruz, to subcontract the furnishing of electrical work to a subcontractor.  No specific work to be done by an electrical subcontractor was identified in the bid specifications or plans, and Cruz did not intend to hire an electrical subcontractor, although the specifications anticipated that there might be a need to relocate electric utilities and the sewer lines right-of-way.

It is generally known in the industry that contractors installing sewer lines around public utility electric or gas lines are not authorized to relocate any lines as they are the property of the applicable public utility, in this case, PSE&G.  Neither Cruz, Plaintiff, nor PVSC had any right to relocate the public utility’s or others’ electrical lines.  The court agreed.  Thus, Cruz was able to demonstrate an electrical subcontractor was not needed or required even if any “uncharted or mismarked” underground electric utilities needed to be supported during the construction.  Cruz showed it would use well known methodologies and equipment, and an Engineered Shoring System to support utility lines when encountered during sewer line installations.  Furthermore, as a matter of fact, no underground electrical utilities were even identified in the Project work right-of-ways, and if any “uncharted or mismarked” underground electrical utilities were encountered, they would not be relocated by Cruz or any bidder.

Plaintiff also asserted that Cruz did not select a CIPP manufacturer and installer in its bid.  Cruz demonstrated on this project the bid specification did not require such, and in any event, the law actually precludes it.  See N.J.S.A. 40A:11-16 a.(2).  The bid sheet form did not specifically require the listing of the CIPP lining manufacturer or installer, but stated to list “All other Subcontractors.”  The bid sheet also specifically stated at the bottom of the form that it required only those statutory required subcontractors to be listed: NOTEIn accordance with N.J.S.A. 40A:11-16 et seq., if a Bidder does not provide the above information, the Owner shall award the Contractor to the next lowest responsible bidder.”  The court concluded that this instruction applied to the statutory required subcontractors such as HVAC, steel erection and ornamental iron, plumbing, and of course electric.  However, none of these subcontractors were necessary to complete the Project despite the fact that the bid “form” specifically listed each of them.  Furthermore, although not directly discussed by the court, the reference to “All other Subcontractors” in the form was inappropriate.  Subcontractors performing general construction are not to be listed in a bid.  See N.J.S.A. 40A:11-16 a.(2).  The recent December 2012 amendments to the statue state in pertinent part:

Subcontractors who furnish general construction work . . . shall not be named in the bid.  Notwithstanding the foregoing provisions of this paragraph, a contracting unit may choose to require in its bid specification that a subcontractor shall be named in a bid when, in the case of (a) of this paragraph, separate bids for each category, the work of that subcontractor exceeds 35 percent of the contracting unit’s estimated amount of value of the work, which shall be set forth in the bid specification.

Thus, since the CIPP manufacturer and installer were providing nothing more than general construction work, by statute and as a matter of law they “shall not be named in the bid.”  Furthermore, the CIPP general construction work did not exceed 35% of the bid (it is approximately 15% or less), and could not have been separately bid pursuant to N.J.S.A. 40A:11-16a.

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