September 2016

In an opinion overturning a $17,000,000 bridge painting contract for the Commodore Barry Bridge, a United States Federal Judge called the procurement practices of the Delaware River Port Authority “a black box . . . obscure and unexplained, and lacking any indicia of transparency or the hallmarks of a deliberative process.”

The case involved lead paint remediation and repainting of the Pennsylvania span of the Commodore Barry.  Seven contractors submitted bids.  Alpha Painting was the apparent low bidder.  Corcon was the second low bidder. Corcon was also the contractor that was perform the painting work on the New Jersey span of the bridge.  Like most agencies engaged in public bidding, the DRPA requires contracts to be awarded to the lowest responsible and responsive bidder.

Six weeks after the bids were opened and read aloud, “after an undocumented process shrouded in mystery and obscured from public scrutiny, the DRPA notified Alpha by an undated letter that it had determined that Alpha was ‘not responsible,’ and rejected its bid.”  After unsuccessfully protesting the decision with the DRPA internally, Alpha filed a bid protest complaint seeking injunctive relief against the DRPA.

After a three day trial, Judge Noel Hillman of the United States District Court for New Jersey, entered an order and opinion granting Alpha the injunction it requested and ordering the DRPA to award the contract to it rather than Corcon.  Judge Hillman’s opinion provides a scathing review of the DRPA’s procurement practices.  Ultimately, Judge Hillman ruled that the DRPA acting arbitrarily, capriciously, and without reason. The opinion describes a culture at the DRPA that is designed to steer contracts to favored contractors rather than to award contracts to the lowest responsible bidder.

The DRPA gave two reasons for ultimately determining – six weeks after opening its bid – that Alpha was not a responsible contractor.  First, the DRPA said that Alpha had not included certain OSHA 300 forms with its bid. Second, the DRPA claimed that Alpha’s “experience modification factor” (EMF) was too low.

As to the OSHA 300 forms, the Court noted a factual dispute as to whether the forms were included with the bid or not.  Alpha claimed they were included and the DRPA claimed they were not. Notwithstanding this, the Court concluded that whether the forms were missing or not was a red-herring as the DRPA admitted it did not rely on the forms at all in evaluating a contractor’s safety record.  Instead the DRPA admitted it simply looked to see if the forms were completed and signed.

As to the EMF score, the Court explained that an appropriate score could only be achieved by contractors that had successfully completed projects in New Jersey and Pennsylvania.  As the Court observed, “the testimony established that a company can paint the Golden Gate Bridge for ten years in a row and not hurt so much as a sea gull and it will lose a DRPA bridge contract to an incumbent contractor who has to pay a penalty rate for insurance based on its recent employee injury records in New Jersey or Pennsylvania.”  Alpha, a Maryland contractor, had not completed enough projects in Pennsylvania and New Jersey to be eligible for an EMF score.  However, the DRPA’s chief engineer testified that there was no reason to doubt that Alpha was a responsible party with a good safety record. This led the court to conclude that the DRPA’s decision to declare Alpha non-responsible based on a EMF score irrational and incapable of “withstand[ing] even a cursory review much less scrutiny.”

However, the Court did not end by simply debunking the DRPA’s stated reason for rejecting Alpha.  Instead, the Court noted that the DRPA “recalculated” the bids so that Corcon, not Alpha, was the lowest bidder.  While this would appear objectionable on its face, for good measure, the Court found that the DRPA’s policies did not permit this practice.  Furthermore, the Court found that the DRPA permitted Corcon to supplement its bid with missing information after the bids were opened.  In fact, the DRPA went so far as to call Corcon’s insurance broker directly and ask that he supply certain forms that Corcon had omitted from its bid.

Based on these circumstances, the Court awarded Alpha the relief it requested and ordered the DRPA to award the bridge painting contract to it.

 

 

Contractors bidding on public contracts know that failing to strictly following all of the technical aspects contained in the instructions to bidders can mean the difference between a winning and losing bid.  In the span of two weeks, I was involved with two cases that underscored the importance of this axiom.  Both cases involved New Jersey’s public bid laws.  While these cases show the importance of following a specific section of New Jersey’s public bid statute, the take away – that details matter – is universal.

The case involved a sewage authority project.  I represented the second low bidder.  The first low bidder submitted a bid package that was complete except for one technical aspect.  It failed to list the name of its electrical subcontractor on the “Subcontractor List” form provided by the authority in the bid package.  Both the instructions to bidders and Section 23.2 of the New Jersey Local Public Contracts Law required that the contractor list the names of its electrical, plumbing, and mechanical subcontractors.  The apparent low bidder listed the name of its plumbing and mechanical subcontractors but not the electrical subcontractor.  Notwithstanding our objections, despite the omission of the name of the electrical subcontractor, the authority decided to award the contract to the apparent low bidder.

Therefore, we challenged the award of the contract to the apparent low bidder in Court by seeking an injunction.  We argued that the instructions to bidders and the New Jersey Public Contracts Law were clear: if a contractor fails to list the name of its electrical subcontractor it is a fatal bid defect, which the local contracting agency cannot waive. The apparent low bidder argued that its failure to list the name of its electrical subcontractor caused no prejudice to the local agency (and ultimately the taxpayers) because the name of its electrical subcontractor was identified elsewhere in the bid package.

The trial court held that the apparent low bidder’s failure to list the name of the subcontractor on the bid form was a fatal non-waivable bid defect and concluded that the authority’s decision to award the contract was in error. Throughout its opinion the trial court emphasized that strict compliance with the bid statutes and instructions to bidders is required in order for a bid to be deemed responsive.  Importantly, the trial court noted bids containing technical defects should still be rejected even when there is an increased cost to the taxpayers because “the overriding interests in insuring the integrity of the bidding process is more important than isolated savings at stake.”