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Brockwell & Carrington Contractors, Inc. v. Kearny Board of Education

420 N.J. Super. 273, 20 A.3d 1165 (App. Div. 2011)

PUBLIC BIDDING; CONTRACTORS; SUBCONTRACTORS; SCHOOLS — Both subcontractors and contractors bidding on school facilities projects are required to include a certification that the bid and the value of all outstanding contracts would not exceed each firm’s, respectively, existing aggregate rating limit.

A Board of Education opened bids for a project and awarded the contract to the lowest bidder. The low bid identified a subcontractor for the heating, ventilation, and air-conditioning (HVAC) portion of the contract. In connection with its bid, the subcontractor submitted a Notice of Classification and a State of New Jersey Form DBC 701 (Form 701). These forms were required by the Division of Property Management and Construction (DPMC). The DPMC classifies contractors by permissible aggregate work volume based upon the given contractor’s submissions detailing financial ability. It is undisputed that at the time the bid was submitted, based on the Form 701, the subcontractor’s aggregate limit was such that it could bid on this project without exceeding its aggregate limit.

Another bidder challenged the low bid, asserting that the HVAC work had a higher value and the subcontractor had therefore underbid the project. The challenger also claimed that it had received a Form 701 from the subcontractor for an unrelated contract a month earlier in which the subcontractor had disclosed a higher backlog of uncompleted contracts. Therefore, according to the challenger, not only was the subcontractor’s Form 701 for the project likely incorrect, but by bidding on the project, the subcontractor had exceeded its aggregate limit. The board investigated and found a backlog that, when added to the bid on the project, would exceed the subcontractor’s aggregate limit.

The challenger moved by way of order to show cause to disqualify the low bid. In opposition, the low bidder submitted a certification from the subcontractor’s president setting forth the financial position of the subcontractor. On the return date, the low bidder and the board argued that relevant portions of state law generally did not apply to subcontractors, and only required that a subcontractor possess, rather than comply with, a valid classification and rating. Based on the separate treatment given to subcontractors in other sections of the applicable statute, the low bidder argued that subcontractors were not included in the broad use of “firm” in the state statute regarding the award of contracts exceeding aggregate rating.

In a written opinion, the lower court rejected these arguments, relying primarily on the Educational Facilities Construction and Financing Act (EFCFA) and prior case law supporting a broad legislative intent to make sure that quality work will be provided. It held that the subcontractor was a “firm” under state law and was subject to the law’s terms. Thus, the lower court decided that the subcontractor was subject to the aggregate rating limit, found the bid materially defective, and denied the low bidder the opportunity to cure. It ordered the Board to award the contract to the challenger, the next lowest responsible bidder. The low bidder appealed and sought a temporary stay; the Appellate Division granted the request and expedited the appeal.

On appeal, the Appellate Division found that the state law covering the requirements for a “contractor certification” was explicitly applicable to subcontractors. Contradicting the board’s and the low bidder’s arguments, the Court pointed to one subsection of the EFCFA requiring that “a pre-qualified contractor seeking to bid school facilities projects, and any subcontractors required to be named shall, as a condition of bidding, submit a sworn contractor certification regarding qualifications and credentials.” Later subsections explain what qualifications and credentials are required, including a certification as to the contractor’s aggregate rating.

The low bidder argued that the certification of aggregate rating referenced in the later subsections was a separate certification that only contractors had to submit. It contended that this aggregate rating certification was not required in the typical subcontractor certification because it was not included in the four qualifications and credentials listed in the immediately prior subsection of the statute. The Court did not agree, and found that such a reading, based on the literal arrangement of the subsections, was not only illogical, but would hamper the legislature’s mandate that the act be construed liberally to effectuate its legislative intent and the purposes of the act.

Moreover, the introduction in the first subsection did not differentiate between the certification that a contractor or subcontractor must submit. The title to the statute referred to a single certification applicable to both contractors and subcontractors. Therefore, both subcontractors and contractors bidding on school facilities projects were required to include a certification that the bid and the value of all outstanding incomplete contracts would not exceed the firm’s existing aggregate rating limit. The Court also held that subcontractors are “firms” subject to the certification requirements and the legislature clearly intended to ensure that only qualified bidders perform the work. The Court then found that, if a firm has a “single prime” contract as part of its backlog of uncompleted work, the firm may deduct eighty-five percent of the value of the subcontracted work on that prime contract when calculating the value of its backlogged contracts for future bids. In the end, the Court affirmed, finding that permitting a post-bid cure under these circumstances would afford the low bidder an unfair advantage.

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