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Canyon Group, Inc. v. Keansburg Municipal Utilities Authority

L-5063-96 (N.J. Super. Law Div. Mon. Cty. 1999) (Unpublished)

PUBLIC BIDDING—Although under limited circumstances a municipal utilities authority bound by the Local Public Contracts Law may reject all bids, it may not do so on a visceral feeling that the bids were too high.

A municipal utilities authority was subject to the Local Public Contracts Law that required it to solicit public bids for a construction project. In an initial bidding round, all bids were rejected for being too high. The plans were redrawn and the project was put out for a second round of bidding. When the bids were publicly received and opened on the revised project, the municipal utility authority again rejected all of the bids. This disappointed the low bidder because it had spoken to the design engineer who had attended the bid opening and was advised that the engineer would recommend award of the contract to it.

After hearing testimony, the Court concluded that the estimate of project cost that may have been prepared by the engineering consultant apparently played no part in the utility authority’s decision to reject the bids. Rather, the bids were rejected because the authority’s construction committee felt they were too high. According to the Court, in some circumstances a governmental entity may reject all bids. Nonetheless, the unbridled power to reject bids, even if that right is reserved in the invitation for bidding, is violative of public policy and can afford a means by which the bidding statute could be evaded. On the other hand, a rule prohibiting rejection of all bids where legitimate circumstances mandate the rejection, is not in the public’s interest. To achieve the proper tension between these two competing principles, courts have opined that where a good faith conclusion is reached that the purposes of the public bidding statutes have been violated or when the lowest bid substantially exceeds the cost estimate or appropriation for the project and/or where the contracting entity forgoes or substantially revises the project, all bids can be rejected. On the other hand, the stated reason to support a governmental entity’s rejection of all bids must be valid and non-pretextual and may not bespeak any avoidance of the underlying purposes of the public bidding statute. In this case, it was obvious to the Court that the authority’s on-the-spot decision making was based on a visceral reaction to the bids and, hence, arbitrary. Although a court generally gives deference to an authority’s decision, that is not the case when the decision is arbitrary. As a result, the authority’s action was set aside and the authority was directed to issue the contract to the lowest bidder.


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