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CFG Health Systems, LLC v. County of Essex

411 N.J. Super. 378, 986 A.2d 695 (App. Div. 2010)

PUBLIC BIDDING — The public bidding statute requires a resolution authorizing a competitive contracting process to be passed each time a public agency desires specialized goods or services and the failure to pass a resolution is a fatal defect requiring rebidding of the proposed contract.

A county issued a request for proposals (RFP) for the provision of medical services. Its existing provider and one competitor submitted bids. During the bid review process, an evaluation committee member failed to submit a proper non-conflict of interest certification, i.e. he filed it in his individual capacity even though his employer had a contract with one of the bidders. Further, all the other members of the committee filed their certifications late. Moreover, even though the public bidding statute required a resolution authorizing a competitive contracting process to be passed “each time” a public contracting agency desired specialized goods or services – such as medical services – the county did not pass such a resolution. For those reasons, although the competing provider’s proposal was lower than the existing provider’s proposal, the county’s purchasing department recommended that the county reject all proposals and begin a new procurement processes. The purchasing agent argued the deficiencies violated the public bidding statute and thus rendered the RFP null and void ab initio. The county followed the purchasing agent’s recommendation, rejected all proposals, and authorized a new competitive contracting process. The otherwise successful holder, the existing provider’s competitor, sued.

The lower court ruled that the county’s actions were arbitrary and capricious. It held the county erred in rejecting both bids by reason of: (a) the lack of a resolution authorizing the contract to be awarded on the basis of competitive contracting; and (b) the failure of members of the evaluation committee to file timely non-conflict of interest certifications. It also held that the existing provider’s proposal was defective and ordered the county to award the contract to the competing provider. The existing provider appealed.

On appeal, the Appellate Division held that the lower court, itself, had erred when it found the county’s rejection of both bids to be arbitrary and capricious. Thus, it reversed the lower court’s invalidation of the county’s rejection of the bids. Consequently, it allowed the county to rebid the contract because the bidding process deficiencies clearly violated the public bidding statute and constituted reasonable grounds for the county’s rejection of both proposals.

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