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CFG Health Systems, LLC v. County of Hudson

413 N.J. Super. 306, 994 A.2d 1045 (App. Div. 2010)

PUBLIC BIDDING — Just because a publically bid requirements contract has its estimated requirement substantially reduced after the contract had been awarded does not mean that a substantial post-award change to the Request for Proposal has been made and therefore the contract does not need to be rebid because it still controls the rights and obligations of the parties.

A county awarded a five year contract to provide medical and mental health services to inmates. Almost five years later, in anticipation of the expiration of the contract, the county issued a request for proposal (RFP) for a new five year contract. The RFP required the successful bidder to provide a minimum of 1,653 hours of staffing for a certain number of designated positions, locations, and shifts per week. It did not require the successful vendor to submit a breakdown of the hourly rates for staff until after the contract was awarded. An evaluation committee reviewed five proposals and recommended the contract be awarded to the existing vendor.

While the recommendation was under consideration, the county asked an expert to review the staffing requirements at the inmate centers. Before receiving the report, the County Board of Chosen Freeholders awarded the contract to the existing vendor. Thereafter, the vendor submitted its hourly rates for the required staff positions. Then, the county expert recommended a substantial reduction of the total number of staffing hours required under the contract. The county and the vendor agreed to change the contract’s staffing requirements, and the county adopted a resolution reflecting the revised, lower contract price which was published.

A competitor bidder filed suit to enjoin the contract award and require the county to re-bid the contract pursuant to the Local Public Contracts Law (LPCL). The lower court held the competitor had standing to seek relief, and that the board’s final resolution was invalid because it represented a material and substantial post-award change to the RFP in violation of the LPCL. However, the court rejected the demand that the county be ordered to re-bid the contract.

On appeal, the Appellate Division affirmed the lower court’s rulings. The Court was satisfied that the competing bidder had sufficient interest in the amendment of the contract to give it the standing to challenge the board’s final resolution and seek a re-bid of the contract. The Court, however, found that the bidder did not challenge the initial contract award or seek to compel the county to accept its bid.

Secondly, the Court did not find the lower court in error when it invalidated the board’s final resolution. The Court said that while a local contracting unit may waive minor or inconsequential discrepancies and technical omissions in a bid proposal, material conditions contained in bidding specifications may not be waived. It found these principles applied to a post-award change to a contract that materially altered the basis upon which the contract was bid and awarded. The Court found the record supported the lower court’s finding that the amendment would result in a thirty-six percent reduction in the staffing requirement and a significant difference in price. The Court opined that these substantiated changes might have influenced whether a potential bidder submitted or refrained from submitting a proposal in response to the original RFP.

The Court also held the county and winning bidder did not intend to abandon the original contract, as awarded, despite their agreement to substantially reduce the staffing levels under the agreement. The competitive bidder had argued that the original contract could not be revived and the only appropriate remedy was for the court to order the county to re-bid the contract. In this regard, the Court agreed with the lower court’s finding that the original contract still controlled the rights and obligations of the parties and it was for the county to determine whether to terminate the agreement without cause on thirty days written notice, as permitted under the contract, and re-bid the contract.

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