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Ernest Book & Sons, Inc. v. Mercer County Improvement Authority

L-2503-09 (N.J. Super. Law Div. 2009) (Unpublished)

PUBLIC BIDDING — Where a request for proposal requires that a bidder for a public contract disclose the names and addresses of its beneficial interest owners, a bid that omits that information is fatally flawed and cannot be cured even if the bidder had furnished such information a year earlier to a different public agency.

Public bidding was opened for a new county courthouse. The applicable statute provided that all bidders had to disclose the names and addresses of stockholders holding a 10% or more stake in any holding corporation. It also required that “if one or more such stockholder or partner is itself a corporation or partnership, the stockholders holding 10% or more of that corporation’s stock or the individual partners owning 10% or greater interest in the partnership *** shall be listed.” Although the lowest bidder submitted the required names and addresses to the Department of Property Management and Construction (DPMC) a year prior to its bid submission (during a prequalification process), it did not provide this information to the county in its bid package. Instead, the lowest bidder simply listed its holding company as its sole shareholder and not the individuals who had a 10% or more interest in the holding company. On that basis, the bidder who submitted the second lowest bid argued that the lowest bid was materially and non-waivably defective.

The Law Division found that at no point prior to the close of bidding did the lowest bidder disclose the names and addresses of the 10% shareholders of the owner corporation. Therefore, the Court held that the lowest bidder’s bid was materially defective and rescinded the award to the lowest bidder. It held that the county did not possess the authority to ignore New Jersey’s public bidding laws. According to the Court, the statute clearly provides that the ownership disclosure statement must be submitted at the time bids are received. Moreover, the Court noted that even if it ignored the statutory timing requirements, the lowest bidder still failed to comply with the statute because its disclosure was to the DPMC and not to the entity that was actually soliciting the bids, i.e. the county. Further, it found that permitting disclosure to another entity would do nothing to make the bidding process more transparent or fair. In addition, it was possible that salient facts could have changed in the year between the disclosure to DPMC and the bid submission to the county. According to the Court, one of the public bidding statute’s goals is to insure that the public body “need not search the state’s or county’s corporate or partnership records to determine the true parties in interest.” The Court also found nothing in the case law suggesting that inadequate or inaccurate disclosure may be cured after the submission of the bid. The statute also reads that failure to submit a proper ownership statement “shall be a fatal defect that shall render the bid proposal unresponsive and that cannot be cured by the governing body.”

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