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P&A Construction, Inc. v. Township of Woodbridge

365 N.J. Super. 164, 838 A.2d 520 (App. Div. 2004)

PUBLIC BIDDING—The fact that a soliciting public entity lists the requirement to furnish financial statements with a bid as an item for which the entity “may” reject a bid does not make submission optional.

The Local Public Contracts Law was amended in 1999 to “add” a new section that makes certain types of bid defects automatic grounds for rejection. The amendment gave rise to the question as to whether it “should be construed as an implicit authorization for a local contracting agency to waive any other type of bid defect.”

A municipality solicited bids for road construction work. One subsection of the request called for specific documents and expressly stated that failure to submit any of the documents listed in that subsection would be mandatory cause for rejection of the bid . The second subsection of the checklist only stated: “[f]ailure to submit the following documents may be a cause for the bid to be rejected… .” That second subsection required submission of “a certified financial statement prepared within the last twelve months.”

The low bidder did not submit a financial statement. Instead, it sent a letter bragging about its bonding capacity and its corporate references. It believed that as a small, privately held corporation, its financial information was confidential. It offered to submit its current financial statement if it turned out to be the low bidder. It was the low bidder, and the next lower bidder challenged the failure to submit a certified financial statement. The municipality denied the challenge, claiming the right to waive the defect based upon the second checklist’s statement that failure to submit the document “may” be a cause for bid rejection. The municipality also pointed to its “many years of positive experience” with the low bidder and its resulting confidence in the low bidder’s ability to meet its contractual obligations. The second low bidder sued, but the lower court held that the requirement was waivable, pointing to the amendment and noting that the items that were mandated by statute were included in the “mandatory” checklist, whereas the requirement for financial statements was not. It also found that there was no competitive edge given to the low bidder because every one of the bidders could have taken the risk of not submitting financial statements.

On appeal, the Court first considered whether submission of the certified financial statements was mandatory or optional. Then, it considered whether failure to submit certified financial statements would have been waivable before the Local Public Contracts Law had been amended. Finally, it considered the effect of the amendment on the waivability of such a requirement.

Before the Court looked at the meaning of the word “may” in the context of the bid’s requirements, it noted that whatever the word “may” might mean in context, it did not mean that the financial statement was optional. To reach that conclusion, it pointed out that one of the items on the list was statutorily mandatory whenever a contracting agency chose to require the item at all. Consequently, the Court concluded that submission of the items on the second part of the checklist was not “optional, but rather that failure to submit one of those items [could] result in rejection of the bid if the contracting agency [found] the deficiency to be material.” As a result, it concluded that all bidders were required to submit certified financial statements with their bids.

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