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R.C.G. Construction Company v. The Mayor and Council of the Borough of Keyport

MON-L-94-00 (N.J. Super. Law Div. 2001) (Unpublished)

PUBLIC BIDDING; CONTRACTORS; REGISTRATION—The failure of a subcontractor, listed in a contractor’s bid, to be registered under the Public Works Contractor Registration Act at the time of bidding is a non-waivable material bid defect.

In a public bidding case, two unsuccessful bidders argued that the successful bid should have been rejected. The arguments were that the New Jersey Public Works Contractor Registration Act (PWCRA) requires listed subcontractors to be registered at the time of the bid, rather than prior to the performance of the contract. This gave rise to a question as to whether failure of a contractor to ensure that all listed subcontractors that are required to be so registered is a non-waivable material error. Another basis for their objection to the successful bid was that the bidder failed to promptly comply with the corporate resolution form contained in the bid package, and such a failure was a non-material error. The PWCRA requires contractors to register with the Department of Labor and states, in part, “No contractor shall bid on or engage in any contract for public work ... unless the contractor is registered pursuant to this act.” The statute also defined how the word “contractor” should be applied, providing that it means a person or entity who enters into a contract which is subject to the provisions of the “New Jersey Prevailing Wage Act” for “the construction, ... of a public building ... and includes any subcontractor or lower-tiered subcontractor of a contractor ... .” The successful bidder claimed that at the time of submitting its bid, only it, and not its subcontractors, was “engaged” in performing public works. It also alleged that if registration of its subcontractors was required, such registration was required prior to the beginning of performance, and not at the time of bidding. Lastly, it argued that if failure to designate registered subcontractors was in error, it was only a nonmaterial, waivable error. The Court began its analysis with the observation that the purpose of the Local Public Contracts Law “is to promote competitive bids ‘to secure for the public the benefits of unfettered competition.’” As such, a public contract award “is not determined by who is the lowest bidder, but rather by the lowest bid that ‘complies with the substantive and procedural requirements in the bid advertisements and specifications.’” There are, however, some deficiencies that are considered, under the law, as immaterial and therefore waivable. Generally, a court looks to see “whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition.” The municipality submitted a letter from the New Jersey Department of Labor stating that subcontractor registration was not required until the commencement of work, but the Court rejected that letter “as conclusive proof.” In doing so, it looked at the legislative intent behind the statute. It took note that the PWCRA specifically defines “contractor” as including a “subcontractor.” Consequently, any part of the statute or bidding instructions which requires a contractor to register was deemed to apply to any subcontractor as well. According to the Court, the fundamental purpose behind the legislation was to ensure that contractors (and subcontractors) who receive public funds from public works contracts would pay their workers prevailing rates. By this analysis, although a subcontractor may not directly bid upon a contract, such a “subcontractor becomes ‘engaged’ or involved in the bidding process the moment the contractor lists the subcontractor on his [sic] its bidding specifications.” To the Court, “[t]he statutory language employed in [the PWCRA] leaves no room for equivocation.” The Court also found failure of a subcontractor to register prior to the bid to be a non-waivable material defect, fatal to the lowest bidder. It agreed that the effect of a waiver in this case would not deprive the municipality of its assurance that the contract would be performed, but held that allowing the deficiency to be cured after bidding would place other bidders “at a disadvantage since subcontractors who are registered may quote a higher price for their services, thus inflating the bids of the contractor.” Its thinking was that “[t]he fact that some contractors could use non-registered subcontractors while other contractors opt for those who are registered tells us that the bidders do not have equal footing. This practice opens the door to chicanery and certainly gives some bidders an advantage over others.” Consequently, it vacated the award of the contract. The Court then reviewed an objection by an unsuccessful bidder that a lower bidder’s failure to include the amount of its contract bid within the corporate resolution submitted by the lower bidder was a material non-waivable bid deficiency. The Court disagreed, saying that waiving such a defect would not deprive the municipality of its assurance that the contract would be entered into, performed, and guaranteed. To the Court, it was clear that the amount of the bid was available in other portions of the bidding package. It was also clear that the lower bidder was wholly owned by the individual who signed the bid on behalf of the company, and therefore, the lower bidder was bound, leaving the municipality with the assurance that it would perform the contract. Lastly, in that regard, the Court did not find that the lower bidder would receive any competitive advantage by waiver of the defect.

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