Serenity Contracting Group, Inc. v. Borough of Fort Lee

A-2590-96T5F, 1997 WL 762064 (N.J. Super. App. Div. 1997)
  • Opinion Date: December 12, 1998

MUNICIPALITIES; PUBLIC BIDDING—Although a municipality has the right to waive a non-material defect in a public bid, it is not obligated to do so.

A contractor sought to restrain the Borough of Fort Lee from entering into a contract for construction of new police headquarters, claiming to be the lowest bidder on the project. The contract was awarded to the second lowest bidder. The Borough claimed it rejected the lowest bid because some of the information was handwritten next to cross outs and was not initialed or explained, despite bid instructions requiring alterations to be initialed and explained. The trial court found for the Borough, holding that it did not abuse its discretion in finding that the contractor submitted a defective bid.

At the Appellate Division, the contractor argued that the alterations were not material defects and therefore that the Borough lacked the discretion to reject the bid. The contractor insisted that a municipality must accept a bid even though it contains non-material, waivable defects. The Appellate Division stated that case law requiring a municipality to reject a bid that has material defects does not mean that a municipality must accept a bid if the defects are non-material. The Borough could either waive the non-material defects or reject the bid because of them. This discretion must reflect sound business judgment and a court will apply the abuse of discretion standard when reviewing a municipality’s ultimate decision. In this case, the Appellate Court found that the Borough properly exercised its discretion in rejecting the lowest bid. The bid specifications required any alterations to be initialed and explained. Some of the alterations related to material portions of the bid and raised questions regarding the substantive nature of the work to be performed. The bid’s unresponsiveness and lack of clarity constituted non-compliance with specific requirements of the bid, and, regardless of materiality, were grounds for rejection of the bid. The Appellate Court concluded that the Borough’s decision was not arbitrary, capricious or done to frustrate the purposes of the bidding process.