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Thomas P. Carney, Inc. v. Franklin Township Board of Education

SOM-L-467-03, 2003 WL 22889566 (N.J. Super. Law Div. 2003)

PUBLIC BIDDING—When utilizing the statute that authorizes negotiated contracts following two unsuccessful rounds of public bids, it is necessary that the negotiated price be lower than the best second round bid, but the comparison is made by calculating the bid as if it included the alternatives that were included in the final, negotiated price.

New Jersey statutes authorize a board of education to award a contract without public advertising under certain circumstances. One of the conditions is that the terms set forth in the negotiated contract cannot be “substantially different” from those which were the subject of competitive bidding. Further, under this exception to advertising, the school board must afford each bidder an opportunity to negotiate. Further, a negotiated, non-advertised process, after two rounds of public bidding, still cannot result in a negotiated contract “unless the negotiated price is lower than the lowest rejected bid price submitted on the second occasion by a responsible bidder” and the price must also be “the lowest negotiated price offered by any responsible bidder” as well as be a reasonable price for such goods or services.

In this case, a board of education advertised for a base bid and for separate prices on a substantial number of alternates. The lowest bid exceeded its budget by a substantial amount. It then readvertised the project and the lowest price still exceeded the board’s budget by a substantial amount. In reliance on the statute, the board requested a base bid with the options formerly described and also requested prices on nineteen “so called value added engineering items” intended to reduce the price. That round was unsatisfactory, so that board held a “second negotiated and non-advertised round.” It changed its methodology to now require a base bid inclusive of about one-third of the original alternatives and about one-half of the value added alternatives. It also sought prices on a number of additional items and “a switch from [] provision of [a] construction manager to [a] clerk of the works.”

The lowest bidder in the second, advertised round participated in the negotiated third round but refused to participate in the negotiated fourth round. The board then sought to award the contract to another bidder. The lowest bidder in the second round sought an injunction to bar the award of the contract, setting forth two reasons. First, it claimed that the ultimate price reached between the “successful” contractor and the board of education was higher than its own second round bid. Second, it claimed that the project negotiated in the fourth round was not substantially similar to the project that was publicly advertised. Therefore, it claimed that the fourth round should have been advertised and open for further public bidding.

The Court analyzed the bidding figures. While it was true that the bid placed by the complainant in the advertised second round was in fact the lowest, it was not based on the same alternatives as were in the “mandatory” negotiated price for the fourth round. When the Court recalculated the claimant’s second round bid using the prices submitted for the actual alternatives that were included within the non-advertised fourth round negotiation, the claimant did not have the lowest second round bid. Further, the negotiated price after the fourth round was, in fact, lower than the lowest price in the advertised second round after taking into consideration the alternatives that were actually adopted by the board of education.

The Court also faced the question of whether the claimant had standing in this matter. Here, although it was invited to negotiate in the fourth round, it declined to do so. There was no evidence that the board of education had discriminated among the bidders when it sought a negotiated price. What happened was that the claimant had the opportunity to participate, but chose not to do so. The Court “could find no case where a plaintiff challenged the bidding and had not actually participated in the process unless the plaintiff had been prevented from doing so.” It didn’t think that the board’s fourth round rules were so onerous as to constitute a sufficient reason for the claimant to drop out of the fourth round. Consequently, the claimant’s standing was “suspect.”

The Court also carefully analyzed the differences between the requirements of the advertised second round bid and the negotiated fourth round bid and found that the project, as negotiated, was not substantially different than the project as offered for public bidding.

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