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Waste Management of New Jersey, Inc. v. Township Council of the Township of Jefferson

A-6928-98T5 (N.J. Super. App. Div. 2000) (Unpublished)

PUBLIC BIDDING—When a multi-year public contract bidding project calls for an annual surety bond, the bonding authority of the surety need only equal one years’ bond amount.

A solid waste collection contract was put out to bid and there were two bidders. The loser contested the contract’s award. It asserted that the winner’s bid was materially defective because of deficiencies in its Consent of Surety. It also claimed that the winning bidder was inexperienced, underfinanced, and lacked sufficient equipment to perform the contract. The winning bid was about $8,000,000. The contract was for five years. The losing bidder claimed that the attorney-in-fact who signed the Consent of Surety did not have authority to bind the Surety for more than $5,000,000. According to the losing bidder, the total value of the contract exceeded the $5,000,000 limitation and thus the Consent was invalid. The Court agreed that a Consent of Surety is an important element of a bid submission and failure to submit a proper Consent is a material defect that cannot be waived. Here, the municipality only required a performance bond in an amount equal to the annual value of the contract. There was no argument that the surety could not issue five annual performance bonds but the losing bidder argued that because the cumulative total of the bonds over the five year period exceeded the bonding authority of the attorney-in-fact, the surety requirement was not met. The Court disagreed. It was satisfied that “measuring the authority of the attorney-in-fact to issue a performance bond in terms of the value of the annual contracts does not expose the municipality to risk and does not place prospective bidders at a competitive disadvantage.” The Court was equally unpersuaded that the winning company was not a “responsible” bidder. Its balance sheet showed a negative worth because of a promissory note that it had given to its principal. Although it never collected solid waste prior to this contract, its principal had been intimately involved with the collection of this particular municipality’s solid waste for a ten-year period and the municipality was satisfied with the principal’s performance over that time. The Court agreed with the municipality that it was entitled to consider the principal’s direct experience over a prolonged period of time “as more than sufficient evidence of his corporation’s responsibility.” Further, as part of its bid package, the winning bidder submitted “details of the arrangements it had made to have the necessary equipment, financing, and personnel in place to permit it to perform under the contract.”

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