Summary

The New Jersey Supreme Court has affirmed a state agency’s decision to award a contract to the lowest bidder even though the bid did not comply with the scope-of-work requirements of a request for proposal.  Matthew J. Barrick, Jr. v. State of New Jersey, et al., (A-8/9-13) (072795) (N.J. Supreme Court July 23, 2014).

Stating the “public interest underlies the public-bidding process in this state,” last week the New Jersey Supreme Court unanimously reaffirmed a state Division of Property Management and Construction decision to award a contract to the lowest bidder even though the bid did not comply with scope-of-work requirements of a request for proposal.

In 2010, the Division, which procures and manages leases for the state, posted an RFP seeking bids from property owners in Morris County for lease of office space for the Department of Labor (“DOL”). The RFP set forth several requirements for the location of the office, including that the property be within one-quarter mile of accessible public transportation. At the close of the RFP period, the Division had received four bids, two of which were from Respondent Matthew Barrick, Jr., and Appellant RMD Properties, LLC (“RMD”). After submission of best and final offers, Barrick’s bid was determined to be the most cost-effective, followed by RMD’s. Following a second round of best and final offers, however, wherein RMD reduced its bid, the Division determined that RMD submitted the most cost-effective bid, and in October 2011 issued a notice of intent to award the lease to RMD.

Arguing that RMD’s proposal failed to satisfy the distance-to-public-transportation requirement because its property was .58 miles from the nearest bus stop, Barrick challenged the award. The Division nonetheless awarded the bid to RMD, noting that cost-effectiveness was of paramount importance in the decision and the distance requirement was not a determinative factor. The Division reasoned that none of the bid properties, including Barrick’s, were located within one-quarter mile of public transit, and after consultation with the DOL, the Division decided that the proposals would not be deemed non-conforming based on the distance requirement because it was not imposed by statute or regulation, and each property was close enough to public transportation to meet the DOL’s overall needs.

Barrick filed a request for reconsideration, and supplemented the record with evidence that there was indeed a bus stop within one-quarter mile of his property, but he had failed to identify this stop in his initial proposal. The Division upheld the award to RMD, stating that although Barrick’s property satisfied the distance requirement, it had determined that such a factor was not outcome-determinative.

On Barrick’s appeal, the New Jersey Appellate Division reversed the award to RMD and remanded the proceeding to the Division to either award the lease to Barrick or rebid the project. The Appellate Division reasoned that the distance requirement was not waivable and the monetary difference between the two bids was insignificant. The Appellate Division also determined that in light of Barrick’s supplemental information – the bus stop being within one-quarter mile of his property – his was the only compliant bid and the Division abused its discretion by awarding the lease to RMD.

On appeal, the Supreme Court considered whether the Division acted arbitrarily in awarding the lease to RMD because its bid did not meet the distance requirement. Citing N.J.S.A. 52:34-12(a)(g), the Supreme Court stated that the Division may not waive material requirements in an RFP. Thus, the analysis turned on what is material. According to the Supreme Court, a determination as to what is material to an RFP, or whether a bid conforms to an RFP, will not be disturbed unless it was arbitrary, capricious, unreasonable, or unsupported by credible evidence.  

The Supreme Court held that at the time the bids were opened, the Division properly determined that the proposals from all qualified bidders deviated from the RFP by exceeding the distance requirement. As to whether the deviation was material, the Supreme Court held that the Division reasonably determined that it was not. The Division had consulted with the DOL and determined that the distance requirement was not legally mandated, and the distances by which the bids exceeded the requirement were de minimis. Having reviewed all other requirements and finding no other deviations, the Division concluded that cost-effectiveness was the factor of paramount importance in the lease procurement, and accordingly awarded the lease to the lowest bidder, RMD. The Supreme Court concluded that this decision was not arbitrary, capricious, or unreasonable.

The appellees had argued that the Supreme Court should dismiss the appeal as moot because Barrick did not move for a stay pending appeal, and the Division had moved forward with the award. The Court did not address this issue, but noted that a party that does not promptly move for a stay pending appeal does so at its peril.

What This Means:

• It is unlikely that courts in New Jersey will disturb a state agency’s bid award to the lowest bidder even if that bid did not necessarily comply with all aspects of the RFP.  
• In responding to an RFP, a party should not necessarily refrain from submitting a bid if it cannot meet all technical requirements.
• A party needs to exercise judgment as to whether a deviation will be deemed material in deciding to submit a bid.
• Parties contesting a bid award should move for a stay pending an appeal.