John Napolitano

1
Association of Environmental Authorities

• John Napolitano
• Johnson Conway, LLP
• June 29, 2009

2
Construction Law Update

• Jen-Electric vs. County of Essex, 197 NJ 627
  (2009)
• More Bid Protests on the Way

3
Alternate Titles

• Did the Supreme Court Open Pandoras Box?
• Jen-Electric Is it Limited to its Facts?
• Good, Now I Can Pay for My Kids College

4
The Issue

• Does the provisions of NJSA 40A11-13 limit the
  standing of those who can challenge a bid
  specification in a public contract to a
  prospective bidder only?
• NJSA 40A11-13(e) states in pertinent part, Any
  prospective bidder who wishes to challenge a bid
  specification shall file such challenge in
  writing with the contracting agent no less than
  three business days prior to the opening of the
  bids. Challenges filed after that time shall be
  considered void and having no impact on the
  contracting unit or the award of the contract.

5
General Facts/History

• The County of Essex was seeking bids for
  infrastructure improvements along Central Avenue
  in Newark.
• The specification included a named manufacturer
  who was represented by a single distributor.
• Despite several attempts to revise the
  specification to appease Jen-Electric, including
  or equal language or prequalify alternates
  and two rounds of bidding, Jen-Electric still
  maintained the specifications were illegal and
  accused the County of bid rigging in the papers
  to the Court.
• Prior to the receipt of the second round of
  bids, Jen-Electric file suit alleging the
  specifications were improper.

6
Original Court Decision

• The Trial Court dismissed the Jen-Electrics
  complaint finding that Jen-Electric was not a
  prospective bidder therefore pursuant to NJSA
  40A11-13(e), Jen-Electric lacked standing to
  challenge the specification.
• The Appellate Division upheld the Trial Courts
  findings.

7
What is Standing

• Standing requires that a litigant have a
  sufficient stake and real adverseness with
  respect to the subject matter of the litigation,
  In re New Jersey Board of Utilities, 299 NJ Super
  554.
• In bid protest cases the Courts have held the
  challenger must be a taxpayer or a bidder to the
  project.
• In order to challenge a successful bidder, the
  bidder must be in opposition to legally receive
  the bid. (See Interstate Waste Removal Co., Inc.
  vs. the Board of Commissioners of the City of
  Bordentown, 140 NJ Super 65.)
• Standing requires a significant interest in the
  outcome.

8
Question on Appeal

• The question to the Supreme Court was, did
  Jen-Electric, Inc., not being a bidder or
  potential bidder on the project, have standing to
  challenge the bid specification, or does NJSA
  40A11-13(e) limit standing to potential bidders
  only?
•  
• The Supreme Court held that 40A11-13(e) did not
  limit who could challenge a bid specification,
  but acts as a statute of limitations requiring
  timely challenges to a specification.
• Jen-Electric, based upon the traditional rules of
  standing, had sufficient interest to challenge
  the bid specification.
• The Court did not rule on the sufficiency of the
  specifications.

9
What Does This Really Mean?

• Did the Court open the flood gates so every
  unhappy supplier whose product was not specified
  can now file a lawsuit to challenge a project
  specification?
• The Court tried to limit this fear by saying, We
  underscore the very limited nature of our ruling.
  Plaintiff here was an active, indeed proactive,
  participant in the bidding process and the
  majority of its concerns addressed core
  principals of public contracting. 
• However, the dissent by Justice Hoens points out
  as a practical matter, there is nothing in the
  majoritys analysis that limits the right of any
  potential supplier, however large or small, to
  commence a challenge to bid specification.

10
What Can Be Done to Protect Yourself?

• The use of performance type specifications
  instead of listing specific manufacturer's piece
  of equipment (This may not be practical.)
• Use of multiple approved vendors Jen-Electric
  case only listed one
• Requiring prequalification of substituted
  material is barred by NJAC 534-9.2(d)
• Under no circumstances shall specifications
  require any form of pre-approved or
  pre-qualification of an equivalent product before
  submission of bids

11
Pending Legislation

• Assembly, No. 3698, Senate, 2782
• Assembly, No. 3424
• Assembly, No. 436
• Senate, No. 770
• Assembly, No. 2561
• Senate, No. 2957

12
Assembly, No. 3698, Senate, No. 2782

• Synopsis

• AEAs Position

• AEA has objected to this bill since it requires
  the owner to award based upon a pre-determined
  ranking of the alternatives which is set forth in
  the bid specifications. It restricts the ability
  of Authorities to maximize the use of
  alternatives in repair of infrastructure or
  mechanical situations. The AEA has worked with
  the sponsor in an attempt to modify the bill to
  protect the AEA members and still address the
  sponsors concerns.

• Provides for base and alternative bids for
  certain public contracts requires contracting
  unit to specify basis for determining lowest
  responsible bid and criteria for selection of
  alternate bids.

13
Assembly, No. 3424

• Synopsis

• AEAs Position

• The AEA seeks to modify the bill to allow the
  contracting entity to determine if it will accept
  a letter of credit.

• Authorizes, at the discretion of the bidder,
  irrevocable letter of credit as performance
  guarantee under the Local Public Contracts Law.

14
Assembly, No. 436

• Synopsis

• AEAs Position

• AEA opposes this bill since it does not protect
  against the opportunity of price manipulation
  between suppliers and contractors. In addition,
  the bill increases paperwork and responsibility
  of the owner with no benefit to the public.
  While AEA recognizes increases in commodity
  pricing is a concern, it believes this bill
  should be limited to specific public projects,
  those where asphalt concrete work exceeds 40 of
  the contract work.

• Permits price adjustments in local public
  contracts for asphalt cement and fuel.

15
Senate, No. 770

• Synopsis

• AEAs Position

• AEA has opposed this bill since it requires all
  contracting entities to use a QPA for purchasing.
  In most Authorities purchasing is a
  collaborative effort between the Authority staff
  and its professionals and the requirement of a
  QPA will not necessarily add any benefit, only
  additional expense. This is on the Governors
  desk.

• Redefines role and qualifications of purchasing
  agent in Local Public Contracts Law.
• This bill is on the Governors desk.

16
Assembly, No. 2561 A Success Story

• Synopsis

• Conclusion

• This bill was passed by the Assembly and the
  Senate but was vetoed by the Governor because of
  the efforts of groups like the AEA who put forth
  well-reasoned objections to the bill.

• Requires certain public contract bid
  advertisements to contain certified cost
  estimates or estimate ranges of projected
  contract costs and specifies grounds for
  rejection of all bids.

17
Senate, No. 2961

• Synopsis

• AEAs Position

• This has just been introduced and no position has
  been taken.

• Prohibits imposition of sewerage service
  connection fee upon municipalities and boards of
  education.

18
End
John Napolitano Johnson Conway, LLP 18 Sycamore
Avenue Ho-Ho-Kus, NJ June 29, 2009