NJ Court Rules Contractors Must Disclose Subsequent Bids If They Impact Aggregate Rating

In Dobco, Inc. v. Brockwell & Carrington Contractors, Inc., the New Jersey Superior Court recently considered whether a bidder who has been adjudicated the low bidder on a particular contract must disclose as much in subsequent bid submissions if the combination of such projects would cause it to exceed its aggregate rating. According to Judge Peter F. Bariso, Jr., the answer is yes.

NJ Court Rules Contractors Must Disclose Subsequent Bids If They Impact Aggregate Rating

The Facts of the Case

On October 8, 2014, the Hudson County Schools of Technology (“HCST”) solicited bids for the construction of the Applied Science Academy at its Jersey City Campus (“the HCST Project”). Defendant Brockwell & Carrington Contractors, Inc. (Brockwell) was the lowest bidder, followed by the second lowest bid submitted by Defendant Benjamin R. Harvey Co., Inc. (“Harvey”). Plaintiff Dobco, Inc. (Dobco) was the third lowest bidder.

Brockwell and Harvey both identified Defendant Sal Electric Co., Inc. (“Sal Electric”) as their electrical subcontractor. Dobco identified an electrical subcontractor other than Sal Electric. Brockwell’s bid was subsequently rejected by HCST because it understated its offer.

In connection with the bid, Sal Electric provided a notice of classification and “State of New Jersey Form DBC 701” (Form 701), both of which are required before a contractor or subcontractor may become eligible to submit bids on public works projects. Under New Jersey’s school bidding laws, every bidder must complete a classification process performed by the Division of Property Management and Construction (DPMC) to determine the maximum amount of public work on which it is qualified to bid, known as the “aggregate rating.” To ensure compliance, every bidder must certify via Form 701 that the bid proposal, “when added to its backlog of uncompleted construction work,” will not exceed the aggregate rating.

With regard to the HCST Project, Sal Electric certified that the amount of its proposal ($1,660,000) and the amount of all outstanding incomplete contracts did not exceed its prequalification dollar limit. However, Sal Electric’s Form 701 failed to disclose the fact that, on October 3, 2014, its general contractor, Torcon, Inc. (“Torcon”) was determined to be the low bidder for a $4 million for a Design Build Procurement project involving the Elizabeth Elementary School (“the Elizabeth Project”). Sal Electric is the electrical subcontractor in that bid. In response, Dobco filed an order to show cause and verified complaint seeking to temporarily enjoin and restrain HCST from awarding a contract for the project. Dobco specifically alleged that Brockwell and Harvey should be disqualified because Sal Electric had exceeded its DPMC aggregate rating limit.

The Court’s Decision

The court agreed with Dobco, holding that a bidder who has been adjudicated the low bidder on a particular contract must disclose as much in submissions if the combination of such projects would cause it to exceed its aggregate rating.

In so ruling, the court rejected the argument that that because Torcon was merely the numerical low bidder, and not yet awarded the Elizabeth Project, Sal Electric should not be required to disclose it. As explained by Judge Bariso:

Under this logic, firms can bid on numerous projects without any regard to their aggregate rating. If accepted, that argument would wreak havoc on our public bidding system. Public entities would, in essence, be barred from determining whether a contractor and its subcontractors are able to perform until after all bid protests have been resolved. The end result would be increased costs to public entities as contractors are required to be disqualified because they, or their subcontractors, have bid on numerous projects without regard to their aggregate rating limit.

The court also held that a bidder’s failure to disclose precludes it from providing, post-bid, clear and convincing evidence that it would nonetheless be able to perform both contracts. “Sal Electric cannot argue that it acted in good faith because it ignored the fact that it was the low bidder in the Elizabeth Project,” Judge Bariso wrote.

Based on its findings, the court concluded that awarding the contract to Sal Electric is prohibited because it would cause it to exceed its aggregate rating. Accordingly, the court further held that because Brockwell and Harvey cannot now substitute an unlisted subcontractor, their bids should be disqualified and Dobco should be adjudicated the lowest responsible bidder.

For more information about this case or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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