On January 31, 2019, the New Jersey State Senate approved legislation that amends the Local Public Contracts Law to require municipalities, counties and other local contracting units to release the names, upon request, of all parties who have received bid documents, if three or more parties have received such documents. The legislation requiring bidders’ list, Senate Bill 2947, has yet to be approved by the Assembly.
Senate Bill 2947
Under Senate Bill 2947, a local contracting unit would be required to make bidders’ lists available in a timely manner and in accordance with New Jersey Open Public Records Act. Alternatively, if the contracting unit maintains its own website, the contracting unit may post the information on that site. Failure to release or post the information would prevent the contracting unit from accepting bids and require the re-advertisement of bids.
Additionally, the proposed legislation would require bid proposal documents for contracts to erect, alter, repair or improve real property—provided the total price exceeds the Local Public Contracts Law bid threshold—to include a bidder’s affidavit of non-collusion. This new requirement aims to ensure that bidders have not participated in collusion with other bidders or owner representatives, or otherwise taken any action in restraint of free and competitive bidding.
Release of Bidders’ Lists
The statement accompanying Senate Bill 2947 explains the law would allow subcontractors to have timely access to bidders on public projects, so they can submit subcontracting bids to those bidders, enabling bidders to put together their lowest possible bids. “Under the current system, if the names of the parties who have received bid documents is not released or made public, then only subcontractors specifically contacted by a bidder are able to submit bids on subcontracting work,” the statement reads. “By expanding the pool of subcontractors vying for a job, the cost should be reduced and the bidder able to submit a lower cost proposal. The bill would also help ensure that minority-owned and women-owned subcontracting businesses get fair opportunity to compete for work on public projects.”
While it favors increasing transparency in the public bidding process, the New Jersey State League of Municipalities (NJSLOM) strongly opposes the bill. In a recent blog post, it specifically highlighted the risk of collusion and bid rigging.
In support, the NJSLOM cited the Appellate Division’s decision in O’Neill Electric Co., Inc. v. the Board of Chosen Freeholders of the County of Warren,in which the court stated, “access to a bidders list facilitates collusive or bid-rigging arrangements and [] withholding disclosure [of such lists] makes this more difficult.” The court further stated that bid-rigging is an “extremely serious problem which costs the public enormous sums of money. The relatively insignificant interest of plaintiff and amici in obtaining bidders lists cannot overcome the grave danger to the public resulting from a failure to keep the door tightly closed to potential corruption in public bidding.”
It should be noted that the O’Neill ElectricCourt was especially concerned with instances in which “prospective bidders know in advance that there is no competition,” as such knowledge could incentivize a bidder to increase its price. The court was also concerned with possible collusion between contractors and subcontractors. Senate Bill 2947 seeks to minimize such risks by mandating disclosure only when three or more bidders have requested documents, and by requiring bidders to submit an affidavit of non-collusion.
The NJSLOM also maintained that the new bidders’ list requirement will be costly for local governments. In addition to imposing new recordkeeping obligations, the bill could also expose municipalities and counties to litigation, according to the NJSLOM.
For more information about the proposed amendments to the Local Public Contracts Law or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.