In In the Matter of Protest Filed by El Sol Contracting and Construction Corp., Contract T100.638 (A-33-24/090076), the Supreme Court of New Jersey held that the New Jersey Turnpike Authority (NJTA) did not act in an arbitrary, capricious, and unreasonable manner when it rejected the bid for a redecking project submitted by El Sol Contracting & Construction Corp. (El Sol) because the bid documents did not include a validly executed Consent of Surety (CoS).
Facts of In the Matter of Protest Filed by El Sol
In May 2024, the NJTA solicited bids for a contract to repair bridges in the Newark Bay area as part of a redecking project. The bid specifications then in effect required that proposals be accompanied by a Proposal Bond for 10% of the proposal, and that the Proposal Bond “be accompanied by a Power of Attorney [(PoA)] and a [CoS].” They also required that the CoS “set forth the surety company’s obligation to provide the Contract Bond upon award of the Contract to the Bidder.”
The NJTA received five bids; the lowest was from El Sol ($70,865,354); the second lowest bid was from Joseph M. Sanzari, Inc. ($80,735,000). Liberty’s Proposal Bond featured a “Bond ID” number. It was “entered and executed” by attorney-in-fact Katherine Acosta, who also signed the CoS as attorney-in-fact. The CoS provided that “in the event an Award is made to [El Sol] for the project . . . and a contract is signed, [Liberty], as Surety, will execute or arrange for the execution of the necessary final bonds in an amount not less than 100% of the Principal’s Proposal.” Liberty’s PoA “appoint[ed] Katherine Acosta…[as] its true and lawful attorney-in-fact, with full power and authority…to sign, execute and acknowledge the following surety bond,” followed by the Bond ID number for El Sol’s Proposal Bond. Liberty’s PoA expressly “limits the acts of those named herein,” specifying that “they have no authority to bind [Liberty] except in the manner and to the extent herein stated.”
On July 29, 2024, a compliance review memo prepared by NJTA staff indicated that the three bids for which Liberty was the surety were defective – all for the same reason: “The limited [PoA] provided does not grant authority to bind the surety to issue the requisite contract bond.” The remaining two bids were accompanied by PoAs from other sureties that authorized the attorneys-in-fact to execute both the Proposal Bond and the CoS. Several weeks after identifying the defect in the three Liberty submissions, the NJTA revised its specifications to require that “[t]he Proposal Bond . . . and the [CoS] shall be accompanied by a [PoA] evidencing the signatory’s authority to bind the Surety to the Proposal Bond … and the [CoS].” The NJTA did not rely upon the revision in considering the bids for the redecking project and explained that, in making this prospective change, it was “trying in good conscience to ensure that the defect here never occurs again.”
On August 27, 2024, the NJTA awarded the contract to the second-lowest bidder. Liberty emailed the NJTA, stating that (1) because Liberty had used this same language in the past on bid documents for prior NJTA projects, and followed through on issuing the final bonds, the NJTA has “waived any perceived defect within the language of the PoA”; (2) the Law Department “could have allowed the bidder to correct the immaterial defect” and “amend the PoA”; and (3) the Proposal Bond, the PoA, and the CoS should be treated as a “single instrument,” having been sent at the same time, in a single file, and “with the same identifying bond number.”
El Sol submitted a bid protest letter, making many of the same points. The NJTA denied El Sol’s bid protest on September 17, 2024. The Appellate Division reversed the NJTA’s determination, interpreting the specifications at issue to require that the PoA be “tethered” only to the Proposal Bond, not the CoS. It further concluded that “Liberty’s…offer to modify the language of the POA to address the issue” obviated the “NJTA’s practical concerns in obtaining assurances.”
NJ Supreme Court’s Decision in In the Matter of Protest Filed by El Sol
The New Jersey Supreme Court reversed. It held that because of the defect in Liberty’s PoA, El Sol did not submit a CoS that validly bound Liberty to execute the Contract Bond, which made its bid incomplete. Accordingly, the NJTA did not act in an arbitrary, capricious, and unreasonable manner when it rejected El Sol’s legally deficient bid.
In reaching its decision, the New Jersey Supreme Court emphasized that the underlying and foundational purpose of public bidding in New Jersey is to guard against favoritism, improvidence, extravagance and corruption, and to secure for the public the benefits of unfettered competition. Those underlying policies forbid waiving material bidding requirements — such as providing a valid CoS – that “could affect the fairness of the competitive-bidding process.” The Court also cited Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 324 (1994), in which it held that waiving the CoS requirement “undermine[s] the stability of the public-bidding process,” and “ha[s] the capacity to affect the fairness of” that process.
Applying the principles above, the New Jersey Supreme Court first found that the Proposal Bond can’t be viewed as a substitute for the CoS. In support, it referenced the language of the Bond, Meadowbrook’s holding that failure to execute a proper CoS when one is required is an unwaivable defect, the lack of supporting evidence, and the fact that El Sol also submitted a CoS.
Next, the New Jersey Supreme Court concluded that the PoA can’t be deemed to apply to the CoS as well as the Proposal Bond simply because they were submitted under the same identifying number. According to the Court, it can’t ignore the exclusive and prohibitive wording of the PoA; nor could the NJTA be estopped from rejecting El Sol’s bid because it had previously accepted Liberty’s PoA and CoS on thirteen occasions. As the Court explained:
Once the NJTA realized, in July 2024, that El Sol had submitted a bid without a validly executed CoS from Liberty, it was legally bound to apply the law and, at the same time, duty-bound to amend the Specifications in such a way that this situation would not recur — and it did so. Had the NJTA chosen to ignore the defect, once it was brought to its attention by the Legal Department, or to allow Liberty to cure the defect, the NJTA would have shown inappropriate favoritism to both El Sol and Liberty vis-a-vis other bidders — including Sanzari, who had submitted a validly executed CoS — and, in so doing, it would have violated our decision in Meadowbrook.
Finally, the New Jersey Supreme Court held that even if the specifications at the time of bidding did not require that a PoA authorize the CoS, the required CoS still had to be validly executed. Here, it was not because the PoA expressly designated Acosta to sign only the Proposal Bond — not the CoS or anything else.