New Jersey Law Journal
VOL. 211 - NO 11
MONDAY, MARCH 18, 2013
Reforming N.J.’s Public
Bidding System
Admitted errors, legal pitfalls
and anticipated changes
By Christopher A. Barbarisi and
Christopher J. Archer
I
n January, the New Jersey Department
of the Treasury announced plans to
implement a privately designed electronic management system for public contract bidding. The purpose of the anticipated system, which is expected to require
all bid proposals for state contracts to be
submitted electronically, is to reduce the
number of errors and illegal provisions
contained in both bids and contracts for
public work. This announcement came
only days before President Obama signed
into law the $50.5 billion Hurricane Sandy
relief package (large portions of which no
Barbarisi is a partner at K&L Gates
LLP in Newark. He has extensive experience in all aspects of government contracting and public bidding. Archer is an
associate with the firm and supports the
government contracts practice.
doubt will be distributed through the New
Jersey public bidding process), and almost
one year to the day after Gov. Chris
Christie ordered a comprehensive review
of New Jersey’s public bidding process
and procurement laws.
While the planning for the new system is still in its early stages, and its
impact is not yet known, many are hopeful
that the system will prove to be a meaningful step down the long road of New
Jersey public bidding and procurement
reform. Still, it is unlikely that the implementation of the new system will cure
New Jersey’s confusing body of public
bidding laws. This area has long been a
complicated maze for vendors attempting
to do business, on both the state and local
levels, with New Jersey public entities.
The acknowledged likelihood of errors
in the bid award process, compounded
with the many precarious and conflicting
aspects of the public bidding laws that
the new electronic system is unlikely to
remedy, compels the conclusion that those
seeking to do business with New Jersey
public entities must employ both vigilance
and competent legal counsel at all stages
of the procurement process.
ESTABLISHED 1878
Disclosed Data Reveals Frequent Errors in
Awarded Public Contracts
In January 2012, Gov. Christie
ordered a comprehensive review of New
Jersey’s public contracting process and
bidding laws. This came in the wake of
a report, based on previously confidential figures from the State Comptroller’s
Office, demonstrating that one in five contracts awarded by the state worth in excess
of $2 million — and one in three contracts
worth in excess of $10 million — were
illegal and violated New Jersey’s public bidding laws. Similarly, on the local
level, the figures revealed that more than
one in five multimillion-dollar contracts
issued by counties, municipalities and
local agencies were legally flawed. The
Department of the Treasury believes that,
in many cases, such errors are caused by
the complicated bid submission process.
The review ordered by Gov. Christie
was aimed at identifying the errors
most commonly made by bidders when
responding to requests for proposals
(RFPs) issued by state and local public
entities for government contracts, and to
simplify the process. According to the
Department of the Treasury, Division of
Purchase and Property (DPP), the most
common mistakes that vendors make
when submitting a proposal in response to
an RFP involve: (1) failing to include all
forms required by the RFP; (2) submitting
proposals containing contradictory terms
and conditions; (3) failing to submit the
Reprinted with permission from the MARCH 18, 2013 edition of New Jersey Law Journal. © 2013 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.
211 N.J.L.J. 742
NEW JERSEY LAW JOURNAL, MARCH 18, 2013
proposal on a timely basis before the bidding deadline; and (4) failing, at the time of
submission, to possess the required licensing and registration required by the RFP
(e.g., Public Works Contractor Registration
for a procurement that is a public work).
The DPP’s announced plan for an
electronic bidding management system is
designed to address these issues by replacing paper with a fully electronic RFP and
bidding process. The state is reviewing
proposals from vendors to design and implement the electronic system and plans to
make a final decision within the next several
months. While the DPP currently lists available bid opportunities on its website, and
vendors may participate in the bid process
online, electronic submission of proposals is
not mandatory. In fact, the state still receives
a large number of paper bids.
N.J.’s Public Bidding Laws Remain a
Complicated Landscape
While the DPP’s new online electronic
bidding system may help to reduce certain
application errors common in the paper
bidding system, it is not likely to address
the issues that make New Jersey’s public
bidding laws a tangled web, fraught with
increasingly litigious vendors and legal
uncertainty. New Jersey’s public bidding
laws are intended to safeguard the process
by which public entities bid and award
contracts for goods and services paid for
with public funds. Although intended to
promote fairness and legitimacy, in reality,
they are a virtual maze of statutes and regulations that impose strict requirements as to
how to advertise, bid upon and ultimately
award public contracts to vendors.
Numerous, Often Conflicting, Sources for
Bidding Requirements
New Jersey lacks a unified set of bidding regulations. Perhaps, as Gov. Christie
suggests, this is yet another instance of having too much “government” in New Jersey.
Whatever the reason, a business seeking to
contract with a New Jersey public entity
faces a different set of rules and procurement regulations depending on what body
offers the procurement, be it the state, a
county or local government, or one of the
state’s many independent authorities and
agencies. Thus, vendors and public entities
often are faced with different key bidding
requirements such as timing, advertising,
bid content and amendments, standard for
award, etc. Virtually any material diversion
from these often conflicting requirements
creates fertile ground for legal challenges,
resulting in delays to the public procurement process and expensive litigation.
For example, a different standard for
the award of a contract will apply depending on which government agency has issued
the RFP. For RFPs at the state level, contracts typically are awarded to the proposal
that is “most advantageous to the State,
[with] price and other factors considered.”
However, for RFPs issued by local governments, contracts typically are awarded to
the “lowest responsible bidder” unless, of
course, the local procurement qualifies for
“competitive contracting” status — which
provides the local purchasing agent with
broad flexibility to fashion its own review
standard. A number of independent state
agencies and authorities, such as the New
Jersey Turnpike Authority and the New
Jersey Water Supply Authority, apply the
“local” lowest responsible bidder standard.
Another dimension of variation is the
period of time within which the public
entity or agency must award the contract.
State level contracts must be awarded
with “reasonable promptness.” However,
more definite timeframes are set forth for
other bodies, like local governments, which
must award the contract or reject bids
within 60 days after bid opening. Certain
independent authorities and agencies have
required contract award timeframes that
differ entirely from those at the state and
local levels, such as the Department of
Transportation, which must award a contract within 30 working days after bids
are received. Requirements for the posting
of security also vary depending on which
body has issued an RFP. At the state level,
bond sums are set by an agency based on
its “assessment of the risk presented to
the State by the type of contract and other
relevant factors.” However, there is less
discretion at the local level.
Erosion of “Standing” Requirements for
Challenging Specifications
Prior to 2009, typically only taxpayers
and prospective bidders had the ability to
challenge public bidding specifications.
In 2009, the New Jersey Supreme Court
expanded the list of entities who have
standing through its ruling in Jen Electric
Inc. v. County of Essex, 197 N.J. 627
(2009). Now, the list of potential challeng-
2
ers to bid specifications is far broader and
includes the potential suppliers, materials
vendors and subcontractors of the prospective bidders themselves. While the
Supreme Court seemed to indicate that its
ruling would apply only to challenges of
bid specifications, and not to challenges
of contract awards, a more recent decision
by New Jersey’s Appellate Division, In
re N.J. State Contract A71188, 422 N.J.
Super. 275 (2011), makes this less clear —
especially within the realm of cooperative
purchasing agreements (CPAs). There, the
Appellate Division ruled that an agency’s
incumbent suppliers have standing to challenge the agency’s decision to join a CPA,
even though those incumbents did not participate in the bidding on the CPA.
While these decisions leave several
open issues, they do make clear that New
Jersey’s courts are trending toward further
erosion of standing requirements for public
bid challenges in favor of a broader overall
ability to bring such contests. As bid challenges could become more frequent, this
trend further illustrates the need for a unified set of bidding rules. Moreover, since
the pool of potential bid challengers is now
greater than ever, businesses engaged in
New Jersey public bidding (as well as their
suppliers and vendors) must take proactive steps to identify and appreciate the
complex labyrinth of New Jersey’s public
bidding requirements.
Conclusion
While the DPP’s forthcoming online
electronic bidding management system
may provide some much-needed uniformity to the manner in which bids are
submitted for public contracts, it will be
far from a panacea. The currently inconsistent landscape of New Jersey’s public
bidding laws, coupled with more relaxed
standing requirements, will continue to
ensure unneeded complexity, costly litigation and pitfalls for the unwary vendor.
Those seeking to do business with New
Jersey public entities should not lower their
guard upon the introduction of the new
electronic system, but instead should continue to approach public bidding in New
Jersey with vigilance and caution, with the
support of competent legal counsel, at all
stages of the procurement process. Those
that fail to do so expose themselves to the
potential for lost business opportunities
and costly protracted litigation. ■