This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its May 2014 decision in C&H Industrial Services, Inc. v. City of Vineland, the Superior Court of New Jersey struck down the City of Vineland’s power plant contract award after finding that the winning bidder, Infrastructure and Industrial Energy, LLC, referred to as IIE, failed to comply with applicable ownership disclosure rules. As the Court noted in its decision, the New Jersey Local Public Contracts Law required bidders to disclose the names and addresses of all partners or owners who hold a ten percent or greater ownership stake in their partnerships or corporations. The Superior Court found that the ownership information submitted by the ownership group was incomplete and that this omission rendered that selected bid non-compliant and legally incapable of acceptance. As the Court stated in its decision:
Requiring bidders to fully disclose ten percent owners serves several purposes: it ensures that the governing body’s members are aware of the real parties in interest; it ensures that the public will be made aware of the real parties in interest; it enables public officials to identify conflicts of interest before a public contract is awarded; and it provides public officials with the information necessary to assess the capability, financial stability, and moral integrity of bidders.
The Court found that a “bidder’s failure to completely disclose ten percent owners undermines the purposes of the ownership disclosure statute and can potentially delay projects and increase their cost”, and that non-compliance with these disclosure rules deprives “the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements.”
The Court also found that this non-disclosure was material since it could put the non-disclosing party “in a position of advantage over other bidders or … otherwise undermin[e] the necessary common standard of competition” and that failing to comply “places the non-compliant bidder in a position of advantage over other bidders who might have bid on the project had they known they could avoid the timely filing of the disclosure statement”.
The Court concluded that the municipality could not waive the non-disclosure and accept the bid in question since permitting a municipality “to waive non-compliance under such circumstances would subvert…the strong public policy underlying compliance with the disclosure statute.” On these grounds, the Superior Court upheld a prior trial decision that struck down the contract award as legally void.
As this case illustrates, both public bodies and private bidders should ensure that they follow the statutory rules that apply to their bidding competitions since non-compliance with those rules can expose a contract award to legal challenge and potential nullification.
