This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2018 decision in Re: Motor Vehicle Commission Surcharge System Accounting and Billing Services, the Superior Court of New Jersey struck down a contract award after finding that the winning bidder submitted a counter-offer in its bid that rendered it non-compliant and incapable of acceptance. The dispute dealt with a Request for Proposals (RFP) for a new billing and collection system that manages motor vehicle charges under applicable state laws. The contract was awarded by the New Jersey Motor Vehicle Commission (MVC) Division of Purchase and Property (named as the Division in the decision) to Gila, LLC, doing business as Municipal Services Bureau (MSB). The award was challenged by the losing incumbent, Xerox State & Local Solutions, Inc.
Xerox challenged the award on the basis that MSB’s pricing form contained conditions that rendered its bid non-responsive. The Court agreed that the bid was materially non-compliant due to its variations from the pricing required in the RFP:
Here, even affording all due deference to the expertise and discretionary judgment of the Division and the Office of the State Treasurer, we concur with Xerox than MSB’s original pricing submission materially deviated from the requirements of this RFP. For one thing, MSB’s pricing sheet failed to specify that printing and postage costs were to be absorbed by MSB within its contingency fee compensation, and that MSB was not expecting to be paid for those extra costs, either by the motorists remitting the surcharges or by the State
More critically, the lengthy footnote on MSB’s pricing sheet was clearly a material deviation from the RFP’s requirement for bids to set forth the full price to be charged by the contract recipient. Undoubtedly, in declaring on the pricing sheet that the transactional costs were subject to future “negotiations” with the State and are “necessary” components to the pricing, MSB was looking to be paid more for its services…
The Court concluded that MSB “hedged its bets” on a key pricing element relating to the recovery of transaction costs and the “Division impermissibly allowed MSB to do so without affording the same flexibility to the other bidder, Xerox”. The Court also rejected the argument that the conditional pricing attached as a footnote to the pricing sheet was an immaterial error, finding instead that it constituted an intentional conditional offer by MSB:
The lengthy footnote in MSB’s pricing sheet manifestly was not an “apparent clerical mistake.” It was not a typo of a pricing figure within the spreadsheet or an arithmetic error. Instead, the footnote conveyed a purposeful message that MSB regarded obtaining additional revenue for transactional costs as “necessary” to the deal.
The Court concluded that the process was flawed, as Xerox was not afforded an equivalent opportunity to submit a “hedged bid”, and the outcome was flawed because the contract was awarded to a non-compliant bidder. It therefore ordered that the contract be re-tendered.
As this case illustrates, purchasing institutions should be careful to screen bids during their evaluation process to ensure that price offers do not contain conditions or qualifications that may render a bid non-compliant. The failure to reject those bids can lead to the nullification of any resulting contract awards.
