This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2012 decision in Securitas Security Services U.S.A. Inc. v. New Jersey Department of Treasury, the Superior Court of New Jersey – Appellate Division struck down a post-bid price change in the state government’s security services contract award. The case dealt with a Request for Proposals (RFP) issued by New Jersey’s Department of Treasury for armed and unarmed security guard services at various state offices, which was valued at approximately $10 million per year.
The contract terms contained in the RFP allowed contractors to seek annual price adjustments to take into account wage increases that occurred “during the prior year”. However, the Department permitted the selected contractor, Protection Plus, to immediately increase the rates it submitted in its bid rather than seeking permission to do so on the first anniversary of the contract term as contemplated by the RFP terms. Securitas Security, a competing bidder, challenged the Department’s post-bid price adjustment.
In considering the challenge, the Court stated that one of the government’s key functions in conducting a bidding process “is ascertaining whether each bidder on a contract is a responsible bidder and whether each bid submitted conforms to the requirements of the RFP.” The Court also stated that in reviewing government procurement decisions:
[T]he judicial role is restricted to four inquiries: (1) whether the agency’s decision offends the State or Federal Constitution; (2) whether the agency’s action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
Turning to the facts of the case, the court ruled that the Department’s post-bid price change was in contravention of the RFP rules:
The process outlined in this RFP provision clearly envisions that the contractor must await the completion of the first year of the contract before seeking a price increase. Moreover, any such price increase approved by the Division is not applied retroactively, but instead only is “available for the upcoming contract year.” Ibid.
The plain language of the statute and the RFP, therefore, required Protection Plus to wait a full year before applying for a price increase based on interim increases in the federal and state prevailing wage. Instead, Protection Plus’s request came only one week after the effective date of Protection Plus’s designation as the State vendor for the contract; one week after the contract’s ordering period began; and three weeks after the Acting Director denied Securitas’s second protest to her intent to award the contract to Protection Plus. The request was thus premature, both under the statute and the bidding specifications. Securitas’s complaint about the increase is justified.
The Court therefore reversed the price adjustment granted by the State Department and ordered that the contractor wait a full year as required by the RFP terms prior to seeking an annual adjustment to its contract prices.
As this case illustrates, a court may strike down post-bid contract changes that contravene applicable tendering rules. Purchasing institutions should therefore ensure that their contract award procedures conform with their statutory and solicitation-specific process rules.
