ACCOUNTS RECEIVABLE MANAGEMENT AND DATA SERVICES, INC., et al. v. UNIVERSITY OF MEDICINE AND DENTISTRY OF NEW JERSEY, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3138-04T53138-04T5

ACCOUNTS RECEIVABLE MANAGEMENT

AND DATA SERVICES, INC. and

WFS SERVICES, INC.,

Plaintiffs-Appellants,

vs.

UNIVERSITY OF MEDICINE AND

DENTISTRY OF NEW JERSEY and

ARMANTI FINANCIAL SERVICES,

LLC,

Defendants-Respondents,

and

PHYSICIAN AND TACTICAL

HEALTHCARE SERVICES, LLC and

PENN CREDIT CORPORATION,

Defendants.

__________________________________

 

Argued September 20, 2006 - Decided October 25, 2006

Before Judges Parrillo, Hoens and

Sapp-Peterson.

On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, C-261-04.

R. James Kravitz argued the cause for appellants (Fox Rothschild, attorneys; Jonathan D. Weiner and Elizabeth G. Litten, of counsel; Maureen E. Kerns and Patricia Barron, on the brief).

Michael J. Gonnella, Deputy Attorney General, argued the cause for respondent University of Medicine and Dentistry of New Jersey (Anne Milgram, Acting Attorney General, attorney; Andrea Silkowitz, Assistant Attorney General, of counsel; D'Andre Workman, Deputy Attorney General, on the brief).

Steven R. Klein argued the cause for respondent Armanti Financial Services, LLC (Cole, Schotz, Meisel, Forman & Leonard, attorneys; Mr. Klein, of counsel and on the brief; Susan M. Usatine, on the brief).

PER CURIAM

Plaintiffs, Accounts Receivable Management and Data Services, Inc. (ARMDS) and WFS Services, Inc., together as a joint venture (ARMDS/WFS), appeal the award of a professional services contract to defendant, Armanti Financial Services, LLC (Armanti), by defendant, The University of Medicine and Dentistry of New Jersey (UMDNJ). We are satisfied that UMDNJ did not act in an arbitrary, capricious or unreasonable manner and, therefore, affirm the award to Armanti.

By way of background, both ARMDS/WFS and Armanti are engaged in similar enterprises, which involve screening patients for Medicaid or charity care eligibility and assisting them with enrollment. ARMDS' relationship with UMDNJ commenced in 1996 when it was awarded a contract to generate approved charity care and Medicaid retroactive applications for UMDNJ's University Hospital (UH). ARMDS understood that a second vendor would be retained to provide similar services and that ARMDS was expected to share patient accounts with that vendor. The contract awarded to ARMDS was renewable on an annual basis and was renewed several times before it expired on June 30, 2003. Armanti's relationship commenced in the fall of 2000 when UMDNJ awarded Armanti a no-bid contract that called for Armanti to perform services similar to those provided by ARMDS. In conjunction with the contract, UMDNJ provided office space to Armanti in UH's emergency room and outpatient clinics. This enabled Armanti to influence the flow of work performed by the two vendors and ultimately resulted in very little work being directed to ARMDS. In a letter dated February 19, 2003, ARMDS complained to the New Jersey Office of State Procurement that UMDNJ had awarded a no-bid contract to Armanti that failed to comply with the requirements of N.J.S.A. 18A:64G-6(n)(2). ARMDS never received a response to its letter.

On March 3, 2004, UMDNJ published a request for bids, RFP #P-04-041 (RFP), which sought proposals to provide charity care eligibility and accounts receivable management services for UH. UMDNJ received three bids in response to the RFP: plaintiffs submitted a bid valued at $5,266,154; Physician and Tactical Healthcare Services, LLC (PATHS) and Penn Credit Corporation (Penn Credit), also a joint venture, submitted a proposal valued at $5,724,463; and, lastly, defendant Armanti submitted a proposal valued at $6,488,960.

The proposals were reviewed by an evaluation committee convened on behalf of UMDNJ. The committee recommended that UMDNJ award the contract to Armanti. The committee found that Armanti's proposal met or exceeded "all of the evaluation criteria, and [would] best provide the technical expertise and professional commitment to successfully provide the services." The committee also found that plaintiffs' application was generally "good," but that plaintiffs lacked experience performing services for hospital facilities of similar size and scope to UH. On May 13, 2004, UMDNJ awarded the contract to Armanti.

In a letter dated May 19, 2004, plaintiffs protested the contract award to Armanti for several reasons. First, they claimed that their proposal was priced "significantly" below that proposed by Armanti. Second, they claimed that their experience was not lacking as they had previously provided this service to UH for several years. Third, they argued that they submitted more resumes than Armanti and that their resumes demonstrated their "appropriate experience for the project." Finally, plaintiffs argued that Armanti was unresponsive to the RFP in several areas and, by example, noted that the RFP requested specific names of backup staff for the project, which Armanti did not provide. Plaintiffs offered to provide more examples of Armanti's unresponsiveness to the RFP. Nowhere in the letter, however, did ARMDS/WFS indicate that as a threshold issue, they believed that Armanti was an ineligible bidder.

On July 7, 2004, UMDNJ held a bid protest hearing. In advance of the hearing, plaintiffs did not receive any written guidelines outlining what would take place during the proceeding. Additionally, no verbatim record was made of the proceeding. However, even plaintiffs acknowledge that they did not protest Armanti's ineligibility at that time. On August 4, 2004, UMDNJ, through its associate vice president, issued a written "final decision regarding the protest."

In its decision, UMDNJ explained that: 1) it was not "required to award contracts to the lowest bidder," instead, it could use a "standard of 'most favorable offer, price and other factors'"; 2) most of the references plaintiffs submitted involved clients with a lower volume of referrals per month than that projected under the RFP, and plaintiffs' application did not contain "definitive information on the staffing of this project"; and 3) plaintiffs' proposal did not show that they would generate the needed revenues for UH.

Plaintiffs responded to the August 4, 2004 letter with correspondence from their attorney dated August 27, 2004. In this letter, plaintiffs requested that UMDNJ certify to the Office of Administrative Law (OAL) that their challenge to the award was a contested case. Alternatively, plaintiffs sought an immediate response from UMDNJ if it believed that plaintiffs were not entitled to have the matter certified to the OAL.

UMDNJ did not respond to the August 27, 2004 letter. On October 20, 2004, plaintiffs filed a verified complaint and order to show cause against defendants claiming that Armanti, based upon the express terms of the RFP, was not a qualified bidder and that its application was otherwise materially defective.

UMDNJ and Armanti filed motions to dismiss the complaint. Defendants argued that the August 4, 2004 letter was a final agency decision subject to review in the Appellate Division, not before the Chancery Division. As such, defendants maintained that plaintiffs' appeal should have been filed in the Appellate Division by September 18, 2004. Moreover, defendants argued that because plaintiffs' verified complaint was filed in the Chancery Division beyond the forty-five-day period prescribed in Rule 2:4-1 for appeals of final agency decisions, defendants were entitled to dismissal of the action, rather than transfer of the matter to the Appellate Division. Defendants also advanced the alternate argument that the appeal was untimely as an action in lieu of prerogative writs pursuant to Rule 4:69.

The court issued a written decision on December 20, 2004, in which it found UMDNJ was a state agency whose decision to award the contract to Armanti was subject to review in the Appellate Division. The court also found that the July 7, 2004 hearing "was quasi-judicial yet did not create a record amenable to Appellate review" and therefore remanded the matter to UMDNJ "for purposes of creating a record through its auspices or those of the Office of Administrative Law[.]"

On January 14, 2005, the court conducted a hearing to settle the form of the order. Following argument, the court entered its order which provided:

(1) the plaintiffs' application for preliminary injunctive relief is denied; (2) the Appellate Division has exclusive jurisdiction over plaintiffs' appeal of UMDNJ's award of the 2004 contract to Armanti; (3) the Court remands this action to UMDNJ for the purpose of creating a record of the July 7, 2004 protest hearing and serving the same on or before February 14, 2005; and (4) the action is hereby dismissed subject to any further application to the Appellate Division based on the record created by UMDNJ pursuant to paragraph 3 of this Order, and all times to appeal are tolled pending receipt of the aforementioned comprehensive record of the July 7, 2004, hearing.

The court never addressed defendants' contention that plaintiffs' appeal, whether to the Appellate Division or as an action in lieu of prerogative writs, was untimely. Although the proposed form of order initially included language preserving this issue for appeal, the final order struck this language, presumably because the parties ultimately had reached an agreement to toll the forty-five-day filing requirements until plaintiffs were served with the reconstructed record. UMDNJ served plaintiffs with "a re[-]creation of the record" on February 9, 2005.

On February 28, 2005, plaintiffs filed a notice of appeal. Plaintiffs claim the award of the contract to Armanti constituted a gross abuse of UMDNJ's discretion as (1) the express conditions of the RFP barred Armanti from submitting a proposal; (2) Armanti's bid was non-conforming in that it failed to respond to numerous material bid specifications; and (3) Armanti's bid was not the most advantageous to UMDNJ, considering price and other factors.

I.

As a preliminary matter, we agree with Judge Francis' determination that for purposes of review of the contract awarded to Armanti, UMDNJ is a state agency. N.J.S.A. 18A:64G-3; see also Fine v. Rutgers, 163 N.J. 464 (2000); Rutgers v. Piscataway Twp., 1 N.J. Tax 164, 171 (Tax 1980). But see Cohen v. Bd. of Trs. of Univ. of Med. and Den. of N.J., 240 N.J. Super. 188, 193 (Ch. Div. 1989). Thus, the August 4, 2004 letter constituted a final decision for appeal purposes, and plaintiffs were, therefore, required to file a timely appeal no later than September 18, 2004, which plaintiffs did not do. Instead, plaintiffs filed their appeal in the Chancery Division on October 20, 2004. We conclude, however, that plaintiffs' appeal is not time-barred because, as Judge Francis ruled, the August 4, 2004 letter, though clearly characterized as a final decision, did not contain an adequate record for appellate review. See In re Issuance of Permit by Dep't of Envtl. Prot., 120 N.J. 164, 181 (1990).

"In order to acquire the requisite finality for triggering the forty-five day period prescribed by R. 2:4-1(b), the 'agency decision should contain adequate factual and legal conclusions.'" Northwest Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 138-39 (2001) (quoting In re CAFRA Permit No. 87-0959-5, 152 N.J. 287, 299 (1997)). "A determination by an agency that does not contain proper factual findings and legal conclusions is not a final decision for appeal purposes under R. 2:4-1(b)." Northwest, supra, 167 N.J. at 139; Szczepanik v. Department of Treasury, 232 N.J. Super. 491, 498-500 (App. Div. 1989). However, once the administrative record has been created, our review of the agency decision is quite circumscribed. In re Taylor, 158 N.J. 644, 656 (1999) (citing Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 587 (1988)). Further, where the challenge to the decision lies in the agency's factual determinations, our inquiry is limited to a determination of whether the record contains substantial, credible evidence to support the findings on which the agency based its action. Brady v. Bd. of Review, 152 N.J. 197, 210-11 (1997).

Moreover, in the context of public bidding, we are aware that the record under review may not involve a full-fledged adversarial proceeding. Hartz Mountain Indus., Inc. v. N.J. Sports & Exposition Auth., 369 N.J. Super. 175, 188-89 (App. Div. 2004). As long as we are satisfied that the record affords us the opportunity to determine whether the decision reached was done in the absence of bad faith, fraud, corruption, or gross abuse of discretion, we will not disturb the agency action nor impose upon the agency a requirement for the full panoply of procedural due process. Id. at 189. See also Keyes Martin & Co. v. Dir., Div. of Purchase & Prop., 99 N.J. 244, 253 (1985).

II.

Plaintiffs claim that at the time Armanti submitted its proposal, it was already under contract to perform collection services for UH and was therefore not qualified to submit a proposal because the express language of the RFP prohibited "bidders currently under contract with [UH] for existing collection agency services . . . from bidding on this contract." Defendants respond that apart from the fact that plaintiffs did not raise this issue at the July 7, 2004 protest hearing, the collection work for which proposals were solicited in the RFP related to bad debt collection, not self-pay, which is the type of collection work that Armanti was performing at the time the RFP was issued. Defendants contend that had plaintiffs raised this issue prior to or during the July 7, 2004 protest hearing, UMDNJ could have explained the distinction.

We adhere to the long established principle that an issue not raised below should not be heard by a reviewing court unless the issue goes to the jurisdiction of the court or concerns a matter of great public interest. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). Plaintiffs failed to raise the status of Armanti as an ineligible bidder in their May 19, 2004 protest letter or during the July 7, 2004 protest hearing. Plaintiffs contend that since they were not given any "procedure or ground rules that would govern their participation, [they] assumed that the July 7 meeting was to be informal" and they "were certainly never informed that the July 7 meeting would be their only opportunity to present their claims to UMDNJ."

Based upon our review of the record, we are not persuaded that plaintiffs' unawareness of the nature of the July 7, 2004 meeting explains their failure to timely raise their claim that Armanti was an ineligible bidder. First, it is evident that plaintiffs were concerned about ineligible bidders at the inception of the process. In their brief, plaintiffs contend "[d]uring the mandatory pre-bid conference, ARMDS-WFS inquired as to which vendors or companies were prohibited from bidding under this provision. UMDNJ simply responded that 'they know who they are.'" Second, plaintiffs were well aware of Armanti's then existing relationship with UH and the nature of the work Armanti was performing because plaintiffs had previously worked with Armanti in performing the same work. Third, a year earlier, ARMDS had complained to state officials about the no-bid contract UMDNJ awarded to Armanti in 2000. Fourth, according to plaintiffs, the no-bid contract gave Armanti direct access to patient information, which ARMDS believed ultimately resulted in the non-renewal of its longstanding contract in 2003. Thus, once UMDNJ noticed plaintiffs that Armanti was the successful bidder, plaintiffs were in a position to immediately raise their claim that Armanti was an ineligible bidder, but did not do so. Rather, plaintiffs proceeded to raise other objections regarding the quality of Armanti's proposal, as compared to their proposal, a comparison presumably irrelevant if Armanti was an ineligible bidder.

Plaintiffs' remaining arguments that Armanti's proposal had nine deficiencies that materially deviated from the bid specification and that the award to Armanti, the highest bidder, was not most advantageous to UMDNJ, considering price and other factors, are without sufficient merit to warrant extensive discussion in a written opinion. R. 2:11-3(e)(1)(E). We add the following comments.

It is well settled that a public agency that issues a request for proposals for public bidding may not waive any material departure from the bid specifications and must reject a bid with such defects. Serenity Contracting Group, Inc. v. Borough of Fort Lee, 306 N.J. Super. 151, 156 (App. Div. 1997), certif. denied, 153 N.J. 214 (1998). See also Star of the Sea Concrete Corp. v. Lucas Brothers, Inc., 370 N.J. Super. 60, 72 (App. Div. 2004). A material departure from a bid specification occurs when a prospective bidder's non-compliance with advertised conditions increases the likelihood that a waiver of compliance:

is capable of becoming a vehicle for corruption or favoritism, or capable of encouraging improvidence or extravagance, or likely to affect the amount of any bid or to influence any potential bidder to refrain from bidding, or which are capable of affecting the ability of the contracting unit to make bid comparisons.

[Serenity, supra, 306 N.J. Super. at 156 (citing Terminal Constr. Corp. v. Atlantic County Sewerage Auth., 67 N.J. 403, 412 (1975).]

Of the nine material defects plaintiffs claim were reflected in the Armanti proposal, the record reveals that plaintiffs raised only three before the agency. In their May 19, 2004 protest letter, they claimed Armanti failed to provide specific names of its backup staff. At the July 7, 2004 protest hearing, where plaintiffs were represented by counsel, plaintiffs claimed Armanti's reference letters were deficient and that Armanti improperly included additional language in its costs proposal.

The re-created record indicates that at the hearing, plaintiffs' counsel agreed that Armanti's general statement that approximately "250 of its employees had the qualities, education and expertise to work on this specific project" was not a material departure from the bid specifications. The record also reveals the hearing officer found that the form reference letters Armanti used contained the requisite information requested in the RFP, including the identity of the organization, years of affiliation with Armanti, and the type of work performed. The remainder of the protest hearing focused upon a comparison of plaintiffs' qualifications against those of Armanti and, although plaintiffs were afforded an opportunity to supplement the record, "they declined the opportunity to submit additional information." Moreover, there is no indication that plaintiffs filed any substantive objections to the re-created record.

We are satisfied that the findings related to the three alleged deficiencies raised below do not evidence arbitrary, capricious, or unreasonable action by UMDNJ. The remaining six deficiencies question Armanti's failure to (1) address the RFP's production and mailing requirements; (2) explain how it would implement the requirements of the RFP; (3) identify its specific plan for contract management; (4) address whether it could identify any anticipated problems handling the contract; (5) provide its office phone number; and (6) describe its experience on contracts of a similar size to the RFP. None of these claimed deficiencies were raised in the original May 19, 2004 protest letter nor the subsequent July 7, 2004 protest hearing. Since plaintiffs had the full opportunity to raise these issues before the administrative agency with the expertise to address their objections and failed to do so, we decline to consider these claims on appeal. ACLU of New Jersey, Inc. v. County of Hudson, 352 N.J. Super. 44, 72 (App. Div.), certif. denied, 174 N.J. 190 (2002). We are mindful that a major objective of public bidding is to "promote honesty and integrity of those bidding and of the system itself" for the benefit of the taxpayers. Keyes, supra, 99 N.J. at 256. In our view, however, the six additional deficiencies plaintiffs have raised do not compromise this objective and, therefore, do not substantially implicate the public interest. Consequently, they are inappropriate for consideration for the first time on appeal. Nieder, supra, 62 N.J. at 234; see also Ferraro v. Demetrakis, 167 N.J. Super. 429, 431-32 (App. Div.), certif. denied, 81 N.J. 290 (1979).

Plaintiffs also contend that UMDNJ abused its discretion by awarding the contract to Armanti because it was not most advantageous to UMDNJ, noting, among other contentions, that Armanti's proposed costs were significantly higher than the other proposals. Pursuant to N.J.S.A. 18A:64G-6(n)(2) of UMDNJ's enabling legislation, its board of trustees is authorized to enter into contracts it deems "most advantageous to the university, price and other factors considered." This provision affords broad discretion to UMDNJ in discharging its contracting functions. Keyes, supra, 99 N.J. at 252-53.

In addition, the higher cost of Armanti's proposal is not necessarily evidence of abuse of discretion, as "other factors" may be considered in the bid selection process. N.J.S.A. 18A:64G-6(n)(2). UMDNJ specifically stated in its August 4, 2004 final decision that the ability to "generate revenue is at least as important as the price to be paid for these services." UMDNJ also found that Armanti could generate these revenues and that it was unclear whether WFS could handle the amount of work required under the contract. We see no basis to disturb these findings. Commercial Cleaning Corp. v. Sullivan, 47 N.J. 539, 549 (1966).

In summary, when the record is reviewed consistent with our obligation to determine whether the administrative action was arbitrary, capricious or unreasonable, we are satisfied that reasonably considering the record as a whole, UMDNJ's determination that the contract award to Armanti was most advantageous to UH, cost and other factors considered, could have been reached on the ample, credible evidence in the record. Close v. Kordulak Bros., 44 N.J. 589, 599 (1965). Thus, plaintiffs have failed to meet their burden to demonstrate that UMDNJ's action was arbitrary, capricious or unreasonable. McGowan v. N.J. State Parole Bd., 347 N.J. Super. 544, 563 (App. Div. 2002).

 
Affirmed.

Physician and Tactical Healthcare Services, LLC and Penn Credit Corporation were dismissed under consent orders filed December 1, 2004.

In their May 19, 2004 protest letter, plaintiffs expressed particular confusion over the evaluation committee's finding that their qualifications were lacking, and in bold type stated, "both WFS and ARMDS had provided the services being bid through this RFP for several years directly to UMDNJ itself."

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A-3138-04T5

October 25, 2006