PATOCK CONSTRUCTION CO v. NEW JERSEY SCHOOLS DEVELOPMENT AUTHORITY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1305-13T3 A-1399-13T3

PATOCK CONSTRUCTION CO.,

Plaintiff-Appellant,

v.

NEW JERSEY SCHOOLS

DEVELOPMENT AUTHORITY,

Defendant-Respondent.

_________________________________

SSP ARCHITECTURAL GROUP, LLC,

Plaintiff-Appellant,

v.

NEW JERSEY SCHOOLS

DEVELOPMENT AUTHORITY,

Defendant-Respondent.

________________________________________________________________

January 10, 2014

Argued December 18, 2013 Decided

Before Judges Sapp-Peterson, Lihotz and Maven.

On appeal from the New Jersey Schools Development Authority, Department of Treasury.

Martin J. Arbus argued the cause for appellant, Patock Construction Co. (Arbus, Maybruch & Goode, LLC, attorneys; Mr. Arbus, of counsel and on the briefs).

Richard W. Gaeckle argued the cause for appellant, SSP Architectural Group, LLC (Hoagland, Longo, Moran, Dunst & Doukas, LLP, attorneys; Andrew J. Carlowicz, of counsel; Mr. Gaeckle, on the briefs).

James H. Landgraf argued the cause for respondent (Dilworth, Paxson, LLP, attorneys; Mr. Landgraf, of counsel and on the brief).

PER CURIAM

In these matters, calendared back-to-back and consolidated for the purpose of this opinion,1 plaintiffs Patock Construction Co. (Patock) and SSP Architectural Group, Inc. (SSP), collectively referred to as Patock, appeal from the New Jersey Schools Development Authority (the Authority) October 22, 2013 final agency decision rejecting Patock's Technical Proposal as non-responsive, and the November 14, 2013 denial of its protest. We conclude the Authority's final agency decision was neither arbitrary, capricious, nor unreasonable. We affirm.

I.

The Authority, an independent agency within the Department of Treasury, issued a request for proposals (RFP) in connection with a design-build contract, No. ET-0061-B01, for the Joseph C. Caruso Elementary School in Keansburg (the Project). Pursuant to Section 3.1.B of the RFP, entitled, "Identification and Qualification of Design-Consultant's Key Team Members," bidders were required to provide the names and resumes of their design consultant and their Key Team Members.

Patock submitted a timely Technical Proposal naming SSP as its design consultant, and identifying Craig A. Slater, AIA, an SSP employee, as its Project Architect and Key Team Member. Patock highlighted Slater's prior experience in its initial description of the design-build team by announcing that its "[t]eam [P]roject architect [was] involved in Joseph C. Caruso bridging documents development." In describing Slater's role on the Project team, Patock stated: "Mr. Slater's involvement allows the SSP team to utilize the most up-to-date information regarding the Project's design as he was responsible for preparing the bridging documents[2] for the Joseph C. Caruso ES while employed with the Authority."

Upon its review of Patock's technical proposal, the Authority determined it to be "non-responsive" to the RFP, making Patock "ineligible to be considered for an award of the design build contract." In its final agency decision, the Authority stated it had employed Slater for a six-week period from December 3, 2012 to January 17, 2013, and that he had been substantially and directly involved in drafting the bridging documents for the Project. The Authority disqualified Slater, and thus precluded his involvement as Patock's Project Architect, pursuant to the New Jersey Uniform Ethics Code, N.J.S.A. 52:13D-17 (the Code), and the Authority's Design-Build Conflict of Interest regulation, N.J.A.C. 19:36-3.5.

Because of Slater's disqualification, the Authority deemed Patock's proposal non-responsive for failing to identify a Project Architect, a mandatory requirement under the RFP. In its decision, the Authority added that "[n]either the RFP, nor applicable laws governing procurement of professional services, permit Patock's identification of a substitute Project Architect after the deadline for submission of Technical Proposals and Price Proposals." The Authority explained that to permit Patock to substitute an alternate Project Architect "would adversely affect competitive bidding by placing Patock in a position of advantage over other bidders."

In accordance with N.J.A.C. 19:36-7.2(a)2, Patock submitted a written protest arguing that (1) Slater was not a "professional consultant" under N.J.A.C. 19:36-3.5 because he was merely a temporary State employee; (2) Slater was not "substantially and directly" involved with the Caruso project while employed by the Authority; (3) even if Slater was disqualified, SSP, as a firm, should not be excluded; and (4) Patock should be permitted to substitute Slater after the submission of the bids "in order to prevent its bid from being rejected." Patock requested an informal hearing.

In response, and in lieu of granting an informal hearing, N.J.A.C. 19:36-7.3(a)1, the Authority issued a second written decision addressing each of Patock's arguments and reaffirming its prior determination. The Authority refuted Patock's interpretation of its conflict of interest regulation by indicating that the definition of "Professional Consultants" in section 3.5 includes both individuals who provide services to the Authority, and Authority employees.

The Authority also refuted Patock's contention that Slater's involvement in the Project was not "substantial and direct" because he held neither a supervisory role at the Authority, nor signed contracts, submitted reports, or approved applications while employed. See N.J.S.A. 52:13D-17 app. H-3 (2011) ("In considering whether a former State employee had substantial and direct involvement in [a] matter, the [State Ethics] Commission has typically reviewed such factors as whether the individual had supervisory responsibility, . . . submitted reports, signed contracts on behalf of the agency, . . . [or] approved applications[.]"). In reaching its determination, the Authority relied on Slater's employment duties, stating:

While Mr. Slater was employed by the [Authority] for only [six] weeks, from December 3, 2013 until January 17, 2013, he was, during his entire time at the [Authority], assigned as the Project Architect for the Caruso Elementary School. He was hired specifically to work on this project and, in fact, worked exclusively on this project while at the [Authority]. His job responsibilities included: review and validation of the District's requirements; development and refinement of the conceptual site plans and schematic floor plans; preparation of agendas for and participation in meetings with the District to review and discuss program needs; and coordination of information exchange and gathering during meetings between [the Authority] and the Keansburg School District. Mr. Slater was integrally involved in meetings with [Authority] design staff, and with Keansburg School District personnel, which meetings, and the discussions and negotiations surrounding those meetings, led directly to the schematic design which Mr. Slater prepared.

The Authority further advised that Slater had "participated in and was privy to numerous communications containing information not available to the general public," and had knowledge of several points of conflict between the Authority and the School District.

With respect to Patock's remaining objections, the Authority clarified that the determination precluding Slater's involvement as a Key Team Member and Project Architect did not specifically disqualify the SSP firm as the design consultant, noting that neither the provisions of the Code nor the Authority's conflict of interest regulation apply to SSP. Rather, the Authority disallowed Patock to cure the deficiency by substituting another Project Architect, reasoning that such substitution after the submission of the Technical Proposals, in this instance, would be "manifestly unfair" to the other bidders, and render the procurement process "unwieldy, untimely and difficult, if not impossible, to manage."

This appeal ensued in which Patock argues:

POINT I

THE AUTHORITY IMPROPERLY REJECTED THE PATOCK TECHNICAL PROPOSAL BASED ON THE NEW JERSEY UNIFORM ETHICS CODE WHERE THE STATE EMPLOYEE WAS NOT SUBSTANTIALLY AND DIRECTLY INVOLVED IN THE MATTER.

POINT II

THE AUTHORITY IMPROPERLY REJECTED THE PATOCK TECHNICAL PROPOSAL BASED ON A PURPORTED CONFLICT OF INTEREST SINCE A TEMPORARY, ON-STAFF EMPLOYEE OF THE AUTHORITY IS NOT A "PROFESSIONAL CONSULTANT" FOR THE PURPOSES OF N.J.A.C. 19:36-3.5.

POINT III

THE AUTHORITY'S REJECTION OF PATOCK'S TECHNICAL PROPOSAL AS NON-RESPONSIVE BASED ON THE FAILURE TO IDENTIFY AN ELIGIBLE KEY TEAM MEMBER IS IMPROPER; ALTERNATIVELY THE AUTHORITY SHOULD HAVE ALLOWED PATCOK TO SUBSTITUTE THE KEY TEAM MEMBER.

II.

Our role in reviewing decisions of administrative agencies is a limited one.

Although sometimes phrased in terms of a search for arbitrary or unreasonable agency action, the 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.
 
[George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994).]

To that end, we "reverse the decision of an administrative agency only if it is arbitrary, capricious or unreasonable or is not supported by substantial credible evidence in the record as a whole." In re Taylor, 158 N.J. 644, 657 (1999). The burden of demonstrating that the action was arbitrary, capricious or unreasonable rests upon the party challenging the action. McGowan v. N.J. State Parole Bd., 347 N.J. Super. 544, 563 (App. Div. 2002). "Although not bound by an agency's determination on a question of law, our courts give 'great deference' to an agency's 'interpretation of statutes within its scope of authority and its adoption of rules implementing' the laws for which it is responsible." In re N.J.A.C. 7:1B-1.1 et seq., 431 N.J. Super.100, 114 (App. Div. 2013)(citation omitted).

"The purpose of bidding statutes is to secure the benefits of competition for the public, and they are to be strictly construed to achieve this end." Stano v. Soldo Constr. Co., 187 N.J. Super. 524, 535 (App. Div. 1983). "Their objects are to guard against favoritism, improvidence, extravagance and corruption; their aim is to secure for the public the benefits of unfettered competition." Terminal Constr. Corp. v. Atl. Cnty. Sewerage Auth., 67 N.J. 403, 410 (1975). Finally, "the efficacy of our competitive bidding statute depends upon its rigorous enforcement." Hillside v. Sternin, 25 N.J. 317, 327 (1957). Guided by these principles, we consider Patock's challenges to the Authority's action.

III.

We first address the issue of Craig Slater's prior employment with the Authority. In its protest, Patock argued Slater was not "substantially and directly" involved in the development of the Project RFP documents. Patock maintains the Authority erred because Slater did not submit reports, sign contracts on behalf of the agency, or otherwise perform a supervisory role while employed. Patock, however, did not present any specific information to support its claim until it did so in its reply brief.3 The supplemental submissions do not raise a factual dispute.

We find no basis to second guess the Authority's factual determination as to Slater's involvement in the Project. Moreover, neither in the supplemental submissions nor during oral argument before this panel has Patock disputed the Authority's delineation of Slater's duties. Rather, Patock merely attempts to minimize the impact of those responsibilities and characterizes its reference to Slater's role in developing the bridging documents for the Project as acceptable "puffery" specifically intended to influence the Authority's subjective evaluation of its proposal.

In view of the Authority's undisputed delineation of Slater's responsibilities, we conclude the Authority's determination that Slater was substantially and directly involved in the development of the Project's bridging documents for the Project is sufficiently supported by the evidence. Mayflower Sec. Co. v. Bureau of Sec., 64 N.J.85, 92-93 (1973).

We turn to consider whether the Authority reasonably invoked the conflict of interest provisions under the Code. Authority employees are subject to the Code, N.J.S.A.52:13D-17, which provides, in pertinent part:

No former State employee shall represent, appear for . . . or provide information not generally available to members of the publicor servicesto . . . any person or party other than the State in connection with any . . . application . . . to which such State . . . employee . . . shall have made any investigation, rendered any ruling, given any opinion, or been otherwise substantially and directly involvedat any time during the course of his office or employment.

(Emphasis added.)

The Authority interpreted this statute to preclude Slater's involvement based on his previous responsibilities with this Project. The Authority reasoned that, as a former employee, Slater may provide information or services to Patock or SSP based on his knowledge of the Project derived from his employment with the Authority.

To be sure, the Authority has an overriding obligation to uphold the public policy mandates of the public bidding laws, that is, to maintain the public trust and ensure that the public bidding process is carried out so as to guard against favoritism, improvidence, extravagance and corruption. Terminal Constr. Corp., supra, 67 N.J. at 410. For that reason, any self-interest Patock has to alternatively interpret Slater's experience must give way to the application of public policy that seeks to avoid even the mere appearance of unfair competition and unfair advantage.

We conclude that the Authority's interpretation of the Code is reasonable and, in our view, correct. Any contrary view blindly ignores the significance of the overarching public policy ideals inherent in the public bidding law, that is, to endure for the public the fair and unbiased procurement of goods and services for the State of New Jersey. We conclude the Authority appropriately disqualified Slater as the Project Architect in accordance with the Code.

IV.

Patock further contends that the Authority's decision to disallow substitution of the Project Architect was arbitrary, capricious, and unreasonable. Patock argues that the mandatory identification of Key Team Members, "to the extent that a bidder may be rejected if that member is ineligible," directly contravenes the Authority's regulatory allowance for substitutions of Key Team Members. We conclude that Patock's argument is not only misplaced, but is negated by the aforementioned public policy considerations invoked by the Authority.

N.J.A.C. 19:36-8.3a provides that "[n]o substitutions . . . of key team members may be made during the selection process or after award of the contract, without prior written approval from the Authority." In this case, the Authority did not permit Patock to substitute the Project Architect after the submission of the Technical Proposals, stating that to do so "would adversely affect competitive bidding by placing Patock in a position of advantage over other bidders."

To support its exercise of discretion, the Authority relies on O'Shea v. N.J. Sch. Constr. Corp., 388 N.J. Super. 312 (App. Div. 2006), a case in which we considered whether the School Construction Corporation, the predecessor agency of the Authority, should be permitted to continue its practice of allowing general contractors to substitute major trade subcontractors for those listed in the general contractor's bid documents after the award of the bid. With respect to the policies underlying the public bidding laws, we concluded that allowing the substitution of subcontractors named in the bid would lead to "uncertainty in the contracting community[] and would open the door to mischief that could undermine competition and public confidence in the process." Id. at 323.

While Patock is correct that O'Shea is distinguishable from the instant matter based upon the consideration of post-award substitutions, we determine that the principles we espoused in O'Shea nevertheless apply here. In O'Shea, we emphasized that the underlying purpose of public bidding statutes "is to secure the benefits of competition for the public, and the statutes are to be strictly construed to achieve that end." Id. at 319. As applied here, these same ideals support the Authority's action, as important public policy concerns informed the exercise of its discretion in denying Slater's substitution, namely, the appearance of impropriety given Slater's prior access to information related to the Project. Consequently, allowing a late substitution of a Key Team Member under these circumstances "undermine[s] the competition and public confidence in the process". Id. at 323.

Accordingly, although the Authority's regulations allow for substitutions, it was not required to do so under the clear language of N.J.A.C. 19:36-8.3a. Thus, the Authority did not abuse its discretion in disallowing the substitution. Its reasons for doing so were supported by substantial credible evidence in the record and public policy underlying public bidding laws.

V.

Finally, we decline to address Patock's additional contention that the Authority's requirement within its RFP that all bidders identify their Key Team Members represents improper rule-making and exceeds both the scope of the Authority's design-build regulations and its enabling legislation. Patock did not raise these claims to the Authority in its protest. SeeR. 2:6-2; Nieder v. Royal Indem. Ins. Co., 62 N.J.229, 234 (1973).

1 This court granted Patock's motion for emergent relief in A-1305-13, and on November 22, 2013 ordered a stay of the award of the contract, pending our expedited review. Thereafter, SSP filed its appeal, A-1399-13, resulting in a sua sponte order scheduling the appeals "back-to-back." Patock and SSP submitted a joint brief and appendix.

2 The Authority's regulations define "bridging architect" as an individual employed by the Authority "to develop preliminary design work and performance criteria, as well as provide other services, such as construction administration services, in connection with design and construction of the school facilities project." N.J.A.C. 19:36-1.2.

3 Through its reply brief, Patock supplemented the appellate record with Slater's certification, describing his responsibilities with respect to the Project while employed by the Authority, as well as a set of schematic drawings used to demonstrate which plans Slater did or did not prepare. The Authority filed a motion to preclude our consideration of Patock's additional information. Although Patock supplemented the record without leave of court, in the interests of justice we have considered the submissions and therefore deny the Authority's motion to strike these submissions.