IN RE BID SOLICITATION 16-X-23961, LAUNDRY CHEMICALS STATEWIDE
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5379-16T3
IN RE BID SOLICITATION
#16-X-23961, LAUNDRY CHEMICALS
STATEWIDE.
_____________________________
Argued October 23, 2018 - Decided December 14, 2018
Before Judges Hoffman and Firko.
On appeal from the New Jersey Department of the
Treasury, Division of Purchase and Property, RFP No.
16-X-23961.
Joshua S. Bratspies argued the cause for appellant
Diamond Chemical Co., Inc. (Sherman Wells Sylvester
& Stamelman LLP, attorneys; Joshua S. Bratspies, of
counsel and on the briefs; Matthew F. Chakmakian, on
the briefs).
Rebecca Pluckhorn, Deputy Attorney General, argued
the cause for respondent Department of Treasury,
Division of Purchase and Property (Gurbir S. Grewal,
Attorney General, attorney; Beth Leigh Mitchell,
Assistant Attorney General, of counsel; Diana
Reynolds, Deputy Attorney General, on the brief).
PER CURIAM
In this procurement case, appellant Diamond Chemical Company, Inc.,
(Diamond Chemical) seeks reversal of a decision by respondent, the Division of
Purchase and Property (Division), to cancel a request for proposal (RFP) for
bids on contracts to supply the State with laundry chemicals. The cancellation
occurred after the Division and its Procurement Bureau (Bureau) concluded that
the list of approved product brands did not correspond to RFP specifications,
and none of the products proposed by any of the five bidders could meet certain
requirements. The cancellation letter further indicated the Division's intent to
revise its RFP specifications and to issue a new solicitation.
Diamond Chemical contends the Division violated its own procedural
regulations, and such action was per se arbitrary and capricious. Specifically,
Diamond Chemical asserts the Division issued a "final agency decision"
awarding it all of the subject contracts, and the Division could not reconsider
this determination under N.J.A.C. 17:12-3.3. We disagree. For the reasons that
follow, we affirm the Division's decision to cancel the RFP.
The essential facts are undisputed. In May 2015, the Division issued a
fifty-one-page RFP 16-X-23961 for the statewide supply of laundry chemicals.
The RFP specified the bid submissions were due on July 1, 2015. The Division
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issued the RFP in order to replace the laundry chemicals contracts set to expire
on July 31, 2015.
The RFP consisted of twelve price lines corresponding to twelve different
laundry chemicals. The twelve price lines were organized into three groups:
group one (dry chemical system); group two (liquid chemical system); and group
three (solid encapsulated detergent).
Group one (dry chemical system) consisted of price line 00001, low
alkalinity/low temperature powdered laundry detergent. Group two (liquid
chemical system) covered price lines 00002 to 000011, entitled:
price line 00002: liquid laundry detergent
price line 00003: liquid heavy duty alkaline builder
price line 00004: detergent/bleach combination liquid
laundry detergent
price line 00005: concentrated liquid chlorine bleach
price line 00006: liquid system combination fabric
softener/sour
price line 00007: liquid antibacterial softener/sanitizer
price line 00008: liquid rust removing sour
price line 00009: regular liquid fabric softener
price line 00010: liquid solvent detergent
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price line 00011: liquid hydrogen peroxide bleach
Group three (solid encapsulated detergent) referred to price line 00012, also
named solid encapsulated detergent. The RFP permitted vendors to bid on one
or more of the three groups.
A key aspect of the RFP was to obtain laundry chemicals for the State that
were both "[e]nvironmentally [p]referable" and "[b]iodegradable[,]" in order to
comply with Executive Order #76 issued on January 12, 2006. The executive
order requires the State to procure and utilize cleaning products that "minimize
potential impacts to human health and the environment . . . ."
Diamond Chemical timely submitted its bid in response to the RFP for all
twelve price lines on July 1, 2015. Also on July 1, the Division's Proposal
Review Unit opened the five proposals timely received, and on September 23,
2015, the Division issued its first notice of intent (NOI-1) to award all three
groups to Diamond Chemical. Thereafter, two competitor bidders,
SupplyWorks, also known as Interline Brands, Inc. (SupplyWorks) and
ACCSES NJ/CNA Services (ACCSES), submitted protests of the Division's
notice of intent to award price lines three, four, and seven to Diamond Chemical.
The Division agreed with the protests by SupplyWorks and ACCSES after
it investigated and determined that Diamond Chemical was ineligible to receive
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the contract award for all ten of Group Two's price lines. Accordingly, the
Division rescinded NOI-1, and on December 14, 2015, it issued a second NOI
(NOI-2) indicating an intent to award a contract to ACCSES for Group Two.
Diamond Chemical then submitted a protest of the Division's NOI-2, arguing its
decision was erroneous. On August 25, 2016, the Director of the Division issued
a "final agency decision with respect to the protest submitted by" Diamond
Chemical, and agreed with Diamond Chemical's arguments. The Director
ordered "the Bureau to rescind [NOI-2 and] to reinstate the original September
23, 2015 NOI [(NOI-1)], awarding all price line[] items to" Diamond Chemical.
This led to the Bureau's September 1, 2016 issuance of NOI-3, which indicated
"an intent to award the contract to Diamond [Chemical] for all Groups." As with
NOI-1 and NOI-2, NOI-3 provided a due date for the competitor bidders to
submit a protest "in accordance with the Division's administrative reg ulations,
N.J.A.C. 17:12-3.3."
ACCSES and SupplyWorks then submitted a protest in response to NOI-
3. On July 10, 2017, the Division wrote to all bidders announcing the
cancellation of the entire RFP. The next day, the Division's Acting Director
issued his "final agency decision with respect to this matter." The decision
provided:
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In connection with its review of this protest [by
ACCSES] and a protest submitted by [SupplyWorks],
the Hearing Unit requested that the Bureau undertake a
thorough review of the RFP specifications, the
approved brands listed on the price sheet, and the
proposals submitted. Based upon this review, the
Bureau concluded that the list of approved brands did
not correspond to the RFP specifications. In addition,
a review of the specifications revealed that certain
requirements could not be met by any of the products
proposed by any of the five bidders. Accordingly, on
July 10, 2017, the Bureau issued a letter to all bidders
advising it had cancelled the subject procurement and
rescinded the intended contract award. The letter
further advised that it was the Bureau's intent to revise
the specifications and issue a new solicitation.
Because the Division rescinded NOI-3 and cancelled the procurement, the
Acting Director found that the protesting bidders' "points are moot and need n ot
be addressed at this time."
Diamond Chemical then filed the present appeal. In addition, Diamond
Chemical requested the Division to stay its decision. The Division denied the
request, and Diamond Chemical did not seek emergent review from this court.
All of Diamond Chemical's arguments on appeal turn on the procedural
question of whether the Division was permitted under N.J.A.C. 17:12-3.3 to
accept, review, and determine more protest submissions from competitor bidders
after the Director issued the August 25, 2016 decision in response to Diamond
Chemical's protest submission regarding NOI-2. Specifically, Diamond
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Chemical argues that under N.J.A.C. 7:12-3.3(d)(2), "a decision on a protest
'shall be a final agency decision,'" meaning that "pursuant to N.J.A.C. 17:12 -
3.1(b), [the decision] is 'appealable [only to] the Appellate Division.'" Diamond
Chemical therefore contends the Division lacked jurisdiction to reconsider or
disturb its August 25, 2016 "final agency decision." We disagree.
When reviewing a final agency decision, we are "in no way bound by the
agency's interpretation of a statute or its determination of a strictly legal issue."
U.S. Bank, N.A. v. Hough, 210 N.J. 187, 200 (2012) (quoting Univ. Cottage v.
N.J. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007)). "However, we defer to an
agency's interpretation of . . . [a] regulation, within the sphere of [its] authority,
unless the interpretation is 'plainly unreasonable.'" Ibid. (alterations in original)
(quoting In re Election Law Enforcement Comm'n Advisory Op. No. 01-2008,
201 N.J. 254, 262 (2010)). This is because "a state agency brings experience
and specialized knowledge to its task of administering and regulating a
legislative enactment within its field of expertise." Ibid. (quoting In re Election,
201 N.J. at 262).
"In the absence of some legislative restriction, administrative agencies
have the inherent power to reopen or to modify and to rehear orders that have
been entered." Burlington Cty. Evergreen Park Mental Hosp. v. Cooper, 56 N.J.
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579, 600 (1970). An "agency is free to alter any prior decision if it concludes
that to do so is in the public interest." St. Joseph's Hosp. & Med. Ctr. v. Finley,
153 N.J. Super. 214, 223 (App. Div. 1977).
In its July 11, 2017 final agency decision to cancel the procurement, the
Division indicated that after further internal review, "the Bureau concluded that
the list of approved brands did not correspond to the RFP specifications," and
that "certain [RFP] requirements could not be met by any of the products
proposed by any of the five bidders." Considering the fact that the Division
realized it was unable to attain the products that it actually sought, it was clearly
in the public interest for the Division to effectively reject all bids and cancel the
procurement. See In re Jasper Seating Co., Inc., 406 N.J. Super. 213, 222 (App.
Div. 2009) ("Any or all bids may be rejected when the State Treasurer or the
Director of the Division of Purchase and Property determines that it is in the
public interest to do so." (quoting N.J.S.A. 52:34-12(a))). The final issue before
us, therefore, is whether the Division was procedurally permitted to conduct
further internal review and modify the August 25, 2016 written decision.
Diamond Chemical primarily contends that because the August 25, 2016
decision stated it was a "final agency decision" by the Division in accordance
with the regulations, all further review and adjudications should have been
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conducted by this court. We find Diamond Chemical's argument unpersuasive,
as it is inconsistent with the language of applicable regulations and case law.
N.J.A.C. 17:12-3.3(a)(2) provides:
(a) A bidder . . . may submit a written protest to the
Director concerning the following:
....
2. Notice of award of contract(s) or of intent to
award contract(s) pertaining to the subject
procurement.
N.J.A.C. 17:12-3.3(d)(2) provides the procedural regulations as to how the
Division responds to protests that the Director accepts to review – it states, in
pertinent part:
The Director . . . may perform a review of the written
record or conduct an in-person presentation directly . .
. . [T]he Director shall make a final written decision on
the matter. In the case of a review or in-person
presentation being handled by a designee from within
the Division, the determination shall be issued by the
Director, or the Director's designee, and such
determination shall be a final agency decision pursuant
to N.J.A.C. 17:12-3.1(b).
Lastly, N.J.A.C. 17:12-3.1(b) states, "Final agency determinations by the
Director on matters of protest are appealable to the Appellate Division."
On August 25, 2016, the Director responded to Diamond Chemical's
protest to NOI-2, stating that its written decision was his "final agency decision
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with respect to the protest submitted by Diamond [Chemical]." This narrow
language demonstrated the Division's willingness to continue reviewing the
procurement internally, and further corresponded with N.J.A.C. 17:12-3.3(d)(2),
which states that in response to a timely protest, "the Director shall make a final
decision on the matter." Moreover, after the August 25 decision, the Division
issued NOI-3, which explicitly permitted competitor bidders to again proffer
written protests under N.J.A.C. 17:12-3.3(a)(2). Diamond Chemical does not
argue, nor do the regulations prohibit, the Division from issuing an NOI after a
final agency decision. The Division thus did not act on the basis of a "plainly
unreasonable" interpretation of the regulations.
We implicitly recognized the ability of an agency to continue internal
review of a "final agency determination" in In re Jasper Seating Co., Inc., 406 N.J. Super. 213 (App. Div. 2009), another case involving the Division. There,
the Division issued an NOI and Jasper Seating Company (Jasper), an
unsuccessful bidder, protested. Id. at 219. Subsequently, "the Division issued
a [f]inal [a]gency [d]etermination formalizing its rejection of [Jasper]'s bids . . .
." Ibid.
Instead of filing an appeal to this court, however, "[a]n email exchange
took place between [Jasper]'s [c]ontract [a]dministrator and the Acting Director
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. . . whereby the Acting Director reiterated the reasons for the" final agency
determination. Id. at 220. Shortly thereafter, Jasper "filed a further protest in
another effort to reverse" the final agency determination. Ibid. Three months
later, the "Acting Director responded in writing . . . and concluded that Jasper
had not presented any facts, information or arguments sufficient to cause the
Acting Director to set aside her [f]inal [a]gency [d]etermination. Nevertheless,
the Acting Director elaborated on her prior determination" by addressing and
rejecting arguments raised in the latter protest which sought to have the Division
waive "minor elements of non-compliance with bid specifications," based on a
provision of the RFP. Ibid. Yet another month later, Jasper, "through a different
law firm, filed another request for reconsideration and a reversal of the Agency's
decision . . . . [T]he Acting Director again responded in writing, reiterating that
she found no basis to alter or vacate the [f]inal [a]gency [d]etermination . . . ."
Id. at 221. Finally, in the same writing, the Acting Director "reminded Jasper
that the recourse available to a bidder disagreeing with a [f]inal [a]gency
[d]etermination is with the Appellate Division." Ibid.
Since this court did not take issue with the procedural history of the case,
we implicitly recognized that while final agency determinations are
"appealable," the Division may continue to respond to bidders' challenges and
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otherwise conduct internal review if it so chooses. We therefore reject Diamond
Chemical's argument that the Division lacked jurisdiction to reconsider or
disturb its August 25, 2016 final agency decision.
Affirmed.
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