The Cumberland County Improvement Authority (“Authority”) issued a public advertisement for bids on a contract for improvements to its solid waste facility in September 2009. CETCO Contracting Services Co. v. Cumberland County Improvement Authority, No. A-6116-09 (App. Div. May 17, 2011). As part of the instructions to bidders, the Authority explained that all general contractors, as well as any subcontractors, would have to complete a Contractor Responsibility Certification (“CRC”) in which it would have to, among other things, verify that it had a satisfactory record of law compliance and past contract performance to justify receiving the contract. The Authority’s instructions also provided that a contractor’s failure to submit a CRC would render it ineligible to receive the contract, and that a submission that contained false or misleading information would also render the contractor ineligible.

On October 20, 2009, the Authority opened the bids. Defendant R.E. Pierson Construction Co., Inc. (“Pierson”) had the lowest bid. The next lowest bid was submitted by CETCO Contracting Services Company (“CETCO”). On November 24, 2009, the Authority adopted a resolution awarding the contract to Pierson and on December 2 forwarded three copies of the contract to Pierson for execution. On December 8, CETCO wrote to the Authority to inquire whether Pierson had identified Atlantic Lining Co., Inc. (“Atlantic”) in its bid as a subcontractor, and whether a CRC had been provided for Atlantic. CETCO also stated in the letter that Atlantic’s owner had previously pled guilty to federal tax fraud charges. Pierson returned the contracts to the Authority on December 22, at which time the Authority advised Pierson that it had to submit CRCs for each of its subcontractors.

On January 15, 2010, Pierson provided CRCs for Atlantic and all of its other subcontractors. That same day CETCO filed a verified complaint and asked that the court issue an order to show cause with temporary restraints that would enjoin the Authority from proceeding with the contract with Pierson. CETCO, apparently unaware that Pierson provided a CRC for Atlantic, alleged that the CRC had not been submitted and also that a valid CRC could not be submitted for Atlantic because of its owner’s conviction. Further, CETCO alleged that Atlantic was not eligible to work on the project. The court entered an order that temporarily prevented the Authority from awarding the contract to Pierson and also directed the Authority and Pierson to demonstrate why a preliminary injunction should not be entered that would prevent the Authority from proceeding with the contract or preventing Pierson from using Atlantic as a subcontractor. On February 2, the Authority adopted a resolution that stated that all bids would be rejected, the project would be re-examined, and new bids would be sought. In the resolution, the Authority referred to the pending action in the Law Division and also observed that it had, before the filing of the lawsuit, reconsidered its financial integrity and its future revenues. Based on that reconsideration, the Authority further stated that it was reassessing the need for the project and its financing for the project.

Thereafter, Atlantic intervened in the action that CETCO filed. Pierson filed for summary judgment and the Authority moved for an order affirming its decision to reject all the bids and re-bid the contract. The trial court denied all the motions. Pierson then filed another summary judgment motion, and the Authority cross-moved and again sought an order approving of its decision to re-bid the contract. The trial court again denied Pierson’s motion but granted the Authority’s request. The court determined that the Authority had the power to reject Pierson’s bid because it was invalid, and that the Authority had a valid reason to reject all bids because it made a good-faith decision to scale back and re-bid the project.

The Appellate Division affirmed the trial court’s ruling. First, the Appellate Division explained that the trial court correctly determined that Pierson’s bid was “fatally flawed” because it did not comply with the bid specifications. In that regard, Pierson identified Atlantic as a subcontractor in its proposal but did not provide a CRC for Atlantic. When Pierson did submit a CRC for Atlantic, the Appellate Division agreed with the trial court’s finding that it “was false and misleading[,]” which rendered Atlantic ineligible to perform the work. The Appellate Division also rejected Pierson’s argument that the Authority could not reject its bid after it returned the signed contract to the Authority. On that point, the Appellate Division stressed that Pierson’s bid was not complete at that time because it did not comply with all of the bid requirements. Accordingly, the Appellate Division ruled that “[b]ecause Pierson did not comply with all of the bid requirements, the Authority acted properly when it adopted its February 2, 2010, resolution rejecting its bid.”

The Appellate Division also determined that Pierson’s contention that the Authority could not reject all bids and re-bid the project lacked merit. In so doing, the Appellate Division noted that the Local Public Contracts Law provided that a contracting unit can reject all bids under certain circumstances, and that the trial court found that the Authority was within its authority to reject all bids because it reconsidered the scope of the project. The Appellate Division ruled that “[t]he trial court correctly found that the Authority did not abuse its discretion by choosing to reject all bids so that it could scale back the project and seek new bids. There is sufficient credible evidence in the record to support the court’s determination that the Authority acted in good faith in deciding to reconsider the scale of the project in light of its changing financial circumstances.” Moreover, in affirming the trial court’s decision, the Appellate Division rejected several other arguments that Pierson advanced.