The Law Offices of William R. VanOrder, P.C.

Navigate through the Outbreak

CONTINUOUS BUSINESS OPERATIONS

 

“Bad things happen because of what we did in good times and good things happen because of what we did in bad times.”

Roberto Críspulo Goizueta former chairman, director and CEO, Coca-Cola Company

The COVID 19 Outbreak will run its course and things will get back to normal.  Luckily, as of the writing of this document, Governor Murphy has NOT ordered any changes to construction operations in New Jersey.  Although that could change any day, the availability of materials and labor, as well as alterations to your business, will certainly influence operations related to construction contracts.

Questions and Answers —The below are general questions, which are published to provide guidance.  You should consult with legal counsel about your specific situation:

Q: What do I do if our contract is delayed because of the COVID 19 Outbreak?

A: Look in your contract for force majeure and related clauses.  The purpose of this clause is to limit risk for the parties (both parties).  You should get an extension of time, however the clause will most likely not give the contractor compensation.  Remember, when performing under a contract, the language governs.  Your actions must be guided by your contract.

Q: What do I do if our contract does not include a force majeure clause?

A: Look for a delay clause or the time extension clause.  The current situation certainly qualifies as a “cause beyond the Contractor’s control.”  Obviously you want an amicable resolution to the current situation, however when entering negotiations, it is always best to know where you stand and whether you are in a position of strength.  Your Contract will give you the information.  Start from there and then negotiate for your best result.

In addition, protect your position by meticulously updating your construction schedules. Equipped with a detailed schedule, you
can argue whether the pandemic was reasonably foreseeable, and whether it made your company’s performance impossible.  These arguments are easier to make with contemporaneous documentation.  More about contemporaneous documentation in the next Q&A.

Q: What do I do if I am being delayed by suppliers?

A:  After you look at your contract (Note that the AIA supplemental conditions include “unusual delay in deliveries” as a reason for a potentially compensable delay), it is most important to give notice to all parties.  Contemporaneous correspondence is your best ally.  In other words, correspondence written at the time that an event is happening has an air of credibility.  Moreover, contemporaneous business documents are admissible as evidence in court.  The goal is not to need to worry about what is admissible in court, but the best way to stay out of court is to show the other side that you are well prepared.  This is a great time to talk to your superintendents, project managers and field people about the importance of contemporaneous documentation, particularly when something outside of your control delays your firm’s performance under the contract.

Q: What do I do if the Owner or a higher tier contractor imposes reporting requirements on my company, which were not in our contract?

A: We all have to do our part if we are going to get through this Outbreak, however we must be sensitive to employees’ personal health information.  If another party is requiring you to agree to additional reporting requirements, make sure they are not asking you to identify any individuals by name or provide personal health information such as the individual’s temperature or whether anyone in their family has COVID 19.

Dealing with this COVID 19 Outbreak is a valley that you and your company must traverse in order to get to the next peak.  There are temporary hospitals to be built.  The Federal and the State Governments are expected to provide stimulus projects in the form of construction projects.  Do the right things during these bad times to make good things happen.

 

About the Author:

Steve Berkowitz has been involved in bidding related to public contracts for more than 30 years.  First as an engineer for a fortune 200 company, designing, estimating and bidding projects, and then as an attorney.  His experience advocating for bidders started in the late 1980s and continues today.  Mr. Berkowitz has successfully argued cases in Superior Court, the Appellate Division and the New Jersey Supreme Court.  He has been admitted Pro Hac Vices in Federal courts in New York, New Hampshire, Louisiana, Missouri, Florida, Illinois, Pennsylvania and Massachusetts.

Feel free to call 856-350-6060 or email 

DISCLAIMER

These materials are intended to provide general information about the subject matter and are presented  with the understanding that neither these materials nor the authors have, nor intend to, render any legal or other professional service or opinions. Anyone dealing with a specific legal matter should research any and all matters described generally herein and should not act upon this information without seeking  professional counsel. Do not send us confidential information until you speak with one of our attorneys and get authorization to send that information.

THE CHALLENGE – How to survive a challenge to the failure to list a subcontractor

It is the golden rule of public bidding in New Jersey; if the bid documents direct the bidders to list a subcontractor, you had better list one, because failure to do so is a material defect that cannot be waived or cured.  However, there is a “loop hole.”   In the case Rencor Inc. v. N. Hudson Sewerage Auth., No. A-1425-06T5,2007 WL 1412090 (App. Div. May 15, 2007), the Court held that a bidder is not required to list a certain trade of subcontractor if it can articulate a strategy, which is acceptable to the Owner, to avoid the need.

In the Rencor case, the construction project required the “removal and relocation of light poles over the proposed pipeline including electrical conduit.” Id at 1.  Obviously, one would need an electrical subcontractor to do this work and the requirement to list such was included in the bid documents.  The apparent low bidder did not list an electrical subcontractor.  The public body awarded the contract to the apparent low bidder.  The second low bidder challenged.

The public body awarded the project to the low bidder, notwithstanding its failure to list an electrical subcontractor, because the low bidder approached the public body with a plan to perform the piping work underneath the light poles without removing them and relocating.  Hence the low bidder did not have the need for an electrician.  The low bidder’s plan was to accomplish the job without removing or relocating the “four light poles owned by somebody other th[a]n the [public body,] that will be held stationary while the pipe is installed underneath them.”  Id. at *1.

Since the public body accepted the low bidder’s plan, the low bidder was not required to list an electrical subcontractor.  The unpublished case is notable for two reasons: first, it permits the low bidder to avoid listing a subcontractor that was required to be listed under well established law, and second, the contractor was permitted to submit a bid that was estimated based on a plan that was admittedly different than that which was described in the bid documents.

In commenting on the trial court’s denial of the option to reject all bids and rebid, the Appellate Division thoughtfully stated “A contrary ruling by us would discourage all bidders from developing fair and reasonably creative and constructive ways of accomplishing the goal established in any public project subject to the requirements of the Local Public Contracts Law.”  Id. at 4.

“A creative approach to completion of the project, as occurred here, cannot be considered a material deviation from contract requirements, in the same category as a bidder’s omission to supply, in a timely fashion, documents and descriptions that are designed to assure the project’s completion by qualified contractors and subcontractors within the parameters of the bid. Citations omitted. The standard of ‘strict compliance with public bidding guidelines,’ does not mean literal compliance to the point of unreason.” Id.

PRACTICE POINT:  It is not enough to figure out a better way to perform a project, one must also get the public body to buy into the new plan.  Saving money is a great way to get their interest.

 

About the Author:

Steve Berkowitz has been involved in bidding related to public contracts for more than 30 years.  First as an engineer for a fortune 200 company, designing, estimating and bidding projects, and then as an attorney.  His experience advocating for bidders started in the late 1980s and continues today.  Mr. Berkowitz has successfully argued cases in Superior Court, the Appellate Division and the New Jersey Supreme Court.  He has been admitted Pro Hac Vices in Federal courts in New York, New Hampshire, Louisiana, Missouri, Florida, Illinois, Pennsylvania and Massachusetts.

 Feel free to call 856-350-6060 or email 

DISCLAIMER

These materials are intended to provide general information about the subject matter and are presented  with the understanding that neither these materials nor the authors have, nor intend to, render any legal or other professional service or opinions. Anyone dealing with a specific legal matter should research any and all matters described generally herein and should not act upon this information without seeking  professional counsel. Do not send us confidential information until you speak with one of our attorneys and get authorization to send that information.

 

THE CHALLENGE – Bid Challenge Issue

The cost of an alternate left blank or filling in “N/A”

It happens all of the time.  An alternate is listed in the bid documents that you do not think is applicable to your scope of work or which you do not think will change your bid price.  You then leave that alternate blank or fill in “N/A” or the like.  Your bid may now be subject to challenge, with NJ Supreme Court precedent behind it.  In the case of  L. Pucillo & Sons, Inc. v. Mayor & Council of Borough of New Milford, 73 N.J. 349 (1977) the Supreme Court held that in a public bid for a garbage scavenger contract where the municipality originally requested bidders to submit proposals for contracts of one, two, three and five years’ duration and where bidding specifications contained warning that all proposals “must” be bid upon and the word “must” was underlined, a bidder’s failure to submit proposal for five-year contract was not a minor irregularity which could be waived but was a substantial departure which could not be overlooked.

Even though  the Borough was not going to accept the five year contract, the Court held that for a bidder to  place a number on the five-year contract was an undertaking that subject the bidder to more risk than a bidder that left the five year option blank or submitted “N/A”, thereby the ability of that bidder to avoid the risk  (because the public body could not award the five year contract to a bidder that did not bid on it), permitted that bidder to avoid risk.  The risk avoidance gave the bidder an advantage over bidders that responded to the alternate by filling in a number, any number even if it is zero.

-PRACTICE POINT: The alternate must have an element of risk associated with it; an alternate to change the color of a wall, for example, is not such an alternate.

“Bidding is the lifeblood of a public works contractor.  One piece of information can mean the difference between obtaining millions of dollars in revenue and losing the bid along with all of the hours that went into the estimate.  STAY INFORMED.  BE VIGILANT.  DON’T SQUANDER OPPORTUNITIES.”

-Steven Berkowitz

About the Author:

Steve Berkowitz has been involved in bidding related to public contracts for more than 30 years.  First as an engineer for a fortune 200 company, designing, estimating and bidding projects, and then as an attorney.  His experience advocating for bidders started in the late 1980s and continues today.  Mr. Berkowitz has successfully argued cases in Superior Court, the Appellate Division and the New Jersey Supreme Court.  He has been admitted Pro Hac Vices in Federal courts in New York, New Hampshire, Louisiana, Mis­souri, Florida, Illinois, Pennsylvania and Massachusetts.

Feel free to call 856-350-6060 or email 

DISCLAIMER

These materials are intended to provide general information about the subject matter and are presented  with the understanding that neither these materials nor the authors have, nor intend to, render any legal or other professional service or opinions. Anyone dealing with a specific legal matter should research any and all matters described generally herein and should not act upon this information without seeking  professional counsel. Do not send us confidential information until you speak with one of our attorneys and get authorization to send that information.

Mistakes on Bids can be Excusable

The time and resources in estimating the bid price, the lost business opportunity, the lost profit, etc… but that is all it should cost, it does not cost the contractor his bid bond if the mistake is an honest one and it is properly brought to the public body’s attention.

There are three reported cases that deal with a contractor’s ability to withdraw its bid due to the contractor’s mistake. These cases stand for the premise that if a contractor makes an honest mistake in its bid and that contractor brings the mistake to the public body’s attention before the public body changes it’s position based on the contractor’s bid, the contractor should be permitted to withdraw his bid without penalty.

The court developed a four prong test to determine whether the contractor should be permitted to withdraw its bid without penalty:

( 1 ) the mistake must be of so great a consequence that to enforce the contract as actually made would be unconscionable;

( 2 ) the matter as to which the mistake was made must relate to the material feature of the contract;

( 3 ) the mistake must have occurred notwithstanding the exercise of reasonable care by the party making the mistake;

( 4 ) it must be able to get relief by way of rescission without serious prejudice to the other party, except for loss of his bargain.

Conduit & Foundation Corp. v. Atlantic City 2 N.J.Super. 433, 440 (Ch.Div. 1949)

Whenever I argued these cases in court, I was usually arguing the law in front of a Judge in order to get my client’s bid bond returned. Some public bodies attempt to impose a “penalty” against the withdrawing bidder because the bidder made a mistake. The “penalty” was written into the bid specifications and attempted to make the withdrawing contractor liable for the difference that the public body had to pay between the withdrawing contractor’s bid and the next lowest bidder’s bid. The contractor making the honest mistake should not lose its bid bond or be penalized.

State laws and sometimes federal laws define the value of bid bonds on public projects. It should be noted that if the project is federally funded, the amount of the bid bond can be greater. In any event, the contractor’s liability should be limited by the amount of the bid bond.

As the Supreme Court noted in the Meadowbrook Carting case, a contractor could make a calculated decision to withdraw his or her bid and forfeit his bid bond if his bid was mis-estimated (not a mistake but a judgment error). So how does the public body distinguish between a bidder who wants to withdraw his bid because he made a judgment error (such withdrawal is NOT permitted) and a bidder that has made an honest mistake? The answer is that the Court will apply the four prong test described above. The McElwee Group, LLC v. Atlantic County Utilities Authority, 2009 WL 5062349 (App.Div.)