By: Steven Cohen, Esq. and Gary Strong, Esq. 

   On March 4, 2009, in Jen Electric, Inc. v. County of Essex, 197 N.J. 627 the New Jersey Supreme Court reversed a unanimous Appellate Division opinion and held that a potential vendor, who is neither a taxpayer nor a prospective bidder, had standing to challenge the propriety of a public project's bid specifications under New Jersey's Local Public Contracts Law ("LPCL Statute").  This decision greatly expands the potential challengers to bid specifications well beyond the limit of prospective bidders, a limit which the Appellate Division has set.  
 
   When the County of Essex ("County") solicited bids and issued specifications for traffic signal operations in Newark, Plaintiff Jen Electric, Inc., ("Jen Electric") a vendor of traffic control systems, objected to the specifications because they identified a specific brand of traffic control equipment.  Two days before the bids were to be opened, Jen Electric filed a complaint with the court claiming that the County violated the LPCL Statute by using a brand name in the specifications without first considering the use of a generic specification, and by requiring the pre-approval of an equivalent product.

 

 

  The issue presented to the trial court was whether a vendor, who was not a prospective bidder, has standing to challenge bid specifications.  The trial court determined that the LPCL allows only a prospective bidder to challenge a bid specification.  It explained that "to be a prospective bidder, to have standing under a law dealing with public bids, you've got to be the person making the public bid or a prospective maker of a public bid."
 
   The Appellate Division took a second look at the case and found that "[b]ecause plaintiff is not a taxpayer in Essex County, did not submit a direct bid on the contract, and never intended to submit a direct bid in response to the specifications, plaintiff does not have standing under our case law to maintain this action."
 
Supreme Court Decision
 
   The Supreme Court reversed the lower courts' decisions on two grounds:
 
1) The LPCL Statute does not limit standing to prospective bidders.  The purpose of the amendatory language to Section 13 of the LPCL Statute is to define what actions must occur before a bid specification challenge will be time-barred and not a restriction upon who has standing to challenge a bid specification.
 
2) The right to challenge bid specifications should be viewed under settled rules governing standing, which provide that "[e]ntitlement to sue requires a sufficient stake and real adverseness with respect to the subject matter of the litigation [and a] substantial likelihood of some harm visited upon the plaintiff in the event of an unfavorable decision ...".
 
   While the intent of the Supreme Court's ruling on the LPCL Statute is clearly to allow interested parties to challenge bid specifications, Justice Hoens dissent is cautionary, stating that "there is nothing in the majority's analysis that limits the right of any potential supplier, however large or small, to commence a challenge to the bid specifications."  Allowing parties one, two or three steps removed from the actual bid to challenge specifications, pre- or post-bid, "creates the very real possibility of significant delay in public contracting and threatens to interfere with the orderly system that the Legislature envisioned and that the statute seeks to impose."  Indeed, public projects may potentially be delayed due to suits from potential subcontractors, vendors and suppliers.  Time will tell whether that potential burden is outweighed by the public interest in providing interested parties with the right to challenge improprieties in bid specifications.