Paul T. Fader's Article in UTCA Magazine Addresses the Public Bidding Aggregate Rating Process

Firm Partner Paul T. Fader, general counsel to the Utilities and Transportation Contractors Association, has written the following article which was published recently in UTCA magazine. The article is necessary reading for contractors and anyone involved in the public bidding process as it discusses the aggregate rating process for contractors 

Paul T. Fader“Calculating Your Aggregate With a New Twist”

Recently, in Dobco Inc. v. Brockwell & Carrington Contractors, Inc., (hereinafter “Dobco II”) a New Jersey trial court considered a case of first impression regarding whether a low bid on another contract, which has not yet been the subject of a contract award, must be disclosed at the time of bidding a contract subject to a DPMC “aggregate rating” limitation. The DPMC aggregate rating establishes a dollar cap on the volume of work that a contractor may become obligated to perform. The contractor’s available bidding capacity is calculated by deducting the value of its uncompleted work, as certified in its Form DPMC 701, from its gross aggregate rating. Evidence of completed work consists of an owner-approved invoice or “other similar documentation”. N.J.A.C. 17:19-2.13(c).  

In a prior Dobco case, i.e., Brockwell & Carrington Inc. v. Kearny Board of Education 420 N.J. Super. 273 (App. Div. 2011) (hereinafter “Dobco I”), the court held that an aggregate rating bidding requirement extended to both the bidder and the bidder’s bid-listed subcontractors. In Seacoast Builders Corp. v. Jackson Twp., Board of Educ. 363 N.J. Super. 373 (App. Div. 2003), the court ruled the contractor must have the needed bidding capacity both at bid time and at the time of contract award.

In the instant case, Dobco II, Dobco challenged the responsiveness of two low bidders, who had bid-listed the same electrical subcontractor (Sal Electric), arguing that Sal Electric’s subcontract exceeded its bidding capacity because it was also the electrical subcontractor of a low bidder (Torcon) on another unrelated contract, which, if ultimately awarded, would diminish Sal Electric’s bidding capacity to the degree that the instant subcontract exceeded its capacity. The low bidder and Sal Electric argued that Sal Electric’s anticipated Torcon subcontract did not have to be disclosed at bid time because the Torcon contract had not then been awarded. Theoretically, such contract might never be awarded due to a successful bid protest or a possible rejection of all bids, or the award may be delayed to the point that, when actually awarded, it would not, due to an intervening diminution of its work backlog, be a non-issue.

The trial court upheld Dobco’s bid challenge and Dobco, the third low bidder, was awarded the contract. The court reasoned that Sal Electric’s expected Torcon subcontract ought to have been disclosed in its Form DPMC 701 certification and that its non-disclosure precluded any post-bid evidence that its aggregate rating would not be exceeded. In support of its decision the court observed that non-disclosure would create havoc because public owners would not be able to expeditiously determine bid capacity. Further, in light of the Seacoast Builders case, Sal Electric had to have the needed bidding capacity at time of bid and at the time of contract award. The court concluded that if the Torcon contract was awarded then the subcontractor's bidding capacity under the instant subcontract, would be exceeded.

The court also touched on, but did not decide, the issue of how to determine completed work for purpose of a DPMC-aggregate-rating analysis. The trial court, noted that, because a contractor might submit an inflated or unsent invoice in order to increase its bidding capacity, some indicia of owner approval of its invoice should be required. 

The takeaway from Dobco II is that bidders on contracts governed by the DPMC rating ought to: (1) disclose in their DPMC 701 any low bid it has previously submitted, but as to which there has been no contract award; and (2) ensure that no bid-listed subcontractor has any such pending low bids that it has failed to disclose in its DPMC 701 submitted with the bidder’s bid package. 

The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation.

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