Delta Chemical Corp. v. Ocean County Utilities Authority

• Decision Date: 22 December 1988
• Citation: 554 A.2d 1381,231 N.J.Super. 180
• Parties: DELTA CHEMICAL CORPORATION, Plaintiff, v. OCEAN COUNTY UTILITIES AUTHORITY and Allied Colloids, Inc., Defendants.
• Court: New Jersey Superior Court

Page 180

231 N.J.Super. 180

554 A.2d 1381

DELTA CHEMICAL CORPORATION, Plaintiff, v. OCEAN COUNTY UTILITIES AUTHORITY and Allied Colloids, Inc.,

Defendants.

Superior Court of New Jersey,

Law Division.

Decided Dec. 22, 1988.

Richard A. Grossman and Thomas J. Heavey, for plaintiff (Grossman & Kruttschnitt, Toms River, attorneys).

Richard H. Woods, for defendant Ocean County Utilities Authority (Hiering, Dupignac & Barnes, Toms River, attorneys).

Arnold R. Kent, Florham Park, for defendant Allied Colloids.

SERPENTELLI, A.J.S.C.

More than a half century after the enactment of the so-called "Buy American" requirement now contained in the Local Public Contracts Law [ N.J.S.A. 40A:11-18], the court is asked to determine the constitutionality of that provision. It is a case of first impression since the only other definitive challenge to the Buy American concept in New Jersey was within the context of state purchases made pursuant to N.J.S.A. 52:33-2 and 3. As will be discussed, those statutes have language distinguishing them from N.J.S.A. 40A:11-18.

The Ocean County Utilities Authority (hereinafter OCUA) solicited bids for the acquisition of polymers to be utilized in its three pollution control facilities. Separate bids were sought for the northern, central and southern water pollution control plants. The instructions to bidders for all three contracts contained the following language:

Preference for Domestic Products

Only manufactured products of the United States, wherever available, shall be used in connection with this contract, pursuant to 40A:11-18 of the Revised Statutes of the State of New Jersey.

Six bids were received. Pursuant to the specifications, tests were performed on the polymers to evaluate their efficiency. The lowest responsible bidder was to be determined not only by price per pound, but also by treatment efficiency. The ultimate determinant of the lowest responsible bidder was the cost of the polymer per dry ton. A summary of the bids of plaintiff, Delta, and defendant, Allied, for the three facilities follows:

                1)  NORTHERN PLANT
                    ---------------  ALLIED:  $20.43
                                     DELTA:    23.05
                2)  CENTRAL PLANT
                    ---------------  ALLIED:  $22.95
                                     DELTA:    38.91
                3)  SOUTHERN PLANT
                    ---------------  ALLIED:  $16.37
                                     DELTA:    40.40
                

Allied was the lowest bidder at all three plants. Delta was the third lowest bidder at the northern and central plants and the highest bidder at the southern plant. Based on estimated usage, the OCUA calculated Delta's total bids at almost $238,000 and Allied's total bid at $157,000. A gross savings of approximately $81,000 would be realized by awarding all three contracts to Allied. The OCUA adopted a resolution awarding the contract for all three facilities to Allied. It is stipulated that Delta intended to provide products manufactured in the United States. Allied and other bidders intended to supply products manufactured outside of the United States.

Delta contends that it is entitled to an award of the contract for all three facilities because it was the only bidder providing an American made product. Alternatively it asserts that it is entitled to an award of a contract for the facilities for which its bid was reasonably competitive with Allied, even if its bid was somewhat higher.

The statute implicated in this case was one of a trilogy of Buy American restrictions adopted in New Jersey during the Depression. A full understanding of the issues in dispute requires a careful reading of each of the statutes. The first two statutes were contained in chapter 174 of the Laws of 1932. The portion relevant to counties and municipalities, originally designated as N.J.S.A. 40:15-1, provided:

American goods and produce to be used where possible

All counties and municipalities shall provide in the specifications for all contracts for county and municipal work and in the specifications for all contracts for work for which they pay any part of the cost, that only manufactured and farm products of the United States, wherever available, be used in such work.

That portion of chapter 174 of the Laws of 1932, relative to state work is designated as N.J.S.A. 52:32-1. It provides:

American goods and products to be used in state work

The state shall make provisions in the specifications for all contracts for state work and for work for which the state pays any part of the cost, that only such manufactured and farm products of the United States, whenever available, be used in such work.

In 1934 a provision was adopted relative to the use of domestic materials on state public work projects. It was very similar to a statute adopted by the federal government in 1933 designated as the Buy American Act. 41 U.S.C.A. §§ 10a-d. The state public work restrictions are contained within N.J.S.A. 52:33-2 and 3:

Only domestic materials to be used on public works; exception

Notwithstanding any inconsistent provision of any law, and unless the head of the department, or other public officer charged with the duty by law, shall determine it to be inconsistent with the public interest, or the cost to be unreasonable, only domestic materials shall be acquired or used for any public work.

....

Provision in contract; exception of particular materials

Every contract for the construction, alteration or repair of any public work in this state shall contain a provision that in the performance of the work the contractor and all subcontractors shall use only domestic materials in the performance of the work; but if the head of the department or other public officer authorized by law to make the contract shall find that in respect to some particular domestic materials it is impracticable to make such requirement or that it would unreasonably increase the cost, an exception shall be noted in the specifications as to that particular material, and a public record made of the findings which justified the exception.

In 1971 the bidding laws were compiled in a revision known as the Local Public Contracts Law. N.J.S.A. 40:15-1 was retained in substantially the same form. It was designated as N.J.S.A. 40A:11-18. In its present form, the statute has been broadened somewhat by an amendment contained in chapter 107 of the Laws of 1982. The statute now reads:

American goods and products to be used where possible

Each local unit shall provide, in the specifications for all contracts for county or municipal work or for work for which it will pay any part of the cost, or work which by contract or ordinance it will ultimately own and maintain, that only manufactured and farm products of the United States, wherever available, be used in such work.

Thus, by way of summary, the statutes regulating local government purchases [ N.J.S.A. 40A:11-18] and state purchases of goods and products [ N.J.S.A. 52:32-1] require that American products be bought "wherever" or "whenever" available. In contrast, the statutes concerning state public work [ N.J.S.A. 52:33-2 and 3] expressly provide authority to dispense with the Buy American requirement in appropriate circumstances.

In K.S.B. Technical Sales Corp. v. North Jersey District Water Supply Commission, 75 N.J. 272, 381 A.2d 774 (1977), app. dism. 435 U.S. 982, 98 S.Ct. 1635, 56 L.Ed.2d 76 (1978) (hereinafter K.S.B. ), the Supreme Court considered constitutional challenges to the Buy American requirements of N.J.S.A. 52:33-2 and 3. As highlighted above, the provisions involved in K.S.B. differ substantially from the statute applicable to local governmental units. The question is whether the significant difference in the wording of the statutes should result in a different disposition of the constitutional issues. Assuming that the constitutional result is the same, the court must ask whether a local unit of government is required to purchase American products wherever available regardless of cost or other considerations.

The statutes involved in K.S.B. were challenged on three constitutional grounds. The issues were the applicability and effect of the General Agreement on Tariffs and Trade (GATT), the alleged conflict between the Buy American provisions and the foreign affairs power and the alleged conflict between the Buy American provisions and the Commerce Clause.

The General Agreement on Tariffs and Trade is an international compact to which the United States is a party. The Buy American statutes involved in K.S.B. appeared to conflict facially with a GATT provision requiring that the products of any contracting party imported into the territory of another contracting party be accorded treatment no less favorable than that accorded to like products of the importing country. However, the K.S.B. Court found the provisions of GATT to be inapplicable to the Buy American statutes because of an exception within the treaty which excluded products which were purchased by a governmental agency for governmental purposes, not for commercial sale and not with a view to use in the production of goods for commercial sale. The K.S.B. Court held that products used for construction of a water treatment plant fell within that exception. Clearly, products used for sewerage facilities should fall within the exception as well. Therefore, the GATT exception applies in this case as it did in K.S.B.

K.S.B. next considered the allegation that N.J.S.A. 52:33-2 and 3 impermissibly intruded into the field of foreign affairs, an area constitutionally reserved to Congress and the President. K.S.B. concluded that the New Jersey Legislature, through the Buy American provisions under review, had not required the government to engage in the "sensitive business of evaluating the politics of countries whose citizens seek to market their products in this State." 75 N.J. at 291, 381 A.2d 774. The Court found that the Buy American provisions applied without discrimination based on the ideology of the seller's country and...