Tormee Const., Inc. v. Mercer County Imp. Authority

• Decision Date: 06 February 1996
• Citation: 143 N.J. 143,669 A.2d 1369
• Parties: , 151 L.R.R.M. (BNA) 2440, 131 Lab.Cas. P 58,088 TORMEE CONSTRUCTION, INC., a Corporation of the State of New Jersey; New Jersey Chapter, Associated Builders & Contractors, Inc., a Not-For-Profit Corporation of the State of New Jersey; Utility & Transportation Contractors Association of New Jersey, Inc., A Not-For-Profit Corporation of the State of New Jersey; Thomas Emick, Individually; and Joseph D. Landolfi, Individually, Plaintiffs-Appellants, v. MERCER COUNTY IMPROVEMENT AUTHORITY, a Body Politic of the State of New Jersey and the County of Mercer, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 143

143 N.J. 143

669 A.2d 1369, 151 L.R.R.M. (BNA) 2440,

131 Lab.Cas. P 58,088

TORMEE CONSTRUCTION, INC., a Corporation of the State of New Jersey; New Jersey Chapter, Associated Builders &amp Contractors, Inc., a Not-For-Profit Corporation of the State of New Jersey; Utility & Transportation Contractors Association of New Jersey, Inc., A Not-For-Profit Corporation of the State of New Jersey; Thomas Emick Individually; and Joseph D. Landolfi, Individually Plaintiffs-Appellants, v. MERCER COUNTY IMPROVEMENT AUTHORITY, a Body Politic of the State of New Jersey and the County of Mercer Defendant-Respondent.

Supreme Court of New Jersey.

Argued Sept. 11, 1995.

Decided Sept. 20, 1995.

Opinion Released Feb. 6, 1996.

Steven E. Brawer, West Orange, for appellants (Ravin Sarasohn Cook Baumgarten Fisch & Rosen, Roseland, attorneys).

Anthony M. Massi and James R. Zazzali, Hamilton, for respondent (Paglione & Massi and Zazzali, Zazzali, Fagella & Nowak, attorneys; Mr. Massi and Kevin H. Main, Trenton, on the briefs).

Frederick J. Rohloff, Haddonfield, submitted a brief for amici curiae Associated Builders and Contractors, Inc., and Chamber of Commerce of the United States of America (Archer & Greiner, attorneys; Mr. Rohloff, John C. Connell, and Louis L. Chodoff, on the brief).

Albert G. Kroll, Verona, submitted a brief for amicus curiae New Jersey State AFL-CIO (Kroll & Gaechter, attorneys).

The opinion of the Court was delivered by

POLLOCK, J.

In George Harms Construction Co. v. New Jersey Turnpike Authority, 137 N.J. 8, 644 A.2d 76 (1994) (Harms ), we declared invalid, as inconsistent with public-bidding statutes, the designation of a particular labor organization as the sole source of labor for a public-construction project. On the facts of the present case, we likewise find invalid a specification requiring contractors to enter into a "project labor agreement" (PLA) with "appropriate labor organizations."

-I-

On March 16, 1995, the Mercer County Improvement Authority (MCIA) solicited bids for a construction project captioned "Mercer County Library Phase One" (Phase One). Phase One involved a series of contracts for additions and alterations to the Ewing Township, Hopewell Township, and Lawrence Township branches of the Mercer County Library System. Subsequently, the MCIA advertised for bids for "Phase Two," which involved similar renovations to other branches in the system.

Included in the Phase One bid package, along with general project documents and specifications, was a copy of Executive Order 94-2, signed by the county executive. The executive order directed "that for appropriate construction projects, there be included in the bid specifications that each contractor, and subcontractor must sign a project agreement which will be negotiated by the construction manager, or the architect of the project, and the appropriate Building and Construction Trade Unions." This "Project Agreement" was to "establish the hours of work, wage rates, fringe benefits, dispute and grievance procedure, and any other terms that may be necessary to ensure a harmonious relationship between the parties." The order justified the "Project Agreement" provision as necessary to avoid "labor strife" and to ensure the timely and orderly completion of the project.

The deadline for the receipt of the bids was April 13, 1995. In a letter of April 6, 1995, addressed to MCIA's attorney, the Associated Builders & Contractors, Inc. (ABC) (a construction industry trade organization with a constituency of approximately 200 non-union firms), the Utility & Transportation Contractors Association of New Jersey (UTCA) (a construction-industry trade organization whose members include prospective subcontractors), and Tormee Construction, Inc. (Tormee) (an "open shop" contractor unaffiliated with any union) questioned the legality of the MCIA's Project Agreement. Consequently, in a second addendum, the MCIA extended the date for the receipt of bids.

On April 20, 1995, the MCIA sent prospective bidders Addendum No. 3, which made numerous changes to the bidding documents. The first change replaced Executive Order 94-2 with Executive Order 95-1. This new order required that

for appropriate construction projects, there be included in the bid specification that each contractor, and subcontractor must sign a project agreement which will be negotiated by the construction manager, or the architect of the project, and an appropriate labor organization in the building and construction industry.

The second change included a definition of "Appropriate Labor Organization." Addendum No. 3 defined an "appropriate labor organization" as

an organization representing journeymen in one or more crafts or trades listed in N.J.A.C. 12:60-3.2, for purposes of collective bargaining and which has (1) entered into a labor agreement with an employer in the building and construction industry, (2) has represented journeymen, mechanics and apprentices employed in projects similar to the contracted work, and (3) has the present ability to refer, provide or represent sufficient numbers of qualified journeymen in the crafts or trades required by the contract to perform the contracted work.

Allegedly motivated by concerns for labor peace, quality of work, and efficient construction schedules, the MCIA adopted Resolution 95-62 on April 24, 1995. That resolution declared that the library projects were appropriate for PLAs. Neither in that resolution nor elsewhere did MCIA express the reasons justifying the PLA. Under MCIA policy, however, a successful bidder, to receive the award of the contract, must enter into a PLA with "appropriate labor organizations."

The PLA was to include a procedure for the resolution of grievances and jurisdictional disputes and for the elimination of the possibility of strikes, work stoppages, and lockouts. Addendum No. 4 set April 27, 1995, as the date for the receipt of bids. The total contract price was approximately $6.03 million, and the project was scheduled to last a maximum of 420 calendar days.

Tormee, ABC, UTCA, Thomas Emick (a non-union worker), and Joseph Landolfi (a resident and taxpayer of Mercer County) (collectively "plaintiffs") filed an action in lieu of prerogative writ to restrain the MCIA from receiving bids and to declare the PLA invalid. On April 27, 1995, the Law Division found the PLA valid and dismissed the complaint. The Appellate Division denied plaintiff's request for a stay. Although we denied a stay, we granted direct certification. 141 N.J. 90 (1995).

On May 22, 1995, the MCIA, through Resolution 95-105, awarded the contracts for the library projects. We heard oral argument on September 11, 1995. On September 20, 1995, we issued an order declaring invalid the PLA specification in Phase Two and directing the removal of that specification from the bid documents.

-II-

In Harms, we analyzed the substantive law relating to the validity of PLAs. No useful purpose would be served by repeating that analysis here. Suffice it to state, the validity of a PLA is primarily a matter of state law. Harms, supra, 137 N.J. at 24-27, 43, 644 A.2d 76. The most recent decision of the United States Supreme Court, Building and Construction Trades Council v. Associated Builders & Contractors, Inc., 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993) (Boston Harbor ), did not preempt state courts from considering the validity of a PLA. Harms, supra, 137 N.J. at 26-27, 644 A.2d 76.

The basic policy underlying the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -49, is to promote competition and combat corruption in public bidding. Cubic W. Data, Inc. v. New Jersey Turnpike Auth., 468 F.Supp. 59, 63 n. 4 (D.N.J.1978). Harms involved a PLA that specified the use of a solitary union. Here, in contrast, the MCIA's PLA requires dealing with "appropriate labor organizations." Although less restrictive than the PLA in Harms, the subject PLA still contravenes the underlying purposes of public-bidding laws. Under the specifications and definitions of the MCIA PLA, only two unions could qualify: the AFL-CIO and the Building Trades Council. The restriction of project labor to two unions, like the restriction to a single union, binds too tightly to satisfy the statutory requirements for bidding on local public contracts.

By any test, contracts for public improvements are among the most important contracts that public entities enter. 34 Michael A. Pane, New Jersey Practice, Local Government Law § 204 at 343 (2d ed. 1993). Taxpayers have an interest in assuring that public entities are cost-effective in spending public funds. Accordingly, the State's competitive-bidding statutes direct that all contracts requiring public advertisement for bids "shall be awarded to the lowest responsible bidder." N.J.S.A. 40A:11-6.1. That direction guards "against favoritism, improvidence, extravagance and corruption" in the awarding of state and municipal contracts. Terminal Constr. Corp. v. Atlantic County Sewerage Auth., 67 N.J. 403, 410, 341 A.2d 327 (1975). As we stated in Harms, "[a]voidance of any potential for contract manipulation is a central theme of all public-bidding doctrine." 137 N.J. at 38, 644 A.2d 76.

Competitive public bidding obviously fosters competition among bidders. The more companies that can bid on a project, the greater the likelihood that the public entity will receive the lowest possible contract price from responsible bidders. Skakel v. Township of North Bergen, 37 N.J. 369, 378, 181 A.2d 473 (1962).

PLAs can contravene the goals of competitive bidding. By mandating that workers belong to certain limited unions, PLAs restrict bidders to contractors with relationships with those unions. The obvious effect of such a restriction is to lessen competition. Additionally, PLAs can increase labor costs by excluding or reducing the number of employable non-union workers.

In some situations, however, PLAs can serve useful purposes....