Opinion
DOCKET NO. A-4705-13T1
05-06-2016
IN RE: REQUEST FOR LETTERS OF INTEREST FOR THE TRANSFER OF OPERATIONS FOR ELEVEN (11) EXISTING COMMUNITY RESIDENTIAL (GH) AND TWO (2) DAY PROGRAMS.
Denis F. Driscoll argued the cause for the appellant Community Access Unlimited, Inc. (Inglesino, Webster, Wyciskala & Taylor, LLC, attorneys; Lisa D. Taylor, of counsel; Ms. Taylor and Grace Chun, on the briefs). Gene Belle Rosenblum, Deputy Attorney General, argued the cause for the respondent New Jersey Department of Human Services, Division of Developmental Disabilities (John J. Hoffman, Acting Attorney General, attorney; Beth Leigh Mitchell, Assistant Attorney General, of counsel; Erick J. Lucadamo, Deputy Attorney General, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Nugent and Higbee. On appeal from New Jersey Department of Human Services, Division of Developmental Disabilities. Denis F. Driscoll argued the cause for the appellant Community Access Unlimited, Inc. (Inglesino, Webster, Wyciskala & Taylor, LLC, attorneys; Lisa D. Taylor, of counsel; Ms. Taylor and Grace Chun, on the briefs). Gene Belle Rosenblum, Deputy Attorney General, argued the cause for the respondent New Jersey Department of Human Services, Division of Developmental Disabilities (John J. Hoffman, Acting Attorney General, attorney; Beth Leigh Mitchell, Assistant Attorney General, of counsel; Erick J. Lucadamo, Deputy Attorney General, on the brief). PER CURIAM
Petitioner Community Access Unlimited, Inc. (CAU) appeals from a final decision of the Division of Developmental Disabilities (DDD) to award a contract for the transfer of six residential group homes to other service providers. On appeal, petitioner argues the DDD acted arbitrarily, capriciously, and unreasonably when it reviewed and scored proposals from potential service providers. For the reasons that follow, we reverse and remand for the Assistant Commissioner to determine the appropriate process for the DDD to use to rebid the contracts.
We discern the following facts from the record. The DDD advertised for a Request for Letters of Interest (RLI) from existing providers to operate eleven existing community residential programs and two day programs (Programs). The Programs serve forty-three individuals with developmental disabilities "[twenty-four] hours a day[,] 365 days a year." Due to various funding and management concerns with the agency managing the Programs, "the [DDD] determined that the Programs had to be transferred to another provider as quickly as possible, to ensure the health, safety[,] and welfare of the clients." Otherwise, the clients would be "removed from their homes" and "without services."
Of the 189 proposals received by the DDD, 176 met the RLI qualifications and were scored. As the Assistant Commissioner explained in her final decision:
The proposals that were ultimately scored were submitted by twenty-nine different agencies collectively.
CAU submitted Letters of Interest for six residential [group home] programs . . . in the Upper Central Region . . . . Nineteen other agencies submitted Letters of Interest for some[,] but not all[,] of the programs. [T]he Letters of Interest submitted by CAU and these [nineteen] other agencies were individually scored.
Nine agencies submitted Letters of Interest for every residential and day program . . . , [which] were subject to an aggregate or averaged review. For each of these [nine] agencies, at least two letters from the Northern region and two letters from the Upper Central region were individually scored. The[] individual scores were then averaged and the average score was assigned to the remaining letters for each such agency. Consequently, each agency had at least four individually scored Letters of Interest, and the average of those scores was applied to the remainder of the Letters of Interest submitted.
The record only contains evidence of one of the individual score sheets. The DDD asserts they "mistakenly instructed the committee members to discard the individual score sheets and retain the master score sheets. By the time the [DDD] directed the committee members to retain the individual score sheets, only one member had not discarded them."
Initially, the DDD's Core Committee, which consisted of five of the DDD staff, reviewed the Letters of Interest. The Letters of Interest were also reviewed by two Residential Program Regional Committees. The Assistant Commissioner found:
[T]he review committees considered the materials submitted by the agencies, as well as "Licensing history, Office of Program Integrity and Accountability (OPIA) Risk Management System history, Quality Assurance Plan, Fiscal health of Provider, vacancy assessment and other factors deemed critical to [the] DDD business needs." Additionally, the [DDD] considered "all proposed program budgets that are based on [an] individual's support needs and staffing."Review committee members evaluated the material independently, then met to discuss and assess final scores. "The final scores were documented on the Point Score Evaluation Sheets" with the committee's notes.
The DDD advised CAU it was not awarded a contract to operate any of the Programs. CAU then requested the DDD's "formal appeal process." The DDD replied requesting that CAU provide "the specific grounds upon which [CAU was] protesting the contract awards," and "a statement indicating whether [CAU was] requesting an in-person presentation." In support of its appeal, CAU argued that its "Letters of Interest were wrongfully rejected and arbitrarily, capriciously, and unreasonably evaluated" and that the DDD violated public contract and bidding laws.
In its final decision the Assistant Commissioner upheld the award of contracts to the other agencies. In addressing CAU's claim that the DDD violated public contract and bidding laws, the DDD found strict compliance with N.J.S.A. 52:34-1 to -25.1 was not required in emergency situations, such as this instance, to protect the health and welfare of clients. See N.J.A.C. 10:3-3.13(b) (enumerating exceptions to bidding procedures). The Assistant Commissioner also determined that any of CAU's challenges to the RLI itself should have been raised prior to the deadline for submitting Letters of Interest. As we explain below, we agree with the Assistant Commissioner's determination that the RLI process was appropriate in this emergency scenario, but disagree that CAU could have challenged the scoring procedures before submitting their Letters of Interest because they had no way of knowing that different scoring procedures would apply to different applicants at that time.
First, we note the Assistant Commissioner also found there was no conflict of interest concerning the participation of Contract Administrator Beverly Arnold, as asserted by CAU, citing N.J.S.A. 52:13D-14, N.J.A.C. 19:61-6.9, and the Executive Commission on Ethical Standards v. Salmon, 295 N.J. Super. 86, 98 (App. Div. 1996). She found Arnold's previous employment was of no issue as Arnold had been a State employee for seventeen years, and there was no need for Arnold to recuse herself. The Assistant Commissioner relied on N.J.A.C. 19:61-7.4(a), which only requires State officials to recuse themselves from an official matter if, within one year following the official's commencement of State service, that matter involves a private sector individual or entity with which they were previously associated. Additionally, the Assistant Commissioner found no evidence of impropriety as Arnold was not on the review committee and "did not play any type of decision-making role in the RLI process." We agree with the Commissioner's analysis of this claim.
Furthermore, the Assistant Commissioner addressed certain specific complaints of CAU. She found that CAU was mistaken in its assertion that it tied with another agency for the highest score for Group Home 3 when, in fact, another agency scored the highest, and the second highest scoring agency was actually awarded the contract. Next, she found that although a winning agency misreported its OPIA Risk Assessment number, the OPIA reports are publicly available, and therefore the "mistake had no impact on the evaluation process." Indeed, the evaluation committee obtained and independently reviewed the OPIA reports for all responding agencies. The Assistant Commissioner highlighted that the OPIA Risk Assessment was only one factor in the evaluation process. We defer to the Assistant Commissioner's expertise in her assessment of these specific complaints and find no basis to disagree with her determinations on the individual specific complaints of CAU relating to its proposals.
CAU appeals from the Assistant Commissioner's affirmance of the DDD's contract awards, claiming (1) the DDD "used two different methods to score the letters of interest," (2) the DDD's final agency decision "could not have been reasonably reached on sufficient credible evidence present in the record," and (3) the DDD did not comply with "New Jersey public contracts law, N.J.S.A. 52:34-1, [to -25.1], for the advertisement and award of public contracts" as "[t]he RLI process . . . constitutes improper rulemaking . . . in violation of the New Jersey Administrative Procedure Act, N.J.[S.A.] 52:14B-1 [to - 31] and the regulations promulgated thereunder."
Our review of a Director's "statutory discretion . . . is limited." Keyes Martin & Co. v. Dir., Div. of Purchase & Prop., 99 N.J. 244, 253 (1985). "[T]he courts should not and cannot substitute their discretion for that of the Director." Commercial Cleaning Corp. v. Sullivan, 47 N.J. 539, 549 (1966). Indeed, "the courts of this state have consistently accorded the Director considerable deference and great latitude in awarding public contracts." Keyes, supra, 99 N.J. at 252. "[I]n the absence of bad faith, corruption, fraud or gross abuse of discretion," a reviewing court should not interfere with the Director's decision. Id. at 253 (quoting Sullivan, supra, 47 N.J. at 549). In other words, the Director's "choice from among responsible bidders under N.J.S.A. 52:34-12(a)(g) is reviewed under the gross abuse of discretion standard." Barrick, supra, 218 N.J. at 258. This highly deferential standard of review applies only to the Director's "ultimate business decision . . . as between responsible bidders whose bids conform to the invitation." State v. Ernst & Young, L.L.P., 386 N.J. Super. 600, 619 (App. Div. 2006) (quoting On-Line Games, supra, 279 N.J. Super. at 593).
Petitioner argues our review must examine whether the DDD acted arbitrarily, capriciously, and unreasonably. However, the standard only applies for review of a contract awarded "to a bidder whose proposal deviates materially from the RFP's requirements." Barrick v. State, 218 N.J. 247, 258-59 (2014). In this case, of the 189 proposals received by the DDD, petitioner's submissions were among the 176 proposals scored because they conformed with the RLI. As petitioner seeks review of the DDD's final determination to award the contracts to other conforming bidders, and does not claim other bidders failed to conform to the RLI requirements, the "gross abuse of discretion" standard applies. --------
We address whether the DDD's award of contracts for the six group homes in question to organizations other than CAU was a gross abuse of discretion.
The objective of the public bidding statutes is to "guard against favoritism, improvidence, extravagance and corruption." Barrick, supra, 218 N.J. at 258 (quoting Keyes, supra, 99 N.J. at 256). Public bidding laws are intended "to secure for the taxpayers the benefits of competition and to promote the honesty and integrity of the bidders and the system." On-Line Games, supra, 279 N.J. Super. at 589. The laws are to be "construed as nearly as possible with sole reference to the public good." Ibid. (quoting Keyes, supra, 99 N.J. at 256). "The conditions and specifications of . . . [a] bid must apply equally to all prospective bidders; the individual bidder cannot decide to follow or ignore these conditions[.]" Hall Constr. Co. v. N.J. Sports & Exposition Auth., 295 N.J. Super. 629, 635 (App. Div. 1996). Additionally, "[m]embers of evaluation committees shall conduct evaluations of proposals objectively, impartially, and with propriety." N.J.A.C. 17:12-2.7(a)(1).
It is undisputed the DDD utilized two different scoring methods to evaluate the proposals. Bidders that did not apply for all the facilities were individually scored for each property. However, the nine bidders that applied for all available programs had only four of their proposals scored, with an average of the four scores assigned to their remaining proposals. This scoring methodology is not only unorthodox, but because it does not treat all bidders the same, was a gross abuse of discretion.
We recognize that the DDD was faced with exigent circumstances as services at the Programs were being provided by an organization facing various financial and management issues. This prompted the DDD to determine the Programs had to be transferred to another or other providers as swiftly as possible, to ensure the health, safety, and welfare of the clients. The DDD only had four months to issue new contracts and transition the Programs to new service providers.
Therefore, as we explain below, the DDD's use of the RLI procedure was appropriate to facilitate the swift award of contracts and implementation of services by suitable providers. However, as soon as the DDD decided to score those applicants who applied to operate all the facilities differently from those which applied to operate some of the facilities, without providing advance notice of the difference in scoring procedures to the applicants, the applicants were no longer being treated equally. We conclude the use of differing means of scoring was a gross abuse of discretion. If the DDD had made public their decision to score only certain applications using an average of scores, then the applicants could have objected in advance or made a different decision on what to include in their Letters of Interest.
Next, we address in more detail petitioner's claim that "[t]he RLI process for the renewal or expansion of DHS purchase of service contracts constitutes improper rulemaking by DHS and [the] DDD, in violation of N.J.[S.A]. 52:14B-1 [to -31] and the regulations promulgated thereunder."
Pursuant to N.J.S.A. 52:34-6, "[a]ll purchases, contracts or agreements, the cost or contract price whereof is to be paid with or out of State funds shall . . . be made or awarded only after public advertisement for bids . . . ." However, where "public exigency requires the immediate delivery of the articles or performance of the service," the statute and the DDD rules permit the relaxation of the formal request for the proposal bidding process. N.J.S.A. 52:34-10(b). See also N.J.A.C. 10:3-3.13(b). Additionally, an Attorney General Formal Opinion grants the Department of Human Services the responsibility to conduct a procurement process that comports with the principles of the public bidding laws, stating:
The purchase statutes and the responsibilities they impose upon the Director apply only to those transactions in which the State contracts for the delivery of goods and services for its own consumption [] to those transactions, in other words, to which the full application
of all of the statutory provisions was intended.
[21 Op. Att'y Gen. 4 (1976).]
Courts should give weight to the Attorney General's opinion where an agency bases its statutory interpretation on that opinion. Peper v. Princeton Univ. Bd. of Trs., 77 N.J. 55, 70 (1978).
However, an agency may not use its interpretive power to amend or adopt regulations. Venuti v. Cape May Cty. Constr. Bd. of Appeals, 231 N.J. Super. 546, 554 (App. Div. 1989). "The manner in which an agency exercises broad discretion 'may be governed by the [APA].'" Besler & Co., Inc. v. Bradley, 361 N.J. Super. 168, 173 (App. Div. 2003) (alteration in original) (quoting St. Barnabas Med. Ctr. v. N.J. Hosp. Rate Setting Comm'n, 250 N.J. Super. 132, 143 (App. Div. 1991)).
In order to avoid abuse of these broad administrative powers, the Supreme Court enumerated six factors that are weighed to determine whether agency action must be designated as an administrative rulemaking requiring implementation through the APA. Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313, 331-32 (1984). The Court explained:
Such a conclusion would be warranted if it appears that the agency determination, in many or most of the following circumstances, (1) is intended to have wide coverage encompassing a large segment of the
regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy. These relevant factors can, either singly or in combination, determine in a given case whether the essential agency action must be rendered through rule-making or adjudication.
[Ibid.]
In weighing the factors outlined in Metromedia, supra, 97 N.J. at 331-32, it is evident that the RLI process is not novel as its basis was addressed in 1976 through the Attorney General Formal Opinion. Most importantly, it is permitted by the statutory and legislative authority afforded to the DDD. Therefore, the RLI process need not be designated as administrative rulemaking requiring implementation through the APA. We conclude DDD did have authority to adopt rules to implement its statutory authority particularly where it involves contracts for services benefitting third parties in exigent circumstances.
The agency asserts that petitioner cannot participate in the process to obtain a contract and subsequently attack the process after being unsuccessful, arguing "the better way to state the rule is to say that a party is estopped from challenging the award of a contract which it actively sought through the same procedures it now attacks." Autotote, Ltd. v. N.J. Sports & Exposition Auth., 85 N.J. 363, 369 (1981). Petitioner's dealings with respondent do not fall within this category because petitioner was never advised of the discrepancy in treatment of applicants before the contracts were awarded. We conclude there was a gross abuse of discretion in evaluating different applicants for the contracts differently. We reverse and remand to the Assistant Commissioner to determine the appropriate process for the DDD to use to rebid the contracts as soon as reasonably possible. The Programs may continue to be operated under the existing contracts by the present operators in order to protect the health and welfare of the clients until new contracts are awarded.
Reversed and remanded. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION