Opinion
DOCKET NO. A-0476-09T2
08-25-2011
IN THE MATTER OF CHALLENGE OF THE STATE'S AWARD OF AN OFFICE SUPPLIES CONTRACT TO STAPLES BUSINESS ADVANTAGE THROUGH THE NATIONAL JOINT POWERS ALLIANCE
Maeve E. Cannon argued the cause for appellants National Office Products Alliance, its members and incumbent vendors (Hill Wallack L.L.P., attorneys; Ms. Cannon and Patrick D. Kennedy, of counsel; Ms. Cannon, Mr. Kennedy and Megan McGeehin Schwartz, on the brief). Kimberly A. Sked, Deputy Attorney General, argued the cause for respondent Division of Purchase and Property (Paula T. Dow, Acting Attorney General, attorney; Beth Leigh Mitchell, Deputy Attorney General, of counsel; Ms. Sked, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Gilroy and Simonelli.
On appeal from the Division of Purchase and Property, Department of Treasury.
Maeve E. Cannon argued the cause for appellants National Office Products Alliance, its members and incumbent vendors (Hill Wallack L.L.P., attorneys; Ms. Cannon and Patrick D. Kennedy, of counsel; Ms. Cannon, Mr. Kennedy and Megan McGeehin Schwartz, on the brief).
Kimberly A. Sked, Deputy Attorney General, argued the cause for respondent Division of Purchase and Property (Paula T. Dow, Acting Attorney General, attorney; Beth Leigh Mitchell, Deputy Attorney General, of counsel; Ms. Sked, on the brief). PER CURIAM
In this appeal we review a challenge to an award of a contract by the Acting Director (Director) of the Department of Treasury's Division of Purchase and Property (Division) for office and classroom-related supplies and paper to Staples Business Advantage (Staples) pursuant to N.J.S.A. 52:34-6.2 (the Staples Contract). Appellants are the National Office Products Alliance (NOPA), eight incumbent vendors who previously contracted with the State for the above-mentioned items, and other NOPA members who sought to be contract vendors. The Division procured the Staples Contract through the National Joint Powers Association (NJPA), a national cooperative purchasing alliance operating under Minnesota law. The NJPA had awarded a contract to Staples (the NJPA Operating Contract) pursuant to an Invitation for Bid (IFB) published in a Minnesota newspaper.
Staples Business Advantage is a division of Staples Contract and Commercial, Inc. Its principal office is located in New Jersey.
On appeal, appellants argue that: (1) the Director exceeded her authority under N.J.S.A. 52:34-6.2 by negotiating a separate contract with Staples that included terms not found in the NJPA Operating Contract (specifically, new discounted pricing terms and a provision requiring Staples to extend the contract's pricing terms to private New Jersey-based "Small/Women/Minority Business Enterprises" (SWMBEs)), and violated N.J.S.A. 52:34-6.2b(2) because there is no record she reviewed and approved the NJPA Operating Contract specifications and determined the contract was the most cost-effective method of procurement prior to awarding the Staples Contract; (2) the NJPA's IFB did not use a competitive bidding process because the IFB was only published in a Minneapolis newspaper and Staples was the lone bidder, it was unduly restrictive because it limited the pool of bidders to vendors with multi-national distribution and marketing plans, and it did not comply with N.J.S.A. 52:34-6.2 and N.J.S.A. 52:34-12; (3) the Director acted arbitrarily, capriciously, and unreasonably and abused her discretion by using a market basket analysis to conclude that the Staples Contract provided savings to the State; (4) N.J.S.A. 52:34-6.2 does not authorize, and N.J.S.A. 52:34-15 prohibits, payment of an administrative fee to the NJPA; and (5) the Staples Contract is not in the State's best interests because it does not adhere to the principles of New Jersey procurement law and policy. The State counters that appellants lack standing to challenge the award because they were not bidders or prospective bidders on the NJPA Operating Contract.
We hold that appellants have standing to challenge the award of the Staples Contract. Cf. In re Protest of Award of Contract A71188 for Light Duty Automotive Parts, ___ N.J. Super. ___ , ___ (App. Div. 2011) (slip op. at 23-24) (hereinafter, AutoZone) (holding that current suppliers have standing to challenge a contract awarded through the cooperative procurement process because of their financial interest). We also affirm the Director's decision to award the contract to Staples, except we reverse and sever the provision requiring Staples to extend the contract's pricing terms to SWMBEs as ultra vires.
Cooperative purchasing agreements allow participating governments to share procurement contracts to obtain quality goods and services in an effective and efficient manner to meet their requirements. Nat'l Ass'n of State Procurement Officials (NASPO), Strength in Numbers: An Introduction to Cooperative Procurements 3 (Feb. 2006), available at http://www.naspo.org/ documents/cooperativepurchasingbrief.pdf. There are three types of cooperative purchasing agreements: (1) "true cooperatives"; (2) "piggyback options"; and (3) third-party aggregators. Id. at 3. In using a piggyback option, "[o]ne or more organizations represent their requirements and include an option for other organizations to 'ride' or 'bridge' the contract as awarded." Ibid.
The New Jersey Legislature determined that "[c]ooperative purchasing agreements would enable New Jersey to benefit from procurements which are more cost-effective because of volume purchasing, standardized specifications, and increased leverage in the marketplace." Assembly Appropriations Committee, Statement to A. 182, at 1 (Feb. 22, 1996); see also AutoZone, supra, slip op. at 31. Accordingly, in 1996, the Legislature enacted the cooperative purchasing agreements statute "as an alternative to the procedures concerning the awarding of public contracts . . . ." N.J.S.A. 52:34-6.2a. The statute permits the Director to "enter into cooperative purchasing agreements with one or more other states, or political subdivisions thereof, for the purchase of goods and services" so long as the agreement is "competitively bid and awarded by one of the jurisdictions on behalf of jurisdictions participating in the contract." Ibid.
N.J.S.A. 52:34-6.2b(1), which is a piggyback option, authorizes the Director "to purchase goods or services through a contract awarded pursuant to a cooperative purchasing agreement whenever the director determines this to be the most cost-effective method of procurement." N.J.S.A. 52:34-6.2b(1). Prior to entering into such a contract, the Director must "review and approve the specifications and proposed terms and conditions of the contract." Ibid.
In 2005, the Legislature amended N.J.S.A. 52:34-6.2 to "increase the State's range of purchasing options and enable the State to realize cost savings by eliminating the need for a separate bidding process for goods and services that have already been competitively bid by other states with similar interests and fiscal restraints." Senate State Government Committee, Statement to S. 2194, at 5 (Jan. 31, 2005); see also S. 2194, 211th Leg., at 16 (Dec. 13, 2004) (statement of Sens. Karcher & Scutari); AutoZone, supra, slip op. at 31. The Legislature authorized the Director "to purchase goods or services through a contract awarded pursuant to a nationally-recognized and accepted cooperative purchasing agreement that has been developed utilizing a competitive bidding process, in which other states participate, whenever the director determines this to be the most cost-effective method of procurement." N.J.S.A. 52:34-6.2b(2).
Pursuant to N.J.S.A. 52:34-6.2b(2), which is also a piggyback option, prior to entering into a nationally recognized cooperative contract, the Director must assure the contract was developed using a competitive bidding process and "review and approve the specifications and proposed terms and conditions of the contract." N.J.S.A. 52:34-6.2b(2). "When the decision is made to enter a cooperative purchasing agreement, the Director is not required to comply with the law of this State governing the award of public contracts other than the requirement to purchase all articles or supplies manufactured or produced by institutional labor." AutoZone, supra, slip op. at 5.
For a two-week period from the end of June to July 2005, the NJPA published the IFB in the Minneapolis Star-Tribune requesting bids from national vendors for a national line item purchasing contract to supply office and classroom-related supplies used by qualified NJPA customers or members. The IFB required bidders to provide
a complete discount listing of all available products offered by the vendor, as well as, a specific selection of most commonly used products defined as a 'market basket' or 'hot list.' This list of products is to be items most commonly used by NJPA qualified customers and must be discounted deeper than that of the general listed discount.
The IFB also required bidders to provide "[t]he stock number/item number, product description, manufacturer, list price, hot list/market basket price and any other product information deemed relevant by the vendor . . . ." The IFB did not restrict the chosen vendor "from offering lower prices in the future to others, or from lowering prices on this contract," and permitted the vendor to provide "greater benefits or terms that are more favorable directly to [any of its NJPA] customer[s] . . . ."
Staples responded to the IFB. As part of its response, Staples agreed to pay the NJPA an administrative fee of two-percent of net sales in exchange for contract facilitation and marketing. On August 18, 2005, the NJPA awarded the NJPA Operating Contract to Staples, the lone bidder. The NJPA Operating Contract included Staples's agreement to pay the administrative fee, and provided for annual periods of renewal (from the date of authorized signatures), required at the end of each year, up to a five-year maximum period as permitted by Minnesota law.
A potential bidder, Corporate Express, declined to submit a bid due to its inability to establish a national marketing plan and follow through with the IFB's terms and conditions to effectively serve nationally-qualified NJPA customers.
Prior to August 2009, the State of New Jersey had entered into Term Contract T0052 (T0052) with approximately twelve vendors for stationary and office supplies for an original contract period from September 1, 2004, to August 31, 2006. After several extensions, T0052 expired on November 30, 2009, as did Term Contract T0038 (T0038), a related contract with other vendors for office paper.
Before these contracts expired, the Division evaluated options for obtaining office supplies from other sources. The Division conducted a cost-effectiveness study using a market basket analysis comparing costs under T0038 and T0052 to those in the NJPA Operating Contract with Staples, the National Intergovernmental Purchasing Alliance cooperative purchasing contract awarded to Corporate Express, and the U.S. Communities cooperative purchasing contract awarded to Office Depot. The Division created an initial market basket of the State's purchasing needs using data from WB Mason, Action Office Supplies (an incumbent vendor), and the State's Distribution and Support Services (DSS). The Division then sent the initial market basket to Staples, Corporate Express, and Office Depot, who all submitted prices for the items contained in the initial market basket. After reviewing this information, the Division concluded that a cooperative purchasing contract could produce cost savings to the State, and decided to take a "wider look at the supplier base."
DSS "maintains and operates a central facility for purchasing and distributing goods throughout the State . . . ." State of N.J., Dep't of Treasury, Div. of Purchase & Prop., Distribution & Support Services Main Page, http://www.state.nj.us/treasury/ dss (last visited July 1, 2011).
In order to assemble a more accurate market basket, the Division asked DSS and all incumbent vendors on T0038 and T0052 to submit usage reports setting forth item prices, quantities ordered, and manufacturers' part numbers. Because some incumbent vendors submitted market baskets containing thousands of items, the Division limited the market basket to items the State had purchased fifty or more of from each vendor in a year. However, if a vendor's market basket contained less than two-hundred items, the Division included all of the items regardless of the amount the State had purchased. The Division then compared the incumbent vendors' reports to the NJPA Operating Contract, and the Corporate Express and Office Depot cooperative purchasing contracts. The Division concluded the NJPA Operating Contract would save the State approximately $1.2 million per year, the Corporate Express contract would save approximately $780,000 per year, and the Office Depot contract would cost the State approximately $713,000 more per year.
The Division also concluded there were other benefits to choosing the NJPA Operating Contract, including smaller required orders, next-day delivery of items, simplified ordering by one-stop shopping, fewer accounts payable, on-line ordering via punch-out and e-cataloging methods, and the ability to make in-store purchases at the contract's prices.
The Division acknowledged, however, there were some disadvantages, including that some of the vendors on T0052 were SWMBEs, the NJPA advertised the IFB only in Minnesota, only Staples submitted a bid, and Staples could raise the price of copier paper quarterly, whereas the incumbent vendors could only do so yearly. Nevertheless, the Division issued a written award recommendation, which included the results of its analysis. The Division recommended that the State award a contract to Staples to replace T0038 and T0052 and all office supplies that were being delivered through the DSS warehouse.
On August 12, 2009, the Director executed the Staples Contract, which was effective between September 1, 2009, and July 31, 2010. The Staples Contract provided more favorable terms than the NJPA Operating Contract in that it guaranteed the State an additional five percent price reduction on over six hundred and fifty of the State's "Core List" items, such as assorted writing utensils, binders and filing supplies.
The State agreed to enter into a new contract with Staples if a new operating contract were awarded to Staples.
The Staples Contract also contained the following provision regarding SWMBEs:
13. Small Business Enterprises:
Staples shall make commercially reasonable efforts to explore opportunities to utilize New Jersey based [SWMBEs] in connection with the products and services provided hereunder. The following are potential opportunities:
(1) Staples shall explore utilizing Boone Enterprises within our network to deliver to NJ State Agency locations. Boone Enterprises is willing to register as a [minority business enterprise] vendor in the State of NJ.
(2) OIC is a vendor whose products are sold by Staples. OIC's products would be available to NJ State Agencies. OIC is in the process of registering with the State of
NJ as a [minority business enterprise] vendor.
(3) Staples shall investigate opportunities with vendors Staples does business with in NJ, who qualify as [a small business enterprise] and who would be willing to register as [a small business enterprise] with the State.
(4) Staples shall invite NJ based [SWBMEs], who manufacture office supply related products, to contact Staples to discuss the option of becoming a Staples supplier. Staples would work in coordination with the Division of Minority and Women Business Development during this process.
(5) (A) Staples shall offer the State of New Jersey's office supply contract pricing to all those NJ based [SWBMEs] that meet the following criteria[.]
On August 21, 2009, the Division notified the incumbent vendors that it would not further extend T0052. On behalf of the incumbent vendors, the NOPA twice requested a stay of implementation of the award of the Staples Contract and the termination of T0052 or, alternatively, for an opportunity to rebid T0052 "and make a similar regional award that would exist in tandem with and compete head to head with the Staples award on a price and quality basis for State and local office supply purchases." The NOPA argued, in part, that (1) the NJPA Operating Contract was not competitively bid; (2) the Director failed to review and consent to the NJPA Operating Contract's specifications and terms; (3) the Director exceeded her statutory authority by extending the Staples Contract pricing terms to SWMBEs; and (4) the NJPA's bidding process was unduly restrictive and poorly advertised.
On August 26, 2009, the Director issued a decision denying the requested stays, concluding that the NOPA and the incumbent vendors lacked standing because they were neither bidders nor potential bidders on the NJPA Operating Contract. Addressing the merits, the Director concluded that the NJPA Operating Contract "was developed [using] a competitive bidding process", N.J.S.A. 52:34-6.2, "does not require that the competitive process by the host state be identical to the competitive bidding process conducted by the State of New Jersey[,]" and the statute does not require the State to participate in the bidding process for the NJPA Operating Contract. The Director also concluded that the plain language of N.J.S.A. 52:34-6.2b(1) does not specify "the characteristics of the competitive bidding process that must be utilized . . . ." She, thus, rejected the NOPA's argument that NJPA had to conduct "a bidding process similar to that mandated in other parts of the procurement statutes . . . ."
The Director rejected the NOPA's claim that she did not review and consent to the NJPA Operating Contract's specifications, terms and conditions prior to awarding the Staples Contract. She also stated there was no post-award arrangement for SWMBEs to act as Staples suppliers; rather, Staples is only to consider extending opportunities to SWMBEs and offer them the same contract pricing it offers the State.
The Director concluded that the bidding process was not unduly restrictive. She observed that "the NJPA procurement was specifically conducted as a cooperative venture which by definition would necessitate and require that the bidder be capable of serving the needs of clients on a national basis." The Director interpreted "[t]he fact that Staples was the only bidder in response to the NJPA procurement [to simply be] an outcome of the bidding process, [which does] not preclude a determination that its contract with the NJPA is nonetheless advantageous to the State of New Jersey and its cooperative purchasing partners."
In an August 28, 2009 supplemental decision, the Director granted a ninety-day extension of T0052 in order for the incumbent vendors to draw down their inventory by selling their products authorized under T0052 to the State's cooperative purchasing partners. This appeal followed.
Because of the substantial overlap between the issues presented in this appeal and in AutoZone, which was then pending before another panel, we delayed issuance of our opinion pending a decision in AutoZone. Following the filing of the opinion in AutoZone on June 27, 2011, the parties filed supplemental briefs addressing the significance of that appeal to this appeal.
I.
We reject appellants' argument that the Director exceeded her authority under N.J.S.A. 52:34-6.2 by negotiating a separate contract with Staples that included new discounted pricing terms not found in the NJPA Operating Contract. Generally, "a public contract cannot be awarded upon terms which are different from those contained in the invitation to bid." Palamar Constr., Inc. v. Pennsauken, 196 N.J. Super. 241, 250 (App. Div. 1983). This is so because all bidders must be "equally situated in their competition for the public contract." Id. at 251 (citing Twp. of Hillside v. Sternin, 25 N.J. 317, 322 (1957)). However, when a public entity negotiates a modification that results in more favorable terms, such a modification should be allowed. See id. at 252-53; see also Greenberg v. Fornicola, 37 N.J. 1, 10-11 (1962) (indicating that the municipality may amend a lease to better serve the municipality's needs). As this court held in AutoZone, supra,
N.J.S.A. 52:34-6.2 does not expressly prohibit the Director from negotiating better terms than those in the cooperative purchasing agreement. In fact, because it allows the Director to enter such an agreement "whenever the director determinesThus, N.J.S.A. 52:34-6.2 also allows the deviations on pricing discounts here. The Director was not required to accept the NJPA Operating Contract "as is"; rather, she had the statutory authority to negotiate more favorable pricing terms with Staples. See AutoZone, supra, slip op. at 30-31.
this to be the most cost-effective method of procurement," N.J.S.A. 53:34-6.2 implicitly allows the deviations made here on delivery terms.
[slip op. at 30 (emphasis added).]
Moreover, N.J.S.A. 52:34-12a(f) states that "for any procurement, the . . . director may negotiate with bidders the final terms and conditions of any procurement, including price; such ability to so negotiate must be expressly set forth in the applicable invitation to bid . . . ." Here, the IFB specifically permitted Staples to offer lower prices and provide "greater benefits or terms that are more favorable directly to [any of its NJPA] customer[s] . . . ."
A deviation from or modification of the pricing terms of the NJPA Operating Contract was permissible in this case, and the law governing State procurement contracts authorized the Director to seek and obtain more favorable contract terms that align with the legislative purpose of N.J.S.A. 52:34-6.2 to save the State money. Accordingly, the Director acted within her statutory authority by negotiating the new discounted pricing terms contained in the Staples Contract.
We reach a different conclusion as to provision 13(5)(A) of the Staples Contract, which requires Staples to extend the contract's pricing terms to SWMBEs that meet certain criteria. The Director is permitted to extend State contract pricing for local use only by entities such as volunteer fire departments, rescue squads, school districts, independent authorities and institutions of higher learning. N.J.A.C. 17:12-1A.4(a). There is no authority permitting the Director to extend State contract pricing terms to private businesses. Her decision to include provision 13(5)(A) was, therefore, ultra vires.
We find no fault with provisions 13(1) to (4), which merely require Staples to engage in exploratory actions.
We do not, however, invalidate the entire Staples Contract. When a contract contains an unlawful provision, if "such provision is severable, courts will enforce the remainder of the contract after excising the illegal portion . . . ." Muhammad v. Cnty. Bank of Rehoboth Beach, Del., 189 N.J. 1, 26 (2006) (quotation omitted), cert. denied, 549 U.S. 1338, 127 S. Ct. 2032, 167 L. Ed. 2d 763 (2007); see also Jacob v. Norris, McLaughlin & Marcus, 128 N.J. 10, 33 (1992) (indicating that courts have authority in certain situations to sever illegal provisions of an agreement and enforce the remainder). A provision is not severable if it is "part and parcel of, and integral to, the other provisions of the contract." Nassef v. Cord, Inc., 90 N.J. Super. 135, 144 (App. Div.), aff'd, 48 N.J. 317 (1966). Stated another way, the court must determine whether striking the illegal portion would "defeat the central purpose of the contract . . . ." Jacob, supra, 128 N.J. at 33 (citing Jones v. Gabrielan, 52 N.J. Super. 563, 572 (App. Div. 1958)).
Provision 13(5)(A) can be severed from the Staples Contract without defeating the contract's central purpose, that is, to save the State money. This provision is not "part and parcel of" or integral to the rest of the contract; rather, it is merely one component of a comprehensive contract that financially benefited the State.
Moreover, severance is permitted by the NJPA Operating Contract's severability clause, which provides that "[t]he provisions of this contract are severable to the extent that any provision held to be invalid shall not affect any other provision or application of the contract that may remain in effect." The NJPA Operating Contract, including this severability clause, was incorporated into the Staples Contract by the following language, "the Director has determined that it is in the State's best interest to participate in the NJPA [Operating] Contract for office and classroom related supplies; and which contract is incorporated herein by reference."
In addition, the Director did not violate N.J.S.A. 52:34-6.2b(2). The record contains sufficient relevant information indicating that the Director reviewed and approved the NJPA Operating Contract specifications prior to awarding the Staples Contract. See AutoZone, supra, slip op. at 38 (indicating that as a prerequisite for appellate review "the record must contain the relevant information for us to perform our review function"). The Director negotiated better pricing terms with Staples than those found in the NJPA Operating Contract. She could not have done so had she not reviewed the NJPA Operating Contract's less favorable pricing terms prior to awarding the Staples Contract. Also, the Division's written recommendation, which the Director signed, compared costs under the NJPA Operating Contract with Staples to those in T0038 and T0052.
The record also contains sufficient relevant information indicating that the Director determined that the NJPA Contract was the most cost-effective method of procurement prior to awarding the Staples Contract. The Division conducted an exhaustive analysis of the costs and benefits of a cooperative purchasing contract, which included a comprehensive comparison between the NJPA Operating Contract, the incumbent vendors' market basket reports, and the Corporate Express and Office Depot cooperative purchasing contracts. The analysis, whereby the Division concluded the State would realize significant savings from the NJPA Operating Contract, was part and parcel of the Director's decision to award the contract to Staples.
II.
Appellants' contention that the IFB did not use a competitive bidding process, was unduly restrictive, and did not comply with N.J.S.A. 52:34-6.2 and N.J.S.A. 52:34-12 lacks merit. N.J.S.A. 52:34-12, which establishes traditional competitive bidding rules that the State must follow when submitting its own IFB, does not apply here. N.J.S.A. 52:34-6.2 created a distinctly different process for the State to procure contracts by cooperative purchasing agreements. The statute does not require the Director to follow the traditional competitive bidding process set forth in N.J.S.A. 52:34-12a. N.J.S.A. 52:34-6.2b(2) only requires the contract onto which the State piggybacks to be developed utilizing "a competitive bidding process", not "the competitive process" required by New Jersey law. See also AutoZone, supra, slip op. at 31-33 (implicitly approving the use of any bidding process so long as it is competitive).
The IFB complied with the competitive bidding process required by Minnesota law. In addition, the IFB was consistent with the NJPA's policy to advertise IFBs in the NJPA's known source of publication, the Minneapolis Star-Tribune, which is a major newspaper in Minnesota. This publication is also consistent with New Jersey law requiring public advertisement of an IFB in one or more newspapers. N.J.S.A. 52:34-12a; see also AutoZone, supra, slip op. at 32 (indicating that "newspaper advertisement of [requests for proposals] is consistent with the practice in this State"). The NJPA placed the advertisement for a two-week period prior to the IFB opening, and did not solicit any vendors or bidders, or communicate to any bidder's lists, directly. Thus, all vendors had equal opportunity to bid. The record does not indicate that any vendor or potential bidder failed to respond to the bid due to lack of notice. See AutoZone, supra, slip op. at 32.
Moreover, the IFB is not rendered anti-competitive merely because Staples was the lone bidder. For whatever reason, other vendors, such as Office Depot, chose not to bid. The specification requiring that the pool of bidders have a national distribution network also is not anti-competitive; rather, this specification was material to the type of cooperative contract the NJPA was bidding. Indeed, the nature of a nationally- recognized cooperative agreement, in which our legislature encouraged the State to join by the passage of N.J.S.A. 52:34-6.2b(2), necessarily restricts the pool of qualified bidders. Accordingly, we conclude that the IFB was not anti-competitive or unduly restrictive, and it complied with N.J.S.A. 52:34-6.2.
III.
Appellants contend for the first time on appeal that the Director acted arbitrarily, capriciously, unreasonably and abused her discretion by using a market basket analysis to conclude that the Staples Contract provided savings to the State, and that N.J.S.A. 52:34-6.2 does not authorize, and N.J.S.A. 52:34-15 prohibits, payment of an administrative fee to the NJPA. Generally, we "'will decline to consider questions or issues not properly presented [below] when an opportunity for such a presentation is available' unless the matter involves . . . jurisdiction or is of public importance[.]" Alloway v. Gen. Marine Indus., L.P., 149 N.J. 620, 643 (1997) (quoting Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973)). Nevertheless, we have decided to address the merits of these arguments.
Appellants also argue that the Director acted arbitrarily by refusing to accept or consider the incumbent vendors' pricing analysis data, which the NOPA submitted to the Division after the Director had rendered her decision. We deny appellants' motion to supplement the record on appeal to include this data. Thus, we will not consider this contention. See Alloway v. Gen. Marine Indus., L.P., 149 N.J. 620, 643 (1997); Soc'y Hill Condo Ass'n v. Soc'y Hill Assocs., 347 N.J. Super. 163, 177-78 (App. Div. 2002).
Our standard of review is restricted to a determination of whether the Director's decision to award the office and classroom-related supplies and paper contract to Staples is founded on bad faith, corruption, fraud or gross abuse of discretion. See AutoZone, supra, slip op. at 37-38 (citations omitted). We discern no reason to question the Director's use of a market basket analysis to determine that the NJPA Operating Contract was the most cost-effective method of procurement. Appellants have not shown the Director's decision to use such an analysis and to award the contract to Staples was founded on bad faith, corruption, fraud or constituted a gross abuse of discretion.
We also conclude there is nothing wrong with Staples paying a two-percent of net sales administrative fee in exchange for contract facilitation and marketing. N.J.S.A. 52:34-6.2 does not prohibit a fee to a nationally-recognized cooperative purchaser for costs incurred in facilitating and marketing the cooperative purchasing agreement. Moreover, N.J.S.A. 52:34-15 is inapposite. That statute provides:
Every contract or agreement negotiated, awarded or made pursuant to this act shall contain a suitable warranty by the contractor that no person or selling agency
has been employed or retained to solicit or secure such contract upon an agreement or understanding for a commission, percentage, brokerage or contingent fee, except bona fide employees or bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business, for the breach or violation of which warranty the State shall have the right to annul such contract without liability or in its discretion to deduct from the contract price or consideration the full amount of such commission, percentage, brokerage or contingent fee.
[N.J.S.A. 52:34-15 (footnote omitted).]
The purpose of N.J.S.A. 52:34-15 is to prevent payment, as a portion of an inflated contract price, of a commission that the winning bidder should be expected to pay as the cost of procuring the State's business. Here, Staples, not the State, pays the administrative fee. The fee is justified because it saves the State money by eliminating the costs the State would otherwise bear by a separate bidding process.
IV.
Appellants' contention that the Staples Contract is not in the State's best interests because it does not adhere to the principles of New Jersey procurement law and policy is without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E). However, we make the following brief comments.
The Director acted well within her statutory authority in this matter. She analyzed the various procurement options, conducted an elaborate market basket analysis, and properly determined that the cooperative purchasing contract was the most cost-effective method of procurement.
The Director's decision to award the contract to Staples is affirmed in part, and reversed in part as to provision 13(5)(A), which shall be severed from the Staples Contract.
I hereby certify that the foregoing is a true copy of the original on file in my office.
___________________________
CLERK OF THE APPELLATE DIVISION