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In the Matter of Aaa Carting and Rubbish Removal, Inc v. Town of Southeast

June 9, 2011


The opinion of the court was delivered by: Ciparick, J.

This opinion is uncorrected and subject to revision before publication in the New York Reports.

In this article 78 proceeding to annul a determination of a Town Board, the question presented is whether the Town Board acted arbitrarily and capriciously and in violation of law in awarding a public bidding contract to other than the lowest responsible bidder. We conclude that General Municipal Law § 103 and Town Law § 122 preclude a Town, in an open bidding process, from choosing a higher bid merely because it subjectively believes that a higher bidder is preferable and more responsible than a lower bidder based on criteria not set forth in the bidding proposal.

The Town of Southeast's existing contract for residential refuse removal services, held by Advance Waste Systems, was due to expire on December 31, 2009. In the hope of capitalizing on competitive forces in the waste removal business, the Town Board (consisting of four Councilmembers and one Supervisor), in July 2009, sought competitive bids from qualified contractors to handle the Town's waste removal needs. On July 8, 2009, the Town published a document titled "Information for Bidders and Contract Documents, Specifications & Proposal for the Collection of Refuse Materials and Bulk Collection Contract" (the bid request). The bid request set forth the qualifications that the Town required from the prospective contractor. Those qualifications included, among other things, that the work of the contractor be done in a prompt, proper, and workmanlike manner, that the contractor provide operating and safety training for its personnel, that the contractor's equipment be maintained in safe and sanitary condition, and that there is reserve equipment that can be put into operation within two hours of a breakdown. The Town Board set August 5, 2009, as the deadline for the submission of bids and reserved the right to reject all bids and readvertise.

The Town Board received three bids. AAA Carting and Rubbish Removal, Inc. (AAA) submitted a bid for $1,210,500 per year, Sani-Pro Disposal Services Corp., d/b/a/ Suburban Carting (Suburban) submitted a bid for $1,496,205 per year, and Advanced Waste Systems submitted a bid for $1,692,306.80 per year. The Town Board, after reviewing the bids, undertook a due diligence procedure, which included visits to AAA and Suburban.*fn1

On August 27, 2009, Councilmember Paul Johnson visited AAA. His report concerning that visit provided at its conclusion: "I believe that AAA can reasonably be construed as being 'responsible' in addition to being the lowest bidder . . . They have the experience, the capital and the infrastructure to execute the Southeast Contract." On September 2, 2009, Councilmembers Johnson and Richard Honeck visited Suburban. In their report concerning that visit, they noted that Suburban's fleet of trucks was newer than AAA's, that Suburban had a strong commitment to safety, and "[t]he operations, cleanliness and professionalism and process are head-and-shoulders superior to that of AAA."

On September 24, 2009, the Town Board held a meeting.

At that meeting, Town Supervisor Michael Rights proposed a resolution seconded by Councilmember Dwight Yee, to award the residential refuse removal contract to AAA, the lowest responsible bidder. The resolution was defeated three to two. Later, Councilmember Johnson proposed an alternate resolution seconded by Councilmember Honeck, to award the contract to Suburban. The resolution provided that "the Town Board has found that qualitative factors, such as safety, professionalism and the availability of spare vehicles are critical to ensure that the contract is executed in a consistent, safe and quality manner."

There was discussion regarding the resolution to award the contract to Suburban prior to holding a vote. During that discussion, Councilmember Yee and Town Supervisor Rights expressed grave concern that the Town was awarding the contract to a higher bidder. Representatives for AAA were also present and voiced opposition to the resolution. The resolution passed three to two. The Councilmembers who voted in favor of the resolution noted that safety and reliability were determinative factors in their selection of the higher bid. While casting his vote in favor of the resolution, Councilmember Johnson stated that "the lowest responsible bidder, when taking into consideration all the other qualitative factors, is [Suburban]." At no time during that meeting, or at any other time prior to the resolution and vote awarding the contract to Suburban, was there any statement that AAA did not adequately fulfill any of therequirements as set forth in the bid request.

After its bid was rejected, AAA sent a letter to Town Supervisor Rights objecting to the Town Board's decision to award the contract to Suburban and requesting an explanation as to why its bid was considered not responsible. AAA received no response to this letter. After communicating with Town counsel, AAA filed a petition, pursuant to CPLR article 78, to set aside the award of the contract to Suburban and to direct the Town to award the contract to AAA.

In response to that petition, Councilmember Honeck provided in his affidavit that in "mak[ing] [his] ultimate decision as to which firm would be most capable of providing for the needs of the residents of the Town of Southeast," he was "helped" by an "impressive presentation" by Suburban, some of the highlights of which were that Suburban conducted monthly training meetings and safety inspections, utilized a specific computer program for reports of accidents and violations, conducted regular alcohol and drug screening of its employees, was a union shop with uniformed employees, and had a large inventory of practically new equipment and a maintenance department with parts that were replenished daily. Additionally, Councilmember Johnson provided in his affidavit that "we as a Town Board chose a contractor that is more qualified, more 'responsible and responsive,' and who will provide a higher level of service at a slightly higher monthly cost over the apparent low bidder."*fn2

In response, Pasquale Cartalemi, the office manager for AAA, argued that AAA was equally qualified as Suburban in many of the criteria that the Town Board found compelling, and that AAA could have provided information regarding these criteria had it been requested to do so.

Supreme Court granted the petition finding that "[t]he award to Suburban is not based on substantial evidence, is arbitrary and capricious, represents an abuse of discretion . . . [and] violates [section] 103 of the Municipal Law and [section] 122 of the Town Law." The Appellate Division reversed, holding that the Town had not acted arbitrarily or capriciously in awarding the contract to Suburban (see Matter of AAA Carting & Rubbish Removal, Inc. v Town of Southeast, 74 AD3d 959, 960 [2d Dept 2010]). It noted that in determining the lowest responsible bidder, the Town could investigate the skill, judgment, and experience of the bidders (see id.). The court further opined that "[w]here a municipality exercises its discretion to reject one or more bids, that decision 'ought not to be disturbed by the courts unless [it is] irrational, dishonest or otherwise unlawful" (id., quoting Matter of Conduit & Found. Corp. v Metropolitan Transp. Auth., 66 NY2d 144, 149 [1985]). We granted AAA leave to appeal (15 NY3d 714 [2010]) and now reverse.

Pursuant to Town Law § 122 and General Municipal Law § 103, all contracts for public work must be awarded to "the lowest responsible bidder."*fn3 The central purposes of New York's competitive bidding statutes are the "(1) protection of the public fisc by obtaining the best work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts" (Matter of New York State Ch., Inc., Associated Gen. Contrs. of Am. v New York State Thruway Auth., 88 NY2d 56, 68 [1996]). It is well settled that the bidding statutes are to be construed strictly in order to achieve those purposes (see Matter of Diamond Asphalt Corp. v Sander, 92 NY2d 244, 259 [1998]) and that rejection of the lowest bid carries with it the "inevitable implication of non-responsibility" for the rejected bidder (Matter of LaCorte Elec. Constr. & Maintenance v County of Rensselaer, 80 NY2d 232, 236 [1992]).

In determining the responsibility of a bidder, an administrative agency or municipality should consider the bidder's "skill, judgment and integrity" (Matter of DeFoe Corp. v New York City Dept. of Transp., 87 NY2d 754, 763 [1996]) and "where good reason exists, the low bid may be disapproved" (Matter of Conduit & Found. Corp., 66 NY2d at 148). Here, the record before the Town Board was devoid of good reason for rejecting the low bid from AAA. The disapproval, as stated by the Town Board, was based on criteria not contained in the bidding proposal. Inclusion of those criteria would have ensured that every bidder had the information necessary to make an intelligent evaluation and bid (see Matter of Suffolk Rd.ways v Minuse, 19 AD2d 888, 889 [2d Dept 1963]; see also Matter of Browning-Ferris Indus. of N.Y. v City of Lackawanna, 204 AD2d 1047, 1048 [4th Dept 1994]; Matter of Progressive Dietary Consultants of N.Y. v Wyoming County, 90 AD2d 214, 217 [4th Dept 1982]). In this instance, none of the qualitative factors that the Town Board identified were in the bid request. Accordingly, it ...

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