Cataract Disposal, Inc. v. Town Board of Newfane

Judgment reversed, with costs, and petition granted, in accordance with the following memorandum: In 1978 the Town Board of the Town of Newfane advertised for bids for a three-year garbage collection contract. Among the specifications in the proposed contract was the requirement that the successful bidder provide a performance bond. The low bidder was J. & I. Disposal, Inc., and that company was awarded the contract even though it was unable to secure a performance bond. Cataract Disposal, Inc., was the only bidder able to provide the required performance bond and has brought this proceeding to rescind the contract. When it was awarded the contract J. & I. Disposal was allowed to substitute..a cash indemnity bond for the performance bond. Thus, the terms of the final contract were not identical to the proposed contract as advertised in the notice to bidders. Conformity to the advertised specifications is not an absolute requirement. Some variance is allowed provided it is not material or substantial. Technical noncompliance or a mere irregularity may be waived by the municipality where it is in the municipality’s best interest to do so (Le Cesse Bros. Contr. v Town Bd. of Town of Williamson, 62 AD2d 28, affd 46 NY2d 960). A variance is material when it gives one bidder a substantial benefit or advantage not given to other bidders or potential bidders (Matter of Glen Truck Sales & Serv. v Sirignano, 31 Misc 2d 1027, 1030). Here the substitution of the cash indemnity bond for the performance bond was a material and substantial variance. The variance created an unfair competitive advantage for J. & I. Disposal. This is true not only because other possible bidders had to consider the cost of acquiring a performance bond when calculating their costs, but also because other possible bidders not able to secure a performance bond and not aware other forms of security were acceptable, may have been dissuaded from bidding. A variance from a specification that determines eligibility to bid must be considered substantial and material (Terminal Constr. Corp. v Atlantic County Sewerage Auth., 67 NJ 403, 412). Of course, a cash indemnity bond is an acceptable form of security. Indeed, there is some authority that a cash indemnity bond provides more security than a performance bond (33 Op St Compt 55). And it would have been proper for the town to have accepted a bid substituting a cash indemnity bond had the notice to bidders informed all potential bidders that alternative forms of security would be considered. The Comptroller’s Opinion relied on by the dissenters does not state that one may be substituted for another when, as here, the bid specifications specify only one form of security. The distinction is particularly significant in this case where the night before the bid specifications were sent out a request was made to the town by the garbage contractors to eliminate the performance bond requirement. The request was considered and turned down. Therefore, once the bid specifications were 797 circulated to potential bidders a performance bond became "the required security” under subdivision 1 of section 103 of the General Municipal Law and could not be varied by the contractor at its own option. Nor does the statement in the proposed contract that "The bid award will be based on the low bid plus alternates”, authorize such a substitution. Although it is proper for a municipality to seek bids on alternative plans or materials, such alternatives must be reasonably defined in the specifications so that the bidders are not deprived of a common basis for bidding (64 Am Jur 2d, Public Works and Contracts, § 52; 10 McQuillin, Municipal Corporations [rev ed], § 29.29). The addition of the word "alternates” in the proposed contract did not inform bidders that substitution of the cash indemnity bond for the performance bond would be permitted. As a result, the common standard necessary to serve as a basis for competitive bidding was lacking. The vice of permitting a bidder to substitute required security is real. Sound public policy is embodied in the General Municipal Law which provides for open competitive bidding on public contracts. To guard against favoritism, extravagance and corruption the requirements of article 4 of the statute should be rigidly adhered to (see Township of Hillside v Sternin, 25 NJ 317). All concur, except Dillon, P. J., and Witmer, J., who dissent and vote to affirm the judgment in the following memorandum.