Reaffirmation of the Unwaivable Consent of Surety Requirement in Public Contract Bidding

Introduction

In In the Matter of Protest Filed by El Sol Contracting and Construction Corp., Contract T100.638, the Supreme Court of New Jersey addressed whether the New Jersey Turnpike Authority (“NJTA”) acted arbitrarily, capriciously, or unreasonably by rejecting the lowest bid on a major bridge‐repair project because the bid package lacked a validly executed Consent of Surety (“CoS”). El Sol Contracting & Construction Corp. (“El Sol”) submitted the lowest proposal for redecking eleven bridges in the Newark Bay area but its bid bond documents—specifically the Power of Attorney (“PoA”) and CoS from its surety, Liberty Mutual Insurance Co.—did not validly bind Liberty Mutual to issue the required Contract Bond. After a staff compliance review, the NJTA disqualified El Sol and awarded the contract to the second‐lowest bidder. The Appellate Division reversed, but the Supreme Court granted certification to clarify the unwaivable nature of the CoS requirement in public bidding.

Summary of the Judgment

The Court unanimously held that El Sol’s bid was materially defective because the PoA expressly authorized the attorney‐in‐fact to sign only the Proposal Bond—not the CoS—and thus the CoS did not validly bind Liberty Mutual to issue the Contract Bond upon award. Relying on Meadowbrook Carting Co. v. Borough of Island Heights, the Court reaffirmed that a required CoS is a “material defect that can be neither waived nor cured.” Because El Sol failed to submit a validly executed CoS at the time of bidding, the NJTA’s rejection of the bid was neither arbitrary nor capricious. The Supreme Court reversed the Appellate Division and reinstated the NJTA’s award of the contract to the next‐lowest bidder.

Analysis

Precedents Cited

Meadowbrook Carting Co. v. Borough of Island Heights (138 N.J. 307, 1994): Established that failure to include a valid CoS is a material, unwaivable defect in a public bid package.
Pucillo & Sons, Inc. v. Township of Belleville (249 N.J. Super. 536, App. Div. 1991): Recognized that omitting a CoS threatens the fairness of the competitive process.
DeSapio Construction, Inc. v. Township of Clinton (276 N.J. Super. 216, Law Div. 1994): Emphasized the need for strict standards and warned against conditional or qualified CoS forms.
Mayo, Lynch & Associates v. Pollack (351 N.J. Super. 486, App. Div. 2002): Held that a blank bid bond and absence of a CoS were material defects.

Legal Reasoning

The Court’s analysis proceeded in three parts:

Purpose of Competitive Bidding: Public bidding statutes guard against favoritism and corruption and ensure fair competition. A timely and valid CoS is integral to assuring that the apparent low bidder can perform the contract.
Application of Meadowbrook: Under Meadowbrook, when a bid specification requires a CoS, its absence or invalid execution is a material defect that cannot be waived or cured—even if the bidder offers to correct the defect post‐bid or has a history of prior acceptance.
Document Interpretation: The Proposal Bond and the CoS are separate instruments. Liberty Mutual’s PoA expressly limited the attorney‐in‐fact’s authority to the Proposal Bond alone. Neither the CoS nor the PoA could be read as binding Liberty Mutual to the Contract Bond obligation because the PoA did not grant authority over the CoS. Accordingly, El Sol’s bid package lacked the requisite legally binding CoS.

Impact

This decision:

Reaffirms the unwaivable nature of material bidding requirements—particularly the CoS—in New Jersey public procurements.
Warns procurements authorities and bidders that informal or post‐bid corrections of a required CoS are impermissible.
Places a premium on rigorous pre‐bid compliance review and precise drafting of PoAs and CoSs to avoid disqualification.
Strengthens the integrity and predictability of the competitive‐bidding process by enforcing strict adherence to stated bid specifications.

Complex Concepts Simplified

Proposal Bond: A guarantee, typically 10% of the bid price, that the bidder will enter into the contract and furnish required performance bonds if awarded the project.
Consent of Surety (CoS): A document in which the surety guarantees that it will issue a 100% Contract Bond if the bidder receives the award and signs the contract.
Power of Attorney (PoA): A written delegation whereby a principal (the surety) authorizes an attorney‐in‐fact to execute instruments—here, the Proposal Bond and, if so empowered, the CoS—on its behalf.
Arbitrary, Capricious, or Unreasonable Review: A deferential standard under which courts uphold agency actions unless they lack a rational basis, contradict controlling law, or disregard critical evidence.

Conclusion

The Supreme Court of New Jersey’s decision in El Sol v. New Jersey Turnpike Authority crystallizes the principle that when a bid specification mandates a Consent of Surety, that document must be validly executed and unambiguously bind the surety to issue the Contract Bond. Material defects in the CoS cannot be remedied after the bid opening, nor can agencies waive such requirements without violating the core policies of fairness and integrity in public bidding. Procurement officials and contractors must therefore pay close attention to the formalities of bid bond documents—especially the precise scope of a PoA—to ensure enforceable, compliant submissions.