IN RE OF HUNGERFORD TERRY v. SUFFOLK COUNTY

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Docket Number

2003-06624.

Judges

Peter B. Skelos

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Smart Summary

Factual and Procedural Background

On January 30, 2003, the Suffolk County Water Authority (SCWA) solicited sealed bids for the supply and installation of iron and manganese filtration systems and related services at two well field/pump stations. The bid specifications allowed the filtration system to be manufactured by Hungerford Terry, Inc. (Pureflow Filtration Division), Tonka Equipment Company, Layne, or an "approved equal." Hungerford Terry, Inc., an unsuccessful bidder, challenged the award of the contract to Eagle Control Corp., alleging that Eagle's bid, which used the Pureflow filtration system, failed to comply with material bid specifications. The Supreme Court annulled the award to Eagle, finding that Eagle had gained an unfair advantage by omitting a required supplemental air wash distributor from its bid, and ordered the SCWA to reopen bidding. The SCWA appealed this order.

Legal Issues Presented

Whether the omission of a supplemental air wash distributor in Eagle Control Corp.’s bid constituted a material noncompliance with the bid specifications.
Whether the Suffolk County Water Authority properly waived a technical irregularity in Eagle’s bid in the best interests of the public authority.
Whether the Supreme Court erred in annulling the contract award and ordering the reopening of the bidding process.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Matter of Cataract Disposal v. Town Bd. of Town of Newfane, 53 NY2d 266, 272	Materiality of noncompliance with bid specifications—material if it impairs public authority interests or places bidders at competitive disadvantage.	Used to define when a municipality must reject a bid due to material noncompliance.
Le Cesse Bros. Contr. v. Town Bd. of Town of Williamson, 62 AD2d 28, affd 46 NY2d 960	Standards for evaluating bid noncompliance and the authority’s discretion.	Supported the principle that the municipality may waive technical irregularities.
Matter of Donno Co. v. Board of Trustees of Vil. of Kings Point, 115 AD2d 603, 604	Materiality of bid deviations and competitive fairness.	Reinforced the standard for determining material noncompliance.
Matter of Vancom-New York, Inc. v. County of Nassau, 203 AD2d 581	Court’s review of agency discretion in waiving bid irregularities.	Supported deference to agency’s rational basis for waiving irregularities.
Matter of AS Transp. Co. v. County of Nassau, 154 AD2d 456, 459	Municipal discretion in bid evaluation and waiver of irregularities.	Confirmed agency’s authority to waive non-material defects.
Matter of Varsity Tr. v. Board of Educ. of City of N.Y., 130 AD2d 581, 582	Standards for materiality and waiver of bid irregularities.	Supported the agency’s discretion if rationally based.
Matter of T.F.D. Bus Co. v. City School Dist. of Mount Vernon, 237 AD2d 448	Rational basis review of agency determination of bid irregularities.	Used to uphold SCWA’s determination that omission was a mere technical irregularity.
Matter of Eldor Contr. Corp. v. Suffolk County Water Auth., 270 AD2d 262	Best interest of the public authority in waiving technical bid irregularities.	Supported the finding that waiving the omission was in SCWA’s best interest due to cost savings.

Court's Reasoning and Analysis

The court recognized that a municipality may waive a technical noncompliance with bid specifications if it constitutes a mere irregularity and waiving it serves the municipality's best interest. However, material noncompliance must result in rejection of the bid. Materiality is determined by whether the noncompliance impairs the interests of the contracting authority or places bidders at a competitive disadvantage. The SCWA’s determination that Eagle’s omission of the supplemental air wash distributor was a minor technical irregularity was supported by a rational basis, as evidenced by an unrefuted affidavit stating the equipment was not necessary to meet performance standards. Additionally, Eagle’s bid was substantially lower than the petitioner’s, justifying the waiver in the SCWA’s best interest. The court found no other deviations from contract specifications in Eagle’s bid. Thus, the court concluded that the SCWA properly awarded the contract to Eagle and reversed the annulment of the award.

Holding and Implications

The order of the Supreme Court annulling the contract award to Eagle Control Corp. is reversed insofar as appealed from, the contract award to Eagle is confirmed, the petition challenging the award is denied, and the proceeding is dismissed on the merits.

The direct effect of this decision is to uphold the contract award to Eagle Control Corp. and dismiss the petitioner’s challenge. The court did not establish new precedent but reaffirmed established principles regarding municipal discretion to waive technical irregularities in bids when supported by a rational basis and in the public interest.

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In the Matter of HUNGERFORD TERRY, INC., Respondent, v. SUFFOLK COUNTY WATER AUTHORITY, Appellant, and EAGLE CONTROL CORP., Respondent.

Ordered that on the court's own motion, the notice of appeal from the order is treated as an application for leave to appeal, and leave to appeal is granted ( see CPLR 5701 [c]); and it is further,

Ordered that the order is reversed insofar as appealed from, on the law, the award is confirmed, the petition is denied, and the proceeding is dismissed on the merits; and it is further,

Ordered that one bill of costs is awarded to the appellant.

On January 30, 2003, the appellant, Suffolk County Water Authority (hereinafter the SCWA), solicited sealed bids for the supply and installation of iron and manganese filtration systems and related services at two of its well field/pump stations. The bid specifications provided that the filtration system be manufactured by either the petitioner, Hungerford Terry, Inc., Pureflow Filtration Division (hereinafter Pureflow), Tonka Equipment Company, Layne, or an "approved equal." The petitioner, an unsuccessful bidder, commenced this proceeding pursuant to CPLR article 78 challenging the award of the contract to Eagle Control Corp. (hereinafter Eagle), alleging that Eagle's bid proposal, which utilized the Pureflow filtration system, failed to comply in various material respects with the bid specifications for this contract. Determining that Eagle gained an unfair advantage by omitting from its bid a required item of equipment, i.e., a supplemental air wash distributor, the Supreme Court granted the petition to the extent of annulling the award of a contract to Eagle and remitted the matter to the SCWA to reopen the bidding for the contract. We reverse insofar as appealed from.

A municipality or agency may waive a technical noncompliance with bid specifications if the defect is a mere irregularity and it is in the best interest of the municipality to do so. However, a municipality must reject the bid if the noncompliance is material or substantial. Noncompliance is considered material only when it would impair the interests of the contracting public authority or place some of the bidders at a competitive disadvantage ( see Matter of Cataract Disposal v. Town Bd. of Town of Newfane, 53 NY2d 266, 272; Le Cesse Bros. Contr. v. Town Bd. of Town of Williamson, 62 AD2d 28, affd 46 NY2d 960; Matter of Donno Co. v. Board of Trustees of Vil. of Kings Point, 115 AD2d 603, 604). The governmental agency has the right to determine whether a variance from bid specifications is material or whether to waive it as a mere irregularity, and that determination must be upheld by the courts if supported by any rational basis ( see Matter of Vancom-New York, Inc. v. County of Nassau, 203 AD2d 581; Matter of AS Transp. Co. v. County of Nassau, 154 AD2d 456, 459; Matter of Varsity Tr. v. Board of Educ. of City of N.Y., 130 AD2d 581, 582).

The unrefuted affidavit of a representative of the SCWA established that the use of a supplemental air wash distributor with the Pureflow filtration system is not necessary to meet performance standards. Accordingly, the determination of the SCWA that Eagle's alleged noncompliance involved a mere technical irregularity which it could properly waive was supported by a rational basis ( see Matter of T.F.D. Bus Co. v. City School Dist. of Mount Vernon, 237 AD2d 448). Moreover, given that Eagle's bid was nearly $40,000 lower than the petitioner's bid, it was in the SCWA's best interests to so waive ( see Matter of Eldor Contr. Corp. v. Suffolk County Water Auth., 270 AD2d 262).

We have reviewed the remaining allegations of noncompliance and find that Eagle's bid did not otherwise deviate from the contract specifications. Accordingly, the SCWA properly awarded the contract to Eagle.