A clear understanding of the Local Public Contracts Law, 40A:11-1 et seq, and the Public School Contracts Law, 18A:18A-1 et seq, (contracting laws) is required to complete an application to participate in the E-Procurement Pilot Program.  A copy of both laws for your use and review with legal counsel is part of this information package.  Further information about the laws can be found online at www.state.nj.us/njded/pscl.  A wide range of “contracting units” are covered by the two laws, including municipalities, public schools, county governments, local authorities and a number of other local entities.

The contracting laws can be applied in three different situations.  First, there is public bidding when the amount of a contract exceeds the bid threshold.  Second, there is the solicitation of quotations when the amount of a contract is below the bid threshold but above 15% of the bid threshold.  Last, there is the situation where the amount of a contract is below 15% of the bid threshold.

I.            Public Bids – Above the bid threshold

The purpose of the contracting laws is to eliminate favoritism, corruption and related ills, in public contracting because the use of public funds requires a high level of integrity.  The laws seek to create a level playing field for all vendors desiring to supply contracting units with goods and services. 

Currently, contracting units must publicly bid any contract above the bid threshold, $17,500 (the bid threshold can be raised to any amount up to $25,000 if the contracting unit has a QPA, a Qualified Purchasing Agent).  The current process requires contracting units to place an advertisement in the newspaper to solicit public bids.  The E-Procurement Pilot Program (P.L. 2001, c.30, s.9) establishes a process for contracting units to conduct the bid process online.  Contracting units may only conduct public bidding online as part of the E-Procurement Pilot Program for commodities approved under the program.

During public bidding, whether online or offline, the bid process cannot be conducted in any manner that would give a specific bidder an unfair advantage over other bidders.  A public advertisement for the solicitation of bids must be available to all potential bidders.  Any system that notifies vendors of the receipt of bids automatically must be careful to make sure the automatic notification does not occur until the public advertisement has been made.

II.        Solicitation of Quotations – Contracts above 15% of bid threshold 

Solicitation of quotations is used when the dollar amount of a contract is estimated to be below the bid threshold.  If the estimated amount of a contract is below the bid threshold, the contracting unit must, if practicable, solicit at least two competitive quotations from vendors for the goods and/or services.  The Division observes that under most circumstances, it is practicable to obtain two competitive quotations for goods and services. 

A contract is awarded to a vendor, determined by a contracting agent to be the most advantageous, price and other factors considered.  A governing body should delegate to its purchasing agent the authority to award a contract when the amount is under the bid threshold.

For purchases where the amount is under the bid threshold, it is appropriate for the contracting unit to use a vendor list.  When goods or services are needed the purchasing agent would use vendors from the list and solicit quotations from the same.  Currently, contracting units can use online procurement systems to solicit quotations from vendors. 

There is no restrictions or special permissions under the contracts laws to use these systems; they are at the contracting unit’s option.  They are not part of the E-Procurement Pilot Program. The E-Procurement Pilot Program deals exclusively with the receipt of bids for award of contracts above the bid threshold.

III.            Use of Business Judgment – Contracts below 15% of the bid threshold

Purchases that fall below 15% of the bid threshold, ($17,500 x 15%= $2,625; w/QPA $25,000 x 15%=$3,750), can be solicited without receiving public bids or quotations by the purchasing agent using sound business practice.   There is no requirement for solicitation of quotations.  Also, this method can be used without participation in the E-Procurement Pilot Program.

Sound business practice means employing such judgment that the price charged to the contracting unit reflects current market conditions and the quantity and delivery needs of the contracting unit. N.J.A.C. 5:34-9.5(b).