Autotote Ltd. v. New Jersey Sports & Exposition Authority

427 A.2d 55, 85 N.J. 363, 1981 N.J. LEXIS 1595

• Court: Supreme Court of New Jersey
• Decided: March 23, 1981
• Status: Published

Opinions

The opinion of the Court was delivered by

SULLIVAN, J.

The principal issue raised in this appeal is whether a negotiated five-year contract awarded by defendant New Jersey Sports and Exposition Authority (Authority) to defendant American Totalisator Company (Amtote), covering the installation and servicing of a totalisator system¹ at the Meadowlands racetrack, violated the public bidding provisions of the New Jersey Sports and Exposition Authority Law, N.J.S.A. 5:10-1 et seq. Plaintiff, Autotote Limited (Autotote), which also designs and supplies totalisator systems, filed suit seeking to have the contract set aside on the ground that the subject matter thereof (the furnishing of totalisator equipment and services) was subject to the public bidding requirements of the statute.

The pertinent section of the New Jersey Sports and Exposition Authority Law under which the defendant Authority operates contains the following provisions regarding public bidding:

The authority, in the exercise of its authority to make and enter into contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers, shall adopt standing rules and procedures providing that, except as hereinafter provided, no contract on behalf of the authority shall be entered into for the doing of any work, or for the hiring of equipment or vehicles, where the sum to be expended exceeds the sum of $2,500.00 unless the authority shall first publicly advertise for bids therefor, and shall award the contract to the lowest responsible bidder; provided, however, that such advertising shall not be required where the contract to be entered into is one for the furnishing or performing services of a professional nature.. .. This section shall not prevent the authority from having any work done by its own employees, nor shall it apply to repairs, or to the furnishing of materials, supplies or labor, or the hiring of equipment or vehicles, when the safety or protection of its or other public property or the public convenience require, or the exigency of the authority’s service will not admit of such advertisement. In such case the authority shall, by resolution, passed by the affirmative vote of a majority of its members, declare the exigency or emergency to exist, and set forth in the resolution the nature thereof and the approximate amount to be so expended. [N.J.S.A. 5:10-21]

The essential facts leading up to the present litigation are not in dispute. In 1975 the Authority, in preparation for the initial opening of the Meadowlands racetrack in September 1976, solicited proposals from Autotote and Amtote for the installation and servicing of a totalisator system at the racetrack. Both parties submitted proposals which were analyzed by the Authority, taking into consideration the experience, reputation, financial ability and stability of each company together with the quality of the equipment and services each proposed to supply. The Autotote proposal ultimately was accepted by the Authority and a three-year contract, commencing September 1976 was negotiated. This contract was not put up for public bidding. The Authority, in its resolution awarding the contract to Auto-tote, set forth two grounds for not advertising for public bids: first, that “an exigency of the Authority’s service . . . exist[ed], which exigency would not admit of public advertisement” and second, that “the major portions of the contract . . . relate to services of a technical and professional nature.” The Autotote totalisator was then installed at the Meadowlands and remained in operation for the three-year term.

During the course of the contract, the Authority became aware of the development of an improved and more efficient totalisator known as a “cash/sell” system. Late in 1977, the Authority solicited proposals from Autotote and Amtote regarding the installation of a cash/sell system at the Meadowlands. At this time, Autotote did not have a cash/sell totalisator in use at any racetrack although it was in the process of developing the new system. Accordingly, it agreed to install demonstration machines in one of the betting divisions at the Meadowlands. During the course of the demonstration in October 1978, the machines repeatedly malfunctioned despite attempts by Auto-tote personnel to correct the problems. New machines were installed but they also failed, causing great inconvenience and confusion to Meadowlands patrons. The Authority finally terminated the demonstration after a week of failures, having reached the conclusion that the proposed Autotote cash/sell system was too unreliable to risk installation.

The Authority then communicated with defendant Amtote to see if it would be interested in “updating” its original proposal to provide a cash/sell totalisator system in time for the commencement of the September 1979 racing season at the Meadow-lands'. Amtote had designed the TIM 300 system,² an advanced type cash/sell totalisator, which was in operation at a number of racetracks. After observing the Amtote system in operation, and being satisfied with the efficiency and reliability of the system in an actual wagering situation, the Authority entered into negotiations with Amtote which culminated in the execution on February 23,1979 of the five-year contract challenged in this suit.

Plaintiff instituted the present action on April 9, 1979. On cross-motions for summary judgment supported by voluminous affidavits and supporting documents, the trial court, on May 17, 1979, granted defendants’ motions. Preliminarily, it ruled that plaintiff had, as the court characterized it, standing to raise the public bidding issue despite the fact that it had negotiated its existing totalisator system contract with the Authority without any public bidding. On the merits, the court found that this type of computer service contract was a combination of equipment and services and held that the matter fell within the “professional services” exception to the requirement of public bidding contained in N.J.S.A. 5:10-21.

The Appellate Division, in an opinion reported at 171 N.J.Super. 480 (1979), reversed and ordered that judgment be entered in favor of plaintiff invalidating the Amtote contract and requiring that public bidding be conducted for a new contract which was to go into effect September 1, 1980. It agreed with the trial court that plaintiff could maintain suit, and that the Amtote contract involved both equipment and services. The panel concluded, however, that the services called for by the contract did not “fall within the ambit of the professional services exemption, and that the public bidding requirement should have been followed.” Id. at 491. Certification was granted by this Court, 84 N.J. 428 (1980), and, on defendants’ motions, the judgment of the Appellate Division was stayed. We now reverse the Appellate Division and reinstate the judgment of the trial court.

We deal first with the question whether Autotote is estopped from maintaining the present suit. Plaintiff had entered into a contract with the Authority to provide a totalisator system and services at the Meadowlands for a three-year period commencing September 1, 1976. This contract was awarded without public bidding. One of the reasons given for this decision was that the major portions of the contract related to services of a technical and professional nature. During the course of this contract, Autotote negotiated with the Authority concerning the furnishing of the more sophisticated cash/sell totalisator system. These negotiations were terminated when the Authority concluded that Autotote’s prototype machines, installed at the Meadowlands on a trial basis, were unreliable. It seems clear, though, that had the demonstration system worked satisfactorily, Autotote was prepared to negotiate a new contract without public bidding.

The abrupt “about-face” in Autotote’s attitude toward public bidding after Amtote was awarded the contract for the cash/sell system raises the question whether Autotote’s past conduct estops it from challenging the award to Amtote. In Waszen v. City of Atlantic City, 1 N.J. 272 (1949), this Court ruled that an unsuccessful bidder for a garbage removal contract did not have standing to challenge the award of the contract to another bidder on the ground of allegedly illegal specifications. The rationale of the holding was that “one cannot endeavor to take advantage of a contract to be awarded under illegal specifications and then, when unsuccessful, seek to have the contract set aside.” 1 N.J. at 276. Plaintiff’s dealings with defendant Authority fall within this category. Although Waszen spoke in terms of standing to bring suit, the better way to state the rule is to say that a party is estopped from challenging the award of a contract which it actively sought through the same procedures it now attacks.

We are concerned, however, with a statutory provision as to which there has been a paucity of judicial attention. The issue is one of substantial public importance and large sums of public monies are at stake. The substantive issue before the Court has been fully developed by both parties and there is a strong likelihood that it would be raised again in the near future if we were to decline to reach it. Since the question is ripe for judicial resolution and since a decision on the public bidding issue will serve the public interest, we address the merits of plaintiff’s argument.

We begin by reaffirming the strong public policy underlying the public bidding statutes. In Terminal Constr. Corp. v. Atlantic Cty. Sewerage Auth., 67 N.J. 403 (1975), this policy was set forth as follows:

Bidding statutes are for the benefit of the taxpayers and are construed as nearly as possible with sole reference to the public good. Their objects are to guard against favoritism, improvidence, extravagance and corruption; their aim is to secure for the public the benefits of unfettered competition. [Id. at 409-410]

In this same vein, it is axiomatic5 that statutory exceptions to public bidding requirements should be strictly construed so as not to dilute this policy or permit a public body to avoid pertinent legislative enactments. See Pucillo v. Mayor and Council of Borough of New Milford, 73 N.J. 349, 356 (1977).

Against this background we consider the Amtote cash/sell totalisator system and services called for under the February 23, 1979 contract. As previously noted, the TIM 300 system permits racetrack patrons to place wagers and to cash winning tickets at any window. The system provides a high wagering capacity in the vital moments just prior to the start of races when the majority of wagers are placed. In operation, the system has demonstrated major savings in the cost of racetrack operations. Its speed of operation provides substantial additional revenues by allowing more bets to be placed in the “finite time” before each race. Since the Authority was seeking an up-to-date totalisator system able to maximize revenues, efficiency and convenience while keeping costs down, the system offered by Amtote fulfilled its needs.

It is undisputed that the TIM 300 totalisator system is highly sophisticated computer equipment needing specially trained personnel to operate it and constant supervision to avoid malfunction. To that end the contract requires Amtote

[t]o furnish an adequate staff of technicians to service and maintain the System in good and accurate operating condition during every day on which totalisator services are provided pursuant to the terms of this Agreement. The function of such technicians shall be to maintain proper operational control of the System and in the event they encounter unusual operating conditions, to promptly restore the System to its normal standard.

We are informed that in fulfilling its contractual obligations, Amtote currently maintains a staff of 12 technicians and 4 operators at the Meadowlands under the charge of an experienced Systems Manager with backup engineers in Maryland on call to deal with problems which the local Amtote staff are unable to solve.

It is unnecessary to spell out all of the highly technical details of the equipment and services. We conclude that the contract in question involves the inextricable integration of a sophisticated computer system and services of such a technical and scientific nature as to constitute “professional services” within the statutory exception to the requirement of public bidding, N.J.S.A. 5:10-21.

This particular statutory provision has not been previously construed, and other public bidding statutes with a professional services exception have received limited judicial attention. Further, we do not find the legislative definitions of “professional services” in another of our public bidding statutes, the Local Public Contracts Law, N.J.S.A. 40A:ll-2, to be helpful in our attempt to ascertain the scope of the exception in N.J.S.A. 5:10-21, despite the Appellate Division’s heavy reliance on them. See 171 N.J.Super. at 490-491. However, it is clear that the term “professional services” is no longer limited to the traditional professions such as law and medicine. See Abelson’s Inc. v. N. J. State Board of Optometrists, 5 N.J. 412, 419 (1950). If the law is to keep pace with scientific developments in business and commerce, it must adapt statutory provisions, such as the one in question, to the realities of the day. See, Waste Management v. Wis. Solid Waste, etc., 84 Wis.2d 462, 267 N.W.2d 659 (Sup.Ct. 1978).

The contract under review calls for both equipment and services. These services are not limited to standby personnel who are called upon to act only in case of malfunction. The system needs specially trained technicians to supervise day-today operations. Without them, the system could not function. In a somewhat similar situation, the Supreme Court of New York, Appellate Division, in American Totalisator Co., Inc. v. Western Reg’l Off-Track Betting Corp., 44 App.Div.2d 750, 396 N.Y.S.2d 301 (1974), ruled that totalisator services constituted professional services not subject to New York public bidding statutes. In so ruling, it stated: “ ‘It would be an unreasonable and mischievous construction of the statute, to apply it to services which require in their proper performance scientific knowledge or professional skill.’ ” 396 N.Y.S.2d at 302 (quoting People ex rel. Smith v. Flagg, 17 N.Y. 584, 587 (1858)). We agree with this decision as well as with the ruling by the Wisconsin Supreme Court in Waste Management, supra, which applied a “scientific knowledge and professional skill” exception to competitive bidding requirements and upheld the award of a negotiated contract for the design, construction and operation of a solid waste recycling facility.

The Amtote contract can also be sustained under another exception contained in the Sports and Exposition Authority Law. This provides that the provision for public bidding shall not apply when “the public convenience require[s]” otherwise. N.J.S.A. 5:10-21. After the Authority decided on the need to change to a cash/sell totalisator system, it installed Autotote demonstration machines at the Meadowlands in late 1978. As has been noted, however, the demonstration failed, causing great inconvenience and confusion to Meadowlands’ patrons.

The Authority was then faced with the necessity of securing a reliable cash/sell totalisator in time for the opening of the September 1979 racing season. Its negotiations with Amtote were on this basis. The TIM 300 system, a proven, operational system containing all the features heretofore mentioned, fulfilled all of the Authority’s requirements. It satisfied the need to have the best system available. It was of tried reliability, thereby minimizing possible disruption of the track’s operations and the resultant inconvenience and confusion to patrons. Because of its sophistication and efficiency it offered major savings in the cost of track operations and at the same time provided substantial additional revenues. In view of these circumstances, we conclude that, under the “public convenience” exception contained in the statute the Authority was authorized to dispense with public bidding and negotiate a contract for the needed equipment and services.

It may well be that the totalisator field will develop to such a degree of standardization and reliability that the services provided will become routine. In view of this possibility, and in the interest of avoiding future controversies, the Authority may wish to re-evaluate the feasibility of accepting public bids on future totalisator contracts. We make this observation being aware that both the Lottery Commission (computer systems contract for state lottery) and the Authority itself (contract for photo-finish photography services) have recently made successful use of the public bidding process in the letting of large-scale equipment/services contracts for their respective agencies. We merely hold that, in the rapidly developing totalisator field as existed in 1979, the services to be provided under the Amtote contract called for such a degree of technical knowledge and professional skill as to bring the contract within the “professional services” exception to the bidding requirement. We also hold that, under the circumstances presented at the time, the award of the contract to Amtote without public bidding was authorized under the “public convenience” exception.

Reversed.

1 A totalisator system involves a complex computer network designed to tabulate and categorize the bets made on every horse in each race. The system also determines the payoff for each race, including the specialty wagers (exacta, daily double, etc.).

2 The TIM 300 system permits racing patrons to go to any window to place wagers of any amount between $1 and $250 in any betting pool in any race to be run that day, and also permits such patrons to cash current or previous day’s winning tickets at any window under the complete control of the computer. This system eliminates the need for separate windows for selling different wager types and amounts and separate windows for the cashing of tickets.