Recent Appellate Division Case Addresses School Transportation Bid and Contract Issues

A recent Appellate Division decision, Hudson County Transportation, Inc. v. Hoboken Board of Education, decided on May 23, 2022, is likely to provide significant protection to school boards that have been struggling with issues stemming from bidding for and contracting with student transportation vendors. School Boards have faced difficult challenges made by student transportation providers over the past two years as schools were either closed entirely or were open on a hybrid model. In the past, school bus companies were typically paid for the standard 180-day school year. Following the outbreak of the Covid-19 pandemic, in March 2020, Governor Murphy signed Executive Order 104, which closed schools for in-person learning for several months. The New Jersey Legislature adopted legislation that required all boards of education to compensate “contracted service providers” in the event schools closed in excess of three or more days of instruction as a result of a state of emergency or public health emergency. N.J.S.A. 18A:7F-9(e)(3).

Following the adoption of that legislation, in August 2020, the Hoboken Board of Education solicited bids for transporting pupils for the 2020-21 school year. The bid specifications advised that the contract would be awarded on a per diem basis and contained a provision establishing the payment terms, which included that per diem contracts will be calculated on the actual number of days transportation services were performed.

HCTI was the lowest bidder on six of the routes and was notified that it would be awarded the contract for those routes. HCTI did not agree unconditionally to accept award, advising that “we need to make sure we get paid on all days regardless of any unforeseen circumstances. We cannot provide transportation services until we get the official contract with these terms and our award letters.”

As a result of this attempt to change the payment terms of the bid, the Board awarded those routes to the next-lowest bidder. HCTI then filed a complaint in the Law Division alleging that the Board’s refusal to award plaintiff the transportation contract violated public bidding laws. Both the trial court and the Appellate Division rejected that position and determined that the transportation vendor’s unilateral alteration to the language in the bid specifications constituted a material change of the contract, which rendered the bid nonconforming and justified rejection. The Appellate Division also found that since there was no contract in place, the provisions of N.J.S.A. 18A:7F-9 which require negotiation if schools are closed for more than three days were inapplicable.

TAKEAWAY

School boards may be able to use this decision in response to any remaining claims for payment by student transportation vendors stemming from the legislative mandate to negotiate payments due to lengthy school closures. Just as importantly, school boards may want to review their bid specifications to make certain that payment for student transportation is based on per diem services actually rendered.

This post was written by Adrienne L. Isacoff, Esq., Co-Chair of the Construction & Public Contracting Group at Florio Perrucci Steinhardt Cappelli Tipton & Taylor, LLC. She may be reached at