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New Jersey School Bus Contractors Group Wins Legal Case, Forfeiture of Improper Bid

A New Jersey Appellate Court last month overturned a Department of Education decision not to force the forfeiture of a school-bus bid bond after the company that won the bids later admitted that it had no ability to fulfill all of the services.

K&M Transportation, Inc., submitted proposals for 29 school bus routes with the Passaic County Education Services Commission (PCESC) for the 2011-2012 school year and was the lowest bidder on eight routes. But K&M later told PCESC representatives that the company could only service two of the routes because the company had but two drivers and two school buses.

An attorney for the Garden State School Bus Contractors Association, said the purpose of bid bonds in the first place is to guard against bidders targeting contracts they know they can’t perform. He added that this practice is common among “fly-by-night” school bus companies that can be costly to tax payers.

“The problem is you that have these reputable school bus companies, like those that are members of the association, who are playing by the rules and are concerned with the safety and well-being of the students they’re transporting,” said Charles Fisher, an attorney with the law firm Windels Marx Lane & Mittendorf, which represented the contractors association. “They have the right insurance, they have the employees, they have the aides, they have the equipment, everything is inspected, and everything is above board.

He added that, instead, companies like K&M are often undercapitalized, may not have properly trained staff or, more importantly may not have the necessary equipment.

“And they’re coming into these public bids and they are winning routes they are not entitled to win because they aren’t playing by the rules,” he continued.

Fisher said that, in his opinion, K&M was trying to improve the odds that it would win the two routes by bidding on more contracts rather than less, knowing full well that it could not fulfill the services on all 29. But, Fisher said, the real problem lied with PCESC, which is supposed to be a gate keeper on such bids but essentially allowed K&M to play the system.

After filing a petition with the state commissioner of education to correct the problem, the matter was turned over to an administrative law judge, who ruled that what K&M and PCESC did was unlawful but stopped short of ordering forfeiture of the bid bonds. Fisher then filed exceptions directly with the commissioner’s office, which also declined to order the forfeiture. The appeal with the appellate division followed.

“In a very real sense, we were saying that the commissioner should have ordered the forfeiture of the bonds, and that was the issue that was squarely addressed by the appellate division,” Fisher said. “If the winning bidder can’t perform a contract, the bond must be pulled.”

“On behalf of the Board of the Garden State School Bus Contractors Association, we are very pleased with the decision,” said Al Van Riper, who serves on the board of the association. “Bus companies seeking to bid on these contracts in the future should make certain that they can perform to the criteria. We have the students’ and taxpayers’ best interest to protect.”

Several attempts to locate phone numbers or e-mail addresses to contact K&M were unsuccessful. Meanwhile, answers to follow-up questions sent to a PCESC representative were not returned to School Transportation News at this writing.

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