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Decision No. 15,977

Appeal of WHITSONS SCHOOL NUTRITION CORPORATION from action of the Board of Education of the William Floyd Union Free School District, Aramark Corporation and Aramark Educational Services, LLC regarding a contract.

Decision No. 15.977

(August 24, 2009)

Sferrazza and Keenan, PLLC, attorneys for petitioner, Joseph Sferrazza, Esq., of counsel

Bond, Schoeneck & King, PLLC, attorneys for respondent board of education, Howard M. Miller, Esq., of counsel

Kral, Clerkin, Redmond, Ryan, Perry & Girvin, LLP, attorneys for respondents Aramark Corporation and Aramark Educational Services, LLC, Andrew J. Mihalick, Esq., of counsel

HUXLEY, Interim Commissioner.--Petitioner, Whitsons School Nutrition Corporation (“Whitsons”), appeals the determination of the William Floyd Union Free School District (“respondent board” or “board”) to award a contract to Aramark Educational Services, LLC (“Aramark”) for food service operations.  The appeal must be dismissed.

On April 27, 2007, respondent board issued a Request for Proposals (“RFP”) for the district’s food service operations for the 2007-2008 school year.  Aramark, the incumbent food services management company, and Whitsons submitted proposals.  On July 9, 2007, respondent board awarded Aramark the contract (“contract”).  This appeal ensued.

Petitioner alleges that the award of the contract to Aramark was irrational, arbitrary and capricious and that respondent board violated General Municipal Law §103(1).  Specifically, petitioner contends that Aramark’s labor projections did not conform to the bid specifications, that Aramark’s labor projections improperly deviated downward from the parameters of an existing collective bargaining agreement, and that Aramark’s variance from bid specifications were material variations that could not be waived.  Petitioner contends that respondent board was required by law to reject Aramark’s bid and accept petitioner’s.  Petitioner requests that the contract award to Aramark be set aside and that petitioner be awarded the contract.

Respondent board maintains that petitioner has failed to meet its burden of proof and is not entitled to the relief requested.  Respondent board alleges that Aramark’s bid was the lowest responsible bid and that it complied with all specifications.  The board contends that in the event Aramark’s bid may have been technically non-conforming, it waived such non-conformity.

Aramark alleges that the petition fails to state a claim, that petitioner fails to establish a primafacie case, that its bid complied with all specifications and that petitioner’s interpretation of the bid specifications was flawed.  Aramark Corporation (as opposed to Aramark) claims that it is not a party to the contract and any claims against it should be dismissed.

The appeal, as against Aramark Corporation, must be dismissed for failure to state a claim for relief.  Section 275.10 of the Commissioner’s regulations requires in pertinent part that a petition “contain a clear and concise statement of petitioner’s claim showing that petitioner is entitled to relief and shall further contain a demand for relief to which petitioner deems himself entitled.”  There is no showing in the petition that Aramark Corporation was a party to or in any way involved with the contract at issue.  Accordingly, the petition with respect to Aramark Corporation must be dismissed.

The entire appeal must be dismissed as moot.  The Commissioner will only decide matters in actual controversy and will not render a decision on a state of facts which no longer exist or which subsequent events have laid to rest (Appeal of Tine, 46 Ed Dept Rep 579, Decision No. 15,600; Appeal of N.C., 46 id. 358, Decision No. 15,532; Appeal of Lombardo, 46 id. 282, Decision No. 15,508).  The contract in question covered the 2007-2008 school year.  Since the term of the contract has ended, and the relief sought relates solely to the award of the contract for that school year, the appeal is moot.

Even if the appeal were not moot, it would be dismissed on the merits.  Contracts subject to competitive bidding shall be awarded “to the lowest possible bidder” (Education Law §305[14]; General Municipal Law §103[1]).  “Petitioner has the burden to demonstrate ‘actual’ impropriety, unfair dealing or some other violation of statutory requirements when challenging an award of a public contract” (Matter of ACME Bus Corp. v. Bd. of Educ. of Roosevelt UFSD, et al., 91 NY2d 51).  There is presumption of regularity which attaches to a school district’s award of a competitively bid contract, and “it is incumbent upon the petitioner to overcome that presumption and establish the action to have been without reasonable foundation” (Matter of Baumann & Sons Buses, Inc. v. Patchogue-Medford UFSD, et al., 231 AD2d 566, 567).  The appearance of impropriety is not sufficient to invalidate a competitively bid contract (Matter of ACME Bus Corp. v. Bd. of Educ. of Roosevelt UFSD, et al., 91 NY2d 51).

In an appeal to the Commissioner, a petitioner has the burden of demonstrating a clear legal right to the relief requested and the burden of establishing the facts upon which petitioner seeks relief (8 NYCRR §275.10; Appeal of Brown, 46 Ed Dept Rep 584, Decision No. 15,602; Appeals of Hubbard, 46 id. 533, Decision No. 15,585; Appeal of Darrow, 46 id. 182, Decision No. 15,477).

The gravamen of petitioner’s claim is that Aramark’s labor projections did not conform to the bid specifications, and that because labor cost is the single largest component of the food service program, this is a material defect which can only be cured by a rejection of Aramark’s bid.  Petitioner argues that it is mathematically impossible for Aramark’s labor figure of $1,118,146 to comply with the bid requirements.

Specifically, petitioner calculates the minimum labor costs (before statutory costs) to be $1,151,000:

     Raw labor costs:  $980,000

     Holiday and sick pay:  approximately $76,000

     Pension and medical:  $96,000

Aramark’s labor schedule shows a total of $1,118,457:

     Wages:  $973,473.29

     Tax:  $69,211.24

     Benefits:  $75,722.47

Petitioner relies on the William Floyd Food Service Bid Required Minimum Labor Schedule:  2007-2008 (“labor schedule”) included in the bid specifications, which lists staff positions, with hours per day and hourly rates listed for each position.  Petitioner calculates a yearly total of $980,772 for raw labor costs based on this schedule.  Petitioner based its calculation on 175 days (for all but three employees), which it asserts is required by the bid specifications.  To support the required days of service, petitioner refers to its own labor cost summary spreadsheet, which it submitted as part of its bid.

Respondents argue that the labor schedule is a staffing schedule of food service workers by job classification, but that it does not require bidders to use the hourly rate or daily hours listed.  Aramark also claims that petitioner overstates the days of service for which food workers must be scheduled.

It is reasonable to conclude that the information listed on the labor schedule which was included in the bid specifications and labeled as “minimum” and “required,” was in fact required, including the positions, hours and rates.  The information does not appear to serve any other purpose, and respondents do not suggest that it does.  However, the source of the days of service figures used by both parties in preparing their bids is unclear.  Petitioner refers to its own spreadsheet and has not demonstrated that the bid specifications require 175 days of service in each school for all employees.  Aramark argues that fewer days of service are required of each cafeteria worker in practice.  Without more, however, I cannot conclude that Aramark was obligated to compute its bid based upon 175 days of service for each cafeteria worker (seeWhitsons Service Corp. v. Bd. of Educ. of Byram Hills CSD, et al., Sup. Ct. Westchester Co., (Adler, J.), April 25, 2005, n.o.r.) and therefore cannot conclude that petitioner’s calculation of $980,000 is the minimum raw labor cost that meets the bid specifications.

Petitioner also contends that additional information included in an addendum to the bid specifications was required and that all bids had to adhere to the collective bargaining agreement terms for benefits for hourly employees.  Specifically, petitioner argues that bidders were required to include $96,000 for “medical-union, pension and buy-out-to employees” and approximately $76,000 for holiday and sick days based on a page entitled “Extra Hourly Payroll Costs and Benefits” and that the cost of substitutes for employees on sick leave must be included.  Petitioner argues, “[A]s a practical matter, the successful bidder cannot renegotiate the existing collective bargaining agreement and is expected to hire the existing staff at their existing rates and benefit structure ....”  Finally, petitioner alleges that the successful bidder is responsible for statutory costs (taxes, unemployment and workers compensation).

Aramark argues that it would be impossible for another contractor to assume its collective bargaining agreement, or to be bound by the terms of its costs and benefits.  Aramark also argues that it is unreasonable, and not required by the bid specifications, for petitioner to assume that a substitute must be hired for every occurrence when a food service worker is on sick leave.

While it may be common and practical for a new food management service company to continue existing staff and to match existing benefits, petitioner has not established that it must, or could, assume the collective bargaining agreement of the incumbent, or that the cost of matching those benefits was required terms of the bid specifications.

Based on the foregoing, I cannot conclude that petitioner has met its burden of proving that Aramark’s bid was noncompliant with the bid specifications and that the award should be nullified.

In light of this disposition, I need not address the parties’ remaining contentions.