The Pennsylvania Separations Act was enacted in 1913, a century ago. It requires public entities to solicit separate bids and award separate contracts for plumbing, heating, electrical, and ventilating work that is part of a public construction project where the costs of construction generally exceed $4,000.
In recent years, there have been many efforts in the Pennsylvania General Assembly to do away with the Separations Act or to limit its application. None have been successful. This year, there are again efforts brewing in the General Assembly to exclude school construction from the requirements of the Separations Act, with one bill progressing more quickly than others.
On April 17, 2013, HB324 was reported out of the House Education Committee. This bill amends the Public School Code to provide for the removal of the Separations Act requirements for school construction.
The sponsor of HB324 provides this rationale for his bill:
My legislation will relieve school districts of the mandate to comply with the Separations Act and will give them the flexibility to determine whether a single or multiple prime delivery system provides the most efficient and cost-effective way to complete a project.
It remains to be seen whether this latest effort to amend the Separations Act will be successful.
The City of Philadelphia continues its crackdown on abuses in its minority subcontracting program.
On May 6, the Philadelphia Office of the Inspector General (OIG) announced that a former certified, minority-owned business, JHS & Sons Supply Co., was improperly used by ten other prime contractors on City contracts. The OIG previously exposed the improper arrangement between prime contractor William Betz Jr. Inc., and JHS, which resulted in a two-year debarment of the Betz firm. My earlier post on the OIG enforcement action against Betz can be found here.
The ten other contractors identified by the OIG are: Burke Plumbing & Heating, Inc.; Clements Brothers and Sister, Inc.; DMC Environmental Group, Inc.; Buzz Duzz Plumbing, Heating, & Air Conditioning, Inc.; Edward Hughes and Sons, Inc.; Martin Johnson Plumbing and Heating, Inc.; Paragon Contracting; J.J. Magnatta, Inc.; John Stevenson, Inc.; and S. Murawski & Sons. The contracts ranged in value from $100k to $350k. The OIG has reached agreements with eight of these ten prime contractors. JHS has also been removed from the City’s registry of certified, minority-owned contractors.
Inspector General Amy L. Kurland said of her office’s recent action:
It was clear from the beginning that this problem was widespread. These settlements meet our goal of ensuring that companies comply with our antidiscrimination requirements. Our mission is to bring companies into compliance, not to put them out of business.
This latest OIG enforcement action again illustrates the extreme peril that prime contractors face in using “pass-through” entities to satisfy the City’s minority subcontracting requirements. If you think you can get away with it, think again. The City will eventually catch up with you, and by then it will be too late to protect yourself.
It’s that time of year again, when Republican legislators in the Pennsylvania General Assembly seek to amend the Pa. Prevailing Wage Act. There are now several proposals to do just that, and two bills are farther along in the process than the many others that have been proposed. In April, the House Labor and Industry Committee voted along straight party lines to report out of committee two bills proposing changes to the Prevailing Wage Act.
The first bill, HB796, will raise the threshold amount from $25,000 to $100,000.
The second bill, HB665, will exempt routine road maintenance contracts.
In addition to these two bills, still more bills have been proposed. Here is a small sampling of some of the other bills pending in the General Assembly:
HB1095 would impose a 3-year moratorium on the Prevailing Wage Act.
HB999 would exempt KOZs from requirements of the Prevailing Wage Act.
HB1257 would require at least 51% of a project to be paid with public monies before the Prevailing Wage Act would apply.
It seems likely that this year will see some changes to the Prevailing Wage Act. What those exact changes will be still remains to be seen. Of course, these newest proposed amendments may lead nowhere, as the amendments proposed last year never came to pass.
This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post is the bid bond.
A bid bond is a form of bid security and is typically required to be submitted with all bids for public contracts in Pennsylvania. The instructions on public bids will ordinarily describe the bid bond requirements for the bid in question. These instructions should be followed lest the bid security is insufficient and the bid is rejected for that reason. A bid bond is essentially a guarantee, backed by a surety company, that the bidder will execute the contract if it is awarded to the bidder.
The failure of a bidder to execute an awarded contract will expose the surety on the bid bond to liability. That liability is typically 10% of the bid price. The bidder’s failure to execute an awarded contract may also subject the bidder itself to additional liability if the bid bond amount does not cover the spread between the bidder’s price and the next lowest price. Of course, the public entity must strictly adhere to the bidding requirements and award requirements before it can seek to enforce the bid bond. The failure to do so will likely invalidate any attempt to forfeit the bid bond.
Thus, the Commonwealth Court held in Travelers Indem. Co. v. Susquehanna County Comm’rs, 17 Pa.Cmwlth. 209, 331 A.2d 918, 920 (1975), that where a public entity failed to give written notice of its acceptance and provide the contract documents for execution there could be no forfeiture of the bid bond. Likewise, in Hanover Area School District v. Sarkisian Brothers, Inc., 514 F.Supp. 697 (M.D.Pa.1981), the federal district court held that a public entity’s failure to provide the lowest bidder with all the documents necessary to finalize the transaction as required by the bid instructions precluded recovery on the bid bond.
If you are bidder faced with a forfeiture of a bid bond for failure to execute a public contract you may have an out if the award was not made in accordance with the bidding instructions. As always, you should consult with an experienced attorney for assistance.
I recently posted about a not-so-recent December 2011 decision in Scientific Games International Inc. v. Commonwealth of Pa., Department of Revenue, where the Pa. Commonwealth Court held that it had original jurisdiction to hear state contract claims seeking non-monetary relief. Well, it turns out that the Commonwealth Court was wrong. So, forget everything I wrote.
In a decision issued on March 25, 2013, the Supreme Court of Pennsylvania reversed the Commonwealth Court and held that claims arising from state contracts can be brought only in the Pa. Board of Claims. In its decision, the Supreme Court wrote that:
… we conclude that the Commonwealth Court erred in interpreting Section 1724(d) [of the Procurement Code] so broadly as to sanction original-jurisdiction actions in a judicial tribunal over nonmonetary claims against the Commonwealth.
On account of the doctrine of sovereign immunity, however, contractors, bidders, and offerors have limited recourse and remedies. Relative to controversies in matters arising from procurement contracts with Commonwealth agencies, the Board of Claims retains exclusive jurisdiction (subject to all jurisdictional prerequisites), which is not to be supplanted by a court of law through an exercise of original jurisdiction.
The full Supreme Court decision can be found here. The factual background for the Court’s decision can be found in my earlier post.