Who Can Be Excluded From Public Bidding?

When a public bid is issued, can a municipality refuse to accept or open bids from any bidder it chooses? The answer is, yes and no.  In some cases, a municipality may engage in a pre-qualification process and exclude certain Read more

DGS Issues 2014 List Of Exempt Steel Products

The Pennsylvania Department of General Services has issued its annual list of machinery and equipment steel products which are exempt under the Pa. Steel Products Procurement Act.  The list for 2014 can be found Read more

Schuylkill Products Officers Sentenced To Prison And Ordered To Pay Restitution Of $119 Million For DBE Fraud

In the criminal fraud case involving Schuylkill Products, Inc., and the U.S. Department of Transportation's Disadvantaged Business Enterprise (DBE) program (see my earlier post here about this case), the former Schuylkill Products vice presidents in charge of sales and marketing and field operations received lengthy prison sentences Read more

PA Public Contracts Quoted In The Philadelphia Inquirer

I'm happy to report that PA Public Contracts was quoted today by business reporter Joseph N. DiStefano in his Philly Deals column in the business section of The Philadelphia Inquirer. The column, "Is state in the clear in loan dispute?", discusses Read more

Who Can Be Excluded From Public Bidding?

When a public bid is issued, can a municipality refuse to accept or open bids from any bidder it chooses?

The answer is, yes and no.  In some cases, a municipality may engage in a pre-qualification process and exclude certain bidders, provided that one is mandated or allowed by statute or ordinance.  On the other hand, where there is no statutorily prescribed pre-qualification process, a municipal official cannot exclude certain persons from bidding under the guise of a “pre-qualification” program.  Two not-so-recent cases illustrate this point very nicely.

In Flaherty v. Allegheny Contracting Industries,  Inc., 6 Pa. Cmwlth. 164, 293 A.2d 639 (1972), the City of Pittsburgh advertised for bids for the supply of asphalt.  The city refused one contractor’s bids and returned them on three occasions.  The Mayor then advised the contractor that its name was being stricken from a list of responsible bidders, and that its future bids would be returned unopened. When the contractor’s subsequent bid was returned unopened, the contractor filed suit for mandamus to have its bid opened.  The trial court rejected attempts by the city to have the case dismissed.  On appeal, the Commonwealth Court also rebuffed the city’s efforts, ruling as follows:

The lower court was also correct in holding that the Mayor and the Director of Public Works had a clear legal duty to receive the bids, to open them and read them aloud.  There is nothing in the statute and Ordinance, quoted above, which would authorize the Mayor to institute, by his own initiative, a prequalification procedure under which he could disqualify a prospective bidder.

The Court in Flaherty held that there was a mandatory, ministerial duty to receive and open all bids that were in proper form and timely received. Thus, an order of mandamus could issue.  The Flaherty case can be found here.

In Harris v. City of Philadelphia, 299 Pa. 473, 149 A. 722 (1930), a bidder filed for an injunction against the City of Philadelphia to prevent the award of a contract to a bidder who had been selected under a prequalification plan.  The plan at issue in Harris effectively sanctioned a “favorites” list.  As the Supreme Court stated: “It [the ordinance] further specifies that the answers received shall be scrutinized by the director of the department which is to supervise the performance of the contract, and, if he is satisfied, the prospective bidder’s name shall be placed on what is known as the ‘white list’ of that contract.”

For obvious reasons, this “white list” proved objectionable to the Supreme Court:

It is obvious that [this plan] nevertheless opens wide the door to possible favoritism.  The awarding director can place upon the white list the name of any intending bidder whom he chooses to approve, however irresponsible in fact, and that decision is not reviewable.  On the other hand, he may compel all bidders, who are not favorites of his, to go to the expense of an appeal to the board, which will have before it only the answers to the questionnaire by those the awarding director has excluded from bidding, with no way of knowing whether or not their plant, equipment, experience, and financial standing are superior or inferior to those of the bidders whose names the director has placed on the white list.  This might well result in everybody being excluded except those who are personal or political friends of the awarding director, or whom he knows are conspiring together to seemingly bid in competition, but in reality to destroy all competition; and it certainly would result in giving the contract to one of the favored bidders, if his bid happened to be the lowest of those actually received, though he was not in fact, a responsible bidder, or no more responsible than those who were not permitted to submit bids and might have offered to do the work for a less sum.

Not surprisingly, the Supreme Court found that the prequalification plan at issue in Harris was fatally flawed.  This decision rested on the longstanding rule which was stated as follows:

Following all of our cases, therefore, we again lay down the rule that all bidders on a municipal contract must be accorded the same treatment, for not otherwise can the requirements of the statute be complied with.  The city may, as heretofore she has done, accept and schedule all bids, and then, if acting in good faith, refuse to award the contract to one who is the lowest bidder, because he is not the ‘lowest responsible bidder.’  Or she may, as she is now attempting to do, determine in advance who are responsible bidders, and refuse to receive bids from those who, after treating all alike, she determines are not in that class.  But she may not impose conditions on one prospective bidder, which are not imposed upon all; nor may she enforce a method by which, through favoritism, one person may be conclusively authorized to bid on a pending contract, while another, equally as responsible and perhaps more so, is wholly excluded from even submitting a bid.

The rules from Harris and Flaherty are clear.  All persons are entitled to respond to a public bid, without exception, unless a prequalification process has been duly authorized.  And any prequalification process must apply equally to all interested bidders, and cannot allow for favoritism or cronyism.

If you are a qualified contractor whose bid was timely but was refused, or who was denied pre-qualified status, you should contact experienced counsel immediately to have the bidding process halted until a ruling can issue mandating the acceptance and opening of your bid.

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Posted on by Christopher I. McCabe, Esq. in Bidder Responsibility, Court Decisions Leave a comment

DGS Issues 2014 List Of Exempt Steel Products

The Pennsylvania Department of General Services has issued its annual list of machinery and equipment steel products which are exempt under the Pa. Steel Products Procurement Act.  The list for 2014 can be found here.

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Posted on by Christopher I. McCabe, Esq. in Steel Products Act Leave a comment

Schuylkill Products Officers Sentenced To Prison And Ordered To Pay Restitution Of $119 Million For DBE Fraud

In the criminal fraud case involving Schuylkill Products, Inc., and the U.S. Department of Transportation’s Disadvantaged Business Enterprise (DBE) program (see my earlier post here about this case), the former Schuylkill Products vice presidents in charge of sales and marketing and field operations received lengthy prison sentences and were ordered to pay restitution of $119 million.

The official press release on the sentencing can be found here.  This is from the press release:

“The sentences handed down today, in what is the largest reported DBE fraud case in USDOT history, serve as clear signals that severe penalties await those who would attempt to subvert USDOT laws and regulations,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General. Prime contractors and subcontractors are cautioned not to engage in fraudulent DBE activity and are encouraged to report any suspected DBE fraud to the USDOT-OIG. Our agents will continue to work with the Secretary of Transportation; the administrators of the Federal Highway, Transit, and Aviation Administrations; and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”

According to U.S. Attorney Peter J. Smith, the DBE fraud lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone. SPI, using Marikina as a front, operated in several other states in the Mid-Atlantic and New England regions. Although Marikina received the contracts on paper, all the work was really performed by SPI personnel, and SPI received all the profits. In exchange for letting SPI use its name and DBE status, Marikina was paid a small fixed-fee set by SPI.

This latest news is just more proof, if any was ever needed, that DBE fraud does not pay.  Contractors working on federally-funded highway projects should be especially wary of trying to sidestep the strict DBE rules that govern such projects.  Doing so, as shown by these sentences, can have serious and life-altering consequences.

If you are a contractor working on a federally-funded highway project, and have questions concenrning the US DOT DBE program, feel free to contact me.  I’ll be happy to answer any questions you have.

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Posted on by Christopher I. McCabe, Esq. in General Leave a comment

PA Public Contracts Quoted In The Philadelphia Inquirer

I’m happy to report that PA Public Contracts was quoted today by business reporter Joseph N. DiStefano in his Philly Deals column in the business section of The Philadelphia Inquirer.

The column, “Is state in the clear in loan dispute?”, discusses the Telwell, Inc. v. PSERS Board of Claims decision which I blogged about here.  The Inquirer article can be found here (a subscription may be required) or here.

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Posted on by Christopher I. McCabe, Esq. in General Leave a comment

Ryco Steel Products Procurement Act Lawsuit Settled For $429,000

In December 2013, the Pa. Attorney General’s Office announced a settlement of the Pa. Steel Products Procurement Act lawsuit with the McKeesport-based Ryco companies and their owners.  The firm and its owners will pay $429,000 to settle the lawsuit, and must comply with a seven-year injunction to guarantee that violations of the Steel Act do not occur again.

The official AG press release can be found here.

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Posted on by Christopher I. McCabe, Esq. in Steel Products Act Leave a comment
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