Procurement Code Is Not Violated Where Only One Price Is Considered In Contract Award

Can a Commonwealth agency consider just a single bidder's price and refuse to even look at the prices of other bidders in making a competitive contract award? According to a recent, unpublished decision of the Commonwealth Court of Pennsylvania, the Read more

Commonwealth Court: Bidder Qualification Criteria Can Be Waived Under Gaeta Decision

If a public entity issues a bid and specifies that bidders must have certain minimum experience, can the public entity waive those requirements for the low bidder?  In my view, the answer is no. Ordinarily, specified qualification criteria are for Read more

Commonwealth Court Reaffirms No Right To Hearing On Protest Filed Under Pa. Procurement Code

Is there a right to a hearing on a bid protest filed under the Pa. Procurement Code? The answer is no. In a recent, unreported decision involving a contract issued by the Philadelphia Parking Authority for a new red light Read more

Public Bidding 101: Are Proprietary Specifications Permissible?

On a public bid can a public entity direct a contractor to furnish and install equipment made by only one manufacturer?  This question is raised often by clients who complain when the specifications they are bidding against are viewed as Read more

Procurement Code Is Not Violated Where Only One Price Is Considered In Contract Award

Can a Commonwealth agency consider just a single bidder’s price and refuse to even look at the prices of other bidders in making a competitive contract award? According to a recent, unpublished decision of the Commonwealth Court of Pennsylvania, the answer is yes.

In January 2014, the Pa. Department of Community and Economic Development (Department) issued a Request for Quotation (RFQ) seeking a contractor to design, market, and implement a sale of tax credits.  The RFQ specified that only those bidders whose technical submittal received at least 70% of the available technical points would be considered “responsible” and eligible for selection on the basis of price.  The Department received three bids. After applying the scoring criteria to the bidders’ technical submittals, the Department eliminated all but one bidder for selection on the basis of price.  A protest was filed by one of the eliminated bidders. The Department denied the protest, and an appeal was then taken to the Commonwealth Court.

On appeal, the bidder argued that, by applying a scoring threshold that eliminated all but one bidder and by failing to compare the selected bidder’s price to the other bidders’ prices, the Department violated the requirement of section 513(g) of the Procurement Code that an agency take price into account when awarding a contract.

Section 513(g) of the Procurement Code states:

(g)  Selection for negotiation.–The responsible offeror whose proposal is determined in writing to be the most advantageous to the purchasing agency, taking into consideration price and all evaluation factors, shall be selected for contract negotiation.

The Commonwealth Court rejected the bidder’s argument, holding:

Section 513(g) requires a purchasing agency to take price into consideration when determining which “responsible offeror” should be selected for contract negotiation. This provision neither requires a purchasing agency to revisit its determination that an offeror is not responsible nor does it prohibit a purchasing agency from applying announced criteria to determine that all but one offeror is non-responsible. Here, the Department was faced with only one offeror who met the RFQ’s criteria to be considered a responsible offeror.  Under these circumstances, we cannot say that the Department erred or violated the Procurement Code by considering the cost submittal of that offeror alone.

From a purely legalistic viewpoint, the Commonwealth Court is correct in interpreting section 513(g). But from a competitive bidding viewpoint, where the taxpayers are served by true competition where all bidders’ prices are exposed and considered, there is something just a bit uneasy about allowing a Commonwealth agency to award a contract based on just one price without knowing whether the other prices were lower.  In this case, was the winning bidder’s proposal truly the “most advantageous” to the Commonwealth, if the other bidders’ prices were lower and if the other bidders were also nonetheless qualified to perform the contract, notwithstanding their failure to meet a scoring threshold, considering that technical scoring and comparison of bidders’ qualifications are inherently subjective while the comparison of bidders’ prices is purely objective.

The unpublished decision of the Commonwealth Court can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Leave a comment

Commonwealth Court: Bidder Qualification Criteria Can Be Waived Under Gaeta Decision

If a public entity issues a bid and specifies that bidders must have certain minimum experience, can the public entity waive those requirements for the low bidder?  In my view, the answer is no.

Ordinarily, specified qualification criteria are for the benefit of the public and are intended to place all prospective bidders on a level playing field by informing them of the minimum qualifications and experience that are required for a contract award.  If the public entity specifies, e.g., five years’ experience in the particular work covered by the bid, bidders with less than five years’ experience will likely refrain from bidding knowing that they would be ineligible for an award.  For this reason, changing or relaxing the qualification criteria after the bids are opened is usually a no-no and a violation of the level playing field rule.  If the public entity decides, after the bid has opened, to award the contract to a bidder with, say, only three years’ experience, the public entity has effectively excluded from the bidding, unfairly and to its detriment, the pool of bidders with only three years’ experience.

In a recent, opinion dealing with a protest on a Commonwealth of Pa. RFP, JPay, Inc. v. Department of Corrections, the Commonwealth Court held that qualification criteria stated in a bid or an RFP could in fact be waived by the public entity under the Gaeta v. Ridley School District decision.  This holding breaks new ground in the area of bidder responsibility.

In 2012, the Pa. Department of Corrections issued an RFP for a turn-key “kiosk-like system” that would allow prison inmates to perform such tasks as placing commissary orders, downloading digital media, checking phone time, and receive and send emails.  The RFP required that each proposal contain an appendix detailing the offeror’s prior experience on at least three prior projects with “at least one (1) project where your firm has implemented a project of similar size and scope and one (1) project you have completed that is related to Kiosk like solutions.” The offeror was also required to include client references for each project, and to “provide examples [of] prior experience in providing MP3 players, downloadable digital entertainment (music), communication (email) and information through kiosks designed for a correctional environment” with examples and references related to the provision of those services within the previous five years.  The RFP also stated that the only two requirements were mandatory: that the bid be signed and timely received.  On the other hand, the RFP reserved the right to waive technical or immaterial nonconformities in the bid.  Three bids were received, and Global Tel*Link (GTL) was selected for negotiations.

One of the bidders, JPay, Inc., filed a protest, claiming among other things that GTL was not a qualified bidder.  The contracting officer responded to the protest that GTL satisfactorily demonstrated its prior experience by submitting ten references which demonstrated that GTL was in the process of implementing a similar kiosk system in South Carolina prison facilities and was planning to install such a system in Kentucky by the end of 2013. The protest was denied and JPay filed an appeal to the Commonwealth Court.

On appeal, JPay’s argument was framed as follows: “JPay alleges that, based upon information it has uncovered outside the RFP process, GTL provided inaccurate information in its submission and therefore could not have met the minimum technical requirements outlined in the 2012 RFP or earned the highest technical score.”

On this point, the Commonwealth Court stated:

The Designee held that the requirement in the 2012 RFP that offerors submit information related to their prior experience was not mandatory and OA was therefore authorized to either waive this requirement or consider it in the scoring. Even assuming JPay’s allegations regarding GTL’s experience are true, we agree with the Designee’s conclusion. The text of the 2012 RFP was clear that there were only two mandatory requirements — the timeliness of receipt of the proposal and signature of the offeror on the proposal — and that OA could waive any other non-conformity, allow the offeror to cure or consider the non-conformity in the scoring. While the 2012 RFP provides that offerors “must” submit information related to their experience on prior projects, a requirement phrased in the imperative does not necessarily make the requirement mandatory.

In my view, the Court’s opinion represents a monumental shift in thinking found in numerous public bidding decisions from years past.  While it is true that whether a bidder is qualified or responsible is typically a decision vested within the sound discretion of the public officials making that decision, and that courts are loathe to second guess decisions on bidder qualifications and responsibility, at the same time it has also been true that specified qualification criteria cannot be changed after the bids have been opened. To allow the criteria to be changed dramatically or waived entirely, as the Court now suggests is permitted under Gaeta, unlevels the playing field, and invites the potential for favoritism and corruption into the public bidding process.

I, for one, see great potential for harm in the court’s decision.  The holding in JPay, Inc. now opens the door wide open to the potential for all sorts of mischief hidden under the guise of public officials determining whether a bidder meets the pre-specified qualification criteria.

The Court’s decision can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Specifications, Bidder Responsibility, Responsibility Leave a comment

Commonwealth Court Reaffirms No Right To Hearing On Protest Filed Under Pa. Procurement Code

Is there a right to a hearing on a bid protest filed under the Pa. Procurement Code? The answer is no.

In a recent, unreported decision involving a contract issued by the Philadelphia Parking Authority for a new red light camera system in the city of Philadelphia, the Commonwealth Court has re-affirmed long-standing precedent that a hearing is not mandatory on a protest filed under the Pa. Procurement Code.  Under 62 Pa. C.S. § 1711.1(e), whether to conduct a hearing is within the “sole discretion” of the head of the purchasing agency.  The Commonwealth Court also held that, under the Pa. Procurement Code, 62 Pa. C.S. § 1711.1(d),  it is not mandatory for a contracting officer to file a response to a protest before issuance of a determination by the agency head.  Finally, the Commonwealth Court found that the denial of a stay of procurement was not in error where the agency head had determined that the protest was clearly without merit and had articulated the substantial interests that would be harmed by a stay.

A copy of the Commonwealth Court decision in Am. Traffic Solutions, Inc. v. Phila. Parking Auth., can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Leave a comment

Public Bidding 101: Are Proprietary Specifications Permissible?

On a public bid can a public entity direct a contractor to furnish and install equipment made by only one manufacturer?  This question is raised often by clients who complain when the specifications they are bidding against are viewed as “proprietary” in nature.  Is this legal, they ask?  Can the public entity really limit the specified equipment to a sole manufacturer?  As always, the answer is, “it depends,” although it is safe to say that all proprietary specifications should be viewed initially as inherently suspect and contrary to the spirit of public and competitive bidding.

The rare, but easy to justify case is where the equipment specified is intended to complement or replace existing unique equipment.  Thus, in Silsby Mfg. Co. v. City of Allentown, 153 Pa. 319, 26 A. 646 (1893), the Supreme Court of Pennsylvania held that the purchase of replacement flues for a patented engine, which could not be bought from any other supplier, was not subject to competitive bidding.  In the same vein, if the public entity could buy such unique equipment without competitive bidding, the public entity will likely be permitted to specify the same equipment in the specifications for a contract to furnish and install the same equipment.

The more common, but harder to justify case is where the equipment specified is clearly proprietary (i.e., made by a sole manufacturer), but where the public entity fails to specify acceptable, alternative equipment, or fails to use the words “or equal” after specifying the base equipment.  In this day and age, it is extremely rare that there are not competing sources for building systems equipment.  Today, major pieces of building equipment (e.g., plumbing or mechanical equipment) are manufactured by a multitude of competing manufacturers, and it is fair to say that all operate in essentially the same manner with the same performance and results. In fact, it is the rare manufacturer who has cornered the market for a piece of building systems equipment.

The only reported court decision in Pennsylvania dealing even remotely with proprietary specifications is Direnzo Coal Co. v. Dep’t of Gen. Servs., 825 A.2d 773 (Pa. Cmwlth. 2002).  In Direnzo, the issue was whether the specified ash content of anthracite coal (12.6%) was unduly restrictive and limiting of competition.  The court rejected the attempt to set aside the procurement, finding:

DGS has discretion to prepare necessary specifications to meet its minimum needs. As addressed above, the change in the maximum allowable ash content from 14% to 12.6% was developed in order to ensure compliance with federal and state regulations pertaining to particulate matter emissions. Therefore, Specification C-80 reflects the legitimate needs of the Commonwealth.

The decision in Direnzo can be found here.

The Pennsylvania Department of General Services Procurement Handbook, Part I, Chapter 13, has this to say about “proprietary specifications”:

Since the purposes for competitive bidding require that all responsible bidders shall have the opportunity to compete, a specification or SOW [statement of work] that has the effect of putting unnecessary obstacles in the way of potential bidders is faulty and illegal. A proprietary specification or SOW has the effect of severely restricting competition.

Recently, I handled a bid protest where the school district specified as “base bid” equipment certain manufacturer-specific pieces of HVAC equipment.  The school district did seek other pricing via alternates and thus agreed that this other “alternate” HVAC equipment would achieve the same result with the same performance as the base bid-specified equipment.  However, rather than specifying all of the HVAC equipment manufacturers as acceptable “base bid” equipment, or using the words “or equal,” the school district elected to favor certain manufacturers over others.  The school district’s attempt to seek alternate pricing for alternative manufacturers proved ineffective where the “base bid” equipment could be purchased only through one manufacturer’s representative and where the representative offered only a lump sum quote for all equipment and refused to provide any “breakout” pricing.  This refusal prevented bidders from providing alternate pricing for alternative heat pumps, as they could not obtain separate pricing for the base bid heat pumps.  Due to the protest I filed, the school district was forced to re-bid the HVAC contract.  This case illustrates the peril of proprietary specification – it is usually not cost effective for the public owner, and it usually limits competition and can lead to higher pricing which is the opposite intent of public bidding.

If you are a contractor faced with a proprietary specification, your best bet is to bring it to the attention of the public owner before bids are due. You should demand the right to offer a substitute that is equivalent to the specified equipment and you should seek to have this substitute equipment accepted as equivalent in all respects.  If this does not work, you should contact experienced counsel who can persuade the public owner of the error of its ways – that the proprietary specification is contrary to the spirit of public bidding and open and fair competition.  Whatever it does, the contractor should not wait until after the bids have been submitted and opened. By then it may be too late.

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Posted on by Christopher I. McCabe, Esq. in Bid Specifications, Court Decisions, Public Bidding 101 Leave a comment

Contract Award Is Not A Contract, But Bidder May Pursue Claim For Damages For Posting Of Bonds

When is a contract award a contract? Virtually never.  Rather, a contract award is just that – an award.  It is not a binding contract and imposes no obligation on the public entity.  In the words of Billie Jean King, a contract award is as fleeting as victory.

Recently, in the case of Allan A. Myers LP v. Montgomery County, the Commonwealth Court of Pennsylvania re-affirmed this long-standing principle of public contracting law.  In 2011, Montgomery County issued a request for proposals for roadwork.  After rejecting a bid from another bidder, the Montgomery County Commissioners adopted a resolution accepting the bid of Allan A. Myers LP (Myers).  Later, when the contract award to Myers was challenged by the rejected bidder, the County Commissioners adopted a second resolution rescinding the award to Myers.  Thereafter, Myers filed suit, seeking damages for breach of contract.  The trial court rejected the claim, holding that merely awarding a contract does not create a binding obligation on the public entity to actually execute a contract.

On appeal to the Commonwealth Court, Myers argued that a contract was formed when the County Commissioners adopted the resolution accepting the bid and awarding a contract to Myers.  Myers also argued that it was entitled to pursue damages for the costs related to procuring the required bonds under a non-contractual theory of recovery.  The Commonwealth Court rejected the appeal by Myers, holding that the Second Class County Code governed the award of the contract to Myers and required a signed, written contract (and not simply a resolution).  The Commonwealth Court followed the seminal case of Crouse, Inc. v. School District of Braddock, 19 A.2d 843 (Pa. 1941), where the Supreme Court reasoned that:

When a municipal body advertises for bids for public work and receives what appears to be a satisfactory bid, it is within the contemplation of both bidder and acceptor that no contractual relation shall arise therefrom until a written contract embodying all material terms of the offer and acceptance has been formally entered into. The motion whose adoption is evidenced by the minutes of the school district in the instant case meant merely that the proposal was accepted subject to the preparation and execution of a formal contract or subject to the motion being rescinded before the contract was executed. A preliminary declaration of intention to enter into a formal contract, which was all the motion adopted amounted to, did not in any way limit the school directors’ freedom of future action.

Thus, Montgomery County was free to rescind the award to Myers without liability for breach of contract.  The first lesson here is that the public entity holds virtually all of the cards in the public bidding and contracting context.  Until a formal public contract is signed and executed, there is no contract.  It’s as simple as that.

On the other hand, the Commonwealth Court gave Myers a green light to pursue its claim for damages from having to post bonds in order to preserve its contract award.  In its Complaint against Montgomery County, Myers had alleged that the procurement of the bonds impaired its “ability to seek or to secure other contracts and work which required bonds.” Of course, how strong this claim is remains to be proven.

Significantly, to my knowledge, this is the first time that an appellate court in Pennsylvania has allowed the potential recovery of damages related to the rescission of a public contract award.  Normally, a disappointed bidder has no right to recover damages, and the Commonwealth Court reiterated this long-standing rule by advising Myers that it could not seek damages for any expenses related to procuring the bonds in connection with its bid as these expenses would have been incurred by all bidders. See J.P. Mascaro & Sons, Inc. v. Bristol Township, 505 A.2d 1071, 1073 (Pa. Cmwlth. 1986)(a disappointed bidder has sustained no injury which entitles him to redress in court).

So, the second lesson here is that, if you receive a contract award, and post the necessary bonds, and the contract award is then rescinded, you may be able to recover damages relating to the posting of the bonds.  Of course, such a claim will be exceedingly difficult to prove.

The decision in Allan A. Myers LP v. Montgomery County can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions Leave a comment
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