Failure to Submit Proper Consent of Surety Is Non-Waiveable Bid Defect

Linkedin Facebook Twitter Plusone Email

In a recent decision, Dragani v. Borough of Ambler, 37 A.3d 27 (2012), the Commonwealth Court of Pennsylvania has ruled that a bid for a borough waste collection contract contained a non-waiveable defect where the bidder failed to include a proper consent of surety from a surety with an at least $20 million of underwriting authority, as per the bid instructions.

While the Court in Dragani recognized that the Supreme Court’s decision in Gaeta granted municipalities more leeway in waiving apparent defects, the Court declined to find that the defect was waiveable under the Gaeta decision.  Instead, the Court held that the borough’s instructions were unambiguous and removed any discretion to waive the consent of surety requirement.  The Court followed its decision in Glasgow v. Pennsylvania Department of Transportation, 851 A.2d 1014 (Pa. Cmwlth. 2004), where it held that, if a defect involves the waiver of a mandatory requirement that the bid specifications treat as non-waiveable, then the defect cannot be waived.

One concern, not explored in the Court’s opnion, is whether the underwriting authority limitation could serve in future bids as a means to disqualify an otherwise qualified bidder whose surety happens not to meet the $20 million threshold, without any real benefit for the municipality.  In Dragani, the bidder’s surety, Fidelity-Maryland, had $16 million in underwriting authority, but its parent had $571 million in underwriting authority.

Nonetheless, the primary lesson from Dragani is that bidders must pay careful attention to the bid instructions, especially those concerning the bid security.  This lesson cannot be overstated.

Linkedin Facebook Twitter Plusone Email
Posted on by Christopher I. McCabe, Esq. in Court Decisions Leave a comment

Add a Comment