Commonwealth Court: Offer to Negotiate Renders Proposal Non-Responsive

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Recently, the Commonwealth Court of Pennsylvania had occasion to reiterate a long-standing rule of public bidding that offering counter-terms in a bid will render the bid non-responsive and will result in rejection of the bid.

In 2011, the Pa. Department of General Services issued an RFP for a design build contract for a power plant to serve a new State Correctional Facility.  The RFP sought competitive, sealed proposals.  Pepco Energy Services, Inc., submitted a proposal in response to the RFP, but stated that it expected to be afforded an opportunity to negotiate the terms of the contract documents.  DGS sought clarification from Pepco regarding its expectation of contract negotiations and further informed Pepco that the contract terms were non-negotiable.  Nonetheless, Pepco restated that it expected to negotiate contract terms.  In response, DGS rejected Pepco’s bid as non-responsive on grounds that it contained “conditional” language.

Pepco filed a protest with DGS asserting that, because contract negotiations were contemplated as part of the RFP process, DGS erred in finding that its proposal was non-responsive.  DGS rejected the protest and Pepco filed an appeal with the Commonwealth Court.

On appeal, DGS argued, in part, that Pepco’s alternate language would have allowed it to negotiate the contract terms, whereas the other prospective proposers submitted their proposals based on an understanding that the contract terms were non-negotiable, thus giving Pepco an unfair advantage, and violating long-standing case law requiring all bidders to be treated equally under a common standard.  The Commonwealth Court upheld the DGS decision, and found that Pepco had no right to negotiate the terms of the contract documents, either before DGS found it to be a responsible bidder, or before DGS made a decision as to which proposal was most advantageous.

The lessons here?  First, in a competitive sealed bidding situation, the contract forms are set in stone and are not subject to further negotiation.  They are issued on a “take it or leave it” basis.  To hold otherwise would undermine the basic rule of a level playing field in public bidding.  Second, read the RFP! If it states that the contract documents are non-negotiable, then they are non-negotiable, no ifs, ands, or buts.  Including a statement that the bidder would like to negotiate the contract terms is only an invitation to be rejected as non-responsive.

The decision in PepcoEnergy Services, Inc. v. Department of General Services can be found here.

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