Federal Judge Criticizes Mystery Procurement Practices Of Delaware River Port Authority

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A recent federal court decision rescinding a $17.8 million bridge painting contract award to the second low bidder ripped the cover off Delaware River Port Authority (DRPA) procurement practices that were “shrouded in mystery and obscured from public scrutiny.”  Although applying New Jersey law, the reasons underlying the decision of Judge Noel L. Hillman of the U.S. District Court for New Jersey are equally applicable to Pennsylvania bidding disputes.

In May 2016, the DRPA issued a bid for a painting contract for the Commodore Barry Bridge. Seven bids were received. Alpha Painting & Construction Company was the low bidder, with a price of $17,886,000; Corcon, Inc., was second with a price just $10,200 higher. Six weeks later, the DRPA rejected Alpha’s bid as “not responsible” for two reasons: Alpha’s bid was missing OSHA 300 forms, and Alpha did not have reported EMF (experience modification factors) scores that reflect a contractor’s workers’ compensation experience on prior jobs.  The DRPA then awarded the contract to Corcon.

After the DRPA denied Alpha’s protest, Alpha sued the DRPA for an injunction rescinding the award to Corcon and ordering an award to Alpha.  After three days of testimony, Judge Hillman determined that the DRPA’s stated reasons for the rejection of Alpha’s bid were arbitrary and capricious, and ordered the DRPA to award the contract to Alpha.

Regarding the missing OSHA 300 forms, even though there was some question as to whether Alpha’s bid had in fact included the forms, Judge Hillman found the forms to be meaningless and to have played no role in the DRPA’s risk management and safety review.  The DRPA’s reliance on the missing forms as a basis to reject Alpha’s bid was therefore arbitrary:

In short, fifty percent of the reason Alpha’s bid was rejected was its failure to provide something DRPA did not really care about. It is hard to think of something more arbitrary or capricious.

As for the lack of reported EMF scores, for which the DRPA deemed Alpha “non-responsible,” Judge Hillman found that this reason was also baseless:

While it is fair to say DRPA considered EMF factors, as simple as the analysis was, in that former instance DRPA rejected Alpha’s bid for not providing something Alpha did not have and could not have because they performed no work in the narrow circumstances as defined by the bid book. Whether Alpha was actually safe, or had a good workers’ compensation claim record, was irrelevant to the DRPA.

All of this demonstrates that DRPA’s concerted effort to deem Alpha non-responsible was simply an effort to squeeze a square peg in a round hole. No rational person would consider Alpha “non-responsible.”

Judge Hillman also found that the DRPA treated Corcon differently than Alpha, allowing Corcon to supplement its safety data after the bid opening, and modifying Corcon’s bid pricing to make Corcon the apparent low bidder. Judge Hillman also took issue with the DRPA’s entire procurement process, calling it “opaque and unreviewable” and a “black box … obscure and unexplained, and lacking any indicia of transparency or the hallmarks of a deliberative process.”

In the end, Judge Hillman found that the DRPA’s practices were particularly egregious and that the DRPA’s conduct had flipped the initial bidding results (Alpha as low bidder and Corcon as second low bidder) “without any meaningful justification or rational process.” He also found that allowing a rebidding would be adverse to the public good and would be unfair to Alpha:

Alpha is fully capable and qualified to perform the work required under the contract, and it is ready to mobilize immediately. The Court will, and must, flip the award back to its original and proper result. “Only by granting the injunctive relief sought by plaintiff can this court ensure that the door remains tightly closed to the evils which are to be averted.”

What lessons can we take from this remarkable decision?

First, Judge Hillman looked behind a “non-responsiveness” determination by examining whether the bid “defect” (the missing OSHA 300 forms) was even material to the bid process.  This is hardly ever done, as responsiveness determinations are usually rubber stamped by the courts. Judge Hillman’s decision could offer persuasive authority to argue that a public owner’s refusal to overlook a bidder’s failure to supply a missing, but meaningless, form is arbitrary and capricious.

Second, having found error, Judge Hillman refused to permit the DRPA to re-bid the project, which is the typical course of action. Instead, he directed the DRPA to award the contract to Alpha. Judges are normally skittish about deciding which bidder receives a contract award. Of course, where a public owner rejects the low bidder and awards the contract to the second bidder, and is later found to have tilted the scales in favor of the second bidder, a court is less likely to allow a re-bidding. Judge Hillman’s words on this remedy are a powerful reminder of the need for judicial scrutiny of abuses in the public bidding process:

Nonetheless, this Court recognizes the unusual nature of the remedy provided to Alpha in this matter. This Court should not be in the business of awarding bridge painting contracts or substituting its judgment for an agency charged with that important responsibility. But it is equally true that this Court should not stand idly by when a public agency, borne of Congress and financed by two states and the traveling public, acts in violation of its own rules, applies those same rules differently to different entities, creates a façade of rationality and transparency, and fails to provide this Court with any meaningful record to review its decision. On this record, an obligation of deference should not become an abdication of responsibility.

As we have noted, after three days of trial and dozens of exhibits this Court still has no idea who made the decision to award the contract to Corcon or by what deliberate process that decision was made. There are no emails, no minutes of discussions or debate, no memoranda among decision-makers, no witnesses to take responsibility. Instead, there is six weeks of silence, a carefully orchestrated but ultimately hollow administrative denial, and another three weeks of pro forma executive action. Equally important, the stated reasons have fallen away as apparent subterfuge. The bidders, both winners and losers, and the public, deserve better from their appointed officials.

A copy of Judge Hillman’s opinion can be found here.

A Courier-Post article reports that the DRPA intends to appeal Judge Hillman’s decision.

If you need assistance on a public bidding issue, call or email me for a no-cost consultation.  I’ll be happy to assist in anyway possible.

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