Christopher I. McCabe, Esq.

Pa. Board of Claims Retains Exclusive Jurisdiction For State Contract Claims

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I recently posted about a not-so-recent December 2011 decision in Scientific Games International Inc. v. Commonwealth of Pa., Department of Revenue, where the Pa. Commonwealth Court held that it had original jurisdiction to hear state contract claims seeking non-monetary relief.  Well, it turns out that the Commonwealth Court was wrong.  So, forget everything I wrote.

In a decision issued on March 25, 2013, the Supreme Court of Pennsylvania reversed the Commonwealth Court and held that claims arising from state contracts can be brought only in the Pa. Board of Claims. In its decision, the Supreme Court wrote that:

… we conclude that the Commonwealth Court erred in interpreting Section 1724(d) [of the Procurement Code] so broadly as to sanction original-jurisdiction actions in a judicial tribunal over nonmonetary claims against the Commonwealth.

***

On account of the doctrine of sovereign immunity, however, contractors, bidders, and offerors have limited recourse and remedies. Relative to controversies in matters arising from procurement contracts with Commonwealth agencies, the Board of Claims retains exclusive jurisdiction (subject to all jurisdictional prerequisites), which is not to be supplanted by a court of law through an exercise of original jurisdiction.

The full Supreme Court decision can be found here.  The factual background for the Court’s decision can be found in my earlier post.

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Posted on by Christopher I. McCabe, Esq. in Board of Claims, Court Decisions, Procurement Code Leave a comment

Bid Protests 101: Standing and Timing

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This is the first in a series of posts on bid protests in Pennsylvania.  This post covers standing – who can file a bid protest – and when the protest must be filed.

For contracts awarded by a local entity, such as a township or a school district, a bid protest can be filed in Common Pleas Court only by a taxpayer of the entity awarding the contract.  A disappointed bidder, who is not also a taxpayer, cannot file a bid protest with the Common Pleas Court.  This rule of standing stems from the bedrock principle that the bidding laws are for the benefit of the public and taxpayers at large, and are not for the benefit of individual bidders.  A bid protest on a local contract should be filed as soon as possible after the basis for the protest becomes known.  If the contract has been awarded by the local entity, the  bidder receiving an award of the contract must be named in the bid protest lawsuit.

For state contracts, the Pa. Procurement Code, at 62 Pa.C.S. § 1711.1, specifies that a bidder or prospective bidder who is “aggrieved in connection with the solicitation or award of a contract” may protest to the head of the purchasing agency in writing.  A bid protest on a state contract must be filed within seven days after the bidder knew or should have known of the facts giving rise to the protest.  If the protestant is a prospective bidder, the protest must be filed prior to the bid opening.  In no event can a protest be filed later than seven days after the date the contract has been awarded.  If a taxpayer wants to file a bid protest on a state contract, it can do so, but only by filing suit in the Commonwealth Court.

Bid protests can cover all aspects of the bidding process.  Some of my later posts will cover potential areas for bid protests.

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

Disappointed Bidder On State Contract Has No Due Process Rights

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In a recent, unreported decision concerning a bid protest for a state contract, the Pa. Commonwealth Court reaffirmed its position that a disappointed bidder for a state contract has no due process rights in connection with the award of the contract.  Therefore, the bidder has no right to a hearing on its bid protest.  Instead, the bidder has only those protest rights enumerated in the Pa. Procurement Code.  The Court ruled that a prior decision finding due process rights was expressly overruled by later enacted legislative amendments to the Procurement Code.

The Commonwealth Court also held that it was proper for the winning bidder to participate in the bid protest.

The Court’s full decision, in Corizon Health, Inc. v. Department of General Services, can be found here.

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

DGS Publishes List of Exempt Steel Products

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On February 9, 2013, the Pa. Department of General Services finally published in the Pa. Bulletin a list of exempt machinery and equipment steel products, as authorized under section 4(b) of the Steel Products Procurement Act (73 P. S. § 1884(b)).

The DGS notice listing the exempt steel products can be found here.  The DGS statement of policy relating to its notice can be found here.

According to the DGS notice, the public has 30 days to submit comments regarding the list.  Comments can be submitted in writing to: Deputy Secretary for Public Works, Department of General Services, 18th and Herr Streets, Harrisburg, PA 17125. Comments can also be submitted by e-mail to: ra-steel@pa.gov.

My prior post on the amendment to the Steel Products Procurement Act mandating a list of exempt products can be found here.

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

Commonwealth Court Can Hear State Contract Claims For Non-Monetary Relief

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[UPDATE: The case discussed in this post is no longer valid.  The Supreme Court has overruled the Commonwealth Court.]

Despite common misperception, the Pa. Board of Claims is not the exclusive forum for all state contract claims.

In a decision from December 2011, Scientific Games International Inc. v. Commonwealth of Pa., Department of Revenue, the Pa. Commonwealth Court held that it has jurisdiction to hear state contract claims seeking non-monetary relief.  The decision concerned an RFP issued by the Department of General Services (DGS), on which there were two bidders, GTECH, the incumbent contractor, and its competitor, Scientific Games.  Scientific Games was awarded the contract, which it executed (DGS did not execute contract).  GTECH then protested.  The protest was rejected by DGS and was also found to be in bad faith.  Nevertheless, DGS canceled the RFP, stating that the cancelation was in its best interests.

Scientific Games then filed a complaint in the Commonwealth Court, claiming that it had a contract with the state and seeking specific performance of the contract and other non-monetary relief.  DGS filed objections to the complaint, arguing that the Board of Claims had exclusive jurisdiction over state contract claims and that Scientific Games had an adequate administrative remedy.

The Commonwealth Court rejected the arguments of DGS that the Board of Claims has exclusive jurisdiction of all claims arising out of state-issued contracts. The Commonwealth Court relied upon a provision in the Pa. Procurement Code concerning the jurisdiction of the Board of Claims which states: “Nothing in this section shall preclude a party from seeking nonmonetary relief in another forum as provided by law.”  The Commonwealth Court also held that the administrative remedies did not apply as the relief being sought by Scientific Games was non-monetary in nature.

This decision allows state contractors another potential forum for determination of their contract disputes with the state, provided, of course, that the disputes do not seek a monetary payment from the state.

The full court decision can be found here.

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

When A Claim Is Not A Claim

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When is a claim not a claim?  When it’s not.

In K-B Offset Printing, Inc. v. Department of General Services, a not-so-recent unreported decision, the Pa. Commonwealth Court held that a letter sent by a contractor to the Pa. Department of General Services and asserting entitlement to more than $1 million in contract underpayments did not constitute a “claim,” as that term is defined in the Pa. Procurement Code.  As a result, the contractor was barred from pursuing its claim before the Pa. Board of Claims due to its failure to exhaust administrative remedies. (Under the Procurement Code, a contractor must first file a claim with the contracting officer before it can proceed before the Board of Claims, and the claim must be filed within six months of the date it accrues.)

A five-year contract between K-B Offset Printing and the state had expired in May 2011.  An audit by K-B discovered that K-B was entitled to additional compensation, due to contractual price adjustments that were to occur every six months but were never implemented.  In June 2011, K-B sent a letter to DGS demanding the underpayments.  While DGS conceded that it had not made the necessary price adjustments, DGS refused to recognize the K-B claim to additional payments, basing its decision on its belief that K-B’s claims were barred by a six-month statute of limitations.

K-B then filed a claim with the Board of Claims.  DGS objected, claiming that the Board lacked jurisdiction because K-B did not first exhaust its administrative remedies by filing a claim with the contracting officer.  The claim was then dismissed by the Board of Claims.  On appeal, the Commonwealth Court accepted DGS’s argument that K-B’s claim was not ripe because K-B did not first file a claim with the contracting officer before it proceeded with filing its claim with the Board of Claims.  The Commonwealth Court held that K-B’s June 2011 letter was not a “claim,” and that K-B’s claim for the additional payments did not accrue until DGS sent the July 2011 letter which stated that DGS would not make any further payments.  The Court rested its holding on a rule of the Supreme Court that a “claim” does not accrue until a claimant is affirmatively notified that it will not be paid by the Commonwealth.

At first blush, the court’s reasoning appears to be a monumental splitting of hairs. K-B sends a letter to DGS demanding more than $1 million as a matter of right under a contract.  That looks and sounds like a claim.  DGS then sends a letter conceding that it goofed on the pricing adjustments, but refusing to pay any more money to K-B due to a legal technicality.  That looks and sounds like a denial of a claim.  Nonetheless, the Commonwealth Court holds that a “claim” must still be filed with the contracting officer, even if such a claim is identical to the first letter and is doomed to ultimate failure.  However, the first letter was not a claim because at that time DGS had not yet stated that would not pay K-B the underpayments. Until that statement was made by DGS, there was no “claim” that could be filed and pursued.

The moral of the story?  File the paperwork, and dot your i’s and cross your t’s, even if the claim is pre-destined to be rejected and doomed to failure.  The Commonwealth Court has now made it abundently clear that even a pointless gesture must be pursued in order to perfect a claim before the Board of Claims.

The K-B Offset court decision can be found here.  Read it and be forewarned.

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Posted on by Christopher I. McCabe, Esq. in Board of Claims, Court Decisions, DGS, Procurement Code Leave a comment

Reminder: E-Verify Now The Law For Public Works Contracts In Pennsylvania

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Effective January 1, 2013, E-Verify is now in place for employment verification for public works contracts in Pennsylvania. My earlier post on E-Verify can be found here.

The Pa. Department of General Services (DGS) has a new page on its website that details the E-Verify requirements and provides a link to a new employment verification form created by DGS for use by public works contractors and subcontractors.  The new DGS page can be found here.

The new DGS regulations (4 Pa. Code. Chapter 66) can be found here.

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Posted on by Christopher I. McCabe, Esq. in E-Verify Leave a comment

Former Philadelphia School Superintendent Ackerman Directed Award of No-Bid Contract

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According to a recent Inquirer article, the Philadelphia School Reform Commission has concluded that former Philadelphia School Superintendent Arlene C. Ackerman directed Philadelphia School District staff to award a controversial $7.5 million no-bid contract for surveillance cameras to a small minority-owned firm in 2010.  The Philadelphia Inquirer article reporting the SRC’s conclusion can be found here.

My earlier post on the lawsuit which was filed by the company which lost the contract can be found here.  This news should bolster the chances of the company in its lawsuit against the School District.

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

City of Phila. Contractors Pay $400K To Settle Alleged Violations of M/W/DSBE Contracting Requirements

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The City of Philadelphia has once again taken enforcement action in connection with its M/W/DSBE contracting requirements.

Under a no-fault settlement agreement signed with the City on December 13, 2012, two City contractors, Aramark Correctional Services and Strother Enterprises, Inc., have agreed to pay a total of $400,000 to settle the City’s claim that the companies circumvented the City’s minority-business requirements and anti-discrimination policies by submitting inaccurate invoices to the City for payment under food services contracts with the Philadelphia Prisons.

The City’s investigation confirmed that Strother was a City-certified MBE and performed actual work in connection with the Prison food services contracts, and that the arrangement between Aramark and Strother did not increase the amounts paid by the City under the Prison food services contracts.  Nonetheless, the City found that Aramark overreported the participation of Strother on the food services contracts. The City alleged that, instead of paying at least 20% of the contract value to Strother, as specified in the contract, Aramark, through the use of a circular billing arrangement, in effect paid Strother approximately 4% of the contract value, an overstatement of more than $2 million.

This is the fourth enforcement action taken by the City this year.  My posts on the City’s earlier enforcement actions can be found herehere and here.

If you are a City contractor and you think you can evade the City’s M/W/DSBE contracting requirements, think again!  The City’s Inspector General is deadly serious about enforcing the City’s M/W/DSBE contracting rules.  If you violate them, you will eventually get caught.  When that happens, you will pay a hefty price.  Don’t make that mistake!  Get sound legal advice before you proceed down a path of no return and potential debarment and significant fines and penalties.

The executive summary of the settlement can be found here.  The settlement agreement can be found here.

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Posted on by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE Leave a comment

Public Bidding 101: Rejection of All Bids

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This post is another in a continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post concerns the rejection of all bids by the public entity.

There are many times that a public entity solicits bids, only to reject all of the bids and conduct a re-bidding.  The reasons for a rejection of all bids may be due to the bid prices exceeding a preliminary construction estimate, or due to a non-responsive, but extremely attractive, low bid that can be easily corrected on a re-bidding, thereby ensuring that the pubic entity gets the best price available.  Clients often ask me whether this is allowed and what they can do to challenge this type of conduct.  Their concerns stem, in part, from the exposure of their bids and their prices which many fear leads to a competitive disadvantage on the re-bidding.  Unfortunately, there is little to stop such conduct. 

First, bidders themselves have no standing to complain of such conduct.  Only a taxpayer can complain and sue to stop such conduct.  Second, there is really no legal basis to stop such conduct.  If a statute allows it, or if the bidding instructions permit it, which is almost always the case, a public entity is free to reject any and all bids, for good reason or for no reason. 

In Weber v. City of Philadelphia, 437 Pa. 179, 262 A.2d 297 (1970), a seminal case in the area of public bidding, the Pennsylvania Supreme Court noted:

“…if a municipality, in connection with competitive bidding, is empowered to do so, it may reject any and all bids in the absence of fraud, collusion, bad faith or arbitrary action…”

As the Supreme Court noted in Weber, the only limitation on the public entity’s power is where such decision is influenced by fraud, collusion, or is committed in bad faith, or constitutes arbitrary action.  But these are high hurdles to surpass and I have never encountered a situation where a court has enjoined the rejection of all bids. 

So, if a public entity decides to reject all bids, there is very little that anyone can do about it. For additional enlightenment on this topic, the Weber case can be found here.

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