DSBE Contracting Rules

The City of Philadelphia has yet again taken action against a City contractor – William Betz Jr. Inc., a plumbing supply firm – for violation of the City’s minority contracting program and anti-discrimination policy (now re-authorized in Executive Order No. 3-12). This is the third enforcement action taken by the City this year. My posts on the City’s earlier enforcement actions can be found here and here.

The City and the Betz firm signed a “no-fault” agreement under which the firm agreed not to participate on City contracts for two years, effective October 23, 2012, essentially a two-year debarment. The City found that the Betz firm had committed violations on at least 15 City contracts. The agreement resulted from debarment proceedings which were instituted by the City earlier this year and which stemmed from a claim by the City that the Betz firm had colluded with two other firms to make it appear that a City-certified minority vendor had provided equipment and supplies for a government-funded weatherization project when the minority vendor was paid only for the use of its name and minority certification. As part of its agreement with the City, the Betz firm also agreed to pay the City $128,000 within 90 days.

As I have stated previously, if you are a City contractor or supplier and you think you can evade the City’s M/W/DSBE contracting requirements, think again! There is very good chance that you will get caught eventually, and, when that happens, you will likely 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.

The City’s full press release on its agreement with the Betz firm can be found here.

Posted on October 25, 2012 by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE Comments Off

City of Phila. Issues New Executive Order for M/W/DSBE Contracting Program

On September 20, 2012, Philadelphia Mayor Michael A. Nutter signed Executive Order No. 3-12 which reauthorizes the City’s Office of Economic Opportunity (formerly known as MBEC) as well as the City’s antidiscrimination policy and program for contracting and subcontracting opportunities on City contracts for minority business enterprises, woman business enterprises, and disabled business enterprises (M/W/DSBEs).

Some of the differences between Executive Order No. 3-12 and the prior Executive Orders on the same topic include the following:

the prior term “good faith efforts” is replaced by a new term “best and good faith efforts”
the prior term “commercially acceptable function” is replaced by the term “commercially useful function” which is borrowed from the regulations for the U.S. Department of Transportation DBE program
OEO no longer certifies M/W/DSBEs but accepts certifications from other certifying agencies and maintains a a M/W/DSBE registry (this has been the case since March 2010)
the two-step appeal process for bidders whose bids are rejected as non-responsive is eliminated and rejected bidders now have only a single and final appeal to the OEO Executive Director

Executive Order No. 3-12 applies to City of Phila. bids advertised and/or opened on or after September 4, 2012.

As always, contractors bidding for City contracts to which Executive Order No. 3-12 applies must carefully abide by the solicitation and commitment requirements of the City’s M/W/DSBE program, and should seek the assistance of experienced legal counsel if they believe that they will be unable to satisfy specified M/W/DSBE participation ranges, or if their bids are rejected as non-responsive for failure to satisfy the specified M/W/DSBE participation ranges and to show best and good faith efforts.

Executive Order No. 3-12 can be found here.

Posted on October 18, 2012 by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE Comments Off

GBCA to Host DBE Seminar on October 25 and 26

On October 25 and 26, 2012, the General Building Contractors Association will host a two part seminar on navigating disadvantaged business enterprise programs in the public contracting realm, for both federally-funded and locally-funded contracts.

Topics to be covered will include: (1) Bidding Requirements/Concerns; (2) Post-Award Enforcement/Compliance; and (3) Best Practices.

I will be in attendance as a presenter on both days, and I am looking forwarding to sharing my knowledge and experiences on these important topics.

Information on the GBCA seminar can be found here.

Posted on October 12, 2012 by Christopher I. McCabe, Esq. in DBE/MBE/WBE Comments Off

Right-to-Know Law Requires Disclosure of Bids Submitted to Contractor Performing Government Function

In a recent decision interpreting the Pa. Right-to-Know Law, the Pennsylvania Supreme Court ruled that the Law required the disclosure of public bids received by a private contractor standing in the shoes of a public entity.

In SWB Yankees, LLC v. Wintermantel, 45 A.3d 1029 (2012), the Supreme Court held that documents in the possession of a private entity serving as the management agent for a municipal authority in the operation of a minor league baseball stadium were subject to disclosure under the newly enacted Right-to-Know Law.

In 2008, the Multi-Purpose Stadium Authority of Lackawanna County entered into a management agreement with a private entity, which vested the private entity with the overall management and control of the day-to-day operations of a municipal-owned baseball club, the Scranton/Wilkes-Barre Yankees, and a municipal-owned minor league stadium.

When the SWB Yankees awarded a new contract for concessionaire operations at the stadium, a newspaper reporter for sought copies of the concessionaire bids from the Stadium Authority. The Authority’s solicitor denied the Right-to-Know request, stating that the Authority did not possess such information. While the Right-to-Know Law applies to certain records in the possession of third parties, like the SWB Yankees, the solicitor claimed that the SWB Yankees was not performing a governmental function on behalf of the Authority and refused to disclose the bids.

The section of the Right-to-Know Law that cover public records in the hands of private parties states as follows:

A public record that is not in the possession of an agency but is in the possession of a party with whom the agency has contracted to perform a governmental function on behalf of the agency, and which directly relates to the governmental function and is not exempt under this act, shall be considered a public record of the agency for purposes of this act.

The Supreme Court rejected the solicitor’s interpretation of the Right-to-Know Law, and held that the Authority was required to disclose any written concessionaire bids for the stadium.

This decision could have far-reaching consequences for public contractors across the Commonwealth. If you are a contractor performing a core and traditional government function – as opposed to simply doing work for the government – then the records of bidding and your performance will likely be subject to disclosure under the Right-to-Know Law. On the other hand, if you are a contractor performing services or work for a public entity, there is still the chance that the records of your work will be subject to disclosure.

A full copy of the Supreme Court’s decision can be found here.

Posted on October 2, 2012 by Christopher I. McCabe, Esq. in General Comments Off

Public Bidding 101: Contract Award

This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post is the contract award – when it must be made and who is entitled to the award.

Under the Pa. Procurement Code, 62 Pa.C.S. § 3911, the award of a public contract must occur within 60 days of the bid opening. This deadline can be extended by written consent signed by the bidder and the public entity. Thereafter, under 62 Pa.C.S. § 3912, once the contract is awarded, it must be executed by the public entity within 60 days of the award. The failure of the public entity to meet these deadlines, absent a written waiver by the successful bidder, will release the successful bidder from any liability on its bid and will entitle all bidders to the return of any posted bid security.

Who is entitled to the contract award? Ordinarily, the lowest responsive and responsible bidder is entitled to the award of the contract. For my post on bid responsiveness, click here. For my post on bidder responsibility, click here. Where the lowest bidder is either non-responsive or non-qualified, the contract may be awarded to a bidder whose price is not the lowest. In Pearlman v. City of Pittsburgh, 304 Pa. 24, 155 A. 118 (1931), the Supreme Court of Pennsylvania observed that, once the pubic entity has determined the lowest responsible bidder, discretion ends, and the contract, if it is to be awarded, must be given to that bidder.

Posted on September 20, 2012 by Christopher I. McCabe, Esq. in Procurement Code, Public Bidding 101 Comments Off

City of Phila. Local Business Entity Preference

Are you a contractor located in the City of Philadelphia and doing business with the City? If so, you may qualify for a bidding preference that could help you land even more City contracts.

A well-known secret of City contracting is the local business entity (LBE) preference. Under the LBE preference, the bid price of a certified LBE is adjusted downward by 5% so that a bid price of $100,000 is treated as $95,000 for purposes of determining the lowest bid price for contract award. After contract award, the LBE is still paid its full bid price.

A contractor can become certified as an LBE if, in the preceding 18 months, (a) it has had its principal place of business in the City, or (b) it has had an office in the City and either more than 1/2 of the contractor’s full-time employees, or more than 50 of the contractor’s full-time employees, have worked in the City at least 60% of the time. The contractor must also have a valid business privilege license for the same preceding 18 months and must have filed a business privilege tax return in the preceding 12 months. The City’s LBE certification is good for 5 years, but is subject to an annual recertification.

It is critical that a contractor awarded a City contract due to its LBE status maintain its LBE status during the term of the City contract. The failure to do so will result in revocation of the LBE status, the imposition of liquidated damages, and a 3-year debarment. The City’s LBE regulations provide that:

The certification made by an LBE in its bid … shall be deemed incorporated into any contract resulting from the bid for which a preference is granted. If the Procurement Commissioner determines that the LBE fails to comply with its certification at any time during the term of its contract, the LBE certification will be revoked and the LBE shall be deemed in substantial breach of such contract, shall be required to pay liquidated damages of 10% of the awarded contract amount, and may be debarred by the Procurement Commissioner in accordance with the Procurement Department Debarment Regulation for a period up to three years.

The City will enforce this regulation and penalize those who abuse the LBE preference. In September 2010, the Philadelphia Inquirer reported on the imposition of liquidated damages for an LBE which could not establish the bona fides of its LBE status.

The City’s LBE regulations can be found here. The City’s LBE application can be found here.

As for whether the LBE preference has benefited the City and its taxpayers economically, this remains an open question. Business columnist Joseph N. DiStefano of the Philadelphia Inquirer recently commented on the City’s LBE, highlighting a large construction contract that the City awarded last year to an LBE. His column can be found here.

Posted on September 13, 2012 by Christopher I. McCabe, Esq. in City of Phila. Comments Off

Public Contracting 101: Surety Bonds

This post is another in a series on the basic concepts and tenets of public contracting in Pennsylvania. Today’s post concerns surety bonds and surety claims. This topic is of critical importance to subcontractors and suppliers on public works projects.

Under the Pa. Public Works Contractors Bond Law of 1967, all public contracts for public works (defined as the construction, reconstruction, alteration or repair of any public building or other public work or public improvement, including highway work) in excess of $5,000 must be accompanied by both a performance bond (at 100% of the contract price, to protect the owner against non-performance) and a payment bond (at 100% of the contract price, to protect subcontractors, suppliers, and laborers against non-payment).

The surety bonds must be issued by a surety company authorized to do business in Pennsylvania. They must also be filed with the public entity awarding the contract.

Payment bonds protect subcontractors and suppliers who have performed labor or furnished materials on a public project. The protection extends to those with direct contracts with the prime contractor and those with direct contracts with a subcontractor or supplier to the prime contractor.

Claims against payment bonds are governed by the Pa. Bond Law. Direct subcontractors and suppliers can bring a claim 90 days after the last date work was performed or materials were supplied. Second tier subcontractors or suppliers must first give written notice of non-payment to the prime contractor, by registered or certified mail, within 90 days from the last date work was performed or materials were supplied.

If a prime contractor has paid its subcontractor in full, but the subcontractor has not paid its subcontractor or supplier, the second tier subcontractor or supplier is out of luck on a claim against the payment bond. In Trumbull Corp. v. Boss Contruction, Inc., 768A.2d 369 (Pa. Cmwlth. 2001), the Commonwealth Court ruled that in such a case the unpaid second tier subcontractor or supplier is barred by a “safe harbor” provision of the Pa. Procurement Code from bringing a payment bond claim. The “safe harbor” provision states as follows:

“Once a contractor has made payment to the subcontractor according to the provisions of this subchapter, future claims for payment against the contractor or the contractor’s surety by parties owed payment from the subcontractor which has been paid shall be barred.”

The public entity is required to provide a copy of payment bond to a subcontractor or supplier who has not been paid upon submission of an affidavit to that effect.

Posted on September 6, 2012 by Christopher I. McCabe, Esq. in Public Contracting 101, Surety and Bonding Comments Off

Pa. Attorney General Sues Public Contractor for Violation of Pa. Steel Products Procurement Act

As I noted in my recent post on the Pa. Steel Products Procurement Act, and as evidenced by recent enforcement action by the Pennsylvania Attorney General, the Act remains as relevant today as when it was first enacted in 1978.

On August 2, 2012, the Pennsylvania Attorney General filed suit against Ryco, Inc., and related Ryco businesses, claiming that they used hundreds of fittings made with foreign steel in fire sprinkler systems installed on a pubic works project at Indiana University of Pennsylvania and a public works project at the Blairsville-Saltsburg School District. The suit also names individual officers, owners, and directors of the Ryco businesses.

The official press release announcing the lawsuit noted that the Attorney General’s investigation into the possible use of lower-cost foreign steel products on Pennsylvania public works projects is “active and ongoing.” The lawsuit asks the Commonwealth Court to order civil penalties of up to $1,000 for each violation and other relief, along with recovery of any payments that were made to Ryco under the contracts and the cost of the investigation. In addition, the lawsuit seeks to prohibit Ryco and the other defendants from submitting bids or supplying materials to any public agency in Pennsylvania or on any state contract for a five year period.

The lawsuit against Ryco is proof positive that the Act is alive and well, and that public contractors supplying steel on public works projects in Pennsylvania, and the owners of these companies, must be extremely careful to know and comply with the Act’s requirements. The failure to do so could result in drastic penalties not only for the companies but for the owners themselves.

The official press release can be found here.

Posted on September 4, 2012 by Christopher I. McCabe, Esq. in Steel Products Act Comments Off

Bid Thresholds for Pa. Borough Contracts Increased

In November 2011, Act No. 92 was signed into law, increasing the monetary thresholds for public contracts awarded by Pennsylvania boroughs.

Sealed competitive bidding is now required with appropriate advertisement for all contracts in excess of $18,500 (an increase from $10,000). Written or telephonic quotes from at least three bidders is now required for all contracts in excess of $10,000 (an increase from $4,000), but not more than $18,500. The Act provides for adjustments to these threshold amounts due to inflation per the “Consumer Price Index for All Urban Consumers” (CPI-U).

The Act became effective January 1, 2012. The full Act can be found here.

Posted on August 28, 2012 by Christopher I. McCabe, Esq. in General Comments Off

Public Contracting 101: Steel Products Procurement Act

This post is one in a series on the basic concepts and tenets of public contracting in Pennsylvania. Today’s post concerns the Pa. Steel Products Procurement Act, a virtual relic of public contracting in Pennsylvania, one that has been around for more than 30 years, but is still of important relevance today.

The Act was passed in 1978 with a stated purpose to protect the U.S. market for steel production and supply. The Act provides that any steel products used or supplied on a Pennsylvania public works contract must be made in the U.S. If the steel product contains any foreign steel, it is a U.S. product only if 75% of the cost of the product has been mined, produced, or manufactured in the U.S.

A public works contract is one for the construction, reconstruction, alteration, repair, improvement, or maintenance of public works. In turn, “public works” has a broad definition as follows:

Any structure, building, highway, waterway, street, bridge, transit system, airport or other betterment, work or improvement whether of a permanent or temporary nature and whether for governmental or proprietary use. The term includes, but is not limited to, any railway, street railway, subway, elevated and monorail passenger or passenger and rail rolling stock, self-propelled cars, gallery cars, locomotives, passenger buses, wires, poles and equipment for electrification of a transit system, rails, tracks, roadbeds, guideways, elevated structures, buildings, stations, terminals, docks, shelters and repairs to any of the foregoing.

Contractors performing general construction work for public entities in the Commonwealth must be especially vigilent in their compliance with the requirements of the Act. There are grave consequences for a violation of the Act, including the withholding of payment and, in the case of a willful violation, a 5-year debarment. An exception in the Act exists where the head of the public agency, in writing, determines that steel products are not produced in the U.S. in sufficient quantities to meet the requirements of the contract.

PennDOT has issued new guidelines for compliance with the Act for PennDOT contracts. The website of Associated Pennsylvania Constructors has a link to the new PennDOT guidelines here.

Recently, in Mabey Bridge & Shore, Inc. v. Schoch, 666 F.3d 862 (3d Cir. 2012), the Act withstood a federal constitutional challenge from a contractor who had to cancel four contracts for temporary bridges on PennDOT projects, and who has been barred from giving future quotes. The contractor had supplied PennDOT with temporary bridges for more than 20 years on 50 different PennDOT projects. But, in 2010, PennDOT notified the contractor that its temporary bridges were prohibited by the Act. In Mabey Bridge & Shore, the contractor claimed that the the Act was unconstitutional and that it was preempted by the federal Buy America Act. The U.S. Court of Appeals for the Third Circuit rejected the contractor’s challenges, found that the Act was not preempted, and upheld PennDOT’s decision.

The Third Circuit’s decision in Mabey Bridge & Shore can be found here.