In a departure from the usual rule, but not surprising given the facts of the case, the Commonwealth Court of Pennsylvania recently enforced a subcontractor’s claim for payment against a public owner.
In 2009, West Allegheny School District terminated Flaherty Mechanical Contractors, LLC, the prime contractor on a school alterations project, for failure to pay various subcontractors. After the termination, to prevent further delay, the school district asked F. Zacherl, Inc., the sheet metal subcontractor, to return to the project and complete the work remaining under its subcontract with Flaherty.
Zacherl orally agreed with school district, provided it was paid its then outstanding invoices. These invoices were paid, and Zacherl completed its work, but the school district made no further payments for either the work Zacherl had performed for Flaherty or the work Zacherl performed for the school district. Zacherl sued Flaherty’s surety and the school district for payment. The trial found in favor of Zacherl, with the surety liable for payment for Zacherl’s work for Flaherty, and the school district liable for Zacherl’s work for the school district. The school district appealed. Read more
According to recent audits conducted by the Pa. Department of the Auditor General, Pennsylvania school districts spent at least $53.7 million in excess of the state’s transportation reimbursement formula through the use of no-bid busing contracts.
The conclusion of the Auditor General was based on audits of about 450 of the state’s 500 public school districts. As a result, Auditor General Eugene DePasquale called on the Pa. General Assembly to mandate competitive bidding for such transportation services, saying:
To get the best possible price and ensure transparency for taxpayers, student transportation contracts should be re-bid every time they are up for renewal. I’m calling on the General Assembly to enact legislation to ensure school districts are getting the best possible price by requiring them to seek competitive bids for transportation services. Amending the Public School Code to require schools to competitively bid transportation services will improve transparency and could put more money in our classrooms.
The Auditor General press release issued on May 12, 2016, can be found here. A PennLive story on the Auditor General’s findings can be found here.
On April 7, 2016, Pa. Governor Tom Wolf signed a new Executive Order establishing that future Commonwealth of Pennsylvania contracts must ensure that contractors doing business with the state will not discriminate in the award of subcontracts or supply contracts, or in hiring, promotion, or other labor matters, on the basis of sexual orientation, or gender identity or expression. The Executive Order also mandates that contractors receiving state funds must have, as a condition of payment, a written sexual harassment policy and that employees of the contractor are aware of the policy. Read more
Under the Pa. Procurement Code, a protest must be filed within seven days after the protestant knew or should have known of the facts giving rise to the protest. If the protest is untimely, it will be rejected. Recently, in a published opinion and in a departure from the usual rule, the Commonwealth Court decided that equitable principles would allow a late-filed protest to be considered.
The case concerned Pa. Department of Transportation (PennDOT) inspection contracts on which Bureau Veritas (BV), the protestant, had submitted a statement of interest. PennDOT ranked BV fifth in its statement of rankings. BV learned of the rankings on November 13, 2014. Seven days later, on November 20, 2014, BV filed a protest, but the email of its protest was rejected by PennDOT’s computer server due to improper formatting of the file attachment. On November 21, 2014, BV learned of the email rejection and promptly re-sent the email with the proper formatting of the file attachment, eight days after the publication of the rankings. PennDOT rejected BV’s protest as untimely and on the merits. BV then argued that it should be allowed to file its protest nunc pro tunc (literally, “now for then”). PennDOT issued a final determination rejecting the protest, as well as the request that the protest be considered nunc pro tunc. BV appealed to the Commonwealth Court. Read more
On March 7, 2016, Governor Tom Wolf signed an Executive Order that raises the minimum wage to $10.15 an hour for employees of certain state contractors.
The employees covered the Executive Order include:
Employees who: (1) directly perform services or construction; or (2) directly perform services for the Commonwealth and are employed by a lessor of property to the Commonwealth; or (3) spend at least 20 percent of their working time in a given work week performing an ancillary service called for in a new lease of property or contract for services or construction exceeding the applicable small purchase threshold entered into with a Commonwealth agency under the jurisdiction of the Governor, including bilateral modifications to existing such leases or contracts, after the effective date of this Executive Order.
According to a 6ABC Action News report:
[The Executive Order] also will affect a narrow set of state contracts – potentially 109 vendors that provide janitorial, landscaping, delivery and food preparation services – that does not include hospitals, nursing care or state universities, administration officials said. The overall cost to the state and its contractors was projected at just above $4 million.
Executive Order No. 2016-02, which takes effect on July 1, 2016, for employees of state contractors, can be found here.
Have you ever wondered what rules govern the award of public contracts by the Philadelphia Gas Works (PGW)? Believe it or not, the answer to this question requires analysis of an ancient Philadelphia Gas Commission document that is more than 50 years old!
PGW is a collection of assets owned by the City of Philadelphia (City) that are used to manufacture and deliver natural gas to citizens residing within the City’s borders. PGW is managed by a non-profit entity, the Philadelphia Facilities Management Corporation (PFMC), pursuant to a 1972 agreement between the City and PFMC. The agreement is itself is authorized by Ordinance No. 455, enacted by the Philadelphia City Council in 1972. The Gas Commission has general oversight over the management and operation of PGW by PFMC.
Yesterday the public radio show, APM Marketplace, aired a business story from a local WHYY reporter, Bobby Allyn, where I was asked to comment on the City of Philadelphia’s recent, no-bid purchase of police body cameras from Taser International.
Here is an excerpt from the story:
Sitting in his office on the 31st floor of a building in Center City Philadelphia, attorney Chris McCabe read the wonky language of a memo prepared by city officials.
“Currently the city has no procurement vehicle for these specific goods and services, and a competitive bid for these services would be time prohibitive,” McCabe said, reading the memo.
It means that the city hasn’t opened up a formal bidding process for a $1.4 million body camera contract expanding a pilot program. Doing so, officials determined, would take too long. McCabe, who negotiated city contracts for more than a decade, said it was unusual, and that the bidding process was there so that contractors win not based on whom they know, but instead on who has the best price.
“You have to protect the taxpayer from fraud, corruption and favoritism, and that’s done through a publicly transparent competitive bidding process,” McCabe said.
You can read and listen to the entire Taser story here.
My earlier post on the City’s no-bid purchase of the police body cameras is here.
The Pa. Steel Products Procurement Act became law in 1978 with a stated purpose to protect the U.S. market for steel production and supply.
At its core, the Act provides that, if any steel products are to be used or supplied on a public works project in Pennsylvania, then only “steel products,” as that term is defined in the Act, can be used or supplied on the project.
The Act defines “steel products” as follows:
Products rolled, formed, shaped, drawn, extruded, forged, cast, fabricated or otherwise similarly processed, or processed by a combination of two or more of such operations, from steel made in the United States by the open hearth, basic oxygen, electric furnace, Bessemer or other steel making process and shall include cast iron products and shall include machinery and equipment listed in United States Department of Commerce Standard Industrial Classification 25 (furniture and fixture), 35 (machinery, except electrical) and 37 (transportation equipment) and made of, fabricated from, or containing steel components. If a product contains both foreign and United States steel, such product shall be determined to be a United States steel product only if at least 75% of the cost of the articles, materials and supplies have been mined, produced or manufactured, as the case may be, in the United States. Transportation equipment shall be determined to be a United States steel product if it complies with section 165 of Public Law 97-424 (96 Stat. 2136).
So, what does this mean?
I have posted on numerous occasions about the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) program. The DBE program is especially relevant to public contractors and subcontractors performing work for PennDOT, SEPTA, the Philadelphia International Airport, the Philadelphia Streets Department, the Port Authority of Allegheny County, and other public entities in Pennsylvania that are managing projects funded with federal transportation dollars.
In this post, I’ll provide some limited background information and links about the DBE program and how the program operates and what rules and regulations apply.
According to a criminal information filed in the U.S. District Court for the Eastern District of Pennsylvania, still another fraud scheme involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) Program has been uncovered, this time on the federally-funded George C. Platt Memorial Bridge project in Philadelphia.
In April 2011, PennDOT awarded a $42.7M contract to perform structural steel painting and repairs on the Platt Bridge to a joint venture consisting of Hercules Painting Company, Inc., of New Castle, Pa., and Vimas Painting Company, Inc., of Lowellville, Ohio. During the bid process, the Hercules-Vimas JV allegedly committed to subcontract $3.1M in DBE work to Vertech International, Inc., to supply paint materials for the project. Instead, the Hercules-Vimas JV allegedly negotiated contracts and ordered materials for the Platt Bridge project directly with non-DBE suppliers, with Vertech allegedly acting as a pass-through to give the appearance that DBE requirements had been satisfied. PennDOT awarded approximately $1.97M in DBE credit to the Hercules-Vimas JV. Vertech was allegedly paid 1.75% of the face value of the invoices it processed to act as a pass-through.