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 on two different federally-funded projects in Philadelphia.
In September 2009, PennDOT awarded a $70.3M contract to a tri-venture consisting of a Philadelphia-based highway contractor, Alpha Painting & Construction Co., Inc., of Baltimore, and Liberty Maintenance, Inc., of Campbell, Ohio, to perform structural steel painting and repairs, and concrete repairs, on the I-95 Girard Point Bridge in Philadelphia. As part of the contract, the tri-venture committed to subcontract $4.7M of work to Markias, a now-defunct certified DBE, to supply materials for use on the the contract. Alpha and Liberty formed a joint venture and allegedly ordered the needed materials directly from non-DBE suppliers, and allegedly used Markias as a pass-through to give the appearance that the DBE requirements had been satisfied. PennDOT awarded approximately $3.26M in DBE credit to the tri-venture based on the DBE work allegedly performed by Markias.
If you are a prime contractor working on federally-funded transportation projects, beware of fraud involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) program. A recently exposed “pass-through” scheme involving $27 million in federally-funded contracts scheme was engineered together by subcontractor Century Steel Erectors Co., and WMCC, Inc., a certified DBE.
In my post from yesterday, found here, I reported on the DBE “pass-through” fraud scheme engineered by Carl M. Weber Steel Service, Inc., and Karen Construction, Inc.
On January 11, 2016, Dennis and Dale Weber, the owners of Weber Steel, were each sentenced to six months’ home confinement and five years’ probation, and Weber Steel was placed on three years’ probation. All three were also ordered to jointly pay $1 million in restitution to the Federal Highway Administration (FHWA).
On February 3, 2016, Judy Noll, the owner of Karen, was sentenced to three years’ probation and ordered to separately pay $336,219 in restitution to FHWA.
The U.S. Department of Transportation’s Office of Inspector General press release on the sentencing can be found here.
Still another “pass-through” fraud scheme involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) program has been exposed, with criminal penalties for all involved.
On October 8, 2015, Dennis Weber, Dale Weber, Carl M. Weber Steel Service, Inc., and Judy Noll pleaded guilty to federal conspiracy charges related to a complex DBE fraud scheme that, incredibly, lasted for more than 16 years, totaled almost $19 million, and involved 224 bridge projects throughout Pennsylvania.
The Pennsylvania Department of General Services (DGS) has issued a preliminary and updated list of machinery and equipment steel products which will be exempt under the Pa. Steel Products Procurement Act for 2016. The list was published in the Pa. Bulletin on Saturday, February 6, 2016, and can be found here.
Effective January 1, 2016, the thresholds for public bidding by Pennsylvania state authorities and municipalities will remain unchanged from 2015 and are as follows:
- Purchases and contracts below $10,500 require no formal bidding or written/telephonic quotations
- Purchases and contracts between $10,500 and $19,400 require three written/telephonic quotations
- Purchases and contracts over $19,400 require formal bidding
Bidding thresholds are adjusted annually for inflation by the Pa. Department of Labor & Industry under Act 90 of 2011. The Pa. Bulletin announcement announcing the 2016 bidding thresholds can be found here.
Thinking of avoiding the Pa. Prevailing Wage Act? Think again! An intentional violation of the Wage Act can and will result in a debarment for three years.
Section 11(e) of the Wage Act provides:
(e) In the event that the secretary shall determine, after notice and hearing as required by this section, that any person or firm has failed to pay the prevailing wages and that such failure was intentional, he shall thereupon notify all public bodies of the name or names of such persons or firms and no contract shall be awarded to such persons or firms or to any firm, corporation or partnership in which such persons or firms have an interest until three years have elapsed from the date of the notice to the public bodies aforesaid. The secretary may in addition thereto request the Attorney General to proceed to recover the penalties for the Commonwealth of Pennsylvania which are payable under subsection (f) of this section.
E-verify, officially known as the Pennsylvania Public Works Employment Verification, Act 127 of 2012, has now been the law of the Commonwealth of Pennsylvania for more than two years, since January 1, 2013. E-verify requires all public works contractors and subcontractors to utilize the federal government’s E-Verify system to ensure that all employees performing work on public works projects are authorized to work in the United States. My earlier post on E-Verify can be found here.
On September 23, 2015, Pennsylvania Governor Tom Wolf signed an Executive Order solidifying his commitment to improving the participation of minority-owned, women-owned, LGBT-owned, veteran-owned, and disabled-owned businesses in state government contracting.
According to the official press release, Executive Order 2015-11, entitled “Diversity, Inclusion, and Small Business Opportunities in State Contracting and Pennsylvania’s Economy,”
directs a consistent and coordinated effort to ensure diversity and inclusion in all contracting opportunities for small and diverse businesses throughout agencies under the governor’s jurisdiction and promotes the creation of programs to better prepare those businesses to compete and succeed in Pennsylvania’s economy.
The current Pennsylvania budget impasse is now entering its fifth month. How does the impasse and the lack of a state budget affect vendors and contractors holding contracts with the Commonwealth of Pennsylvania and its departments, boards and agencies?
According to the FAQ webpage of the Office of the Budget, the following questions and answers address payments to vendors and contractors and future contracts:
Question 9: Will Commonwealth agencies process invoices from vendors?
Answer: Yes. Vendors with state contracts who continue to provide goods and services to commonwealth agencies can submit invoices and Commonwealth agencies will process all invoices received. All invoices held during the budget impasse will be sent promptly to the State Treasury for processing after the FY15-16 budget is enacted.
Question 10: How will the budget impasse affect existing contracts?
Answer: Most state contracts include language addressing this situation, which states that the commonwealth’s obligation to make payments shall be subject to the availability and appropriation of funds and that contractors may not stop work or refuse to make delivery because of non-payment. If the Commonwealth’s untimely payment results in a default situation, the contractor may pursue the remedies set forth in the contract.
Question 11: Can Commonwealth agencies enter into new contracts for 2015-16?
Answer: Agencies may enter into new contracts for FY 2015-16. The contracts will clearly state that payment is subject to appropriation.
The takeaway here is that vendors and contractors doing business with a public entity like the Commonwealth of Pennsylvania should never forget that public contracts are unlike private contracts in many ways, not the least of which is that the payment obligations of the public entity are nearly always subject to legislative appropriation of the funds necessary for payment. So, while payment may be delayed due to non-appropriation, the obligation to perform the work covered by the contract continues even in the face of non-payment.