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Bid Protests

Commonwealth Court: Bidder Qualification Criteria Can Be Waived Under Gaeta Decision

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If a public entity issues a bid and specifies that bidders must have certain minimum experience, can the public entity waive those requirements for the low bidder?  In my view, the answer is no.

Ordinarily, specified qualification criteria are for the benefit of the public and are intended to place all prospective bidders on a level playing field by informing them of the minimum qualifications and experience that are required for a contract award.  If the public entity specifies, e.g., five years’ experience in the particular work covered by the bid, bidders with less than five years’ experience will likely refrain from bidding knowing that they would be ineligible for an award.  For this reason, changing or relaxing the qualification criteria after the bids are opened is usually a no-no and a violation of the level playing field rule.  If the public entity decides, after the bid has opened, to award the contract to a bidder with, say, only three years’ experience, the public entity has effectively excluded from the bidding, unfairly and to its detriment, the pool of bidders with only three years’ experience.

In a recent, opinion dealing with a protest on a Commonwealth of Pa. RFP, JPay, Inc. v. Department of Corrections, the Commonwealth Court held that qualification criteria stated in a bid or an RFP could in fact be waived by the public entity under the Gaeta v. Ridley School District decision.  This holding breaks new ground in the area of bidder responsibility.

In 2012, the Pa. Department of Corrections issued an RFP for a turn-key “kiosk-like system” that would allow prison inmates to perform such tasks as placing commissary orders, downloading digital media, checking phone time, and receive and send emails.  The RFP required that each proposal contain an appendix detailing the offeror’s prior experience on at least three prior projects with “at least one (1) project where your firm has implemented a project of similar size and scope and one (1) project you have completed that is related to Kiosk like solutions.” The offeror was also required to include client references for each project, and to “provide examples [of] prior experience in providing MP3 players, downloadable digital entertainment (music), communication (email) and information through kiosks designed for a correctional environment” with examples and references related to the provision of those services within the previous five years. The RFP also stated that the only two requirements were mandatory: that the bid be signed and timely received.  On the other hand, the RFP reserved the right to waive technical or immaterial nonconformities in the bid. Three bids were received, and Global Tel*Link (GTL) was selected for negotiations.

One of the bidders, JPay, Inc., filed a protest, claiming among other things that GTL was not a qualified bidder. The contracting officer responded to the protest that GTL satisfactorily demonstrated its prior experience by submitting ten references which demonstrated that GTL was in the process of implementing a similar kiosk system in South Carolina prison facilities and was planning to install such a system in Kentucky by the end of 2013. The protest was denied and JPay filed an appeal to the Commonwealth Court.

On appeal, JPay’s argument was framed as follows: “JPay alleges that, based upon information it has uncovered outside the RFP process, GTL provided inaccurate information in its submission and therefore could not have met the minimum technical requirements outlined in the 2012 RFP or earned the highest technical score.”

On this point, the Commonwealth Court stated:

The Designee held that the requirement in the 2012 RFP that offerors submit information related to their prior experience was not mandatory and OA was therefore authorized to either waive this requirement or consider it in the scoring. Even assuming JPay’s allegations regarding GTL’s experience are true, we agree with the Designee’s conclusion. The text of the 2012 RFP was clear that there were only two mandatory requirements — the timeliness of receipt of the proposal and signature of the offeror on the proposal — and that OA could waive any other non-conformity, allow the offeror to cure or consider the non-conformity in the scoring. While the 2012 RFP provides that offerors “must” submit information related to their experience on prior projects, a requirement phrased in the imperative does not necessarily make the requirement mandatory.

In my view, the Court’s opinion represents a monumental shift in thinking found in numerous public bidding decisions from years past. While it is true that whether a bidder is qualified or responsible is typically a decision vested within the sound discretion of the public officials making that decision, and that courts are loathe to second guess decisions on bidder qualifications and responsibility, at the same time it has also been true that specified qualification criteria cannot be changed after the bids have been opened. To allow the criteria to be changed dramatically or waived entirely, as the Court now suggests is permitted under Gaeta, unlevels the playing field, and invites the potential for favoritism and corruption into the public bidding process.

I, for one, see great potential for harm in the court’s decision.  The holding in JPay, Inc. now opens the door wide open to the potential for all sorts of mischief hidden under the guise of public officials determining whether a bidder meets the pre-specified qualification criteria.

The Court’s decision can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Bid Specifications, Bidder Responsibility, Procurement Code, Responsibility Leave a comment

Who Can Be Excluded From Public Bidding?

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When a public bid is issued, can a municipality refuse to accept or open bids from any bidder it chooses?

The answer is, yes and no.  In some cases, a municipality may engage in a pre-qualification process and exclude certain bidders, provided that one is mandated or allowed by statute or ordinance.  On the other hand, where there is no statutorily prescribed pre-qualification process, a municipal official cannot exclude certain persons from bidding under the guise of a “pre-qualification” program.  Two not-so-recent cases illustrate this point very nicely.

In Flaherty v. Allegheny Contracting Industries,  Inc., 6 Pa. Cmwlth. 164, 293 A.2d 639 (1972), the City of Pittsburgh advertised for bids for the supply of asphalt.  The city refused one contractor’s bids and returned them on three occasions.  The Mayor then advised the contractor that its name was being stricken from a list of responsible bidders, and that its future bids would be returned unopened. When the contractor’s subsequent bid was returned unopened, the contractor filed suit for mandamus to have its bid opened.  The trial court rejected attempts by the city to have the case dismissed.  On appeal, the Commonwealth Court also rebuffed the city’s efforts, ruling as follows:

The lower court was also correct in holding that the Mayor and the Director of Public Works had a clear legal duty to receive the bids, to open them and read them aloud.  There is nothing in the statute and Ordinance, quoted above, which would authorize the Mayor to institute, by his own initiative, a prequalification procedure under which he could disqualify a prospective bidder.

The Court in Flaherty held that there was a mandatory, ministerial duty to receive and open all bids that were in proper form and timely received. Thus, an order of mandamus could issue.  The Flaherty case can be found here.

In Harris v. City of Philadelphia, 299 Pa. 473, 149 A. 722 (1930), a bidder filed for an injunction against the City of Philadelphia to prevent the award of a contract to a bidder who had been selected under a prequalification plan.  The plan at issue in Harris effectively sanctioned a “favorites” list.  As the Supreme Court stated: “It [the ordinance] further specifies that the answers received shall be scrutinized by the director of the department which is to supervise the performance of the contract, and, if he is satisfied, the prospective bidder’s name shall be placed on what is known as the ‘white list’ of that contract.”

For obvious reasons, this “white list” proved objectionable to the Supreme Court:

It is obvious that [this plan] nevertheless opens wide the door to possible favoritism.  The awarding director can place upon the white list the name of any intending bidder whom he chooses to approve, however irresponsible in fact, and that decision is not reviewable.  On the other hand, he may compel all bidders, who are not favorites of his, to go to the expense of an appeal to the board, which will have before it only the answers to the questionnaire by those the awarding director has excluded from bidding, with no way of knowing whether or not their plant, equipment, experience, and financial standing are superior or inferior to those of the bidders whose names the director has placed on the white list.  This might well result in everybody being excluded except those who are personal or political friends of the awarding director, or whom he knows are conspiring together to seemingly bid in competition, but in reality to destroy all competition; and it certainly would result in giving the contract to one of the favored bidders, if his bid happened to be the lowest of those actually received, though he was not in fact, a responsible bidder, or no more responsible than those who were not permitted to submit bids and might have offered to do the work for a less sum.

Not surprisingly, the Supreme Court found that the prequalification plan at issue in Harris was fatally flawed.  This decision rested on the longstanding rule which was stated as follows:

Following all of our cases, therefore, we again lay down the rule that all bidders on a municipal contract must be accorded the same treatment, for not otherwise can the requirements of the statute be complied with.  The city may, as heretofore she has done, accept and schedule all bids, and then, if acting in good faith, refuse to award the contract to one who is the lowest bidder, because he is not the ‘lowest responsible bidder.’  Or she may, as she is now attempting to do, determine in advance who are responsible bidders, and refuse to receive bids from those who, after treating all alike, she determines are not in that class.  But she may not impose conditions on one prospective bidder, which are not imposed upon all; nor may she enforce a method by which, through favoritism, one person may be conclusively authorized to bid on a pending contract, while another, equally as responsible and perhaps more so, is wholly excluded from even submitting a bid.

The rules from Harris and Flaherty are clear.  All persons are entitled to respond to a public bid, without exception, unless a prequalification process has been duly authorized.  And any prequalification process must apply equally to all interested bidders, and cannot allow for favoritism or cronyism.

If you are a qualified contractor whose bid was timely but was refused, or who was denied pre-qualified status, you should contact experienced counsel immediately to have the bidding process halted until a ruling can issue mandating the acceptance and opening of your bid.

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Posted on by Christopher I. McCabe, Esq. in Bidder Responsibility, Court Decisions Leave a comment