Does PA Steel Act Prohibit Public Owner From Specifying Foreign-Made Cast Iron Boiler?

The PA Steel Products Procurement Act requires that all steel products (including cast iron products) supplied on a Pennsylvania public works project must be made from U.S.-made steel. Recently, a school district's contract specified a cast iron boiler manufactured in Europe as the Read more

Disappointed Bidder Lacks Standing To Challenge P3 Contract Award By Non-Commonwealth Entity

In a recent case of first impression, the Commonwealth Court of Pennsylvania has affirmed a lower court ruling that a disappointed bidder lacked standing to challenge a contract awarded by a non-Commonwealth entity under the Public-Private Transportation Partnership Act (P3 Act). In Read more

City Of Allentown Permitted To Use RFP Process For Waste Services Contract

In a decision issued on July 20, 2017, the Commonwealth Court of Pennsylvania upheld the City of Allentown's use of the Request for Proposals (RFP) process in a contract award. In 2015, Allentown issued an RFP for the award of a Read more

Are RFQs Immune From Protest Under The Procurement Code?

If you respond to a Request for Quotes (RFQ) issued by a Commonwealth department or agency, can you protest if the resulting purchase order is awarded to another bidder? According to the Commonwealth's Office of Administration, the answer is no. Read more

Pennsylvania Initiates Disparity Study For Small Diverse Business Program

In June 2017, the Commonwealth of Pennsylvania initiated a disparity study that will provide information to help the Department of General Services (DGS) implement the Pennsylvania's Small Diverse Business Program. The expected completion date for the disparity study is Read more

City of Phila.

City Of Philadelphia Contractor Charged With Mail Fraud

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Add yet another contractor to the list of victims of the investigative prowess of the City of Philadelphia’s Office of the Inspector General (OIG).

On May 19, 2014, as a result of an OIG investigation, the U.S. Attorney’s Office charged Airmatic, Inc., a woman-owned, Malvern-based firm doing business with the City of Philadelphia, with defrauding the City of approximately $556,633.03.  It is alleged that Airmatic supplied “unapproved, off-contract products” to various City departments in violation of its contracts with the City.  If convicted, Airmatic faces a maximum possible sentence of five years of probation, a $500,000 fine, or twice the pecuniary gain/loss, a $400 special assessment, and restitution to the City of Philadelphia.

The takeaway on this latest prosecution against a City contractor?  If you are thinking of pulling a fast one by the City, don’t.  You will get caught, and you will be punished.

The FBI press release on the charges against Airmatic can be found here. The Information against Airmatic can be found here.  The Philly.com article on the charges against Airmatic can be found here.

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Posted on by Christopher I. McCabe, Esq. in City of Phila., Phila. Inspector General Leave a comment

Philadelphia Inspector General Investigation Leads To Arrest Of City Contractor

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Add arrest to the long list of risks facing City of Philadelphia contractors who fudge their bids and obtain City contracts by lying on their paperwork.

As a result of an investigation by the Office of Inspector General (OIG), John Hart, owner of Hart Enterprises & Associates, a City contractor and general contracting firm, was arrested and is facing prosecution on ten felony counts of forgery and four misdemeanor counts of unsworn falsifications to authorities. The OIG investigation discovered that Hart Enterprises made numerous misrepresentations in paperwork submitted to the City for five contracts awarded between 2011 and 2012 for work at the Philadelphia International Airport. The OIG also found that the City did not properly screen the paperwork for potential fraud.   Hart Enterprises allegedly forged ten surety bonds submitted to the City, and also allegedly misrepresented its financial history and City tax status.  The OIG has also recommended that the City debar Hart Enterprises.

The investigation also prompted the OIG to issue a policy recommendation report noting several apparent weaknesses in the City’s contracting process.  The report points out that many of the representations made by potential contractors are never independently verified by City officials, allowing dishonest companies to hide negative information and secure City contracts.  The report also found “communication and coordination problems” across City departments, which prevent the City from recouping money from contractors for outstanding wage or tax obligations.  Among the report’s recommendation are more stringent review of contractor qualifications, better communication in the payment hold process, and independent verification of supporting documentation.  According to the OIG, the Hart Enterprises investigation and the policy report are the work of the OIG’s new Contract Compliance Unit, an initiative which is focused on protecting the integrity of the City’s contracting process.

An article in the Philadelphia Inquirer on the OIG investigation and report can be found here.

The OIG policy recommendation report can be found here.

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Posted on by Christopher I. McCabe, Esq. in City of Phila., Phila. Inspector General Leave a comment

City Of Philadelphia Ordinance Imposes New Disclosure Requirement For City Contractors

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City of Philadelphia contractors now have yet another requirement to contend with before they can be awarded a City contract.  This time, contractors must disclose the gender makeup of their boards and executive staff.

On September 6, 2013, Philadelphia Mayor Nutter signed Bill No. 13045701 which amends section 17-104 of the Philadelphia Code and which mandates that prospective contractors for the City disclose the current percentage of female executive officers in the company and the current percentage of females on the company’s executive and full boards; the company’s aspirational goals for the inclusion of females in executive positions and on the executive and full boards; and the intended efforts by the contractor to achieve the aspirational goals.

Bill No. 13045701 can be found here.

The bill was sponsored by Councilwoman Blondell Reynolds Brown who issued a press release touting the bill.  According to the press release, the bill was a recommendation from a 2013 report produced and sponsored by Councilwoman Reynolds Brown and reported out of the City Council Committee on Commerce and Economic Development. In the press release, Councilwoman Reynolds Brown is quoted as follows:

“We cannot manage what we cannot measure.  This bill will offer us the transparency needed to determine if a contractor values diversity in the workplace and in leadership positions.  It requires prospective contractors to put the gender of their leadership in writing, which tells them up front that gender diversity matters. We want to encourage companies to increase the number of women seated at those tables where major decisions are made, because we know that if women are not at the table, issues that are important to us end up on the menu.”

For what it’s worth, the purpose of this new contractor requirement escapes me.  What if a City contractor has no women on its board or on its executive staff?  How does the City intend to use this information?  For example, the City cannot, in a constitutional manner, mandate that only contractors that have women on their staffs or boards be eligible for City contracts or receive preferential treatment in the award of City contracts.  This new requirement is just one more burden added to already burdened City contractors.

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

Subcontractor Officially Debarred From City Of Phila. Contracts

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On June 21, 2013, the City of Philadelphia debarred a subcontractor (and its owner) for violation of the City’s minority contracting rules.  The subcontractor, JHK, Inc., a subcontractor to prison health contractor Corizon Health Services, Inc., was debarred for two years for falsely representing its role as a woman-owned subcontractor in an agreement with Corizon.  JHK was supposed to provide first-aid services to prison inmates as a subcontractor to Corizon.  In fact, JHK provided no services.

Philadelphia Inspector General Amy L. Kurland had this to say about the debarment:

“This debarment sends a strong and definitive message: The City of Philadelphia will not tolerate businesses that circumvent the City’s antidiscrimination policies. We will continue working with Procurement, Finance and the Law Department to ensure that legitimate M/W/DSBEs have a fair shot at the contracting opportunities they deserve.”

Corizon itself previously entered into a $1.85 million settlement with the City and agreed to strengthen its corporate compliance program by reviewing all of its subcontracting agreements to ensure compliance with City anti-discrimination policies.  My post on that action can be found here.  The Inspector General’s executive summary of its investigation into Corizon and JHK can be found here.

In its press release, the Inspector General claims that this is the first involuntary debarment in the City’s history.  However, based on my own personal experience with the City’s Law Department, this claim is probably mistaken as I believe that, during the tenure of the late Procurement Commissioner Louis Applebaum, the City officially debarred a City prime contractor for falsifying invoices on a number of City contracts.

The lesson here? At the risk of beating a dead horse, don’t lie or cheat on public contracts, not to mention on any contract.  The risk is too great and the reward too little.

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

Philadelphia Inspector General Shines Spotlight On Use Of MBE Pass-Through

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The City of Philadelphia continues its crackdown on abuses in its minority subcontracting program.

On May 6, the Philadelphia Office of the Inspector General (OIG) announced that a former certified, minority-owned business, JHS & Sons Supply Co., was improperly used by ten other prime contractors on City contracts.  The OIG previously exposed the improper arrangement between prime contractor William Betz Jr. Inc., and JHS, which resulted in a two-year debarment of the Betz firm.  My earlier post on the OIG enforcement action against Betz can be found here.

The ten other contractors identified by the OIG are: Burke Plumbing & Heating, Inc.; Clements Brothers and Sister, Inc.; DMC Environmental Group, Inc.; Buzz Duzz Plumbing, Heating, & Air Conditioning, Inc.; Edward Hughes and Sons, Inc.; Martin Johnson Plumbing and Heating, Inc.; Paragon Contracting; J.J. Magnatta, Inc.; John Stevenson, Inc.; and S. Murawski & Sons.  The contracts ranged in value from $100k to $350k.  The OIG has reached agreements with eight of these ten prime contractors.  JHS has also been removed from the City’s registry of certified, minority-owned contractors.

Inspector General Amy L. Kurland said of her office’s recent action:

It was clear from the beginning that this problem was widespread.  These settlements meet our goal of ensuring that companies comply with our antidiscrimination requirements. Our mission is to bring companies into compliance, not to put them out of business.

This latest OIG enforcement action again illustrates the extreme peril that prime contractors face in using “pass-through” entities to satisfy the City’s minority subcontracting requirements.  If you think you can get away with it, think again.  The City will eventually catch up with you, and by then it will be too late to protect yourself.

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Posted on by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE, Phila. Inspector General 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

City of Phila. Reaches Settlement With City Contractor for Violation of M/W/DSBE Contracting Rules

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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.

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

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

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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.

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

City of Phila. Local Business Entity Preference

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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.

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

Paid Sick Leave Now A Requirement for Some Phila. Contractors and Subcontractors

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Some City of Philadelphia contractors and subcontractors now have a new requirement to contend with, along with all of the other assorted rules and regulations that govern their contracts with the City.

Effective July 1, 2012, under the newly amended “Philadelphia 21st Century Minimum Wage and Benefits Standard,” for profit service contractors or subcontractors on City contracts of $10,000 or more in a 12-month period, who have annual gross receipts of more than $1,000,000, must provide their employees with some level of paid sick leave. A service contractor is one with a City contract “for the furnishing of services to or for the City, except contracts where services are incidental to the delivery of products, equipment or commodities.”  This would appear to encompass public works contractors, service providers, and professional firms providing service to the City.

A contractor covered by the new law will be required to provide full-time, non-temporary, and non-seasonal employees with at least one hour of paid sick leave for every 40 hours worked, up to a maximum of 32 hours per year, for employers with more than five but less than 11 employees, and up to 56 hours per year, for employers with at least 11 employees.

However, a contractor can obtain a waiver of the new sick leave requirement by submitting an application to the City’s Office of Labor Standards.  The application must set forth detailed reasons for an employer’s inability to comply with the new law. For example, the new requirements may be waived, in whole or in part, by a bona fide collective bargaining agreement.  Thus, the many City contractors who are also union contractors will likely be unaffected by the new requirement.

In order to ensure compliance with the new requirements, City contractors should first determine whether it applies to them.  If so, these contractors should then amend their leave, record-keeping, and posting policies.

The Philadelphia 21st Century Minimum Wage and Benefits Standard can be found here.

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