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

Court Decisions

Extra Work Claim Against School District Does Not Require Written Change Order Or Adherence To Section 508 Of Public School Code

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Long-standing precedent in Pennsylvania required a contractor’s change order claim against a public entity to be supported by a written change order and strict adherence to the contract requirements and any applicable public law.

For claims against school districts, all of that changed in 2007 with the Commonwealth Court’s decision in James Corp. v. North Allegheny School District, 938 A.2d 474 (Pa.Cmwlth.2007).  In James Corp. the Commonwealth Court allowed an extra work claim in the absence of a formal written change order and held that Section 508 of the Public School Code of 1949 (requiring affirmative vote of a majority of all the members of a school board for contracts) did not bar the claim.

And now the decision in James Corp. has been re-affirmed by the Commonwealth Court.  On March 6, 2015, the Commonwealth Court issued a formal opinion in East Coast Paving & Sealcoating, Inc., v. North Allegheny School District, a case involving a change order claim based on a directive to perform work without a formal written change order, and cited its decision in James Corp. as binding precedent.  In East Coast Paving, the Commonwealth Court stated:

With respect to the School District’s argument that a change order was a necessary condition to payment, our holding in James Corp. v. North Allegheny School District, 938 A.2d 474 (Pa.Cmwlth.2007), is binding precedent. Notably, it involved the School District as the defendant and the very same contract language invoked here by the School District.

The Commonwealth Court also rejected the school district’s argument that Section 508 was an insurmountable obstacle to the contractor’s extra work claim:

In its second issue, the School District argues that the trial court erred in concluding that the School District authorized East Coast to do the soft spot repair work. The School District contends that a change to a contract “must be approved by affirmative vote of the school board members and the approv[al] must be reflected in the minutes or record as provided by Section 508 of the Public School Code, 24 P.S. § 5–508.” School District Brief at 15. According to the School District, the School Board did not approve the soft spot repair work.

The School District made this argument in James, and we rejected it there. We explained:

We reject [the School District’s] argument [that] Section 508 of The Public School Code of 1929, Act of March 10, 1929, P.L. 30, as amended, 24 P.S. §§ 5–508 (requiring school board approval for increases or decreased to indebtedness), bars [the contractor’s] claim for payment of additional work. Testimony established [the School District] considered the work part of the contract; thus, further school board approval was unnecessary.

James, 938 A.2d at 478 n.12. Moreover, we explained:

[The School District], having directed [the contractor] to perform the additional work asserting it was required by contract, cannot now disavow liability for costs incurred by claiming [the contractor] did not have written authorization [from the School Board].

Id. at 487.

The record established that the School District required East Coast to do the soft spot repair work. The School District does not argue that the soft spot repairs were not necessary. As in James, it was not necessary for the School Board to approve, specifically, the soft spot repair work. The School Board approved the paving project and its completion by East Coast, and that is all that was required by Section 508.

Thus, at least for the time being, and at least with respect to contractor claims against school districts in Pennsylvania, a contractor does not need a formal, written change order in order to pursue a claim for extra work performed at the direction of an official or employee of the school district.  Moreover, Section 508 of the Public School Code is not a legal impediment to these claims.  This is more than welcome news for contractors doing business with school districts across the Commonwealth of Pennsylvania.  Of course, contractors are advised to consult with experienced counsel when faced with these types of claims.

The Commonwealth Court decision in East Coast Paving can be found here.

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Posted on by Christopher I. McCabe, Esq. in Court Decisions, Public School Code Leave a comment

Commonwealth Court Again Holds That Penalty Award Is Mandatory On Finding Of Bad Faith

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[NOTE: The Commonwealth Court decision reported in this post has been overruled by the Supreme Court. See my new post on the Supreme Court’s July 2016 ruling that a finding of bad faith does not mandate an award of fees and penalties.]

In a recent, unpublished opinion, in the case of Klipper Construction Associates, Inc. v. Warwick Township Water and Sewer Authority, the Commonwealth Court of Pennsylvania affirmed its recent holding in A. Scott Enterprises, Inc. v. City of Allentown (Oct. 2014), and has held again that a finding of bad faith on the part of a public agency in withholding payment from a public contractor mandates the award of a penalty.  This is from the Court’s decision:

Contractor’s assertion that the trial court erred in failing to award any penalty is correct. As noted above, a finding of bad faith requires the trial court to make a penalty award under Section 3935(a) of the Prompt Pay Act. A. Scott Enterprises, Inc., __ A.3d at __, 2014 WL 5335358 at *7. We must therefore reverse the trial court on this issue.

What is “bad faith”?  Section 3935(a) of the Procurement Code has this to say about bad faith:

An amount shall be deemed to have been withheld in bad faith to the extent that the withholding was arbitrary or vexatious. An amount shall not be deemed to have been withheld in bad faith to the extent it was withheld pursuant to section 3934 (relating to withholding of payment for good faith claims).

The takeaway? If you are a public contractor denied payment by a public entity and can show bad faith – arbitrary or vexatious conduct – on the part of the public entity, then you will be awarded a penalty which might be as high as 1% per month on the amount owed.  If you are the public entity and are withholding payment from the contractor, then you must fully comply with section 3934 of the Procurement Code to avoid a finding of bad faith.

The Commonwealth Court decision can be found here.  My earlier post on the A. Scott Enterprises case can be found here.

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Posted on by Christopher I. McCabe, Esq. in Court Decisions, Procurement Code, Public Works Payment Rules Leave a comment

Commonwealth Court Rules That Award Of Fees And Penalty Is Mandatory On Finding Of Bad Faith

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[NOTE: The Commonwealth Court decision reported in this post has been overruled by the Supreme Court. See my new post on the Supreme Court’s July 2016 ruling that a finding of bad faith does not mandate an award of fees and penalties.]

In a recently published opinion, the Commonwealth Court has held that a finding of bad faith by a public entity in refusing to make payment to a public contractor mandates the award of attorney’s fees and the statutory penalty of 1% per month.

In 2009, the City of Allentown (Allentown) awarded a road paving contract to A. Scott Enterprises (Scott).  After mobilization, the job was suspended when a pile of contaminated dirt was discovered at the job site.  Scott resumed some of its work and then left the job site while the parties negotiated Scott’s costs.  The parties were unable to agree on payment for the additional costs to deal with the job suspension and the contaminated soil.

Scott then filed suit to recover its losses on the project, and was awarded damages of $927,299.  The jury also found that Allentown breached the contract and acted in bad faith in refusing to make payment to Scott for its contract damages and suspension costs.  However, despite the finding of bad faith, the trial court refused to award Scott attorney’s fees, the statutory penalty of 1% per month, and pre- and post-judgment interest.  Scott appealed to the Commonwealth Court.

On appeal, Allentown argued that an award of fees and penalties was discretionary with the trial court.  The Commonwealth Court rejected Allentown’s arguments, and held that the jury finding of bad faith mandated an award of fees and penalties to Scott:

The purpose of the Procurement Code is to “level the playing field” between government agencies and contractors. See Pietrini Corp. v. Agate Construction Co., 2006 PA Super. 140, 901 A.2d 1050, 1055 (Pa. Super. 2006). It advances this goal by requiring a government agency that has acted in bad faith to pay the contractor’s legal costs, as well as an interest penalty. Otherwise, the finding of bad faith is a meaningless exercise with no consequence for the government agency found to have acted in bad faith. We conclude that Section 3935 of the Procurement Code requires the imposition of attorney’s fees and the statutory penalty upon a jury’s finding of bad faith. See City of Independence v. Kerr Construction Paving Company, Inc., 957 S.W.2d 315, 321-23 (Mo. Ct. App. 1997) (holding that Missouri’s procurement code’s use of “may” regarding penalty interest and attorney’s fees means “shall” and upon finding of bad faith by jury, trial court must award such damages, even though the extent of damages is a matter for the discretion of trial judge).

On the question of when the public agency must make payment to the contractor, the Commonwealth Court had this to say:

There was conflicting evidence on the exact amount the City owed Contractor.  However, the City had an obligation to make a good faith effort to pay for Contractor’s suspension costs and to pay those invoices it did not challenge. 62 Pa. C.S. §3932. If the City disputed the amount of a suspension invoice, it was required to so notify Contractor, withhold the disputed amount and pay the remainder of the invoices. Instead the City paid nothing.

While the Commonwealth Court held that an award of fees and penalties was mandatory, the amount to award is within the trial court’s discretion.  The case was remanded to the trial court for a hearing to determine the award of reasonable attorney’s fees.

The takeaway from this decision is that public agencies have a clear duty to determine what is owed to a contractor and to pay that amount.  They cannot simply throw up their hands and refuse to make any payment because there is a dispute over some items of work.  The Commonwealth Court’s holding strengthens the hand of public contractors in Pennsylvania, and puts public agencies on notice that the Procurement Code has real teeth and that they will be held accountable for bad faith conduct in refusing to make proper and timely payment to their contractors

The Commonwealth Court’s opinion can be found here.

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Posted on by Christopher I. McCabe, Esq. in Court Decisions, Procurement Code, Public Works Payment Rules Leave a comment

Procurement Code Is Not Violated Where Only One Price Is Considered In Contract Award

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Can a Commonwealth agency consider just a single bidder’s price and refuse to even look at the prices of other bidders in making a competitive contract award? According to a recent, unpublished decision of the Commonwealth Court of Pennsylvania, the answer is yes.

In January 2014, the Pa. Department of Community and Economic Development (Department) issued a Request for Quotation (RFQ) seeking a contractor to design, market, and implement a sale of tax credits.  The RFQ specified that only those bidders whose technical submittal received at least 70% of the available technical points would be considered “responsible” and eligible for selection on the basis of price.  The Department received three bids. After applying the scoring criteria to the bidders’ technical submittals, the Department eliminated all but one bidder for selection on the basis of price.  A protest was filed by one of the eliminated bidders. The Department denied the protest, and an appeal was then taken to the Commonwealth Court.

On appeal, the bidder argued that, by applying a scoring threshold that eliminated all but one bidder and by failing to compare the selected bidder’s price to the other bidders’ prices, the Department violated the requirement of section 513(g) of the Procurement Code that an agency take price into account when awarding a contract.

Section 513(g) of the Procurement Code states:

(g)  Selection for negotiation.–The responsible offeror whose proposal is determined in writing to be the most advantageous to the purchasing agency, taking into consideration price and all evaluation factors, shall be selected for contract negotiation.

The Commonwealth Court rejected the bidder’s argument, holding:

Section 513(g) requires a purchasing agency to take price into consideration when determining which “responsible offeror” should be selected for contract negotiation. This provision neither requires a purchasing agency to revisit its determination that an offeror is not responsible nor does it prohibit a purchasing agency from applying announced criteria to determine that all but one offeror is non-responsible. Here, the Department was faced with only one offeror who met the RFQ’s criteria to be considered a responsible offeror.  Under these circumstances, we cannot say that the Department erred or violated the Procurement Code by considering the cost submittal of that offeror alone.

From a purely legalistic viewpoint, the Commonwealth Court is correct in interpreting section 513(g). But from a competitive bidding viewpoint, where the taxpayers are served by true competition where all bidders’ prices are exposed and considered, there is something just a bit uneasy about allowing a Commonwealth agency to award a contract based on just one price without knowing whether the other prices were lower.  In this case, was the winning bidder’s proposal truly the “most advantageous” to the Commonwealth, if the other bidders’ prices were lower and if the other bidders were also nonetheless qualified to perform the contract, notwithstanding their failure to meet a scoring threshold, considering that technical scoring and comparison of bidders’ qualifications are inherently subjective while the comparison of bidders’ prices is purely objective.

The unpublished decision of the Commonwealth Court can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Leave a comment

Commonwealth Court Reaffirms No Right To Hearing On Protest Filed Under Pa. Procurement Code

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Is there a right to a hearing on a bid protest filed under the Pa. Procurement Code? The answer is no.

In a recent, unreported decision involving a contract issued by the Philadelphia Parking Authority for a new red light camera system in the city of Philadelphia, the Commonwealth Court has re-affirmed long-standing precedent that a hearing is not mandatory on a protest filed under the Pa. Procurement Code.  Under 62 Pa. C.S. § 1711.1(e), whether to conduct a hearing is within the “sole discretion” of the head of the purchasing agency.  The Commonwealth Court also held that, under the Pa. Procurement Code, 62 Pa. C.S. § 1711.1(d),  it is not mandatory for a contracting officer to file a response to a protest before issuance of a determination by the agency head.  Finally, the Commonwealth Court found that the denial of a stay of procurement was not in error where the agency head had determined that the protest was clearly without merit and had articulated the substantial interests that would be harmed by a stay.

A copy of the Commonwealth Court decision in Am. Traffic Solutions, Inc. v. Phila. Parking Auth., can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Leave a comment

Public Bidding 101: Are Proprietary Specifications Permissible?

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On a public bid can a public entity direct a contractor to furnish and install equipment made by only one manufacturer?  This question is raised often by clients who complain when the specifications they are bidding against are viewed as “proprietary” in nature.  Is this legal, they ask?  Can the public entity really limit the specified equipment to a sole manufacturer?  As always, the answer is, “it depends,” although it is safe to say that all proprietary specifications should be viewed initially as inherently suspect and contrary to the spirit of public and competitive bidding.

The rare, but easy to justify case is where the equipment specified is intended to complement or replace existing unique equipment.  Thus, in Silsby Mfg. Co. v. City of Allentown, 153 Pa. 319, 26 A. 646 (1893), the Supreme Court of Pennsylvania held that the purchase of replacement flues for a patented engine, which could not be bought from any other supplier, was not subject to competitive bidding.  In the same vein, if the public entity could buy such unique equipment without competitive bidding, the public entity will likely be permitted to specify the same equipment in the specifications for a contract to furnish and install the same equipment.

The more common, but harder to justify case is where the equipment specified is clearly proprietary (i.e., made by a sole manufacturer), but where the public entity fails to specify acceptable, alternative equipment, or fails to use the words “or equal” after specifying the base equipment.  In this day and age, it is extremely rare that there are not competing sources for building systems equipment.  Today, major pieces of building equipment (e.g., plumbing or mechanical equipment) are manufactured by a multitude of competing manufacturers, and it is fair to say that all operate in essentially the same manner with the same performance and results. In fact, it is the rare manufacturer who has cornered the market for a piece of building systems equipment.

The only reported court decision in Pennsylvania dealing even remotely with proprietary specifications is Direnzo Coal Co. v. Dep’t of Gen. Servs., 825 A.2d 773 (Pa. Cmwlth. 2002).  In Direnzo, the issue was whether the specified ash content of anthracite coal (12.6%) was unduly restrictive and limiting of competition.  The court rejected the attempt to set aside the procurement, finding:

DGS has discretion to prepare necessary specifications to meet its minimum needs. As addressed above, the change in the maximum allowable ash content from 14% to 12.6% was developed in order to ensure compliance with federal and state regulations pertaining to particulate matter emissions. Therefore, Specification C-80 reflects the legitimate needs of the Commonwealth.

The decision in Direnzo can be found here.

The Pennsylvania Department of General Services Procurement Handbook, Part I, Chapter 13, has this to say about “proprietary specifications”:

Since the purposes for competitive bidding require that all responsible bidders shall have the opportunity to compete, a specification or SOW [statement of work] that has the effect of putting unnecessary obstacles in the way of potential bidders is faulty and illegal. A proprietary specification or SOW has the effect of severely restricting competition.

Recently, I handled a bid protest where the school district specified as “base bid” equipment certain manufacturer-specific pieces of HVAC equipment.  The school district did seek other pricing via alternates and thus agreed that this other “alternate” HVAC equipment would achieve the same result with the same performance as the base bid-specified equipment.  However, rather than specifying all of the HVAC equipment manufacturers as acceptable “base bid” equipment, or using the words “or equal,” the school district elected to favor certain manufacturers over others.  The school district’s attempt to seek alternate pricing for alternative manufacturers proved ineffective where the “base bid” equipment could be purchased only through one manufacturer’s representative and where the representative offered only a lump sum quote for all equipment and refused to provide any “breakout” pricing.  This refusal prevented bidders from providing alternate pricing for alternative heat pumps, as they could not obtain separate pricing for the base bid heat pumps.  Due to the protest I filed, the school district was forced to re-bid the HVAC contract.  This case illustrates the peril of proprietary specification – it is usually not cost effective for the public owner, and it usually limits competition and can lead to higher pricing which is the opposite intent of public bidding.

If you are a contractor faced with a proprietary specification, your best bet is to bring it to the attention of the public owner before bids are due. You should demand the right to offer a substitute that is equivalent to the specified equipment and you should seek to have this substitute equipment accepted as equivalent in all respects.  If this does not work, you should contact experienced counsel who can persuade the public owner of the error of its ways – that the proprietary specification is contrary to the spirit of public bidding and open and fair competition.  Whatever it does, the contractor should not wait until after the bids have been submitted and opened. By then it may be too late.

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Posted on by Christopher I. McCabe, Esq. in Bid Specifications, Court Decisions, Public Bidding 101 Leave a comment

Contract Award Is Not A Contract, But Bidder May Pursue Claim For Damages For Posting Of Bonds

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When is a contract award a contract? Virtually never.  Rather, a contract award is just that – an award.  It is not a binding contract and imposes no obligation on the public entity.  In the words of Billie Jean King, a contract award is as fleeting as victory.

Recently, in the case of Allan A. Myers LP v. Montgomery County, the Commonwealth Court of Pennsylvania re-affirmed this long-standing principle of public contracting law.  In 2011, Montgomery County issued a request for proposals for roadwork.  After rejecting a bid from another bidder, the Montgomery County Commissioners adopted a resolution accepting the bid of Allan A. Myers LP (Myers).  Later, when the contract award to Myers was challenged by the rejected bidder, the County Commissioners adopted a second resolution rescinding the award to Myers.  Thereafter, Myers filed suit, seeking damages for breach of contract.  The trial court rejected the claim, holding that merely awarding a contract does not create a binding obligation on the public entity to actually execute a contract.

On appeal to the Commonwealth Court, Myers argued that a contract was formed when the County Commissioners adopted the resolution accepting the bid and awarding a contract to Myers.  Myers also argued that it was entitled to pursue damages for the costs related to procuring the required bonds under a non-contractual theory of recovery.  The Commonwealth Court rejected the appeal by Myers, holding that the Second Class County Code governed the award of the contract to Myers and required a signed, written contract (and not simply a resolution).  The Commonwealth Court followed the seminal case of Crouse, Inc. v. School District of Braddock, 19 A.2d 843 (Pa. 1941), where the Supreme Court reasoned that:

When a municipal body advertises for bids for public work and receives what appears to be a satisfactory bid, it is within the contemplation of both bidder and acceptor that no contractual relation shall arise therefrom until a written contract embodying all material terms of the offer and acceptance has been formally entered into. The motion whose adoption is evidenced by the minutes of the school district in the instant case meant merely that the proposal was accepted subject to the preparation and execution of a formal contract or subject to the motion being rescinded before the contract was executed. A preliminary declaration of intention to enter into a formal contract, which was all the motion adopted amounted to, did not in any way limit the school directors’ freedom of future action.

Thus, Montgomery County was free to rescind the award to Myers without liability for breach of contract.  The first lesson here is that the public entity holds virtually all of the cards in the public bidding and contracting context.  Until a formal public contract is signed and executed, there is no contract.  It’s as simple as that.

On the other hand, the Commonwealth Court gave Myers a green light to pursue its claim for damages from having to post bonds in order to preserve its contract award.  In its Complaint against Montgomery County, Myers had alleged that the procurement of the bonds impaired its “ability to seek or to secure other contracts and work which required bonds.” Of course, how strong this claim is remains to be proven.

Significantly, to my knowledge, this is the first time that an appellate court in Pennsylvania has allowed the potential recovery of damages related to the rescission of a public contract award.  Normally, a disappointed bidder has no right to recover damages, and the Commonwealth Court reiterated this long-standing rule by advising Myers that it could not seek damages for any expenses related to procuring the bonds in connection with its bid as these expenses would have been incurred by all bidders. See J.P. Mascaro & Sons, Inc. v. Bristol Township, 505 A.2d 1071, 1073 (Pa. Cmwlth. 1986)(a disappointed bidder has sustained no injury which entitles him to redress in court).

So, the second lesson here is that, if you receive a contract award, and post the necessary bonds, and the contract award is then rescinded, you may be able to recover damages relating to the posting of the bonds.  Of course, such a claim will be exceedingly difficult to prove.

The decision in Allan A. Myers LP v. Montgomery County can be found here.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions Leave a comment

Commonwealth Court Finds Ambiguity In Bid Spec Creates Bidding Defect Requiring A Re-Bid

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Does an ambiguous bid specification create an unlevel playing field?  The answer has almost always been yes, and a recent Pennsylvania Commonwealth Court decision reiterates that long-standing principle of public bidding law.

In 2011, Allegheny County and the City of Pittsburgh sought bids for a contract to process recyclable materials.  Greenstar Pittsburgh, LLC (Greenstar), a disappointed bidder, brought suit, along with an individual taxpayer, to enjoin the contract award to Pittsburgh Recycling Services (PRS) and to compel issuance of a new bid.  Greenstar argued that language in the bidding specifications was open to more than one reasonable interpretation and provided PRS with an unfair advantage in the bidding process.  The trial court agreed, and determined that the following language in the bid specification was ambiguous:

3.3 QUALIFICATIONS OF BIDDERS

The Contractor’s facility shall be located within a fifteen (15) mile radius from the City’s Department of Public Works . . . located at 30th and A.V.R.R.

The bidding specifications included numerous references to the Contractor’s “processing facility” and a “receiving site.”  As a result, the trial court concluded that Section 3.3 was ambiguous because the word “facility” could reasonably be used to denote either “other receiving site” or the “Contractor’s processing facility.”

On appeal, the Commonwealth Court affirmed the trial court’s decision.  In affirming the trial court, the Commonwealth Court first noted the law governing ambiguity in public bidding specifications:

Our Supreme Court has also recognized that the common standard required to ensure free and fair competition among bidders extends to the form as well as the substance of an invitation to bid for a public contract. In Guthrie v. Armstrong, 303 Pa. 11, 154 A. 33 (1931), the Court concluded that: “The form of the contract is often as vital as anything involved in the transaction, and, unless bidders are on an equality as to knowledge of its proposed provisions, there may be a great advantage to a bidder who has a certain understanding with which the public authorities may agree, over a bidder whose understanding is otherwise.” 303 Pa. at 18, 154 A. at 35. Where a public authority has issued an invitation to bid with provisions subject to more than one reasonable interpretation, while the authority may not have acted in bad faith, the effect may be the same: the common standard is eroded and the public authority can no longer ensure that the public has gained the benefit of fair and just competition among bidders. … As with an ambiguous contract provision, if a provision in bidding specifications is subject to more than one reasonable interpretation, the ambiguous provision must be interpreted against the drafter.

In affirming, the Commonwealth Court agreed that it was reasonable to interpret Section 3.3 to mandate the contractor’s processing facility or the contractor’s other receiving site to be located within the specified 15 mile radius, and concluded that Section 3.3 was ambiguous on its face. Because of this ambiguity, the Commonwealth Court recognized that the pool of bidders interested in participating in the bidding process could be impacted:

We are left to speculate how many potential bidders failed to participate in the bidding process because they did not have the interpretation shared by [Allegheny County and Pittsburgh] and PRS and instead shared the same reasonable interpretation of Section 3.3 made by Greenstar.

The hallmark of public bidding is a level playing field, and ambiguous bid specifications are an inherently unleveling force.  Greenstar recognizes this.  So, if you are a bidder encountering an ambiguous bid specification which can affect, e.g., how you compute your bid price, or whether you are qualified to bid, you have encountered an unlevel playing field.  In such case, it is extremely likely that your bid protest will be successful.

The decision in Greenstar Pittsburgh LLC v. Allegheny County can be found here.

A hat tip to my friend and former colleague Wally Zimolong, Esq., who brought this case to my attention and who also blogged about it at his blog Supplemental Conditions.

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Posted on by Christopher I. McCabe, Esq. in Bid Protests, Bid Responsiveness, Bid Specifications, Court Decisions Leave a comment

Commonwealth Court Decides Telwell Appeal And Finds Board Of Claims Has No Jurisdiction To Hear Loan Claim

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On April 2, 2014, the Commonwealth Court of Pennsylvania decided the appeal in the case of Telwell, Inc., against the Public School Employees’ Retirement System (PSERS) and affirmed the decision of the Board of Claims that it lacked jurisdiction to hear the underlying claim which arose from a loan made by PSERS to Telwell.

In reaching its decision, the Commonwealth Court recognized that the Board of Claim still retained broad jurisdiction to hear “contract” claims, even where the underlying contracts are not made pursuant to the Procurement Code:

Based upon the expansive construction of the Board’s jurisdiction, which gives effect to the public policy of providing a method of redress to those who contract with the Commonwealth, this Court recently concluded that the Board has jurisdiction over contracts made with a Commonwealth agency, even if the contracts are not made pursuant to the Code.

Nonetheless, the Commonwealth Court was compelled to rule against Telwell on its claim against PSERS finding that the Procurement Code was unambiguous in excluding claims related to loans:

Given the clear and unambiguous language of Section 102(f.1), this Court is constrained to hold that the Board does not have subject matter jurisdiction over the Restated Claim.

The Commonwealth Court, however, handed Telwell a partial victory when it remanded the matter to the Board of Claims with instructions to transfer the Telwell claim against Grandbridge Real Estate Capital LLC to the Court of Common Pleas of Philadelphia County.  Grandbridge is a private entity without sovereign immunity and was the servicer on the loan to Telwell.

My earlier post on the Telwell v. PSERS dispute can be found here.

The Commonwealth Court decision can be found here.

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Posted on by Christopher I. McCabe, Esq. in Court Decisions, Procurement Code Leave a comment

Public Bidding Hall of Fame: Yohe v. Lower Burrell

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This post is one in a continuing series intended to highlight significant Pennsylvania court decisions in the area of public bidding.  The decision highlighted here concerns the core purpose of public bidding requirements.

In 1965, the Pennsylvania Supreme Court decided Yohe v. Lower Burrell, 208 A.2d 847 (Pa. 1965).  In Yohe, the City of Lower Burrell had sought to award exclusive contracts for garbage collection.  Six persons, including the taxpayer plaintiff, were asked to enter into three year contracts under which each would be granted the exclusive privilege to collect garbage in a specified district and to collect fees not to exceed a monthly maximum of $1.50 from each home serviced.  No direct payments would be made from the city’s treasury.

A taxpayer sued to challenge the city’s actions, arguing the the Third Class City Code required competitive bidding.  The trial court dismissed the complaint, holding that the statutory bidding requirements applied only where a city made payments of more than $1,000 and that no such payments by the city were involved.  An appeal was taken.  The issue on appeal was whether the city could award exclusive contracts for the collection of garbage without first advertising for bids where each contract involved sums in excess of $1,000 to be paid, not from the city treasury, but directly by city residents.

The Supreme Court disagreed with the trial court and reversed, stating first as follows:

Bidding requirements ‘are for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption in the awarding of municipal contracts, and to secure the best work or supplies at the lowest price practicable, and are enacted for the benefit of property holders and taxpayers, and not for the benefit or enrichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to the public interest.’  (Footnotes omitted.)  10 McQuillan, Municipal Corporations §  29.19, at 266-67 (3d ed. 1950).

The Court then found that it made no difference that the city itself was not making a direct payment to the garbage collector:

The need for bidding requirements is just as compelling in the instant case where the garbage collector is compensated directly by the recipients of his service as it is when the recipients pay for service through the conduit of the municipal treasury.  In each case, regardless of who makes the final payment, it is the taxpaying citizen who provides the necessary funds and whose interest must be protected.  The provisions of the Third Class City Code in issue here were enacted to insure that protection.  We cannot interpret those sections in a way which would substantially emasculate their protective objectives and thereby encourage the objectionable practices which the Act seeks to eliminate.  The language of the Act compels the interpretation that competitive bidding is required on these contracts even though the money comes directly from the taxpayers rather than from the city treasury.

The Yohe decision has been cited numerous times in public bidding cases, and its language regarding the purpose of public bidding has stood the test of time.  The Yohe holding is also significant for another reason – if a government entity is making a contract, it’s likely to be viewed as a public contract, one that must meet the requirements of public bidding and public contracting, even if the public treasury is unaffected.

The Yohe decision can be found here.

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Posted on by Christopher I. McCabe, Esq. in Court Decisions, Hall of Fame Decisions Leave a comment