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.

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

USDOT Inspector General Issues Audit Critical Of DBE Program

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On April 23, 2013, two years after initiation of its audit, the Office of the Inspector General (OIG) of the U.S. Department of Transportation (DOT) issued a final audit report on the administration of the DOT Disadvantaged Business Enterprise (DBE) Program.

In its audit, the OIG assessed whether (1) the DOT provides adequate DBE program management, (2) DOT’s Operating Administrations and recipients sufficiently oversee and implement the DBE program, and (3) the DOT achieves its program objective to help develop DBEs to succeed in the marketplace.  The OIG’s audit concluded that the DOT does not provide effective program management for the DBE program.

The OIG audit focused, in part, on the utilization of DBEs by prime contractors on federally-funded projects.  The dire statistics concerning use of DBEs in general and in Maryland are worth noting:

The Department has limited success in achieving its program objective to develop DBEs to succeed in the marketplace because recipients place more emphasis on getting firms certified as DBEs rather than assisting them to identify opportunities and to market themselves for DBE work on federally funded projects. As a result, the majority of certified DBE firms from the six States we visited—especially smaller firms—have been unsuccessful in obtaining federally funded contracts. For example, at the 6 States we visited, less than 20 percent of the 7,689 certified firms actually received work on federally funded projects.

***

For example, of Maryland’s 560 DBEs that received awards through the DBE program, 4 firms consistently win the most contracts—over 100 contracts each, for a total of 609 contracts. In contrast, 202 of those 560 Maryland DBEs have won only 1 DBE contract since becoming certified.

The statistics concerning Maryland are troubling to say the least.  Maryland has 4,863 DBE firms in its DBE directory. Of this number, only 560 DBE firms have ever obtained a contract.  That is only a 12% participation.  But of that number, four are consistent repeat recipients of contracts.  That means only 0.1% of DBEs in Maryland are getting the lion’s share of the contracts!  This would also seem to suggest that the remaining 4,859 DBEs are defunct, not capable of performing work, not interested in performing work, or simply certified firms with no interest in ever obtaining federally-funded work.  If that is the case, why are these firms listed in the DBE directory and what use is the directory?  These are troubling questions not answered by the OIG audit report.

Here is the conclusion from the OIG audit report:

DOT has spent billions of dollars through its DBE program to remedy past and current discrimination against socially and economically disadvantaged individuals competing for federally assisted projects. However, weaknesses in DBE program management and implementation have allowed ineligible firms to win DBE contracts and have left the majority of DBE firms without work. The Department’s fragmented DBE program management structure can only be effective if Operating Administrations and recipients are offered clear DBE guidance and training with which to implement the program. Because the Department’s DBE guidance and training is not sufficiently comprehensive, it must take a more proactive oversight approach to ensure that recipients comply with DBE regulations and make progress toward achieving DBE program goals. If the Department does not provide more comprehensive guidance and training or strengthen its program management, the DBE program may continue to be exposed to billions of dollars in fraud, waste, and abuse.

The OIG audit report will likely add fuel to the fire of long-time critics of the DBE program.   A link to the OIG audit report can be found here.

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Posted on by Christopher I. McCabe, Esq. in DBE/MBE/WBE 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

PennDOT Adjusts Procedures for Counting DBE Suppliers

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Effective November 15, 2012, the Pennsylvania Department of Transportation (PennDOT) announced in a recent Bulletin on its ECMS website that it was adjusting its procedures for counting DBE suppliers in response to federal guidance.

Under the new procedures, in order for a DBE firm to receive regular dealer (60%) credit for materials supplied on a federally-assisted transportation project, the answer to the following two questions must be “yes”:

First, does the firm “regularly” engage in the purchase and sale or lease, to the general public in the usual course of its business, of products of the general character involved in the contract and for which DBE credit is sought?

Second, is the role the firm plays on the specific contract in question consistent with the regular sale or lease of the products in question, as distinct from a role better understood as that of a broker, packager, manufacturer’s representative, or other person who arranges or expedites a transaction?

In order to assist prime contractors and DBEs, PennDOT has developed a new form for determining the appropriate DBE credit. This form can be found here. PennDOT is also requesting feedback on the form from prime contractors who elect to use it.  Comments and suggestions should be submitted to: minorityparticipation@pa.gov.

According to the PennDOT Bulletin, if it is later determined that the DBE misrepresented itself or erroneously concluded that it was acting as a regular dealer, the DBE participation would still have to be revised.  However, PennDOT would fully consider the form’s documentation in its good faith efforts review if the prime contractor was unable to replace the DBE participation.  Therefore, it would be prudent for prime contractors to start to use this form in order to protect themselves from a later adverse determination on “good faith efforts.”

The complete Bulletin can be found here.

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

U.S. Department of Transportation Proposes Modifications to DBE Rule

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On September 6, 2012, the U.S. Department of Transportation published a Notice of Proposed Rulemaking (NPRM) which proposed various modifications to its Disadvantaged Business Enterprise (DBE) Program.

The U.S. DOT DBE program affects public contractors in Pennsylvania working on Federal-aid highway, Federal Transit Administration, or Federal Aviation Administration funded projects.  This would include, for example, PennDOT, airport, Phila. Streets Department, and SEPTA projects.  The Associated General Contractors of America has prepared a summary of the significant proposed changes in the NPRM – it can be found here.

The U.S. DOT has also extended the period for comments on the NPRM to December 24, 2012.  Information on the NPRM and the extended comment period can be found here and here.

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Posted on by Christopher I. McCabe, Esq. in 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

GBCA to Host DBE Seminar on October 25 and 26

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On October 25 and 26, 2012, the General Building Contractors Association will host a two part seminar on navigating disadvantaged business enterprise programs in the public contracting realm, for both federally-funded and locally-funded contracts.

Topics to be covered will include: (1) Bidding Requirements/Concerns; (2) Post-Award Enforcement/Compliance; and (3) Best Practices.

I will be in attendance as a presenter on both days, and I am looking forwarding to sharing my knowledge and experiences on these important topics.

Information on the GBCA seminar can be found here.

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

Philadelphia Prison Contractor Fined $1.85M for Evading Minority Contracting Rules

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The City of Philadelphia has once again taken enforcement action against a City contractor for a violation of the City’s minority contracting rules.  The City’s inspector general conducted an investigation of Prison Health Services, the City’s contractor for prison health care services, and charged the contractor with using a woman-owned firm as a mere pass-through entity in order to satisfy the City’s minority contracting rules.  Prison Health Services agreed in a settlement to a fine of $1.85 million.

The City’s inspector general, Amy Kurland, was quoted in the Philadelphia Inquirer as follows:

“In reality, that company did nothing except give its name to Prison Health Services so Prison Health Services could get the contract,” she said.

Mayor Nutter had even harsher words:

Mayor Nutter called the PHS settlement “a significant moment that sends a very, very strong message to everyone who does business with the city.”  “If you engage in inappropriate or illegal activities,” Nutter said, “we will find you and root you out.”

The settlement with the contractor was the third such enforcement action taken since May 2011, when the City debarred a contractor for violation of minority contracting rules on work at the Philadelphia International Airport.  My post regarding the City’s prior enforcement actions can be found here.  The Philadelphia Inquirer article on the City’s enforcement action can be found here.

If you are a City contractor and you think you can evade the City’s contracting requirements, think again!  You will get caught eventually, and you will likely pay a hefty price.  Don’t make that mistake.  Get advice before you proceed down a path of no return.

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