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

Procurement Code

Public Bidding 101: Emergency Bidding

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Emergency contracting for repairs, maintenance, and public safety are a routine occurrence with public owners across the Commonwealth. A building in danger of collapse needs to be torn down on an immediate basis to ensure public safety.  A system fails in a public building requiring an emergency repair to restore the system to proper working order. A roadway or bridge is washed out during a storm mandating immediate action to restore access for the public and emergency vehicles. In such dire situations, can a public owner bypass the normal rules of competitive bidding and award a contract an expedited basis? The answer is yes, with some caveats.

Where an emergency threatens the health, welfare, or safety of the citizenry, and does not permit a delay in response, a public owner can dispense with the formal rules of public bidding such as timing of award and public notice. On the other hand, even in an emergency, the public owner cannot simply award a contract without competition.  An emergency may relax the requirement for notice and advertising, but it doesn’t eliminate competition. After all, if a public owner can invite pricing from one contractor in an emergency, there is usually no good reason why it can’t also invite pricing from other contractors at the same time.

This principle is aptly illustrated by the emergency bidding section in the Commonwealth Procurement Code, at 62 Pa.C.S. § 516, which provides:

The head of a purchasing agency may make or authorize others to make an emergency procurement when there exists a threat to public health, welfare or safety or circumstances outside the control of the agency create an urgency of need which does not permit the delay involved in using more formal competitive methods. Whenever practical, in the case of a procurement of a supply, at least two bids shall be solicited. A written determination of the basis for the emergency and for the selection of the particular contractor shall be included in the contract file.

Thus, the Procurement Code recognizes that, even in the face of an emergency, competition and transparency are still required.

Likewise, the Public School Code, at 24 P.S. § 7-751, also allows for emergency contracting but still requires competition:

… Provided, That, if due to an emerency a school plant or any part thereof becomes unusable, competitive bids for repairs or replacement may be solicited from at least three responsible bidders, and, upon the approval of any of these bids by the board of school directors, the school district may proceed at once to make the necessary repairs or replacements in accordance with the terms of said approved bid or bids. …

In Upper Darby Twp. v. Ramsdell Construction Co., a 1943 trial court decision, the court noted that “statutory requirements that municipalities must have contracts in writing and advertise for bids have been held not to apply to a situation where there is an emergency.” But the court also added: “The important thing, therefore, in these cases would seem to be the determination as to whether or not there was an emergency.”

The bottom line is that, in a documented emergency requiring immediate attention, a public owner can dispense with the normal rules of public bidding while still having to seek competition.

If you need assistance on a public bidding issue, call or email me for a no-cost consultation.  I’ll be happy to assist in anyway possible.

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Posted on by Christopher I. McCabe, Esq. in Procurement Code, Public Bidding 101, Public School 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

Public Bidding 101: Bid Bonds

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This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania.  The subject of today’s post is the bid bond.

A bid bond is a form of bid security and is typically required to be submitted with all bids for public contracts in Pennsylvania.  The instructions on public bids will ordinarily describe the bid bond requirements for the bid in question.  These instructions should be followed lest the bid security is insufficient and the bid is rejected for that reason.  A bid bond is essentially a guarantee, backed by a surety company, that the bidder will execute the contract if it is awarded to the bidder.

The failure of a bidder to execute an awarded contract will expose the surety on the bid bond to liability. That liability is typically 10% of the bid price. The bidder’s failure to execute an awarded contract may also subject the bidder itself to additional liability if the bid bond amount does not cover the spread between the bidder’s price and the next lowest price.  Of course, the public entity must strictly adhere to the bidding requirements and award requirements before it can seek to enforce the bid bond.  The failure to do so will likely invalidate any attempt to forfeit the bid bond. 

Thus, the Commonwealth Court held in Travelers Indem. Co. v. Susquehanna County Comm’rs, 17 Pa.Cmwlth. 209, 331 A.2d 918, 920 (1975), that where a public entity failed to give written notice of its acceptance and provide the contract documents for execution there could be no forfeiture of the bid bond.  Likewise, in Hanover Area School District v. Sarkisian Brothers, Inc., 514 F.Supp. 697 (M.D.Pa.1981), the federal district court  held that a public entity’s failure to provide the lowest bidder with all the documents necessary to finalize the transaction as required by the bid instructions precluded recovery on the bid bond.

If you are bidder faced with a forfeiture of a bid bond for failure to execute a public contract you may have an out if the award was not made in accordance with the bidding instructions.  As always, you should consult with an experienced attorney for assistance.

 

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Posted on by Christopher I. McCabe, Esq. in Public Bidding 101, Surety and Bonding Leave a comment

Public Bidding 101: Rejection of All Bids

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This post is another in a continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post concerns the rejection of all bids by the public entity.

There are many times that a public entity solicits bids, only to reject all of the bids and conduct a re-bidding.  The reasons for a rejection of all bids may be due to the bid prices exceeding a preliminary construction estimate, or due to a non-responsive, but extremely attractive, low bid that can be easily corrected on a re-bidding, thereby ensuring that the pubic entity gets the best price available.  Clients often ask me whether this is allowed and what they can do to challenge this type of conduct.  Their concerns stem, in part, from the exposure of their bids and their prices which many fear leads to a competitive disadvantage on the re-bidding.  Unfortunately, there is little to stop such conduct. 

First, bidders themselves have no standing to complain of such conduct.  Only a taxpayer can complain and sue to stop such conduct.  Second, there is really no legal basis to stop such conduct.  If a statute allows it, or if the bidding instructions permit it, which is almost always the case, a public entity is free to reject any and all bids, for good reason or for no reason. 

In Weber v. City of Philadelphia, 437 Pa. 179, 262 A.2d 297 (1970), a seminal case in the area of public bidding, the Pennsylvania Supreme Court noted:

“…if a municipality, in connection with competitive bidding, is empowered to do so, it may reject any and all bids in the absence of fraud, collusion, bad faith or arbitrary action…”

As the Supreme Court noted in Weber, the only limitation on the public entity’s power is where such decision is influenced by fraud, collusion, or is committed in bad faith, or constitutes arbitrary action.  But these are high hurdles to surpass and I have never encountered a situation where a court has enjoined the rejection of all bids. 

So, if a public entity decides to reject all bids, there is very little that anyone can do about it. For additional enlightenment on this topic, the Weber case can be found here.

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

Public Bidding 101: The RFP

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This post is another in my continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post is the Request for Proposal (RFP) and whether, and to what extent, the general rules of sealed, competitive bidding apply to RFPs.

An RFP is a type of invitation to bid.  It is typically used where the public entity seeks to enter into a contract in the area of professional services – such as architectural, engineering or legal services.  This is because contracts for those services are not governed by the rule of lowest responsive, responsible bidder, and in fact can be awarded, in many instances, without any competition whatsoever and to a bidder whose bid is not the lowest in price.

In Malloy v. Boyertown Area School Bd., 540 Pa. 308, 657 A.2d 915 (1995), a seminal case in this area, the Pennsylvania Supreme Court described the reasons why the “low bid” rule does not apply to professional services contracts:

For those contracts for which the distinctiveness and quality of service is the paramount concern, there exists a special relationship between the property owner and the contractor.  In these types of contracts, the contractor owes a special duty of loyalty to the property owner because the contractor in essence becomes the property owner’s agent and, therefore, must act in good faith and always in the furtherance of the property owner’s interests vis-à-vis the other contractors on the project.

The Supreme Court’s statement nicely summarizes why professional services contracts are not subject to the low bid rule.  There is an element of trust in such contracts, and this element is not necessarily assumed by the bidder whose bid is the lowest.  So, the public entity has discretion in the award of such contracts and can seek to enter into such contract through an RFP process.

However, once the public entity embarks on a course of bidding, even via a more informal RFP process which does allow for negotiation, it is bound to “adhere to that procedure throughout the procurement process.”  In Lasday v. Allegheny County, 499 Pa. 434, 453 A.2d 949 (1982), another seminal case in this area, Allegheny County solicited proposals under an RFP for operation of a newstand and gift shop concession.  The RFP stated that separate proposals to operate only the newstand would not be accepted.  Nonetheless, Allegheny County then allowed one proposer to make such a proposal and to grant the concession to that proposer on the basis of its proposal, without also allowing the existing operator an opportunity to submit such a proposal.  The Supreme Court held that this was improper and held that, once an RFP process is undertaken, it must be adhered to in all respects in accordance with its instructions and guidelines.

If you are a respondent to a public RFP, consider these rules carefully, and remember that the public entity cannot act contrary to the instructions of its own RFP.

 

 

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

Public Bidding 101: Contract Award

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This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania.  The subject of today’s post is the contract award – when it must be made and who is entitled to the award.

Under the Pa. Procurement Code, 62 Pa.C.S. § 3911, the award of a public contract must occur within 60 days of the bid opening.  This deadline can be extended by written consent signed by the bidder and the public entity.  Thereafter, under 62 Pa.C.S. § 3912, once the contract is awarded, it must be executed by the public entity within 60 days of the award.  The failure of the public entity to meet these deadlines, absent a written waiver by the successful bidder, will release the successful bidder from any liability on its bid and will entitle all bidders to the return of any posted bid security.

Who is entitled to the contract award? Ordinarily, the lowest responsive and responsible bidder is entitled to the award of the contract.  For my post on bid responsiveness, click here.  For my post on bidder responsibility, click here.  Where the lowest bidder is either non-responsive or non-qualified, the contract may be awarded to a bidder whose price is not the lowest.  In Pearlman v. City of Pittsburgh, 304 Pa. 24, 155 A. 118 (1931), the Supreme Court of Pennsylvania observed that, once the  pubic entity has determined the lowest responsible bidder, discretion ends, and the contract, if it is to be awarded, must be given to that bidder.

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Posted on by Christopher I. McCabe, Esq. in Procurement Code, Public Bidding 101 Leave a comment

Public Bidding 101: Bidder Responsibility

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This is one in a continuing series of posts on the basic tenets of public bidding in Pennsylvania.  The subject of today’s post is bidder responsibility.

“Responsibilty” refers to the qualifications, including competence and experience, of a bidder to perform a public contract.  Whether a bidder is responsible or qualified to receive a contract award is ordinarily left up to the discretion of the government officials in charge of awarding the contract.  The courts are extremely reluctant to overrule government decisions to disqualify a bidder as non-responsible.

The standards for bidder responsibility have been established for many years.  The criteria include financial responsibility, integrity, efficiency, industry, experience, promptness, and ability to successfully perform and complete the contract.  While some may believe that the ability to secure and post a bond is proof of their responsibility, a bond is not a substitute for the failure of a bidder to satisfy qualification criteria.  Furthermore, a bidder cannot be rejected as non-qualified unless the government officials have also first conducted an investigation into all bidders’ respective qualifications.

Bidder responsibility can be determined before bids are received, via a pre-qualificaiton process, or after the bids are received.  All bidders must be judged according to the same criteria.  A pre-qualification process may be used only if one is mandated or allowed by statute or ordinance.  Where there is no prescribed pre-qualification process, a municipal official may not exclude certain persons from bidding under the guise of a pre-qualification program.

In Harris v. City of Philadelphia, 299 Pa. 473, 149 A. 722 (1930), the Supreme Court of Pennsylvania had this to say about responsibilty determinations:

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 … 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 … 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.

This rule of public bidding is as applicable today as it was in 1930.

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Posted on by Christopher I. McCabe, Esq. in Public Bidding 101, Responsibility Leave a comment

Public Bidding 101: Bid Mistakes and Bid Withdrawals

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This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania.  The subject of today’s post is bid mistakes and withdrawal of bids.  I am often asked whether a bidder can withdraw its bid due to a mistake in price.  The answer is not so simple.

Typically, public bids are binding on the bidder for 60 days after bid opening, unless the bidder and the public entity execute a written consent for a longer period.  If the bids are not accepted within that time frame, or if a contract is not executed within 60 days of the contract award, the bidder is permitted to withdraw its bid and escape liability on its bid and its bid security or bid bond.  Otherwise, the bidder is legally bound by its bid, and cannot withdraw its bid, unless it can satisfy the stringent requirements for a bid withdrawal.

Bid withdrawal is governed by state statute.  If a bidder makes an honest and good faith mistake in calculating its bid price, the bidder can withdraw its bid.  But the bidder must act quickly.

First, written notice to withdraw the bid must be given within two business days of bid opening.  Second, and more importantly, the bidder must submit credible evidence that the reason for the price bid being substantially lower was a clerical mistake, and not a “judgment” mistake, and was actually due to an unintentional and substantial arithmetical error or an unintentional omission of a substantial quantity of work, labor, material or services made directly in the compilation of the bid.  Third, withdrawal of the bid cannot result in a contract award on another bid of the same bidder, its partner, or to a corporation or business venture owned by the bidder or in which it has a substantial interest.  Fourth, if a bidder is permitted to withdraw its bid, the bidder cannot supply any material or labor to, or perform any subcontract or other work agreement for any person to whom a contract or subcontract is awarded in the performance of the contract for which the withdrawn bid was submitted.

If a bidder is permitted to withdraw its bid, the public entity can award the contract to the next lowest bidder or can reject all bids.  If the latter occurs and the bid is re-advertised, the withdrawing bidder may be liable for all re-advertising and other associated costs, if it is determined that such costs would not have been incurred but for the withdrawal.  The withdrawing bidder is also prohibited from resubmitting a bid on the re-bid.

The Pa. bid withdrawal statute can be found at 72 P.S. § 1601, et seq.  If you need assistance with a bid withdrawal, call or email me for a free consultation.

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

Public Bidding 101: Responsiveness

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This post is one in a continuing series on the basics of public bidding in Pennsylvania.  The topic of this post is “responsiveness.”

The term “responsiveness” refers to whether a bid is compliant with the requirements specified in the invitation to bid.  For a public bid to be accepted, it must be “responsive” to the bidding instructions, meaning that it must satisfy the mandatory terms, conditions, and instructions contained in the bid invitation.  If a bid fails to adhere to the mandatory bidding requirements, the bid is considered “non-responsive.”

Mandatory compliance with bidding instructions guarantees that contract awards will be made fairly and economically.   First, with clear-cut ground rules for vendor competition, none of the bidders will obtain an unfair advantage from a special knowledge of the bidding requirements.  Second, the principle of strict adherence to the bid instructions reduces the possibility of fraud or favoritism in favor of one bidder over another.

Examples of non-responsive bids are those that are missing critical pricing information, or an authorized signature of the bidder.  A non-responsive bid may be missing a bid bond, may contain a counter-offer that deviates from the specifications of the bid, or may be missing a required form, such as a signed addendum.  A determination that a bid is non-responsive is typically final and is normally not subject to any review or administrative appeal by the rejected bidder.  The concept of bid responsiveness was noted and explained in Nielson v. Womer, 46 Pa. Cmwlth. 283, 406 A.2d 1169, 1171 (1979).

Whether a bid which is non-responsive can nonetheless be accepted by waiving the bid defect was addressed in my earlier post on the “Hall of Fame” decision in Gaeta v. Ridley School District.

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

Public Bidding 101: A Level Playing Field

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This post is the first in what will be a continuing series of posts on the basic tenets of public bidding and contracting in Pennsylvania.

A cornerstone of public bidding is the concept of a “level playing field” which binds all of the bidders to a common standard which governs all bids that are received.  A common standard implies previously prepared specifications, freely accessible to all competitors, and not written in favor of one particular bidder.  The level playing field is violated whenever the public entity applies a different standard to the bids received, or awards a contract based upon unpublished or unadvertised standards, or otherwise deviates from the published bid instructions and requirements.

In Ezy Parks v. Larson, 499 Pa. 615,  454 A.2d 928 (1982), a case which is often cited, the Supreme Court re-affirmed the concept of a level playing field.  In Ezy Parks, the Supreme Court enjoined an award by PennDOT of new leases for existing parking lots where the bid instructions were ambiguous and did not provide a common basis on which all of the bids could be judged.  Further, the Supreme Court re-emphasized that the bidding instructions could not be clarified on an ad hoc basis by ex parte explanations from public officials to those potential bidders who are either clever enough to seek such advice or who simply, for whatever reason, have special access to the ears of the public officials.

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