Thinking of avoiding the Pa. Prevailing Wage Act? Think again! An intentional violation of the Wage Act can and will result in a debarment for three years.
Section 11(e) of the Wage Act provides:
(e) In the event that the secretary shall determine, after notice and hearing as required by this section, that any person or firm has failed to pay the prevailing wages and that such failure was intentional, he shall thereupon notify all public bodies of the name or names of such persons or firms and no contract shall be awarded to such persons or firms or to any firm, corporation or partnership in which such persons or firms have an interest until three years have elapsed from the date of the notice to the public bodies aforesaid. The secretary may in addition thereto request the Attorney General to proceed to recover the penalties for the Commonwealth of Pennsylvania which are payable under subsection (f) of this section.
E-verify, officially known as the Pennsylvania Public Works Employment Verification, Act 127 of 2012, has now been the law of the Commonwealth of Pennsylvania for more than two years, since January 1, 2013. E-verify requires all public works contractors and subcontractors to utilize the federal government’s E-Verify system to ensure that all employees performing work on public works projects are authorized to work in the United States. My earlier post on E-Verify can be found here.
On September 23, 2015, Pennsylvania Governor Tom Wolf signed an Executive Order solidifying his commitment to improving the participation of minority-owned, women-owned, LGBT-owned, veteran-owned, and disabled-owned businesses in state government contracting.
According to the official press release, Executive Order 2015-11, entitled “Diversity, Inclusion, and Small Business Opportunities in State Contracting and Pennsylvania’s Economy,”
directs a consistent and coordinated effort to ensure diversity and inclusion in all contracting opportunities for small and diverse businesses throughout agencies under the governor’s jurisdiction and promotes the creation of programs to better prepare those businesses to compete and succeed in Pennsylvania’s economy.
The current Pennsylvania budget impasse is now entering its fifth month. How does the impasse and the lack of a state budget affect vendors and contractors holding contracts with the Commonwealth of Pennsylvania and its departments, boards and agencies?
According to the FAQ webpage of the Office of the Budget, the following questions and answers address payments to vendors and contractors and future contracts:
Question 9: Will Commonwealth agencies process invoices from vendors?
Answer: Yes. Vendors with state contracts who continue to provide goods and services to commonwealth agencies can submit invoices and Commonwealth agencies will process all invoices received. All invoices held during the budget impasse will be sent promptly to the State Treasury for processing after the FY15-16 budget is enacted.
Question 10: How will the budget impasse affect existing contracts?
Answer: Most state contracts include language addressing this situation, which states that the commonwealth’s obligation to make payments shall be subject to the availability and appropriation of funds and that contractors may not stop work or refuse to make delivery because of non-payment. If the Commonwealth’s untimely payment results in a default situation, the contractor may pursue the remedies set forth in the contract.
Question 11: Can Commonwealth agencies enter into new contracts for 2015-16?
Answer: Agencies may enter into new contracts for FY 2015-16. The contracts will clearly state that payment is subject to appropriation.
The takeaway here is that vendors and contractors doing business with a public entity like the Commonwealth of Pennsylvania should never forget that public contracts are unlike private contracts in many ways, not the least of which is that the payment obligations of the public entity are nearly always subject to legislative appropriation of the funds necessary for payment. So, while payment may be delayed due to non-appropriation, the obligation to perform the work covered by the contract continues even in the face of non-payment.
In a recent decision, the Supreme Court of Pennsylvania has held that the Pa. Contractor and Subcontractor Payment Act (“CASPA”) does not apply to a construction project where the owner is a governmental entity. CASPA is a Pennsylvania statute governing payments to contractors and subcontractors on construction projects located in Pennsylvania. CASPA typically applies to private development projects, whereas the Pa. Procurement Code’s Prompt Pay Schedules apply to state or local public works projects.