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

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

Bidder’s Response To RFP Does Not Create Contract

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In an unpublished opinion issued in November 2012, in a case brought by two disappointed bidders involving contracts awarded in 2002, the Commonwealth Court revisited some core principles of public bidding which are worth repeating.

The underlying facts concerned an Request for Proposals issued by Hazleton Area School District for school bus transportation contracts.  The school district awarded the contracts, not to the lowest bidders, but to other bidders based upon the model year of the buses proposed for the contracts. The low bidders sued and challenged the award and also asserted a tortious interference claim against the competing bidders.

As a preliminary matter, the Court noted that the low bidders’ standing as taxpayers did not also give them a cause of action for breach of contract or tortious interference.  Taxpayer standing does not translate into a claim for damages.

The Court first held that the bidders’ response to the school district’s RFP did not create a binding contract with the school district.  The bidders argued that the circulation of the RFP constituted a unilateral contract offer which was accepted by the school district.  The Court rejected this position and reiterated the long-standing rule in Pennsylvania that an invitation to bid or an RFP is merely an invitation for an offer and is not an offer itself.  Rather, the bid is the offer which the public entity is free to accept or reject.  Thus, the Court held that the issuance of the RFP did not bind the school district to award the bus contracts to the low bidders.

Second, the Court held that there was no interference by the other competing bidders with the low bidders’ “prospective” business relationship with the school district.  The competing bidders were free to ask the school district to consider the age of the buses in making its decision to award the bus contracts. This sort of conduct was privileged and could not subject the other bidders to a tortious interference claim by the disappointed bidder.

The moral of the story?  Bid protests are not easy to win, especially where the bid protests are based on unwarranted extensions of the law and where counsel argue points that have no support in public bidding law and muck up their clients’ claims with silly theories like tortious interference with contract.

The decision in Yurcho v. Hazleton Area School District can be found here.

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

Commonwealth Court Voids Drug Contract Where Price Was Not A Factor In Contract Award

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In March 2011, the Pennsylvania Department of Public Welfare (DPW) issued a Request for Proposals (RFP), under a competitive sealed proposal process, seeking proposals for the supply of pharmaceuticals for its Developmentally Disabled Centers.  The pricing structure set out in the RFP provided that the winning vendor would be reimbursed through Medicare, Medical Assistance (MA), or private insurance.  Apparently, DPW would not consider price as a factor in its award of the contract.

DPW received four bids and awarded the contract to Diamond Drugs whose proposal was scored the highest.  Omnicare filed a protest with DPW and argued that DPW violated the Procurement Code by failing to consider price as an element of the bids when it contracted to purchase pharmaceuticals for which there was no set pricing scheme and where DPW would pay for drugs not covered by Medicare, MA, or a private insurer.  Section 513(g) of the Procurement Code requires that a purchasing agency consider price in the competitive sealed proposal process. DPW argued that that its actions were proper because it would pay the same regardless of which vendor won the contract. DPW rejected the protest.  Omnicare then appealed to the Commonwealth Court of Pennsylvania.

On May 15, 2013, the Commonwealth Court sustained the protest and voided the contract.  The Commonwealth Court first held that the protest was timely as it was filed within seven days after notice of the contract award was posted to the DPW website.  The Commonwealth Court rejected DPW’s argument that the protest was untimely because the RFP provided Omnicare with enough information on which to base its bid protest.  The Commonwealth Court next held that the contract violated the Procurement Code because DPW will pay directly for non-compensable medications even though it did not consider price as a factor in its award.

The Commonwealth Court wrote:

In doing so, and in failing to consider pricing for non-compensable drugs as an element of the proposals, DPW deprived itself and the offerors of the opportunity to discover whether an offeror could offer better prices for non-compensable drugs than those arrived at by using the MA pricing formula. Given that the offerors’ prices for non-compensable drugs could have differed, DPW violated Section 513(g) [of the Procurement Code] by failing to consider pricing as an element of the proposals.

The Commonwealth Court decision in Omnicare, Inc. v. Department of Public Welfare 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

Proposed Bill Will Exclude School Work From Separations Act

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The Pennsylvania Separations Act was enacted in 1913, a century ago. It requires public entities to solicit separate bids and award separate contracts for plumbing, heating, electrical, and ventilating work that is part of a public construction project where the costs of construction generally exceed $4,000.

In recent years, there have been many efforts in the Pennsylvania General Assembly to do away with the Separations Act or to limit its application.  None have been successful.  This year, there are again efforts brewing in the General Assembly to exclude school construction from the requirements of the Separations Act, with one bill progressing more quickly than others.

On April 17, 2013, HB324 was reported out of the House Education Committee.  This bill amends the Public School Code to provide for the removal of the Separations Act requirements for school construction.

The sponsor of HB324 provides this rationale for his bill:

My legislation will relieve school districts of the mandate to comply with the Separations Act and will give them the flexibility to determine whether a single or multiple prime delivery system provides the most efficient and cost-effective way to complete a project.

It remains to be seen whether this latest effort to amend the Separations Act will be successful.

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Posted on by Christopher I. McCabe, Esq. in Separations Act Leave a comment