Can A Public Owner Ever Seek Clarification Of Ambiguous Pricing?

Recently, a public owner solicited bids for a university construction project. The bid form sought pricing for base bid work and alternate work. One of the bidders included ambiguous pricing for an alternate item, in that the pricing was Read more

Debriefing After Non-Selection Does Not Toll 7-Day Deadline For Bid Protest

The Pa. Procurement Code sets a strict deadline for bid protests - the protest must be filed within seven days after the protestant knew or should have known of the facts giving rise to the protest.  If the protest is untimely, it Read more

Does Separations Act Prohibit Use Of Best Value Contracting For Construction Of Philadelphia Public Buildings?

Now that "best value" contracting is officially the new game in town for City of Philadelphia procurement, with the issuance of the new best value regulations, it's worth asking whether the longstanding Separations Act precludes the City from using best Read more

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

USDOT Inspector General Issues Audit Critical Of DBE Program

Linkedin Facebook Twitter Plusone Email

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.

Linkedin Facebook Twitter Plusone Email
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

Linkedin Facebook Twitter Plusone Email

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.

Linkedin Facebook Twitter Plusone Email
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

Linkedin Facebook Twitter Plusone Email

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.

Linkedin Facebook Twitter Plusone Email
Posted on by Christopher I. McCabe, Esq. in Separations Act Leave a comment

Philadelphia Inspector General Shines Spotlight On Use Of MBE Pass-Through

Linkedin Facebook Twitter Plusone Email

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.

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

Amendments to Prevailing Wage Act Proposed

Linkedin Facebook Twitter Plusone Email

It’s that time of year again, when Republican legislators in the Pennsylvania General Assembly seek to amend the Pa. Prevailing Wage Act.  There are now several proposals to do just that, and two bills are farther along in the process than the many others that have been proposed. In April, the House Labor and Industry Committee voted along straight party lines to report out of committee two bills proposing changes to the Prevailing Wage Act.

The first bill, HB796, will raise the threshold amount from $25,000 to $100,000.

The second bill, HB665, will exempt routine road maintenance contracts.

In addition to these two bills, still more bills have been proposed. Here is a small sampling of some of the other bills pending in the General Assembly:

HB1095 would impose a 3-year moratorium on the Prevailing Wage Act.

HB999 would exempt KOZs from requirements of the Prevailing Wage Act.

HB1257 would require at least 51% of a project to be paid with public monies before the Prevailing Wage Act would apply.

It seems likely that this year will see some changes to the Prevailing Wage Act. What those exact changes will be still remains to be seen.  Of course, these newest proposed amendments may lead nowhere, as the amendments proposed last year never came to pass.

Linkedin Facebook Twitter Plusone Email
Posted on by Christopher I. McCabe, Esq. in Prevailing Wage Leave a comment