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

Philadelphia School District Sued Over Contract Award To Minority Firm

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The Philadelphia School District has been sued by a suburban, white-owned firm which lost out on a School District contract in favor of a minority-owned firm.  The Philadelphia Inquirer has reported that the firm, which lost a $7.5 million surveillance-camera project after former Philadelphia School Superintendent Arlene C. Ackerman allegedly intervened on behalf of a minority-owned firm, has filed a federal civil rights lawsuit against the School District and Ackerman.

The firm may have an uphill battle in its suit.  It is well-established that disappointed bidders have no standing to sue public entities for lost profits due to the loss of a contract award.  Moreover, the federal courts have held that disappointed bidders have no claims for due process violations for alleged bidding irregularities because the bidders themselves have no personal or property rights in the lost contract.

On the other hand, if the firm can establish that, but for the actions of Ackerman and due to the race of its owner or the race of the owner of the minority-owned firm, it would have obtained the contract, it may be able to prevail against the School District.  This suit in such case would be no different that the challenges to minority “set-aside” laws which were viewed as quotas and which were struck down by the courts.  If successful, the suit will result in an award of attorney’s fees in favor of the firm.

The suit is the fourth brought against the district in the aftermath of the decision to award an emergency, no-bid contract to a minority-owned firm to install surveillance cameras in 19 city schools the state had deemed dangerous. The School District justified bypassing its normal bidding requirements by calling the camera installation an “emergency.”

The Philadelphia Inquirer article can be found here.  An Inquirer article on a whistleblower suit by a former School District official arising out of the same contract award can be found here.

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Posted on by Christopher I. McCabe, Esq. in Phila. School District Leave a comment

Should Disappointed Bidder Be Allowed to Recover its Bid Preparation Costs?

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In Pennsylvania, a general rule of public bidding is that a disappointed bidder cannot recover lost profits or other costs for the reason that the bidding laws are for the benefit of the taxpayers and not the bidders themselves.

But what of the disappointed bidder, whose bid is wrongfully rejected but where injunctive relief is denied to the taxpayer who has sought such relief?  If it is later determined that the taxpayer was indeed correct, but it is too late for the wrongful decision to be undone and for the contract to be awarded to the bidder instead, or at least enjoined, should the disappointed bidder be allowed to recover, if not its lost profits, at least its bid preparation costs?

In the case of Meccon, Inc. v. Univ. of Akron, the Ohio Supreme Court held in 2010 that, when a rejected bidder establishes that a public entity violated competitive-bidding laws in awarding a public contract, the bidder may recover reasonable bid preparation costs as damages if (a) the bidder promptly sought, but was denied, an injunction to suspend work on the project, pending resolution of the bid dispute, and (b) it is later determined that the bidder was wrongfully rejected and injunctive relief is no longer available.

The Ohio Supreme Court’s reasoning in support of its decision is powerful:

If, for instance, a rejected bidder alleges that a public authority failed to comply with competitive-bidding laws and promptly seeks injunctive relief to delay the public-improvement project pending resolution of the dispute, denial of the requested injunctive relief means that determination of the allegation of wrongful conduct by the public authority will not take place until much later in the litigation. Under our precedent, once the public-improvement work commences or is completed, the rejected bidder will not be able to perform the public contract even if the bidder demonstrates that its bid was wrongfully rejected.  In such circumstances, the wrongfully rejected bidder is left with no remedy for the public authority’s unlawful conduct, and injunctive relief will no longer serve to deter the public authority’s unlawful conduct.

Of course, this rule has never been applied by the Pennsylvania courts. The general rule here is that only injunctive relief is available and only if sought by a taxpayer.  The disappointed bidder itself has no standing as a bidder to seek any relief against a public entity for the reason that the bidding laws are for the benefit of the taxpayers and general public.

In view of the Ohio decision, there may come a time that such a limited claim is asserted on behalf of a disappointed bidder.  To allow such a claim, the rule on standing would need to be modified in Pennsylvania.

There are numerous instances where injunctive relief is denied to a taxpayer, but where there is a strong claim that the public entity acted in a wrongful manner (thereby harming the interests of the public, the taxpayers, and the participating bidders). And certainly, for many large public works projects, the costs of preparing a bid, for what the bidder believed would be a fair and open process, can be quite significant.  If such costs cannot recouped and the public entity faces no threat of injunctive relief, how are the interests of taxpayer served, especially where the bidder is a taxpayer itself?

If the bid process is found to be unfair and wrongful, but if injunctive relief is no longer available, there is no real deterrent to the public entity if it chooses to repeat its same conduct on future bids.  In such a case, should the potential remedy be limited solely to injunctive relief for a taxpayer, even where such relief is unavailable as a practical matter, because the project has already commenced, and where the bidder, in reliance upon what was expected to be a fair and open process, has expended significant costs?  In such a case, it could be argued that a limited exception to the standing rule should be carved out to permit the disappointed bidder to at least recover its bid preparation costs.

The Meccon decision can be found here.

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Posted on by Christopher I. McCabe, Esq. in General 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

$500K Settlement for Ohio Contractor in DBE Case on Cleveland Airport Project

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Federal prosecutors in Ohio recently announced that an Ohio contractor has agreed to pay the U.S. Justice Department $500,000 to settle complaints that the contractor improperly claimed credit for minority contractors on a $130 million runway expansion at Cleveland Hopkins International Airport.

Federal prosecutors accused the contractor of submitting false claims that made it appear that the contractor was in compliance with the U.S. Department of Transportation disadvantaged business enterprise program, which was required for the contractor to obtain and keep its contract. The contract was funded by the U.S. DOT.

A Cleveland Plain Dealer article on the complaints and the settlement can be found here.

This settlement is proof, once again, that contractors who evade the DBE rules on federally-funded transportation contracts are at serious risk for significant civil sanctions and potentially criminal penalties, including enforcement action under the federal False Claims Act.  Rather than seeking to meet DBE goals by using questionable “pass-through” entities, contractors should remember that the U.S. DOT DBE rules require only good faith efforts to meet the specified contracting goals. The DBE goals cannot be enforced as quotas, and a contractor’s failure to meet the goals should not disqualify it from receiving a contract, so long as the contractor can show that it has expended reasonable and good faith efforts to meet the goals. A denial of the contract for failure to meet the goals, in the face of good faith efforts, could subject the public entity to an equal protection claim.

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

What is the PA Unified Certification Program?

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The Pennsylvania Unified Certification Program (PA UCP) was created as a result of a change in the Disadvantaged Business Enterprise (DBE) regulations issued by the U.S. Department of Transportation, and is designed to provide “one-stop shopping” for firms seeking certification as a DBE in accordance with 49 CFR Part 26 and as an Airport Concession DBE (ACDBE) in accordance with 49 CFR Part 23.  These regulations are issued by the US DOT and governn its DBE program which mandates disadvantaged contractor goals in federally-funded contracts. Information on the US DOT program can be found here.

The PA UCP is comprised of all Pennsylvania recipients of funds from the Federal Aviation Administration (FAA), the Federal Highway Administration (FHWA), and the Federal Transit Administration (FTA).

The PA UCP makes all certification decisions on behalf of all agencies and organizations in Pennsylvania with respect to participation in the DBE and ACDBE Programs. In other words, firms certified as a DBE or ACDBE with the PA UCP are eligible to participate on any FAA-, FHWA-, or FTA-funded contract as a DBE or ACDBE.

The PA UCP website can be found here. Click here to learn how to become certified as a DBE or ACDBE.

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