Can Retainage Be Held Until Final Completion Of The Project?

On public projects, an owner typically withholds retainage of 10%. Can the owner hold this 10% retainage until final completion? The short answer is, No! Section 3921 of the PA Procurement Code mandates that, when the contract is 50% completed, retainage "shall Read more

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

Renegotiation Of Prices For Contract Extension Held Unlawful; Competitive Bidding Required

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Recently, in Hanisco v. Township of Warminster, the Commonwealth Court ruled that Warminster Township improperly negotiated new pricing for an extension of a waste services contract.  The Court held that the township should have let the new contract by competitive bidding.

While the general rule is that a municipality may extend and renew public contracts without the need for competitive bidding, to do so the municipality must specify in the original bid requirements that the contract can be renewed or extended and under what terms.  If the specifications do not spell out this allowance, then the contract must be competitively bid again when it expires.

The problem in Hanisco was that, while the original 5-year waste contract allowed for two 1-year extensions, the prices for the two 1-year extensions were already set by the contract.  But in 2009, rather than adhering to these fixed prices, the township and the contractor, knowing that the prices were higher than in the marketplace, privately negotiated more favorable pricing for the two 1-year extensions in the form of a “rebate.”  This new pricing required an amendment to the contract to reflect the better pricing and to permit the township to exercise the renewal option.

In Hanisco, the Court framed the issue as follows:

The issue before this Court is whether the prices for the waste services provided by [the contractor] set forth in the 2005 Contract for the two, one-year options for 2010 and 2011 could be privately renegotiated by the parties or whether such a renegotiation required public, competitive bidding pursuant to Section 3102(a) of the [Pennsylvania Second Class Township] Code.

The Commonwealth Court held that the conduct of the township and the contractor was improper:

… the option in the instant case contained the essential terms, including price, and was a part of the competitive bidding process. This price term was definite and not open for future negotiation. Indeed, the option here was even more definite than that in Bevilacqua, where the term of the option remained open for negotiation based on the value of the improvements the concessionaire made. Here, because the Township did not exercise the option in accordance with its terms but, instead negotiated a new price, the Township and [the contractor] entered into a new contract that became subject to the Code’s mandatory public bidding requirements.

The evil which the Commonwealth Court addressed in Hanisco is the opportunity for favoritism when a municipality negotiates in private for a contract that should be competitively bid.  While the township officials may have believed that they were acting in good faith, in order to get the best deal they could for their constituents, in reality by not putting the contract out for bid the township would not know if it could have achieved even greater savings.

As the Commonwealth Court stated:

The overarching public policy encompassed by the public bidding requirements must take precedence to ensure the integrity of the process, its transparency and fairness, and to engender a greater sense of trust in government among the citizen taxpayers. While we understand that the Township wanted to provide savings to its constituents, the decision not to advertise its waste services contract for competitive bidding has prevented the parties from knowing whether greater savings could have been achieved had the contract been rebid pursuant to the Code.

The Hanisco decision can be found here.

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

Should The Prevailing Wage Act Be Amended?

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The Pa. Prevailing Wage Act mandates the payment of specified wages for publicly-funded public works contracts of $25,000 or more.  The wages are typically tied to the wages established by area collective bargaining agreements.

Currently, there are a number of proposed amendments to the Act which would alter application of the Act to different public contracts.

House Bill 709, or the “School Construction Cost Reduction Act,” would exempt school districts as a public entity required to pay prevailing wages, unless the school board votes to be subject to prevailing wage.

House Bill 1329 would raise the contract monetary limit from $25,000 to $185,000.  The $25,000 limit was set in 1961.

There are opposing viewpoints on the various proposed amendments to the Act as well as to the general concept of payment of prevailing wages on public contracts.  Viewpoints in favor of the amendments and against the Act can be found here and here.  Viewpoints in favor of the Act and opposing the proposed amendments can be found here and here.

For a non-partisan viewpoint from an economist with the nonpartisan Keystone Research Center, click here.

Needless to say, the proposed amendments would radically alter the landscape of public contracting in Pennsylvania.  Whether such an altered landscape would actually result in lower construction costs for public entities and taxpayers, without a reduction in decent, middle class wages for workers on public works projects, is an open question.  In all likelihood, the possibility of significantly lower costs on public contracts is probably just an illusion, and something touted by politicians looking for votes.

 

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Posted on by Christopher I. McCabe, Esq. in Prevailing Wage Leave a comment

PENNVEST Announces $115 Million In Water And Wastewater Projects

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On April 25, 2012, the Pennsylvania Infrastructure Investment Authority (PENNVEST) announced the investment of $115 million in 28 non-point source, drinking water, and wastewater projects in 17 counties.  In the PENNVEST press release, Governor Tom Gorbett is quoted:

“These projects will significantly contribute to improved waterways, including the Chesapeake Bay, and will also create hundreds of new jobs that are so vital to our local communities.”

“These projects serve the dual purposes of responsible environmental stewardship and steadfast economic recovery, both of which are critical to the future of Pennsylvania.”

Of the $115 million total, $82 million is for low-interest loans and $33 million is offered as grants.

The funding comes from a combination of state funds approved by voters, federal grants to PENNVEST from the Environmental Protection Agency, and recycled loan repayments from previous PENNVEST funding awards.  This new funding will undoubtedly mean more work for public works contractors performing wastewater and utility work in Pennsylvania.

For the official PENNVEST press release, click here.

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

OEO Changes Policy on City Contracts for Non-Stocking M/W/DSBE Suppliers

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After long treating M/W/DSBE supply firms the same as M/W/DSBE subcontractors, and giving City contractors 100% credit for the use of M/W/DSBE supply firms, the City of Philadelphia Office of Economic Opportunity has now changed its tune.  Apparently, the OEO will no longer give full credit for use of an M/W/DSBE supply firm, unless the firm is a “stocking” supplier, meaning that it actually has in stock the supplies which it plans to furnish to the prime contractor on the City contract.

The new policy was reported in The Philadelphia Tribune in February.  Angela Dowd-Burton, Executive Director of the OEO, was quoted in the Tribune article as follows:

“They [the M/W/DSBE] don’t have the inventory, and the probability is they’re just picking up the phone and collecting a fee…So, we’ve decided that whatever commission you get from making that call, that’s the only participation we’re going to report on.”

“Contractors will ultimately have to find participation from minority- and women-owned businesses that actually hire people and use contractors that do work, as opposed to someone that is providing more of a clerical function.”

The new OEO policy will undoubtedly affect many M/W/DSBE supply firms, as it is rare that any supplier will have in stock all of the needed supplies for a construction project.  Where custom or special order equipment is involved, as is the case on many public works projects, it is unlikely that any supplier will have the equipment in stock.

The OEO is reportedly encouraging the use of subcontractors for the ordering of construction supplies.  It is hard to see how this makes any difference, however, as it is unlikely that a subcontractor will have in stock the supplies that the supply firm does not.

As for City contractors, they must now pay greater attention to the firms that they propose to meet the City’s M/W/DSBE contracting goals. If those firms are suppliers, and not working subcontractors, the City contractor may need to think twice before using the supply firm to avoid risking disqualification for failure to meet the City’s contracting goals, or seek clarification from the OEO before submitting a bid.

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