In a recent decision, Dragani v. Borough of Ambler, 37 A.3d 27 (2012), the Commonwealth Court of Pennsylvania has ruled that a bid for a borough waste collection contract contained a non-waiveable defect where the bidder failed to include a proper consent of surety from a surety with an at least $20 million of underwriting authority, as per the bid instructions.
While the Court in Dragani recognized that the Supreme Court’s decision in Gaeta granted municipalities more leeway in waiving apparent defects, the Court declined to find that the defect was waiveable under the Gaeta decision. Instead, the Court held that the borough’s instructions were unambiguous and removed any discretion to waive the consent of surety requirement. The Court followed its decision in Glasgow v. Pennsylvania Department of Transportation, 851 A.2d 1014 (Pa. Cmwlth. 2004), where it held that, if a defect involves the waiver of a mandatory requirement that the bid specifications treat as non-waiveable, then the defect cannot be waived.
One concern, not explored in the Court’s opnion, is whether the underwriting authority limitation could serve in future bids as a means to disqualify an otherwise qualified bidder whose surety happens not to meet the $20 million threshold, without any real benefit for the municipality. In Dragani, the bidder’s surety, Fidelity-Maryland, had $16 million in underwriting authority, but its parent had $571 million in underwriting authority.
Nonetheless, the primary lesson from Dragani is that bidders must pay careful attention to the bid instructions, especially those concerning the bid security. This lesson cannot be overstated.
This is one in a series of posts which will highlight significant Pennsylvania court decisions in the area of public bidding and contracts. The first decision highlighted concerns waiver of bid defects.
In Gaeta v. Ridley School District, 567 Pa. 500, 788 A.2d 363 (2002), the low bidder submitted as bid security a B-rated bid bond, whereas the bid instructions had required an “A-rated” bid bond. However, the school district waived the apparent bid defect and allowed the bidder to substitute an A-rated bid bond for the B-rated bid bond. The school district’s decision was challenged as a violation of the basic rules of public bidding.
On appeal, the issue was whether the school district could waive the defect in the low bidder’s bid. The Supreme Court of Pennsylvania rejected the taxpayer challenge, and upheld the bid bond substitution because no competitive advantage was conferred on the low bidder and because the bid bond did not affect the performance of the contract as the bid bond would ultimately be replaced by a performance bond.
In Gaeta, the Supreme Court announced a new test for waiver of bid defects. Under the test announced in Gaeta, a municipality is permitted to waive a bid defect where the waiver will not deprive the municipality of an assurance that the contract would be entered into, performed, and guaranteed according to its specified requirements, and where the waiver will not place one bidder in a position of advantage over the other bidders or will not otherwise undermine the necessary standard of competition.
The waiver test in Gaeta has been applied in numerous case since Gaeta was decided.
This post is the first in what will be a continuing series of posts on the basic tenets of public bidding and contracting in Pennsylvania.
A cornerstone of public bidding is the concept of a “level playing field” which binds all of the bidders to a common standard which governs all bids that are received. A common standard implies previously prepared specifications, freely accessible to all competitors, and not written in favor of one particular bidder. The level playing field is violated whenever the public entity applies a different standard to the bids received, or awards a contract based upon unpublished or unadvertised standards, or otherwise deviates from the published bid instructions and requirements.
In Ezy Parks v. Larson, 499 Pa. 615, 454 A.2d 928 (1982), a case which is often cited, the Supreme Court re-affirmed the concept of a level playing field. In Ezy Parks, the Supreme Court enjoined an award by PennDOT of new leases for existing parking lots where the bid instructions were ambiguous and did not provide a common basis on which all of the bids could be judged. Further, the Supreme Court re-emphasized that the bidding instructions could not be clarified on an ad hoc basis by ex parte explanations from public officials to those potential bidders who are either clever enough to seek such advice or who simply, for whatever reason, have special access to the ears of the public officials.
Welcome to PA Public Contracts, a legal blog focused on the issues of public bidding and contracting at the state and local level in Pennsylvania.
This blog will offer news, analysis, opinions, and commentary on public bidding and contracting in Pennsylvania, analysis and commentary on significant court decisions, legislative changes to public procurement law, ideas and tips on public contracting issues, and observations on public bidding questions and disputes. It is intended eventually to be a clearinghouse of sorts for the topic of public bidding and contracting in Pennsylvania.
I am a construction and public contract attorney at Jacoby Donner, P.C., a boutique construction law firm based in Philadelphia. Prior to joining Jacoby Donner in June 2005, I was an attorney with the City of Philadelphia Law Department where I focused my practice on representing the City of Philadelphia in a variety of public contract and procurement matters, such as contractor suits, payment claims, MBEC issues, bid protests, and injunction actions in Common Pleas Court.
I hope that all of those who visit this blog will find it of value to their business and public contracting efforts. Feel free to contact me for further information or assistance.