In a recent, unreported opinion, the Commonwealth Court held that the Separations Act is not superseded by the Guaranteed Energy Savings Act (GESA), 62 Pa.C.S. §§ 3751-3758, which allows a public entity to award a single contract to implement an “energy conservation measure.”
In May 2017, James P. Wescott, the owner of Wescott Electric Company, filed a taxpayer lawsuit to enjoin the Delaware County Intermediate Unit (IU) from awarding a single $38 million contract for the construction of two new additions to an existing structure, the removal of a boiler system, and installation of a new centralized HVAC system to serve all three connected structures. Wescott challenged the award based on the IU’s failure to follow the Separations Act which requires separate bids for plumbing, HVAC, and electrical work. The IU argued that GESA specifically permitted the award of a single contract because the project, which included replacement of an existing boiler and installation of a new centralized HVAC system, qualified as an “energy conservation measure” under 62 Pa.C.S. § 3752. The trial court agreed with the IU and denied the injunction, ruling that a guaranteed energy savings contract did not have to comply with the Separations Act.
On appeal, the Commonwealth rejected the trial court’s reasoning as follows:
… we are not persuaded that the Separations Act and GESA are in conflict. Instead, we believe that a compelling argument can be made that these statutes can function together such that effect could be given to both, thereby obviating the need for any statutory construction analysis. The Separations Act generally requires separate bidding and award of contracts to the lowest responsible bidder for any construction or alteration of a public building that exceeds $4,000.00. GESA’s application is very narrow and limited to specific situations involving energy, water, or wastewater projects which would result in a cost savings that would effectively pay for the projects themselves. The fact that a project may include an element of energy, water, or wastewater savings does not make the entire project subject to GESA. Indeed, in this case, the IU could have bid out the construction of the additions separately in accordance with the Separations Act and limited the GESA project to demolition of the existing boiler system and replacement with a centralized HVAC system.
Even though the Commonwealth Court disagreed with the trial court, it upheld the injunction on grounds that the taxpayer had failed to establish that greater injury would occur from refusing to grant the injunction and that the public interest would not be harmed if an injunction were to be granted.
The upshot from this ruling is that greater scrutiny will be applied to the use of GESA by a public owner to avoid the Separations Act. The full Commonwealth Court opinion can be found here.
If you need assistance with a Separations Act question, feel free to call or email me. I’ll be happy to assist in anyway possible.
Christopher I. McCabe, Esq.
