How many votes are needed for a municipal authority board to award a public contract? The Commonwealth Court recently held, in Seda-Cog Joint Rail Authority v. Carload Express, Inc., 185 A.2d 1232 (2018), that a majority vote of board members present and voting is sufficient and effective to award the contract and that abstaining board members are not counted as “present” even if they are physically present.
The Seda-Cog Joint Rail Authority (Authority), is governed by a 16-member board of directors and owns rail lines in several Pennsylvania counties, which are operated by a private railroad operator. In 2014, the Authority issued an RFP for a new operating agreement. The RFP contemplated that the highest scoring operator would receive the new agreement. Because of abstentions by board members, it was clear throughout the RFP selection process that no more than 10 board members would vote to decide the contract award. The Authority also informed candidates that it would require “yes” votes from at least nine board members to award a contract. However, this voting requirement was not included in the RFP or the Authority’s bylaws.
At the end of the evaluation process, Carload Express, Inc. (Carload) received the highest score. A meeting of all 16 board members was held, with seven votes in favor of Carload, three votes against, and six abstaining. The Authority declined to award the contract to Carload, and filed an action seeking a declaration that the 7-3 vote was ineffective. Carload filed a counterclaim seeking a contrary declaration, and an order requiring the Authority to execute a contract with Carload. The trial court ruled in favor of the Authority and Carload appealed to the Commonwealth Court.
On appeal, the Commonwealth Court held that the Municipal Authorities Act and common law voting requirements required only a majority vote of members present for voting and that abstaining members were not counted as “present.” Therefore, the 7-3 vote was effective. The Commonwealth Court also rejected the Authority’s argument that the RFP’s boilerplate reservation of rights allowed it to change the voting requirement:
The Authority’s reliance on its boilerplate reservations of rights in the RFP is unavailing. Where a municipal entity voluntarily undertakes to follow a specified procedure in awarding a contract, it must adhere to that process. Lasday v. Allegheny Cty., 499 Pa. 434, 453 A.2d 949 (1982)(citing Am. Totalisator Co. v. Seligman, 489 Pa. 568, 414 A.2d 1037 (1980)). The contract award process must also be in accord with basic standards of fairness; a municipal entity cannot disclaim that obligation by a purported reservation of rights to reject any or all proposals.
The Commonwealth Court also held that Carload’s failure to object to the Authority’s nine-vote requirement did not preclude it from arguing that the seven-vote plurality was sufficient to award it the contract. Finally, the Commonwealth Court concluded that Carload had a legal right to be awarded the contract:
The Authority provided a detailed description in the RFP of the selection process it would use to award the new operating agreement. The RFP plainly contemplated that the highest scoring proposal would be awarded the contract. The Authority offered no substantive reason for declining to award the operating agreement to Carload, which received the highest score under the Authority’s own scoring process. Notably, the Authority is not permitted to award the operating agreement to another entity by ignoring its own selection procedure as mandated by the RFP. See Am. Totalisator (where the Commonwealth failed to abide by the terms of its own RFP, it lacked discretion to award a contract contrary to those terms, thus warranting judicial intervention). Therefore, we conclude Carload has a legal right to be awarded the operating agreement.
This decision is important for two reasons. First, it re-affirms the long-standing rule that a public entity must adhere to the process outlined in its bidding documents. Second, it recognizes the authority of a court to compel a contract execution by a public entity under appropriate circumstances, given that courts typically decline to order such relief.
The Commonwealth Court decision can be found here.
If you need assistance with a public contracting issue, feel free to call or email me. I’ll be happy to assist in anyway possible.
Christopher I. McCabe, Esq.
