Four Plead Guilty In Fraud Scheme To Obtain $18.7 Million In DBE Subcontracts On PennDOT Projects

Still another “pass-through” fraud scheme involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) program has been exposed, with criminal penalties for all involved.

On October 8, 2015, Dennis Weber, Dale Weber, Carl M. Weber Steel Service, Inc., and Judy Noll pleaded guilty to federal conspiracy charges related to a complex DBE fraud scheme that, incredibly, lasted for more than 16 years, totaled almost $19 million, and involved 224 bridge projects throughout Pennsylvania.

Posted on February 11, 2016 by Christopher I. McCabe, Esq. in DBE/MBE/WBE, PennDOT Comments Off

DGS Issues Preliminary List Of Exempt Steel Products For 2016

The Pennsylvania Department of General Services (DGS) has issued a preliminary and updated list of machinery and equipment steel products which will be exempt under the Pa. Steel Products Procurement Act for 2016. The list was published in the Pa. Bulletin on Saturday, February 6, 2016, and can be found here.

Posted on February 9, 2016 by Christopher I. McCabe, Esq. in DGS, Steel Products Act Comments Off

2016 Bidding Thresholds Announced For State Authorities And Municipalities

Effective January 1, 2016, the thresholds for public bidding by Pennsylvania state authorities and municipalities will remain unchanged from 2015 and are as follows:

Purchases and contracts below $10,500 require no formal bidding or written/telephonic quotations

Purchases and contracts between $10,500 and $19,400 require three written/telephonic quotations

Purchases and contracts over $19,400 require formal bidding

Bidding thresholds are adjusted annually for inflation by the Pa. Department of Labor & Industry under Act 90 of 2011. The Pa. Bulletin announcement announcing the 2016 bidding thresholds can be found here.

Posted on January 12, 2016 by Christopher I. McCabe, Esq. in General Comments Off

Intentional Violation Of Pa. Prevailing Wage Act Will Result In Debarment

Thinking of avoiding the Pa. Prevailing Wage Act? Think again! An intentional violation of the Wage Act can and will result in a debarment for three years.

Section 11(e) of the Wage Act provides:

(e) In the event that the secretary shall determine, after notice and hearing as required by this section, that any person or firm has failed to pay the prevailing wages and that such failure was intentional, he shall thereupon notify all public bodies of the name or names of such persons or firms and no contract shall be awarded to such persons or firms or to any firm, corporation or partnership in which such persons or firms have an interest until three years have elapsed from the date of the notice to the public bodies aforesaid. The secretary may in addition thereto request the Attorney General to proceed to recover the penalties for the Commonwealth of Pennsylvania which are payable under subsection (f) of this section.

Posted on December 17, 2015 by Christopher I. McCabe, Esq. in Prevailing Wage Comments Off

DGS Sends Violation Notices Concerning Non-Compliance With E-Verify

E-verify, officially known as the Pennsylvania Public Works Employment Verification, Act 127 of 2012, has now been the law of the Commonwealth of Pennsylvania for more than two years, since January 1, 2013. E-verify requires all public works contractors and subcontractors to utilize the federal government’s E-Verify system to ensure that all employees performing work on public works projects are authorized to work in the United States. My earlier post on E-Verify can be found here.

Posted on December 3, 2015 by Christopher I. McCabe, Esq. in E-Verify Comments Off

Gov. Tom Wolf Signs Executive Order To Improve Participation Of Small & Diverse Businesses

On September 23, 2015, Pennsylvania Governor Tom Wolf signed an Executive Order solidifying his commitment to improving the participation of minority-owned, women-owned, LGBT-owned, veteran-owned, and disabled-owned businesses in state government contracting.

According to the official press release, Executive Order 2015-11, entitled “Diversity, Inclusion, and Small Business Opportunities in State Contracting and Pennsylvania’s Economy,”

directs a consistent and coordinated effort to ensure diversity and inclusion in all contracting opportunities for small and diverse businesses throughout agencies under the governor’s jurisdiction and promotes the creation of programs to better prepare those businesses to compete and succeed in Pennsylvania’s economy.

Posted on November 12, 2015 by Christopher I. McCabe, Esq. in DBE/MBE/WBE, DGS Comments Off

Continuing Pa. Budget Impasse Affects Payments To Contractors

The current Pennsylvania budget impasse is now entering its fifth month. How does the impasse and the lack of a state budget affect vendors and contractors holding contracts with the Commonwealth of Pennsylvania and its departments, boards and agencies?

According to the FAQ webpage of the Office of the Budget, the following questions and answers address payments to vendors and contractors and future contracts:

Question 9: Will Commonwealth agencies process invoices from vendors?

Answer: Yes. Vendors with state contracts who continue to provide goods and services to commonwealth agencies can submit invoices and Commonwealth agencies will process all invoices received. All invoices held during the budget impasse will be sent promptly to the State Treasury for processing after the FY15-16 budget is enacted.

Question 10: How will the budget impasse affect existing contracts?

Answer: Most state contracts include language addressing this situation, which states that the commonwealth’s obligation to make payments shall be subject to the availability and appropriation of funds and that contractors may not stop work or refuse to make delivery because of non-payment. If the Commonwealth’s untimely payment results in a default situation, the contractor may pursue the remedies set forth in the contract.

Question 11: Can Commonwealth agencies enter into new contracts for 2015-16?

Answer: Agencies may enter into new contracts for FY 2015-16. The contracts will clearly state that payment is subject to appropriation.

The takeaway here is that vendors and contractors doing business with a public entity like the Commonwealth of Pennsylvania should never forget that public contracts are unlike private contracts in many ways, not the least of which is that the payment obligations of the public entity are nearly always subject to legislative appropriation of the funds necessary for payment. So, while payment may be delayed due to non-appropriation, the obligation to perform the work covered by the contract continues even in the face of non-payment.

Posted on November 5, 2015 by Christopher I. McCabe, Esq. in DGS Comments Off

Contractor & Subcontractor Payment Act Does Not Apply To Public Projects In Pennsylvania

In a recent decision, the Supreme Court of Pennsylvania has held that the Pa. Contractor and Subcontractor Payment Act (“CASPA”) does not apply to a construction project where the owner is a governmental entity. CASPA is a Pennsylvania statute governing payments to contractors and subcontractors on construction projects located in Pennsylvania. CASPA typically applies to private development projects, whereas the Pa. Procurement Code’s Prompt Pay Schedules apply to state or local public works projects.

Posted on September 3, 2015 by Christopher I. McCabe, Esq. in Court Decisions, Public Works Payment Rules Comments Off

Participation By Awardee In Bid Protest Hearing Not Improper Under Procurement Code

In two, not-so-recent decisions involving bid protests filed under the Pa. Procurement Code, the Commonwealth Court of Pennsylvania has held that it was not improper to allow the awarded vendor to actively participate in the protests.

In the two cases, the aggrieved bidders filed protests with the Pa. Department of Corrections challenging awards for a contract for a secure telephone system for inmates housed at Department facilities. In each case, the Secretary permitted the contract awardee to participate in the bid protest. In one protest, the awardee was permitted to file a reply to the bid protest.

On appeal, the bidders argued in each case that the contract awardee’s participation in the protest and hearing was unlawful because, under section 1711.1 of the Procurement Code, the only proper parties to a protest are the protestant and the contracting officer, and the awardee may not participate because, under the statute, it is not an enumerated party to a protest.

The Commonwealth Court flatly rejected this argument, finding that there was no abuse of discretion in allowing the contract awardee to participate in the protest. This decision makes perfect sense. The Procurement Code itself, at section 1711.1(e), provides that the person deciding the protest “may request and review such additional documents or information he deems necessary to render a decision and may, at his sole discretion, conduct a hearing.” This could certainly include information from the vendor who has been awarded the contract. In addition, as the Court noted, the Department of General Service’s Procurement Handbook permits such participation where “substantial issues are raised by the protest.” Furthermore, by comparison, in an equity action filed to protest and enjoin a local contract award, the contract awardee is deemed to be an indispensable party and must be included in the proceeding.

So, if you intend to protest a bid or contract award under the Procurement Code, you are hereby forewarned: be prepared to fend off arguments by both the agency soliciting your bid and the entity who has been awarded the contract.

The two Commonwealth Court decisions can be found here and here.

Posted on August 27, 2015 by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Comments Off

Extra Work Claim Against School District Does Not Require Written Change Order Or Adherence To Section 508 Of Public School Code

Long-standing precedent in Pennsylvania required a contractor’s change order claim against a public entity to be supported by a written change order and strict adherence to the contract requirements and any applicable public law.

For claims against school districts, all of that changed in 2007 with the Commonwealth Court’s decision in James Corp. v. North Allegheny School District, 938 A.2d 474 (Pa.Cmwlth.2007). In James Corp. the Commonwealth Court allowed an extra work claim in the absence of a formal written change order and held that Section 508 of the Public School Code of 1949 (requiring affirmative vote of a majority of all the members of a school board for contracts) did not bar the claim.

And now the decision in James Corp. has been re-affirmed by the Commonwealth Court. On March 6, 2015, the Commonwealth Court issued a formal opinion in East Coast Paving & Sealcoating, Inc., v. North Allegheny School District, a case involving a change order claim based on a directive to perform work without a formal written change order, and cited its decision in James Corp. as binding precedent. In East Coast Paving, the Commonwealth Court stated:

With respect to the School District’s argument that a change order was a necessary condition to payment, our holding in James Corp. v. North Allegheny School District, 938 A.2d 474 (Pa.Cmwlth.2007), is binding precedent. Notably, it involved the School District as the defendant and the very same contract language invoked here by the School District.

The Commonwealth Court also rejected the school district’s argument that Section 508 was an insurmountable obstacle to the contractor’s extra work claim:

In its second issue, the School District argues that the trial court erred in concluding that the School District authorized East Coast to do the soft spot repair work. The School District contends that a change to a contract “must be approved by affirmative vote of the school board members and the approv[al] must be reflected in the minutes or record as provided by Section 508 of the Public School Code, 24 P.S. § 5–508.” School District Brief at 15. According to the School District, the School Board did not approve the soft spot repair work.

The School District made this argument in James, and we rejected it there. We explained:

We reject [the School District’s] argument [that] Section 508 of The Public School Code of 1929, Act of March 10, 1929, P.L. 30, as amended, 24 P.S. §§ 5–508 (requiring school board approval for increases or decreased to indebtedness), bars [the contractor’s] claim for payment of additional work. Testimony established [the School District] considered the work part of the contract; thus, further school board approval was unnecessary.

James, 938 A.2d at 478 n.12. Moreover, we explained:

[The School District], having directed [the contractor] to perform the additional work asserting it was required by contract, cannot now disavow liability for costs incurred by claiming [the contractor] did not have written authorization [from the School Board].

Id. at 487.

The record established that the School District required East Coast to do the soft spot repair work. The School District does not argue that the soft spot repairs were not necessary. As in James, it was not necessary for the School Board to approve, specifically, the soft spot repair work. The School Board approved the paving project and its completion by East Coast, and that is all that was required by Section 508.

Thus, at least for the time being, and at least with respect to contractor claims against school districts in Pennsylvania, a contractor does not need a formal, written change order in order to pursue a claim for extra work performed at the direction of an official or employee of the school district. Moreover, Section 508 of the Public School Code is not a legal impediment to these claims. This is more than welcome news for contractors doing business with school districts across the Commonwealth of Pennsylvania. Of course, contractors are advised to consult with experienced counsel when faced with these types of claims.

The Commonwealth Court decision in East Coast Paving can be found here.