Procurement Code Protest Allowed Where Late Filing Was Due To Extraordinary Circumstances

Under the Pa. Procurement Code, a 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 will be rejected. Recently, in a published opinion and in a departure from the usual rule, the Commonwealth Court decided that equitable principles would allow a late-filed protest to be considered.

The case concerned Pa. Department of Transportation (PennDOT) inspection contracts on which Bureau Veritas (BV), the protestant, had submitted a statement of interest. PennDOT ranked BV fifth in its statement of rankings. BV learned of the rankings on November 13, 2014. Seven days later, on November 20, 2014, BV filed a protest, but the email of its protest was rejected by PennDOT’s computer server due to improper formatting of the file attachment. On November 21, 2014, BV learned of the email rejection and promptly re-sent the email with the proper formatting of the file attachment, eight days after the publication of the rankings. PennDOT rejected BV’s protest as untimely and on the merits. BV then argued that it should be allowed to file its protest nunc pro tunc (literally, “now for then”). PennDOT issued a final determination rejecting the protest, as well as the request that the protest be considered nunc pro tunc. BV appealed to the Commonwealth Court. Read more

Posted on June 2, 2016 by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, PennDOT, Procurement Code 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

Procurement Code Is Not Violated Where Only One Price Is Considered In Contract Award

Can a Commonwealth agency consider just a single bidder’s price and refuse to even look at the prices of other bidders in making a competitive contract award? According to a recent, unpublished decision of the Commonwealth Court of Pennsylvania, the answer is yes.

In January 2014, the Pa. Department of Community and Economic Development (Department) issued a Request for Quotation (RFQ) seeking a contractor to design, market, and implement a sale of tax credits. The RFQ specified that only those bidders whose technical submittal received at least 70% of the available technical points would be considered “responsible” and eligible for selection on the basis of price. The Department received three bids. After applying the scoring criteria to the bidders’ technical submittals, the Department eliminated all but one bidder for selection on the basis of price. A protest was filed by one of the eliminated bidders. The Department denied the protest, and an appeal was then taken to the Commonwealth Court.

On appeal, the bidder argued that, by applying a scoring threshold that eliminated all but one bidder and by failing to compare the selected bidder’s price to the other bidders’ prices, the Department violated the requirement of section 513(g) of the Procurement Code that an agency take price into account when awarding a contract.

Section 513(g) of the Procurement Code states:

(g) Selection for negotiation.–The responsible offeror whose proposal is determined in writing to be the most advantageous to the purchasing agency, taking into consideration price and all evaluation factors, shall be selected for contract negotiation.

The Commonwealth Court rejected the bidder’s argument, holding:

Section 513(g) requires a purchasing agency to take price into consideration when determining which “responsible offeror” should be selected for contract negotiation. This provision neither requires a purchasing agency to revisit its determination that an offeror is not responsible nor does it prohibit a purchasing agency from applying announced criteria to determine that all but one offeror is non-responsible. Here, the Department was faced with only one offeror who met the RFQ’s criteria to be considered a responsible offeror. Under these circumstances, we cannot say that the Department erred or violated the Procurement Code by considering the cost submittal of that offeror alone.

From a purely legalistic viewpoint, the Commonwealth Court is correct in interpreting section 513(g). But from a competitive bidding viewpoint, where the taxpayers are served by true competition where all bidders’ prices are exposed and considered, there is something just a bit uneasy about allowing a Commonwealth agency to award a contract based on just one price without knowing whether the other prices were lower. In this case, was the winning bidder’s proposal truly the “most advantageous” to the Commonwealth, if the other bidders’ prices were lower and if the other bidders were also nonetheless qualified to perform the contract, notwithstanding their failure to meet a scoring threshold, considering that technical scoring and comparison of bidders’ qualifications are inherently subjective while the comparison of bidders’ prices is purely objective.

The unpublished decision of the Commonwealth Court can be found here.

Posted on October 14, 2014 by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Comments Off

Commonwealth Court: Bidder Qualification Criteria Can Be Waived Under Gaeta Decision

If a public entity issues a bid and specifies that bidders must have certain minimum experience, can the public entity waive those requirements for the low bidder? In my view, the answer is no.

Ordinarily, specified qualification criteria are for the benefit of the public and are intended to place all prospective bidders on a level playing field by informing them of the minimum qualifications and experience that are required for a contract award. If the public entity specifies, e.g., five years’ experience in the particular work covered by the bid, bidders with less than five years’ experience will likely refrain from bidding knowing that they would be ineligible for an award. For this reason, changing or relaxing the qualification criteria after the bids are opened is usually a no-no and a violation of the level playing field rule. If the public entity decides, after the bid has opened, to award the contract to a bidder with, say, only three years’ experience, the public entity has effectively excluded from the bidding, unfairly and to its detriment, the pool of bidders with only three years’ experience.

In a recent, opinion dealing with a protest on a Commonwealth of Pa. RFP, JPay, Inc. v. Department of Corrections, the Commonwealth Court held that qualification criteria stated in a bid or an RFP could in fact be waived by the public entity under the Gaeta v. Ridley School District decision. This holding breaks new ground in the area of bidder responsibility.

In 2012, the Pa. Department of Corrections issued an RFP for a turn-key “kiosk-like system” that would allow prison inmates to perform such tasks as placing commissary orders, downloading digital media, checking phone time, and receive and send emails. The RFP required that each proposal contain an appendix detailing the offeror’s prior experience on at least three prior projects with “at least one (1) project where your firm has implemented a project of similar size and scope and one (1) project you have completed that is related to Kiosk like solutions.” The offeror was also required to include client references for each project, and to “provide examples [of] prior experience in providing MP3 players, downloadable digital entertainment (music), communication (email) and information through kiosks designed for a correctional environment” with examples and references related to the provision of those services within the previous five years. The RFP also stated that the only two requirements were mandatory: that the bid be signed and timely received. On the other hand, the RFP reserved the right to waive technical or immaterial nonconformities in the bid. Three bids were received, and Global Tel*Link (GTL) was selected for negotiations.

One of the bidders, JPay, Inc., filed a protest, claiming among other things that GTL was not a qualified bidder. The contracting officer responded to the protest that GTL satisfactorily demonstrated its prior experience by submitting ten references which demonstrated that GTL was in the process of implementing a similar kiosk system in South Carolina prison facilities and was planning to install such a system in Kentucky by the end of 2013. The protest was denied and JPay filed an appeal to the Commonwealth Court.

On appeal, JPay’s argument was framed as follows: “JPay alleges that, based upon information it has uncovered outside the RFP process, GTL provided inaccurate information in its submission and therefore could not have met the minimum technical requirements outlined in the 2012 RFP or earned the highest technical score.”

On this point, the Commonwealth Court stated:

The Designee held that the requirement in the 2012 RFP that offerors submit information related to their prior experience was not mandatory and OA was therefore authorized to either waive this requirement or consider it in the scoring. Even assuming JPay’s allegations regarding GTL’s experience are true, we agree with the Designee’s conclusion. The text of the 2012 RFP was clear that there were only two mandatory requirements — the timeliness of receipt of the proposal and signature of the offeror on the proposal — and that OA could waive any other non-conformity, allow the offeror to cure or consider the non-conformity in the scoring. While the 2012 RFP provides that offerors “must” submit information related to their experience on prior projects, a requirement phrased in the imperative does not necessarily make the requirement mandatory.

In my view, the Court’s opinion represents a monumental shift in thinking found in numerous public bidding decisions from years past. While it is true that whether a bidder is qualified or responsible is typically a decision vested within the sound discretion of the public officials making that decision, and that courts are loathe to second guess decisions on bidder qualifications and responsibility, at the same time it has also been true that specified qualification criteria cannot be changed after the bids have been opened. To allow the criteria to be changed dramatically or waived entirely, as the Court now suggests is permitted under Gaeta, unlevels the playing field, and invites the potential for favoritism and corruption into the public bidding process.

I, for one, see great potential for harm in the court’s decision. The holding in JPay, Inc. now opens the door wide open to the potential for all sorts of mischief hidden under the guise of public officials determining whether a bidder meets the pre-specified qualification criteria.

The Court’s decision can be found here.

Posted on August 26, 2014 by Christopher I. McCabe, Esq. in Bid Protests, Bid Specifications, Bidder Responsibility, Procurement Code Comments Off

Commonwealth Court Reaffirms No Right To Hearing On Protest Filed Under Pa. Procurement Code

Is there a right to a hearing on a bid protest filed under the Pa. Procurement Code? The answer is no.

In a recent, unreported decision involving a contract issued by the Philadelphia Parking Authority for a new red light camera system in the city of Philadelphia, the Commonwealth Court has re-affirmed long-standing precedent that a hearing is not mandatory on a protest filed under the Pa. Procurement Code. Under 62 Pa. C.S. § 1711.1(e), whether to conduct a hearing is within the “sole discretion” of the head of the purchasing agency. The Commonwealth Court also held that, under the Pa. Procurement Code, 62 Pa. C.S. § 1711.1(d), it is not mandatory for a contracting officer to file a response to a protest before issuance of a determination by the agency head. Finally, the Commonwealth Court found that the denial of a stay of procurement was not in error where the agency head had determined that the protest was clearly without merit and had articulated the substantial interests that would be harmed by a stay.

A copy of the Commonwealth Court decision in Am. Traffic Solutions, Inc. v. Phila. Parking Auth., can be found here.

Posted on July 17, 2014 by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions, Procurement Code Comments Off

Contract Award Is Not A Contract, But Bidder May Pursue Claim For Damages For Posting Of Bonds

When is a contract award a contract? Virtually never. Rather, a contract award is just that – an award. It is not a binding contract and imposes no obligation on the public entity. In the words of Billie Jean King, a contract award is as fleeting as victory.

Recently, in the case of Allan A. Myers LP v. Montgomery County, the Commonwealth Court of Pennsylvania re-affirmed this long-standing principle of public contracting law. In 2011, Montgomery County issued a request for proposals for roadwork. After rejecting a bid from another bidder, the Montgomery County Commissioners adopted a resolution accepting the bid of Allan A. Myers LP (Myers). Later, when the contract award to Myers was challenged by the rejected bidder, the County Commissioners adopted a second resolution rescinding the award to Myers. Thereafter, Myers filed suit, seeking damages for breach of contract. The trial court rejected the claim, holding that merely awarding a contract does not create a binding obligation on the public entity to actually execute a contract.

On appeal to the Commonwealth Court, Myers argued that a contract was formed when the County Commissioners adopted the resolution accepting the bid and awarding a contract to Myers. Myers also argued that it was entitled to pursue damages for the costs related to procuring the required bonds under a non-contractual theory of recovery. The Commonwealth Court rejected the appeal by Myers, holding that the Second Class County Code governed the award of the contract to Myers and required a signed, written contract (and not simply a resolution). The Commonwealth Court followed the seminal case of Crouse, Inc. v. School District of Braddock, 19 A.2d 843 (Pa. 1941), where the Supreme Court reasoned that:

When a municipal body advertises for bids for public work and receives what appears to be a satisfactory bid, it is within the contemplation of both bidder and acceptor that no contractual relation shall arise therefrom until a written contract embodying all material terms of the offer and acceptance has been formally entered into. The motion whose adoption is evidenced by the minutes of the school district in the instant case meant merely that the proposal was accepted subject to the preparation and execution of a formal contract or subject to the motion being rescinded before the contract was executed. A preliminary declaration of intention to enter into a formal contract, which was all the motion adopted amounted to, did not in any way limit the school directors’ freedom of future action.

Thus, Montgomery County was free to rescind the award to Myers without liability for breach of contract. The first lesson here is that the public entity holds virtually all of the cards in the public bidding and contracting context. Until a formal public contract is signed and executed, there is no contract. It’s as simple as that.

On the other hand, the Commonwealth Court gave Myers a green light to pursue its claim for damages from having to post bonds in order to preserve its contract award. In its Complaint against Montgomery County, Myers had alleged that the procurement of the bonds impaired its “ability to seek or to secure other contracts and work which required bonds.” Of course, how strong this claim is remains to be proven.

Significantly, to my knowledge, this is the first time that an appellate court in Pennsylvania has allowed the potential recovery of damages related to the rescission of a public contract award. Normally, a disappointed bidder has no right to recover damages, and the Commonwealth Court reiterated this long-standing rule by advising Myers that it could not seek damages for any expenses related to procuring the bonds in connection with its bid as these expenses would have been incurred by all bidders. See J.P. Mascaro & Sons, Inc. v. Bristol Township, 505 A.2d 1071, 1073 (Pa. Cmwlth. 1986)(a disappointed bidder has sustained no injury which entitles him to redress in court).

So, the second lesson here is that, if you receive a contract award, and post the necessary bonds, and the contract award is then rescinded, you may be able to recover damages relating to the posting of the bonds. Of course, such a claim will be exceedingly difficult to prove.

The decision in Allan A. Myers LP v. Montgomery County can be found here.

Posted on June 17, 2014 by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions Comments Off

Commonwealth Court Finds Ambiguity In Bid Spec Creates Bidding Defect Requiring A Re-Bid

Does an ambiguous bid specification create an unlevel playing field? The answer has almost always been yes, and a recent Pennsylvania Commonwealth Court decision reiterates that long-standing principle of public bidding law.

In 2011, Allegheny County and the City of Pittsburgh sought bids for a contract to process recyclable materials. Greenstar Pittsburgh, LLC (Greenstar), a disappointed bidder, brought suit, along with an individual taxpayer, to enjoin the contract award to Pittsburgh Recycling Services (PRS) and to compel issuance of a new bid. Greenstar argued that language in the bidding specifications was open to more than one reasonable interpretation and provided PRS with an unfair advantage in the bidding process. The trial court agreed, and determined that the following language in the bid specification was ambiguous:

3.3 QUALIFICATIONS OF BIDDERS

The Contractor’s facility shall be located within a fifteen (15) mile radius from the City’s Department of Public Works . . . located at 30th and A.V.R.R.

The bidding specifications included numerous references to the Contractor’s “processing facility” and a “receiving site.” As a result, the trial court concluded that Section 3.3 was ambiguous because the word “facility” could reasonably be used to denote either “other receiving site” or the “Contractor’s processing facility.”

On appeal, the Commonwealth Court affirmed the trial court’s decision. In affirming the trial court, the Commonwealth Court first noted the law governing ambiguity in public bidding specifications:

Our Supreme Court has also recognized that the common standard required to ensure free and fair competition among bidders extends to the form as well as the substance of an invitation to bid for a public contract. In Guthrie v. Armstrong, 303 Pa. 11, 154 A. 33 (1931), the Court concluded that: “The form of the contract is often as vital as anything involved in the transaction, and, unless bidders are on an equality as to knowledge of its proposed provisions, there may be a great advantage to a bidder who has a certain understanding with which the public authorities may agree, over a bidder whose understanding is otherwise.” 303 Pa. at 18, 154 A. at 35. Where a public authority has issued an invitation to bid with provisions subject to more than one reasonable interpretation, while the authority may not have acted in bad faith, the effect may be the same: the common standard is eroded and the public authority can no longer ensure that the public has gained the benefit of fair and just competition among bidders. … As with an ambiguous contract provision, if a provision in bidding specifications is subject to more than one reasonable interpretation, the ambiguous provision must be interpreted against the drafter.

In affirming, the Commonwealth Court agreed that it was reasonable to interpret Section 3.3 to mandate the contractor’s processing facility or the contractor’s other receiving site to be located within the specified 15 mile radius, and concluded that Section 3.3 was ambiguous on its face. Because of this ambiguity, the Commonwealth Court recognized that the pool of bidders interested in participating in the bidding process could be impacted:

We are left to speculate how many potential bidders failed to participate in the bidding process because they did not have the interpretation shared by [Allegheny County and Pittsburgh] and PRS and instead shared the same reasonable interpretation of Section 3.3 made by Greenstar.

The hallmark of public bidding is a level playing field, and ambiguous bid specifications are an inherently unleveling force. Greenstar recognizes this. So, if you are a bidder encountering an ambiguous bid specification which can affect, e.g., how you compute your bid price, or whether you are qualified to bid, you have encountered an unlevel playing field. In such case, it is extremely likely that your bid protest will be successful.

The decision in Greenstar Pittsburgh LLC v. Allegheny County can be found here.

A hat tip to my friend and former colleague Wally Zimolong, Esq., who brought this case to my attention and who also blogged about it at his blog Supplemental Conditions.

Posted on June 6, 2014 by Christopher I. McCabe, Esq. in Bid Protests, Bid Responsiveness, Bid Specifications, Court Decisions Comments Off

Bid Protests 101: Grounds For The Protest

This is the another in a series of posts on bid protests in Pennsylvania. This post covers the potential grounds for the bid protest.

Based on my experience, there are two primary potential bases for a bid protest. The first concerns a bid’s responsivesness or whether the bid is complete and responsive to the bidding instructions. The second concerns a bidder’s responsibililty or qualifications.

A challenge that a bid is non-responsive will likely be successful if the challenged bid (which has been accepted by the public entity) is materially defective in some way. Is it missing a required form? Are there prices missing? Did the bidder fail to sign its bid? If the protesting taxpayer can show that the winning bid is “defective” in some way, courts will be receptive to a challenge to the award. This type of protest is appealing as it raises the question of an unlevel playing field which is a bedrock principle of public contracting. On the other hand, if the public entity has rejected a bid because it is non-responsive, it is unlikely that a protest by the rejected bidder will be unsuccessful. A court will be extremely hesitant to overrule a finding that the bid is defective.

A challenge to a bidder’s responsibility is difficult to win. Normally, whether a bidder is qualified (responsible) to perform a contract is left to the sound discretion of the public officials. A court will normally err on the side of allowing the public entity to decide these questions on its own. On the other hand, if the public entity has excluded a bidder from the bid, either as part of a pre-qualification process, or an ad hoc basis, on grounds that the bidder is “unqualified,” the disqualified and excluded bidder will have a good chance of success if the bidder can show that it is as qualified as the other permitted bidders, or if the criteria under which the bidder is excluded are unpublished or unevenly applied. Excluding bidders from the bidding process is counter to the notion of competition. The more bidders there are, the better the price will be for the taxpayers.

Besides these two primary bases, a bid protest can raise other aspects of the bid process that were irregular or were not in conformance with the bidding instructions. Did the bid comply with minority contracting requirements? Did a bidder has some sort of advantage over other bidders?

As always, it is advisable to consult with experienced counsel before proceeding with a bid protest.

Posted on December 10, 2013 by Christopher I. McCabe, Esq. in Bid Protests Comments Off

Bidder’s Response To RFP Does Not Create Contract

In an unpublished opinion issued in November 2012, in a case brought by two disappointed bidders involving contracts awarded in 2002, the Commonwealth Court revisited some core principles of public bidding which are worth repeating.

The underlying facts concerned an Request for Proposals issued by Hazleton Area School District for school bus transportation contracts. The school district awarded the contracts, not to the lowest bidders, but to other bidders based upon the model year of the buses proposed for the contracts. The low bidders sued and challenged the award and also asserted a tortious interference claim against the competing bidders.

As a preliminary matter, the Court noted that the low bidders’ standing as taxpayers did not also give them a cause of action for breach of contract or tortious interference. Taxpayer standing does not translate into a claim for damages.

The Court first held that the bidders’ response to the school district’s RFP did not create a binding contract with the school district. The bidders argued that the circulation of the RFP constituted a unilateral contract offer which was accepted by the school district. The Court rejected this position and reiterated the long-standing rule in Pennsylvania that an invitation to bid or an RFP is merely an invitation for an offer and is not an offer itself. Rather, the bid is the offer which the public entity is free to accept or reject. Thus, the Court held that the issuance of the RFP did not bind the school district to award the bus contracts to the low bidders.

Second, the Court held that there was no interference by the other competing bidders with the low bidders’ “prospective” business relationship with the school district. The competing bidders were free to ask the school district to consider the age of the buses in making its decision to award the bus contracts. This sort of conduct was privileged and could not subject the other bidders to a tortious interference claim by the disappointed bidder.

The moral of the story? Bid protests are not easy to win, especially where the bid protests are based on unwarranted extensions of the law and where counsel argue points that have no support in public bidding law and muck up their clients’ claims with silly theories like tortious interference with contract.

The decision in Yurcho v. Hazleton Area School District can be found here.

Posted on July 11, 2013 by Christopher I. McCabe, Esq. in Bid Protests, Court Decisions Comments Off

Commonwealth Court Voids Drug Contract Where Price Was Not A Factor In Contract Award

In March 2011, the Pennsylvania Department of Public Welfare (DPW) issued a Request for Proposals (RFP), under a competitive sealed proposal process, seeking proposals for the supply of pharmaceuticals for its Developmentally Disabled Centers. The pricing structure set out in the RFP provided that the winning vendor would be reimbursed through Medicare, Medical Assistance (MA), or private insurance. Apparently, DPW would not consider price as a factor in its award of the contract.

DPW received four bids and awarded the contract to Diamond Drugs whose proposal was scored the highest. Omnicare filed a protest with DPW and argued that DPW violated the Procurement Code by failing to consider price as an element of the bids when it contracted to purchase pharmaceuticals for which there was no set pricing scheme and where DPW would pay for drugs not covered by Medicare, MA, or a private insurer. Section 513(g) of the Procurement Code requires that a purchasing agency consider price in the competitive sealed proposal process. DPW argued that that its actions were proper because it would pay the same regardless of which vendor won the contract. DPW rejected the protest. Omnicare then appealed to the Commonwealth Court of Pennsylvania.

On May 15, 2013, the Commonwealth Court sustained the protest and voided the contract. The Commonwealth Court first held that the protest was timely as it was filed within seven days after notice of the contract award was posted to the DPW website. The Commonwealth Court rejected DPW’s argument that the protest was untimely because the RFP provided Omnicare with enough information on which to base its bid protest. The Commonwealth Court next held that the contract violated the Procurement Code because DPW will pay directly for non-compensable medications even though it did not consider price as a factor in its award.

The Commonwealth Court wrote:

In doing so, and in failing to consider pricing for non-compensable drugs as an element of the proposals, DPW deprived itself and the offerors of the opportunity to discover whether an offeror could offer better prices for non-compensable drugs than those arrived at by using the MA pricing formula. Given that the offerors’ prices for non-compensable drugs could have differed, DPW violated Section 513(g) [of the Procurement Code] by failing to consider pricing as an element of the proposals.

The Commonwealth Court decision in Omnicare, Inc. v. Department of Public Welfare can be found here.