Can A Public Owner Recover Legal Fees From A Bidder Who Loses A Challenge To A Bid Rejection?

Can a public entity include in its bid instructions the right to recover its legal fees from a bidder if the bidder’s bid protest lawsuit is unsuccessful? In the course of providing advice recently to a client, I came across the following clause in a bidder’s qualification statement:

By submission of any Bid, the bidder agrees that in the event its bid is rejected by the Owner for any reason and such rejection is contested by the bidder through the commencement of legal proceeding, whether in law or equity, the Owner shall be entitled to an award of reasonable attorneys’ fees and costs if the Owner’s rejection of the bid is upheld, affirmed, or otherwise not set aside.

Is this clause even enforceable? In my opinion, such a clause is patently unenforceable as against public policy. It is also a brazen attempt by a public entity to prevent a good faith bid challenge and keep its public bidding process out of the public eye. Read more

Posted on January 11, 2022 by Christopher I. McCabe, Esq. in Bid Protests, Bid Specifications, Bidder Responsibility 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

Public Bidding 101: Are Proprietary Specifications Permissible?

On a public bid can a public entity direct a contractor to furnish and install equipment made by only one manufacturer? This question is raised often by clients who complain when the specifications they are bidding against are viewed as “proprietary” in nature. Is this legal, they ask? Can the public entity really limit the specified equipment to a sole manufacturer? As always, the answer is, “it depends,” although it is safe to say that all proprietary specifications should be viewed initially as inherently suspect and contrary to the spirit of public and competitive bidding.

The rare, but easy to justify case is where the equipment specified is intended to complement or replace existing unique equipment. Thus, in Silsby Mfg. Co. v. City of Allentown, 153 Pa. 319, 26 A. 646 (1893), the Supreme Court of Pennsylvania held that the purchase of replacement flues for a patented engine, which could not be bought from any other supplier, was not subject to competitive bidding. In the same vein, if the public entity could buy such unique equipment without competitive bidding, the public entity will likely be permitted to specify the same equipment in the specifications for a contract to furnish and install the same equipment. Read more

Posted on July 10, 2014 by Christopher I. McCabe, Esq. in Bid Specifications, Court Decisions, Public Bidding 101 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.