Recent Commonwealth Court Decision Affirms Core Bidding Principles

A recent decision concerning a bid protest filed on a PennDOT contract re-affirmed core principles of public bidding and bid protests on Commonwealth contracts.

In Sidelines Tree Service, LLC v. Department of Transportation, the Commonwealth Court considered an appeal from a denial of a bid protest filed on a contract for line-clearance tree-trimming services. The hearing officer determined that the disappointed bidder was non-responsible due to its poor performance on prior PennDOT contracts, and denied the protest. On appeal, the Commonwealth Court affirmed. Read more

Posted on February 3, 2022 by Christopher I. McCabe, Esq. in Bid Protests, Bidder Responsibility, Com. of Pa., Court Decisions, PennDOT, Public Bidding 101, Responsibility Comments Off

Commonwealth Court Strikes Down Use Of Project Labor Agreements Except In Extraordinary Circumstances

A project labor agreement (PLA) is a “pre-hire” collective bargaining agreement with one or more labor unions that establishes the working conditions on a specific, usually public, construction project. PLAs are controversial, not least because they typically restrict nonunion contractors from using their own workforce and require them instead to hire their workforce from the local unions’ labor pool, but their previous use on public projects in Pennsylvania has been upheld. However, in a recent case brought by two nonunion contractors, the Commonwealth Court has now invalidated the use of a PLA on a public highway project as a violation of Pennsylvania’s strict competitive bidding requirements for public contracts.

In December 2017, the Pennsylvania Department of Transportation (PennDOT) issued a bid for a highway improvement project for US Route 202 in Norristown. The bid required the winning contractor to sign a PLA with the Building and Construction Council of Philadelphia and Vicinity, which represented 11 local unions. The PLA required the winning contractor to hire their workforce through the local unions and to be bound by the local unions’ collective bargaining agreements. However, the PLA also specified that, if the winning contractor had a collective bargaining agreement with the United Steelworkers union, which was not one of the 11 local unions, then the contractor was permitted to use its own workforce.

Allan Myers, L.P. (Myers) and J.D. Eckman, Inc. (Eckman), two nonunion contractors, filed protests with PennDOT, challenging the use of the PLA. Myers and Eckman argued that the PLA was unlawful, arbitrary and discriminatory, as it disfavored nonunion contractors and unduly favored contractors affiliated with United Steelworkers. PennDOT disagreed, arguing that case law supported the use of a PLA on a public works project. The protests were denied, and Myers and Eckman then appealed to the Commonwealth Court. Read more

Posted on January 17, 2019 by Christopher I. McCabe, Esq. in Bid Protests, Com. of Pa., Court Decisions, PennDOT, Procurement Code, Project Labor Agreements Comments Off

Employees Of Nonunion Contractor Lack Standing To Challenge PennDOT Bid Solicitation

A challenge to a public bid or contract ultimately depends on the “standing” of the challenger to bring the challenge. Standing means that the party initiating legal action must show that it has been “aggrieved” – i.e., that it has a “substantial, direct, and immediate interest in the outcome of the matter. A recent decision by the Commonwealth Court squarely addressed the issue of standing in the context of a public bid solicitation and found it lacking.

In December 2017, the Pennsylvania Department of Transportation (PennDOT) issued a bid solicitation for a contract to perform highway improvements to US Route 202 in Norristown. The bid required contractors to sign a project labor agreement (PLA) with the Building and Construction Council of Philadelphia and Vicinity.

Two employees of a nonunion contractor, Allen Myers LP (Meyers), filed an action in the Commonwealth Court seeking to enjoin PennDOT from requiring contractors to sign the PLA as a condition for bidding and performing work on the Route 202 project. They alleged that the PLA precluded nonunion contractors from bidding on the project and applied different standards to different bidders, and alleged that the PLA requirement violated the Commonwealth Procurement Code and the State Highway Law. Read more

Posted on December 27, 2018 by Christopher I. McCabe, Esq. in Court Decisions, PennDOT Comments Off

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

DBE Pass-Through Scheme Alleged On PennDOT Platt Bridge Project In Phila.

According to a criminal information filed in the U.S. District Court for the Eastern District of Pennsylvania, still another fraud scheme involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) Program has been uncovered, this time on the federally-funded George C. Platt Memorial Bridge project in Philadelphia.

In April 2011, PennDOT awarded a $42.7M contract to perform structural steel painting and repairs on the Platt Bridge to a joint venture consisting of Hercules Painting Company, Inc., of New Castle, Pa., and Vimas Painting Company, Inc., of Lowellville, Ohio. During the bid process, the Hercules-Vimas JV allegedly committed to subcontract $3.1M in DBE work to Vertech International, Inc., to supply paint materials for the project. Instead, the Hercules-Vimas JV allegedly negotiated contracts and ordered materials for the Platt Bridge project directly with non-DBE suppliers, with Vertech allegedly acting as a pass-through to give the appearance that DBE requirements had been satisfied. PennDOT awarded approximately $1.97M in DBE credit to the Hercules-Vimas JV. Vertech was allegedly paid 1.75% of the face value of the invoices it processed to act as a pass-through.

Posted on March 17, 2016 by Christopher I. McCabe, Esq. in DBE/MBE/WBE, PennDOT Comments Off

DBE Pass-Through Scheme Alleged On Two PennDOT Bridge Projects In Phila.

According to a criminal information filed in the U.S. District Court for the Eastern District of Pennsylvania, still another fraud scheme involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) Program has been uncovered on two different federally-funded projects in Philadelphia.

In September 2009, PennDOT awarded a $70.3M contract to a tri-venture consisting of a Philadelphia-based highway contractor, Alpha Painting & Construction Co., Inc., of Baltimore, and Liberty Maintenance, Inc., of Campbell, Ohio, to perform structural steel painting and repairs, and concrete repairs, on the I-95 Girard Point Bridge in Philadelphia. As part of the contract, the tri-venture committed to subcontract $4.7M of work to Markias, a now-defunct certified DBE, to supply materials for use on the the contract. Alpha and Liberty formed a joint venture and allegedly ordered the needed materials directly from non-DBE suppliers, and allegedly used Markias as a pass-through to give the appearance that the DBE requirements had been satisfied. PennDOT awarded approximately $3.26M in DBE credit to the tri-venture based on the DBE work allegedly performed by Markias.

Posted on March 3, 2016 by Christopher I. McCabe, Esq. in DBE/MBE/WBE, PennDOT Comments Off

Pennsylvania Steel Erector Indicted In DBE Pass-Through Scheme And Suspended On Federally Funded Contracts

If you are a prime contractor working on federally-funded transportation projects, beware of fraud involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) program. A recently exposed “pass-through” scheme involving $27 million in federally-funded contracts scheme was engineered together by subcontractor Century Steel Erectors Co., and WMCC, Inc., a certified DBE.

Posted on February 25, 2016 by Christopher I. McCabe, Esq. in DBE/MBE/WBE, PennDOT Comments Off

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

PennDOT Adjusts Procedures for Counting DBE Suppliers

Effective November 15, 2012, the Pennsylvania Department of Transportation (PennDOT) announced in a recent Bulletin on its ECMS website that it was adjusting its procedures for counting DBE suppliers in response to federal guidance.

Under the new procedures, in order for a DBE firm to receive regular dealer (60%) credit for materials supplied on a federally-assisted transportation project, the answer to the following two questions must be “yes”:

First, does the firm “regularly” engage in the purchase and sale or lease, to the general public in the usual course of its business, of products of the general character involved in the contract and for which DBE credit is sought?

Second, is the role the firm plays on the specific contract in question consistent with the regular sale or lease of the products in question, as distinct from a role better understood as that of a broker, packager, manufacturer’s representative, or other person who arranges or expedites a transaction?

In order to assist prime contractors and DBEs, PennDOT has developed a new form for determining the appropriate DBE credit. This form can be found here. PennDOT is also requesting feedback on the form from prime contractors who elect to use it. Comments and suggestions should be submitted to: minorityparticipation@pa.gov.

According to the PennDOT Bulletin, if it is later determined that the DBE misrepresented itself or erroneously concluded that it was acting as a regular dealer, the DBE participation would still have to be revised. However, PennDOT would fully consider the form’s documentation in its good faith efforts review if the prime contractor was unable to replace the DBE participation. Therefore, it would be prudent for prime contractors to start to use this form in order to protect themselves from a later adverse determination on “good faith efforts.”

The complete Bulletin can be found here.

Posted on December 4, 2012 by Christopher I. McCabe, Esq. in DBE/MBE/WBE, PennDOT Comments Off

Bridge Contractor Found Guilty in 15-Year DBE Scheme

Once again, the U.S. Department of Transportation’s DBE program is in the news, with a warning for contractors who might think they can evade the DBE rules applicable to federally funded public contracts. In April 2012, the owner of Schuylkill Products, Inc., a Pennsylvania bridge contractor, was found guilty on 26 of 30 charges in an indictment including conspiracy to defraud the U.S. DOT in a DBE fraud scheme.

Joseph W. Nagle, the contractor-owner, was convicted of participating in a 15-year-long scheme, where he and other executives at his firm diverted over 300 PennDOT and SEPTA construction contracts to the firm and a subsidiary firm that were reserved for DBE’s. The contractor owner and his co-conspirators executed the scheme by using Marikina Construction Corporation, a small Connecticut highway construction firm, as a “front” company to obtain these lucrative government contracts.

This prosecution is Exhibit A on why contractors should be especially wary of trying to circumvent the strict DBE rules on U.S. DOT-funded public contracts. If you happen to be caught, the penalties – both criminal and civil – can be severe, including jail time.

According to the press release issued by the United States Attorney’s Office for the Middle District of Pennsylvania, this recent prosecution is just one salvo in the federal government’s continuing battle to shut down DBE fraud schemes:

“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “This significant conviction, in what is the largest reported DBE fraud case in USDOT history, will serve as a clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations. Prime contractors and subcontractors are cautioned not to engage in fraudulent DBE activity and are encouraged to report any suspected DBE fraud to the USDOT-OIG. Our agents will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway and Transit Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”

The full press release explaining the prosecution and its background can be found here. This case has some similarities to the recent prosecution of an Ohio contractor which I commented about here.