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

Bid Protests Upheld Due To Unauthorized Meeting With Bidder

In three recent, unreported decisions arising out of the same procurement, the Commonwealth Court has held that a meeting between the public entity and a bidder, after bids had been received in response to an RFP, but before the bidder was determined to be responsible and before its proposal was deemed to be responsive or the most advantageous, was unauthorized and improper.

In July 2016, the Pa. Department of Human Services (DHS) issued an RFP seeking proposals from managed care organizations to provide health care services in five different “zones” to medical assistance beneficiaries. In November 2016, after bids were received, the DHS issued a selection memo which was subsequently rescinded due to a scoring error. In December 2016, after rescission of the November selection memo but before a new selection of bidders was made, DHS and its counsel met with representatives of a bidder, Pennsylvania Health & Wellness, Inc. (PHW), to discuss PHW’s “operational readiness to operate as an MCO on a statewide basis.” Read more

Posted on June 7, 2018 by Christopher I. McCabe, Esq. in Bid Protests, Procurement Code Comments Off

Can Retainage Be Held Until Final Completion Of The Project?

On public projects, an owner typically withholds retainage of 10%. Can the owner hold this 10% retainage until final completion? The short answer is, No!

Section 3921 of the PA Procurement Code mandates that, when the contract is 50% completed, retainage “shall not exceed 5% of the value of completed work” and can then be withheld only until substantial completion. The only condition is that the contractor must be making “satisfactory progress,” and there must be no cause for a “greater withholding.” Read more

Posted on February 6, 2018 by Christopher I. McCabe, Esq. in Procurement Code, Retainage Comments Off

Debriefing After Non-Selection Does Not Toll 7-Day Deadline For Bid Protest

The Pa. Procurement Code sets a strict deadline for bid protests – the 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. The impact of this brightline rule was shown in a recent Commonwealth Court decision involving a late-filed protest.

In 2016, the Pa. Department of Human Services issued an RFP seeking proposals from managed care organizations to implement a managed care program for physical health and long-term services for the elderly and disabled. After evaluation of proposals, the Department notified one of the bidders, UnitedHealthcare of Pennsylvania, Inc., that it was not selected. Thereafter, the Department conducted a debriefing with UnitedHealthcare where it provided information concerning the strengths and weaknesses of UnitedHealthcare’s proposal. Unhappy with the outcome, UnitedHealthcare filed a protest, more than seven days after it was notified that it was not selected, but within seven days of the debriefing. The Department denied the protest as untimely, and UnitedHealthcare filed an appeal with the Commonwealth Court. Read more

Posted on December 12, 2017 by Christopher I. McCabe, Esq. in Bid Protests, Com. of Pa., Court Decisions, Procurement Code Comments Off

Are RFQs Immune From Protest Under The Procurement Code?

If you respond to a Request for Quotes (RFQ) issued by a Commonwealth department or agency, can you protest if the resulting purchase order is awarded to another bidder?

According to the Commonwealth’s Office of Administration, the answer is no. In a recent protest, the OA issued a letter which took the remarkable position that “‘Award’ under an RFQ merely results in a Purchase Order under an existing multiple-award contract; therefore an RFQ is not the solicitation or award of a contract, and cannot be protested.”

Needless to say, this position is not supported by a fair reading of section 1711.1 of the Commonwealth Procurement Code which allows an aggrieved bidder or prospective bidder to protest the solicitation or award of a state contract. Certainly, a purchase order that is part of a multiple-award contract is nonetheless a contract; indeed, without issuance of a purchase order, the multiple-award contract is essentially meaningless. Likewise, an RFQ is a solicitation for a quote which may result in a contract – i.e., the purchase order.

Posted on September 7, 2017 by Christopher I. McCabe, Esq. in Bid Protests, Com. of Pa., Procurement Code Comments Off

Public Works Payment 101: Final Payment

Payment issues dominate the world of the public works contractor in Pennsylvania. When must progress payments be made? When can the government withhold payment? Is interest due on late payments? When is final payment due? How much retainage can be withheld and when must retainage be reduced and fully released?

Generally, payment obligations on public works contracts are set forth in Part II, Chapter 39, of the Pa. Procurement Code, 62 Pa.C.S. § 3901, et seq. These provisions control the public owner’s payment obligations, as well as contractors’ obligations for payment to its subcontractors.

This post is the first in a planned series on the payment requirements for public works contracts in Pennsylvania. Under the Commonwealth Procurement Code, 62 Pa.C.S. § 3941, the public owner’s obligations for final payment are strict.

When retainage is withheld, the public contract must require the architect or engineer to make final inspection within 30 days of receipt of the contractor’s request for final inspection and final payment. If the work is substantially completed, then

the architect or engineer shall issue a certificate of completion and a final certificate for payment, and the government agency shall make payment in full within 45 days except as provided in section 3921, less only one and one-half times the amount required to complete any then-remaining uncompleted minor items, which amount shall be certified by the architect or engineer and, upon receipt by the government agency of any guarantee bonds which may be required, in accordance with the contract, to insure proper workmanship for a designated period of time. [Emphasis added]

Under the terms of the section 3941, once the punch list items are completed, the public owner must make final payment of the amount that was withheld for completion of the punch list .

What does all of this mean in plain English?

Once “substantial completion” is achieved, (1) an inspection must be performed within 30 days after a contractor’s request, (2) the architect must issue a certificate of completion and for payment, (3) the architect must prepare a punch list and assign a value for the punch list items, and (4) payment, less one and a half times the punch list value, must be made to the contractor within 45 days. Final payment must then be made once all of the punch list items are completed.

If you are public works contractor, it is imperative that you request a final inspection after substantial completion. This request triggers the final payment obligations of the public owner. This request also triggers the public owner’s obligation to release retainage. Contrary to popular practice, a public owner is not permitted to hold 5% retainage (or more) until the literal final completion of the work.

If you need assistance on a public works payment issue, call or email me for a no-cost consultation. I’ll be happy to assist in anyway possible.

Posted on April 11, 2017 by Christopher I. McCabe, Esq. in Procurement Code, Public Works Payment Rules Comments Off

Public Bidding 101: Emergency Bidding

Emergency contracting for repairs, maintenance, and public safety are a routine occurrence with public owners across the Commonwealth. A building in danger of collapse needs to be torn down on an immediate basis to ensure public safety. A system fails in a public building requiring an emergency repair to restore the system to proper working order. A roadway or bridge is washed out during a storm mandating immediate action to restore access for the public and emergency vehicles. In such dire situations, can a public owner bypass the normal rules of competitive bidding and award a contract an expedited basis? The answer is yes, with some caveats.

Where an emergency threatens the health, welfare, or safety of the citizenry, and does not permit a delay in response, a public owner can dispense with the formal rules of public bidding such as timing of award and public notice. On the other hand, even in an emergency, the public owner cannot simply award a contract without competition. An emergency may relax the requirement for notice and advertising, but it doesn’t eliminate competition. After all, if a public owner can invite pricing from one contractor in an emergency, there is usually no good reason why it can’t also invite pricing from other contractors at the same time. Read more

Posted on January 12, 2017 by Christopher I. McCabe, Esq. in Procurement Code, Public Bidding 101, Public School Code Comments Off

Bad Faith Finding Does Not Mandate Award Of Attorney Fees And 1% Penalty

If a public owner breaches its payment obligations to a public contractor and acts in bad faith in doing so, is the public contractor automatically entitled to an award of its attorney’s fees and a 1% penalty under section 3935 of the Procurement Code?

In a recently published opinion, the Supreme Court of Pennsylvania has ruled that such an award is discretionary, not automatic, reversing a 2014 Commonwealth Court decision which had held that a bad faith finding entitled the contractor to recover its attorney’s fees and the 1% penalty. Read more

Posted on August 17, 2016 by Christopher I. McCabe, Esq. in Court Decisions, Procurement Code, Public Works Payment Rules 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

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.