When A Claim Is Not A Claim

When is a claim not a claim? When it’s not.

In K-B Offset Printing, Inc. v. Department of General Services, a not-so-recent unreported decision, the Pa. Commonwealth Court held that a letter sent by a contractor to the Pa. Department of General Services and asserting entitlement to more than $1 million in contract underpayments did not constitute a “claim,” as that term is defined in the Pa. Procurement Code. As a result, the contractor was barred from pursuing its claim before the Pa. Board of Claims due to its failure to exhaust administrative remedies. (Under the Procurement Code, a contractor must first file a claim with the contracting officer before it can proceed before the Board of Claims, and the claim must be filed within six months of the date it accrues.)

A five-year contract between K-B Offset Printing and the state had expired in May 2011. An audit by K-B discovered that K-B was entitled to additional compensation, due to contractual price adjustments that were to occur every six months but were never implemented. In June 2011, K-B sent a letter to DGS demanding the underpayments. While DGS conceded that it had not made the necessary price adjustments, DGS refused to recognize the K-B claim to additional payments, basing its decision on its belief that K-B’s claims were barred by a six-month statute of limitations.

K-B then filed a claim with the Board of Claims. DGS objected, claiming that the Board lacked jurisdiction because K-B did not first exhaust its administrative remedies by filing a claim with the contracting officer. The claim was then dismissed by the Board of Claims. On appeal, the Commonwealth Court accepted DGS’s argument that K-B’s claim was not ripe because K-B did not first file a claim with the contracting officer before it proceeded with filing its claim with the Board of Claims. The Commonwealth Court held that K-B’s June 2011 letter was not a “claim,” and that K-B’s claim for the additional payments did not accrue until DGS sent the July 2011 letter which stated that DGS would not make any further payments. The Court rested its holding on a rule of the Supreme Court that a “claim” does not accrue until a claimant is affirmatively notified that it will not be paid by the Commonwealth.

At first blush, the court’s reasoning appears to be a monumental splitting of hairs. K-B sends a letter to DGS demanding more than $1 million as a matter of right under a contract. That looks and sounds like a claim. DGS then sends a letter conceding that it goofed on the pricing adjustments, but refusing to pay any more money to K-B due to a legal technicality. That looks and sounds like a denial of a claim. Nonetheless, the Commonwealth Court holds that a “claim” must still be filed with the contracting officer, even if such a claim is identical to the first letter and is doomed to ultimate failure. However, the first letter was not a claim because at that time DGS had not yet stated that would not pay K-B the underpayments. Until that statement was made by DGS, there was no “claim” that could be filed and pursued.

The moral of the story? File the paperwork, and dot your i’s and cross your t’s, even if the claim is pre-destined to be rejected and doomed to failure. The Commonwealth Court has now made it abundently clear that even a pointless gesture must be pursued in order to perfect a claim before the Board of Claims.

The K-B Offset court decision can be found here. Read it and be forewarned.

Posted on January 17, 2013 by Christopher I. McCabe, Esq. in Board of Claims, Court Decisions, DGS, Procurement Code Comments Off

Public Bidding 101: Contract Award

This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post is the contract award – when it must be made and who is entitled to the award.

Under the Pa. Procurement Code, 62 Pa.C.S. § 3911, the award of a public contract must occur within 60 days of the bid opening. This deadline can be extended by written consent signed by the bidder and the public entity. Thereafter, under 62 Pa.C.S. § 3912, once the contract is awarded, it must be executed by the public entity within 60 days of the award. The failure of the public entity to meet these deadlines, absent a written waiver by the successful bidder, will release the successful bidder from any liability on its bid and will entitle all bidders to the return of any posted bid security.

Who is entitled to the contract award? Ordinarily, the lowest responsive and responsible bidder is entitled to the award of the contract. For my post on bid responsiveness, click here. For my post on bidder responsibility, click here. Where the lowest bidder is either non-responsive or non-qualified, the contract may be awarded to a bidder whose price is not the lowest. In Pearlman v. City of Pittsburgh, 304 Pa. 24, 155 A. 118 (1931), the Supreme Court of Pennsylvania observed that, once the pubic entity has determined the lowest responsible bidder, discretion ends, and the contract, if it is to be awarded, must be given to that bidder.

Posted on September 20, 2012 by Christopher I. McCabe, Esq. in Procurement Code, Public Bidding 101 Comments Off

E-Verify Mandated for Public Works Contracts in Pennsylvania

After a long wait, E-Verify is coming to Pennsylvania. On July 5, 2012, Gov. Corbett signed into law the Public Works Employment Verification Act (S.B. 637) which takes effect January 1, 2013.

The Act requires all public works contractors and subcontractors in Pennsylvania to use E-Verify to verify the employment eligibility of new employees and applies to projects with an estimated cost in excess of $25,000 that are funded by the Commonwealth, or its political subdivisions, authorities, or agencies. E-Verify is an internet-based system that compares information from an employee’s Form I-9, Employment Eligibility Verification, to data from the U.S. Department of Homeland Security and Social Security Administration records to confirm employment eligibility.

Under the Act, a contractor must submit a verification form signed under penalty of perjury and acknowledging its compliance with the Act as a precondition of being awarded a public works contract. Subcontractors must submit the form prior to commencing work on the public works project. In addition, contractors must include in their subcontracts information about the requirements of the Act. The Department of General Services (DGS) will create the verification form and is also charged with enforcement of the Act through complaint-based as well as random audits.

A contractor or subcontractor violates the Act by failing either to use E-Verify or to provide the verification form. Sanctions for failure to use E-Verify range from a warning letter (to be posted on the DGS website) for a first violation to a one year debarment for a third and subsequent violation. A willful violation of the Act will result in a 3-year debarment. Civil penalties for failure to use the form or for false statements on the form range from $250 to $1,000 for each violation.

The Act provides significant protection for whistleblowers. If an employee of a contractor or subcontractor is retaliated against for instigating or cooperating in an investigation, the employee can bring suit (which must be brought within 180 days from the date the employee knew of the retaliation) to obtain reinstatement of employment and to collect three times lost wages, along with an award of attorney’s fees and costs.

A contractor or subcontractor who relies in good faith on E-Verify has immunity from sanctions and shall have no liability to any individual who is not hired or is discharged from employment. Good faith is shown by a federal agency’s written acknowledgment of the use of E-Verify. Contractors are not liable for violations by subcontractors.

Information on E-Verify can be found here. To participate in a webinar on E-Verify click here. The full Act can be found here.