Ryco Steel Products Procurement Act Lawsuit Settled For $429,000

In December 2013, the Pa. Attorney General’s Office announced a settlement of the Pa. Steel Products Procurement Act lawsuit with the McKeesport-based Ryco companies and their owners. The firm and its owners will pay $429,000 to settle the lawsuit, and must comply with a seven-year injunction to guarantee that violations of the Steel Act do not occur again.

The official AG press release can be found here.

Posted on January 16, 2014 by Christopher I. McCabe, Esq. in Steel Products Act Comments Off

Pa. Steel Products Procurement Act Applies To Work Contracted By Private Non-Profit Foundation

Does the Pa. Steel Products Procurement Act apply to a project undertaken by a private non-profit entity for a university under the Pennsylvania State System of Higher Education? According to a recent decision by the Commonwealth Court in the enforcement lawsuit brought by the Pa. Attorney General’s Office against various Ryco, Inc., entities (see my earlier post here about that lawsuit), the answer is yes.

In an opinion filed February 21, 2013, in the Ryco case, in response to objections raised by the Ryco entities, the Commonwealth Court (Judge Colins) has held that the Steel Act does apply to a student housing project undertaken for Indiana University of Pennsylvania (IUP) by the Foundation for the Indiana University of Pennsylvania (Foundation), a non-profit foundation affiliated with IUP.

The Ryco entities had argued that the Foundation was not a “public agency,” that the housing project was not funded with public money, and that the housing project was not bid as public contracts. In rejecting these arguments, the Commonwealth Court noted that the Steel Act does not require the owner to be a public agency, only that the project be a public work. Here, there was no legal question, in the Court’s view, that the student housing project was a public work.

The Commonwealth Court also noted that the Foundation itself was in fact a “public agency” under the Steel Act. The Foundation was created to promote educational purposes, including for the construction of buildings for IUP. The Foundation had been engaged by IUP to finance and construct the student housing project. The Court borrowed from caselaw interpreting the Prevailing Wage Act in finding that, under these facts, the Foundation was a “public agency” for purposes of application of the Steel Act. In the analagous Prevailing Wage Act case, the Court had held that a private, non-profit corporation created by a county for the purpose of building and operating a nursing home was a “public body.”

The lesson here for contractors working on what are potentially public works projects is to understand the full nature of project they are working on (even if they have only a small part of the project) and to think about the ultimate user/owner of the project. Here, it seems quite obvious that student housing for a state university has all of the hallmarks of a public works project to which the Steel Act would typically apply.

The Commonwealth Court’s decision can be found here. A later ruling by the Commonwealth Court in the same Ryco case re-affirmed that the Court’s holdings were as a matter of law, and precluded any further defense by the Ryco entities that the Steel Act did not apply to the student housing project. That later decision can be found here.

Posted on January 14, 2014 by Christopher I. McCabe, Esq. in Court Decisions, Steel Products Act Comments Off

DGS Publishes List of Exempt Steel Products

On February 9, 2013, the Pa. Department of General Services finally published in the Pa. Bulletin a list of exempt machinery and equipment steel products, as authorized under section 4(b) of the Steel Products Procurement Act (73 P. S. § 1884(b)).

The DGS notice listing the exempt steel products can be found here. The DGS statement of policy relating to its notice can be found here.

According to the DGS notice, the public has 30 days to submit comments regarding the list. Comments can be submitted in writing to: Deputy Secretary for Public Works, Department of General Services, 18th and Herr Streets, Harrisburg, PA 17125. Comments can also be submitted by e-mail to: ra-steel@pa.gov.

My prior post on the amendment to the Steel Products Procurement Act mandating a list of exempt products can be found here.

Posted on February 19, 2013 by Christopher I. McCabe, Esq. in DGS, Steel Products Act Comments Off

New Law Directs DGS To Prepare List Of Products Exempt Under Steel Procurement Act

On October 25, 2012, Governor Tom Corbett signed HB 1840 which amends the Pa. Steel Products Procurement Act (first passed in 1978) and which directs the Pa. Department of General Services (DGS) to prepare a list of steel products, such as machinery and equipment, that are not produced in the United States in sufficient quantities and that are therefore exempt from the provision in the Act that local governments purchase steel products manufactured only in the United States.

Once prepared and publicly accessible via the internet, contractors, subcontractors, suppliers, bidders, and public agencies will be able to rely upon the list in preparing bids and entering into contracts. The list of exempt machinery and equipment is to be updated annually on a date selected by DGS. In addition, prior to publication on its website, and in each subsequent year, DGS must publish the list in the Pennsylvania Bulletin and provide for a 30-day public comment period. DGS is also required, via a statement of policy, to establish a process for creating the list and resolving disputes with respect to items on the list raised during the public comment period prior to the publication on its website.

This new law is sure to be welcomed by contractors and suppliers as it will eliminate uncertainty in bidding and will reduce disputes over whether certain steel products are produced in sufficient quantities in the United States.

HB 1840 takes effect in 60 days and can be found here.

Posted on October 30, 2012 by Christopher I. McCabe, Esq. in DGS, Steel Products Act Comments Off

Pa. Attorney General Sues Public Contractor for Violation of Pa. Steel Products Procurement Act

As I noted in my recent post on the Pa. Steel Products Procurement Act, and as evidenced by recent enforcement action by the Pennsylvania Attorney General, the Act remains as relevant today as when it was first enacted in 1978.

On August 2, 2012, the Pennsylvania Attorney General filed suit against Ryco, Inc., and related Ryco businesses, claiming that they used hundreds of fittings made with foreign steel in fire sprinkler systems installed on a pubic works project at Indiana University of Pennsylvania and a public works project at the Blairsville-Saltsburg School District. The suit also names individual officers, owners, and directors of the Ryco businesses.

The official press release announcing the lawsuit noted that the Attorney General’s investigation into the possible use of lower-cost foreign steel products on Pennsylvania public works projects is “active and ongoing.” The lawsuit asks the Commonwealth Court to order civil penalties of up to $1,000 for each violation and other relief, along with recovery of any payments that were made to Ryco under the contracts and the cost of the investigation. In addition, the lawsuit seeks to prohibit Ryco and the other defendants from submitting bids or supplying materials to any public agency in Pennsylvania or on any state contract for a five year period.

The lawsuit against Ryco is proof positive that the Act is alive and well, and that public contractors supplying steel on public works projects in Pennsylvania, and the owners of these companies, must be extremely careful to know and comply with the Act’s requirements. The failure to do so could result in drastic penalties not only for the companies but for the owners themselves.

The official press release can be found here.

Posted on September 4, 2012 by Christopher I. McCabe, Esq. in Steel Products Act Comments Off

Public Contracting 101: Steel Products Procurement Act

This post is one in a series on the basic concepts and tenets of public contracting in Pennsylvania. Today’s post concerns the Pa. Steel Products Procurement Act, a virtual relic of public contracting in Pennsylvania, one that has been around for more than 30 years, but is still of important relevance today.

The Act was passed in 1978 with a stated purpose to protect the U.S. market for steel production and supply. The Act provides that any steel products used or supplied on a Pennsylvania public works contract must be made in the U.S. If the steel product contains any foreign steel, it is a U.S. product only if 75% of the cost of the product has been mined, produced, or manufactured in the U.S.

A public works contract is one for the construction, reconstruction, alteration, repair, improvement, or maintenance of public works. In turn, “public works” has a broad definition as follows:

Any structure, building, highway, waterway, street, bridge, transit system, airport or other betterment, work or improvement whether of a permanent or temporary nature and whether for governmental or proprietary use. The term includes, but is not limited to, any railway, street railway, subway, elevated and monorail passenger or passenger and rail rolling stock, self-propelled cars, gallery cars, locomotives, passenger buses, wires, poles and equipment for electrification of a transit system, rails, tracks, roadbeds, guideways, elevated structures, buildings, stations, terminals, docks, shelters and repairs to any of the foregoing.

Contractors performing general construction work for public entities in the Commonwealth must be especially vigilent in their compliance with the requirements of the Act. There are grave consequences for a violation of the Act, including the withholding of payment and, in the case of a willful violation, a 5-year debarment. An exception in the Act exists where the head of the public agency, in writing, determines that steel products are not produced in the U.S. in sufficient quantities to meet the requirements of the contract.

PennDOT has issued new guidelines for compliance with the Act for PennDOT contracts. The website of Associated Pennsylvania Constructors has a link to the new PennDOT guidelines here.

Recently, in Mabey Bridge & Shore, Inc. v. Schoch, 666 F.3d 862 (3d Cir. 2012), the Act withstood a federal constitutional challenge from a contractor who had to cancel four contracts for temporary bridges on PennDOT projects, and who has been barred from giving future quotes. The contractor had supplied PennDOT with temporary bridges for more than 20 years on 50 different PennDOT projects. But, in 2010, PennDOT notified the contractor that its temporary bridges were prohibited by the Act. In Mabey Bridge & Shore, the contractor claimed that the the Act was unconstitutional and that it was preempted by the federal Buy America Act. The U.S. Court of Appeals for the Third Circuit rejected the contractor’s challenges, found that the Act was not preempted, and upheld PennDOT’s decision.

The Third Circuit’s decision in Mabey Bridge & Shore can be found here.