Supplemental Conditions

Documenting Good Faith Efforts on 100% State Funded Projects

Posted in Disadvantage Business Enterprises (DBE)

As readers of this blog know, demonstrating “good-faith efforts” to subcontract work to disadvantaged business enterprises (DBE)  in order to meet the DBE participation goal has long been the law on projects receiving funding through the FWHA or FTA.  Recently, the Pennsylvania Department of Transportation made a revision to its regulations requiring that the same be done on 100% state funded projects in the Commonwealth.  This meas virtually every transportation prime contractor performing work in the Commonwealth will have to document “good-faith efforts” of subcontracting work to DBE firms.  Because many firms will be performing this task for the first time, it is worth reviewing what qualifies as a good-faith effort and why it is important to demonstrate those efforts.

A Refresher on Good-Faith Efforts

Federal law requires that transportation projects receiving funding, in whole or in part, through the federal Department of Transportation, establish a goal for the percentage of work subcontracted to DBE firms.  The law explicitly states that the goal is not a quota and a contractor’s bid cannot be rejected simply because it failed to meet the DBE subcontracting goal set forth in the invitation to bid so long as the contractor demonstrates “good faith efforts” in attempting to meet the goal.  Appendix A to the DOT’s DBE regulations, Appendix A, 49 C.F.R. 26, provides guidance on what qualifies as a “good faith effort” to meet the DBE participation goal.  The regulations state the following are examples of good faith efforts:

  1. Aggressively soliciting from certified DBEs who have the capability to perform the work of the contract and taking appropriate steps to follow up initial solicitation
  2. Selecting portions of the work to be performed by DBEs in order to increase the likelihood that the DBE goals will be achieved. This includes, where appropriate, breaking out contract work items into economically feasible units to facilitate DBE participation, even when the prime contractor might otherwise prefer to perform these work items with its own forces.
  3. Providing interested DBEs with adequate information about the plans, specifications, and requirements of the contract in a timely manner to assist them in responding to a solicitation
  4. Negotiating in good faith with interested DBEs. It is the bidder’s responsibility to make a portion of the work available to DBE subcontractors and suppliers and to select those portions of the work or material needs consistent with the available DBE subcontractors and suppliers, so as to facilitate DBE participation. Evidence of such negotiation includes the names, addresses, and telephone numbers of DBEs that were considered; a description of the information provided regarding the plans and specifications for the work selected for subcontracting; and evidence as to why additional agreements could not be reached for DBEs to perform the work.

The New Requirements for ALL Pennsylvania Transportation Projects

In 2013, the Pennsylvania Assembly passed a law requiring contractors on projects receiving 100% state funding to demonstrate the same good-faith efforts that were previously limited to federally funded projects. In August 2014, PennDOT implemented regulations pursuant to those changes are significant in several ways, including some that go beyond the current federal requirments.

First, PennDOT’s example of good faith efforts, perhaps not surprisingly, is nearly identical to DOT’s example contained in Appendix A of the regulations.

Second, within seven (7) calendar days after a bid opening, the apparent low bidder must documenting to PennDOT its good-faith efforts in soliciting DBE subcontractors. Failure to submit this required documentation shall result in the apparent low bidder’s bid being rejected.  

Third, if PennDOT reviews the documentation submitted by the apparent low bidder and determines that it has not demonstrated good-faith efforts, the bid shall be rejected.

Fourth, all firms listed in the good faith efforts submission, including those providing professional and other services, must be submitted for subcontractor approval after the contract is executed and approved before the DB’s actual performance of work. Submit for subcontractor approval any DB to be utilized whether or not they are listed in the good faith efforts submission approved by the Good Faith Review Officer. The request for approval must include:

  • A copy of the executed signature page of the subcontract;
  • A copy of the scope of work; and
  • A copy of the unit prices as the appear in the subcontract or agreement.

Fifth, if a DBE firm needs to be replaced, contractors must notify PennDOT. However, unlike under the federal rules, PennDOT’s permission is not required before the DBE firm is replaced.

Sixth, like under the federal regulations, contractors must use good faith efforts in subcontracting change order work to DBE firms.

Finally, a contractor’s duties do not end with the project.  PennDOT is requiring contractors to keep documentation of their good faith efforts for three years after final payment is accepted.  Furthermore, following the completion of the project PennDOT will review whether the contractor has complied with the new DBE rules throughout the life of the project.  Contractors that fail to comply may be subject to sanctions.

Opportunities for Veteran Owned Firms

While many prime contractors are likely pulling their hair out at the prospect of complying with yet another regulation, some firms that are likely cheering the new rules are veteran owned and disabled veteran owned small businesses.  Under federal law, only firms that are owned 51% or more by a female or minority can qualify for DBE status.  However, PennDOT’s regulations take a more expansive view and includes DVOSBs and VOSBs in its definition of “Diverse Business.”  Therefore, DVOSB and VOSB firms should be aggressively courting prime contractors in the Commonwealth and, conversely, prime contractors should not limit their good faith efforts to only women and minority owned firms on 100% state funded projects.

 

 

THE EVER GROWING MISSION CREEP OF THE OFCCP

Posted in Government Contracts

Previously, I have written and warned about the Department of Labor’s Office of Federal Contract Compliance (“OFCCP”), which I like to call the most powerful federal agency you have never heard of.  The OFCCP purpose is to enforce federal affirmative action regulations applicable to contractors and subcontractors performing work funded, in whole or in part, with federal funds.  While OFCCP has been around for years, its level of enforcement activity was low.  That changed with the election of President Obama’s and his policy of taking executive action through regulation wherever and whenever possible.  Beginning in 2010, OFCCP enforcement activity, primarily in the form of affirmative action “audits,” has exploded.  This week the OFCCP issued a notice of proposed rule, which, by its own admission, will cost the federal contractors $50,000,00.

What is the Proposed Rule?

OFCCP is proposing to make changes to 41 CFR § 60-1.7.  Currently, that regulation requires federal prime and subcontractors to file an annual EEO-1 report, which requests information related to the race, ethnicity, and gender of employees.  The regulation was promulgated under Executive Order 11246.  That Order was signed by our last great Regulator – in –Chief, Lyndon Johnson in 1965.  It was signed during the Civil Rights Era when institutional racism was a reality.  The purpose of the Order was to prohibit discrimination in employment based upon race, creed, color, or national origin (but not sex, which apparently was still ok in 1965).  The Order authorized the Department of Labor to issue regulations to promote the goal of ended discrimination in the hiring of individuals by federal contractors.

                OFCCP proposed change will extend the reporting requirements intended to snuff racial discrimination in employment, a real problem in 1965, to include the requirements intended to snuff out “wage discrimination,” which a straw man problem is made up by the Administration.  The proposed rule would require federal contractors and subcontractors with more than 100 employees and federally funded contracts of greater than $50,000 to annually report to the OFCCP an “Equal Pay Report.”  The report would require contractors to disclose to the OFCCP:

(a)    The total number of workers by race, ethnicity, and gender;

(b)   Total W-2 earnings of all workers broken down by race, ethnicity, and gender; and

(c)    The total hours worked in each job category by race, ethnicity, and gender.

According to the OFCCP, the information on the report would be kept “confidential” (just like the tax returns of non-profit tea party organizations) and would not be used as the basis for an enforcement action.

What is Wrong With the Proposed Rule?

First and foremost, an overwhelming majority of employees of federal contractors, especially construction contractors, have wages regulated by the Davis Bacon act.  Therefore, there is no disparity in pay based on race, ethnicity, and gender.

Second, the OFCCP does not explain how it expects federal contractors to capture the data necessary to complete the report.  W-2 reports do not contain the race, ethnicity, and sex of the employee.  Moreover, the federal law prohibits an employer from asking an employee about his or her race, ethnicity, national origin, or gender.

Third, OFCCP goes beyond the power granted to it by Executive Order 11246.  OFCCP states that the legal authority for the proposed rules is Executive Order 11246. However, the Executive Order says nothing about regulations concerning wage discrimination.

This Could Be the Biggest DBE Fraud Case Yet

Posted in Disadvantage Business Enterprises (DBE)

In several previous posts, we have talked about the growing risk to contractors that violate the federal, state, and local D/M/WBE programs.  This summer we saw the sentencing of the remaining defendants in the infamous Schuykill Products case.  That case was a $136 million DBE scam that the FBI called the largest DBE fraud ever.

Today, the Wall Street Journal, the New York Times, and others are reporting about a DBE fraud indictment that could far exceed Schuykill Products in size.  The case involves DCM Erectors, Inc., who was the steel erector for the 1 World Trade Center project.  According to the reports, DCM engaged in a classic DBE pass through scheme in order to obtain nearly $1 billion in contracts from the Port Authority of NY/NJ.  The indictment seeks to hold the CEO of DCM personally liable for the fraud.

While the case is a reminder to all contractors to make sure their DBE compliance procedures are in check, those performing work in the NY metropolitan area should pay particular attention.  This case was brought by the U.S. Attorney for the Southern District of New York. In recent years, the Southern District of New York has been a hotbed for DBE fraud prosecutions, including several high profile cases that have resulted in guilty pleas and convictions.

 

 

Why Unions Can No Longer Escape RICO Claims

Posted in Unions

In an earlier post, I explained how a September 2011 decision in a matter U.S. v. Larson paved the way for the indictment of ten members of Ironworkers Local 401. That post explained that because of a controversial Supreme Court decision in U.S. v. Enmons unions enjoyed almost unfettered protection from RICO claims so long as they claimed their alleged actions were in furtherance of “legitimate union objectives.” However, the Larson Court rejected the preposterous argument that otherwise illegal activity was permitted if committed by a union and its members in furtherance of bargaining activity.  A recent decision in the Local 401 case has extended the holding of the Larson Court, which was limited to the Western District of New York, to the Eastern District of Pennsylvania.

On July 21, 2014, Judge Michael Baylson issued an opinion denying a motion to dismiss filed by five of the ten ironworkers indicted under criminal RICO laws. The motions sought to dismiss the indictment in part because of the Supreme Court’s decision in Enmons. Like in Larson, Judge Baylson rejected the contention that Enmons afforded unions broad protection from prosecution so long as some union objective was shown. Judge Baylson held there was nothing legitimate about the ironworkers’ use of violence and arson in attempting to obtain unwanted work stating:

“These allegations support a finding that Defendants used threats and violence to exact unwanted or fictitious work. This is not a valid union objective, and is not protected under Emmons (sic)”

Judge Baylson’s opinion coupled with the Larson Court’s earlier opinion is very important. These cases clearly indicate that federal court’s will not afford unions broad protection from prosecution under Enmons and that unions can no longer hide behind Enmons when engaging in otherwise unlawful activity.  Interestingly, the Philadelphia Business Journal featured a story earlier this week about how U.S. Attorney Zane Memeger has made cases like the ironworkers case a priority.  We will see if the recent decision in the ironworkers case emboldens him to bring more cases against unions for activity similar to the ironworkers.

Failing to Understand DBE Regs Leads to Bid Rejection

Posted in Disadvantage Business Enterprises (DBE)

In an earlier post, I talked about bid challenges and rejections being one of the “hidden dangers” of failing to understand and follow DBE regulations.  I explained how strict minority set asides or quotas are almost always unconstitutional.  In fact, the DOT DBE regulations explicitly state that the DBE goals are not quotas. Rather, they are goals that contractors must use “good-faith efforts” to achieve. A State Transportation agency cannot reject a bid because it fails to include a commitment to subcontract work that meets or exceeds the stated DBE goal. However, for its bid to be accepted, the contractor must be able to demonstrate “good faith efforts” in attempting to meet the stated DBE contracting goal.

A Maryland case shows how one contractors lack of understanding of DBE regulations likely resulted in it losing an airport contract.  (For a detailed explanation of the case visit livingstonprocurment.com)  In that case, the Maryland Aviation Administration issued an Invitation for Bids for fence installation and repair at two airports. The Invitation for Bids stated a DBE participation goal of 15%.

Fence Connection, Inc. was the apparent low-bidder and stated that 25% of its subcontracted work would be performed by a single DBE subcontractor.  However, the because the DBE was a supplier only 60% of the value of the work subcontracted to the DBE could be counted towards Fence Connection, Inc.’s DBE goal.  MAA rejected the bid believing that it was not possible for Fence Connection to meet the stated DBE goal using the fuel supplier because Fence Connection could not accurately state the amount of fuel it would purchase from the DBE supplier.

Fence Connection appealed to the Maryland Board of Contract Appeals.  The Board of Appeals affirmed the MAA’s rejection of the bid Fence Connection “could not accurate calculate how much fuel it was use on the contract.”

Unfortunately for Fence Connection, its apparent lack of understanding of DBE regulations caused it to lose the bid.  How could Fence Connection saved its bid?  First, even if it could not exactly calculate the amount of fuel it intended to purchased it could have come close based upon past fuel usage and perhaps expert testimony.

Second, outside of that calculation Fence Connection could still have come away with the contract if it demonstrated it used “good-faith efforts” to meet the stated DBE 15% goal and the DBE fuel supplier was all was the only reasonable candidate for subcontracting.  In order to do that, Fence Connection would need to have documented aggressive efforts to find DBE subcontractors to perform 15% of the work.  If it did so, Fence Connection should have been awarded the contract even if its DBE goal came in below 15%.  In other words, it could have argued that because it demonstrated good-faith efforts it is irrelevant if it met the 15% goal because under DBE regulations its bid cannot be rejected solely for failing to meet the goal.

5 Ways to Recover Your Attorney’s Fees When Litigating With the Government

Posted in Construction Law

Litigating a case against the government is an intimidating task.  The government has virtually unlimited resources at its disposal to wage its case.  Each side must bear it’s on costs of litigation, which means you must pay your attorney while the government attorneys are already paid by the taxpayers. However, in certain cases involving the government an award of attorneys is available to successful litigants, which can level the playing field.  Here is a look at five areas where successful parties in litigation involving the government can recover attorney’s fees from the government.

1.         Civil Rights Actions.

            When the local, state, or federal government violates an individual’s or corporate entity’s constitutional rights, they can sue the government for damages under 42 U.S.C. § 1983.  A claim under Section 1983 can arise when a party’s property is taken without due process of law, its free speech rights are infringed, or it is subject to a warrantless search and seizure.  If a party is successful in its litigation and the government is found liable for violating its constitutional rights, 42 U.S.C. § 1988 authorizes the court to award the party reasonable attorneys fees and costs.

2.         Equal Access to Justice Act.

            The Equal Access to Justice Act (EAJA) provides for an award of attorneys fees and costs to a party that prevails in litigation against the federal government or a federal government agency.  Unlike in attorney’s fees under 42 U.S.C. § 1983, under the EAJA, an award of attorneys fees and costs is mandatory.  However, the EAJA applies only to cases involving the federal government or a federal government agency.  Conversely, claims arising under 42 U.S.C. § 1983 can involve a local or state government.

            In order to receive an award of attorneys fees and costs, a party must meet four criteria:

            (1)        they must be a “prevailing party” in its suit against the government;

            (2)        the government’s position must not be “substantially justified;”

            (3)        there are no “special circumstances” that would make the award unjust;

            (4)        the application must be made within thirty (30) days of final judgment;

            Importantly, to be deemed a prevailing party entitled to attorneys fees, an applicant need not win on every claim it brings.  Rather, the Supreme Court has stated that a prevailing party is “one who has succeeded on any significant claim affording it some right to relief.”  The form of relief can be a judgment on the merits or a preliminary injunction.

            The government bears the burden of proof in demonstrating that its position was had substantial justification.  Substantial justification is “justification to a degree that could satisfy a reasonable person.”  The Supreme Court has “interpreted the term substantial justification as describing a position that has a reasonable basis both in law and fact.”

            Some examples of cases involving construction companies where the government failed to prove substantial justification for its position include:

  • Successful bid protests;
  • Successful payment claims;
  • Successful appeals of denial of SBA, DVOSB, and VOSB certification;
  • Successful defense of agency actions (OSHA, DOL, OFCCP)

            The downside to attorney’s fees claims under the EAJA is that, typically, the award of attorneys fees is capped at $125 per hour, unless the court decides otherwise.  Furthermore, individuals with a net worth of more than $2,000,000 or entities with a net worth of more than $7,000,000 and more than 500 employees are not eligible for an award of attorney’s fees under the EAJA.

3.         GAO Bid Protests.

Disappointed bidders on a contract being let by the federal government or government agency have the ability to challenge the contract award by filing a bid protest with the Government Accountability Office (“GAO”).  If GAO determines that a solicitation, proposed award, or award does not comply with statute or regulation, it may recommend that the agency pay the protester the costs of:

(1)   Filing and pursuing the protest, including attorneys’ fees and consultant and expert witness fees; and

(2) Bid and proposal preparation.

4.         Eminent Domain.

            Eminent domain is the process by which the government can acquire private property for public use.  If a private owner is successful in defending a claim by the federal government that a property should be acquired by eminent domain or if the federal government abandons its claim for the property then an award of the owner’s attorney’s fees is mandatory.  Local and State governments can also acquire property through eminent domain.  The rules vary from by State.  However, many States contain provisions in their eminent domain laws for compensating private owner’s attorney’s fees.

            Inverse condemnation is the legal term used to refer to when the government takes an action that impacts the economic value of a private property.  The action can be a physical one, such as where the access to private property is effected, or regulatory, such as where a government regulation impacts the ability for an owner to use his land.  The latter is sometimes referred to as a “regulatory taking.”  If the federal government has engaged in inverse condemnation and a private property owner sues the federal government and is successful, then under 42 U.S.C. § 4654(c), an award of attorney’s fees is mandatory.

 5.         Civil Asset Forfeiture.

            Under civil asset forfeiture laws, the federal government is empowered to seize property if it believes the property was obtained by or used to further committing a crime.  This is true even if the owner of the property is never charged with any wrongdoing.  As can be imagined, civil asset forfeiture laws are controversial.  However, private property owner’s challenging a civil forfeiture proceeding under federal law who are successful are entitled to a mandatory award of attorney’s fees.

For more information about recovering attorneys fees and costs from the government, visit our Economic and Individual Liberty Program at http://zimolonglaw.com/practice-areas-2/economic-and-individual-liberty. 

Performing Work in Philadelphia? Several New Laws Impact the Construction Industry

Posted in Construction Law

On January 1, 2014, a series of changes to the City of Philadelphia’s licensing laws for construction contractors went into effect.  Moreover, on February 6, 2014 and May 14, 2014, Mayor Nutter signed additional changes into law, which will become effective in 2015.  Your immediate attention to these new rules is required because the penalties for non-compliance have increased significantly.

1.         Who is subject to the new laws?

The new laws require all general contractors, including owners that act as general contractors, and subcontractors of any tier that perform more than $500 of work to become licensed.

2.         Who is exempt from the new rules?

 The new laws grant an exemption to the following:

  • owners performing improvements to owner occupied properties or to properties they intend to occupy;
  • engineers and architects;
  • government employees performing work in their capacity as government employees;
  • contractors and subcontractors already licensed by the City; and
  • contractors and subcontractors performing less than $500 of work.

3.         What are the requirements for a license?

Contractors and subcontractors must complete an application prepared by the Department of Licenses and Inspections and pay a $100 fee.  Contractors and subcontractors must renew their license annually.  This is a change from the previous law that required renewal every three (3) years.

To obtain a license, contractors and subcontractors must:

  • obtain a commercial activity license and tax identification number (business privilege number) from the City.  This must be done before applying for a license.
  • certify under penalty of law that they (a) have complied with all City tax obligations, (b) are financial solvent, (c) are not debarred by any public body or government agency, and (d) are in compliance with all applicable laws of the Commonwealth relating to operation of their business.
  • provide proof that the new law’s insurance requirements are met (see point 4 below for information about insurance requirements); and
  • provide proof that one or more supervisory employees has completed OSHA 30 training within the last five (5) years[1].

4.         What are the new insurance requirements?

The new law has strict insurance requirements.  The new law requires that contractors and subcontractors maintain a minimum level of insurance. Proof that these minimum requirements are maintained is a prerequisite to obtaining a license.  Contractors and subcontractors must maintain the following:

  • workers compensation insurance at statutory limits (which is already required under state law);
  • a CGL policy with minimum coverage of $500,000 per occurrence;
  • products and completed operations coverage with minimum coverage of $500,000 per occurrence; and
  • motor vehicle liability insurance with minimum covered of $300,000 per occurrence.

Certificates of insurance must be submitted with the application.  Importantly, the certificate of insurance must: (a) describe the type of work the contractor and subcontractor performs, (b) the name and telephone number of the contractor’s insurance broker or agent, and (c) name the City of Philadelphia as an additional insured[2]

5.         What are the post-licensing requirements?

 The new law imposes several conditions on contractors and subcontractors post-licensing.  Contractors and subcontractors shall:

  • update the Department of Licenses and Inspections on changes to information supplied on their application;
  • secure all permits prior to beginning construction;
  • display their license number on all advertising, stationery, at their main place of business, at their job sites, on proposals and contracts, and vehicles;

(The numbers on vehicles must be at least two inches in height.  It is not clear what qualifies as displaying the license number at a place of business and at a job site.)

  • maintain complete financial and construction records (including plans) for each job performed, for four years, after the completion of the job; and
  • provide certain information to the Department of Licenses and Inspections regarding their subcontractors.

6.         What conduct is prohibited?

The new law specifically states that the following are prohibited:

  • performing work without a permit;
  • deviating from or disregarding in any material respect the plans and specifications approved by the Department of Licenses and Inspection, unless the change is approved by the Department[3];
  • assigning or transferring a permit to another contractor;
  • hiring an unlicensed contractor or subcontractor.

The law is clear that the prohibition on the hiring of unlicensed contractors and subcontractors applies to project owners and developers.

7.         What are the special notice requirements that apply to “prime contractors”?

The new law defines “prime contractor” as “any contractor that is identified on a permit application as the contractor responsible for the construction authorized by the permit.”  Therefore, the definition applies to traditional general contractors but also specialty trades that are required to pull permits for their respective trade, such as electrical and plumbing subcontractors.

The new law requires prime contractors to submit to the Department of Licenses and Inspection in writing within three (3) days of beginning work on the project the following:

  • the address of the project;
  • the prime contractor’s name, business address, and license number;
  • a list of all subcontractors of any tier used on the project with their respective license numbers;
  • proof that each contractor and subcontractor has all other licenses required by the Philadelphia Code (business privilege, tax, ect.);
  • the name of the property owner; and
  • such other information as the Department of Licenses and Inspections requires.

Furthermore, the new law requires the prime contractor to post this information at the project site in a place that is clearly visible to public view.  The Department of Licenses and Inspections is currently promulgating a uniform standard for signage that must be displayed and that contains the information required to be displayed.  What is unclear is whether there will be a sign for each “prime contractor” or only one sign that lists the name of the general contractor and the major trade subcontractors.

8.         What are the OSHA training requirements?

In addition to the OSHA 30 hour training for supervisory employees required in order to obtain a license, beginning in 2015 all construction workers regardless of position performing work on a project located in Philadelphia shall have completed OSHA 10 training or better and must carry proof that they have completed this training.

9.         What are the penalties for violating the new rules?

Contractors and subcontractors found to have violated the new rules can have their licenses revoked for a period of one (1) year and they shall be prohibited from pulling any permits during that one (1) year period.

Moreover, the law authorizes the imposition of fines and imprisonment of up to ninety (90) days for violators.

Starting in 2015, the Philadelphia Fire Department shall have concurrent enforcement with the Department of Licenses and Inspections to issue stop work orders in cases imposing an immediate threat to life or property.

 10.       What are the whistleblower provisions of the new rules?

One of the most significant changes in the law concerns the addition of a provision authorizing private individuals to bring a cause of action against a contractor or subcontractor who has allegedly violated the licensing rules and requirements.  Similar to the federal False Claims Act, the new law incentivizes citizens to bring complaints by permitting the Court to award the citizen up to thirty percent (30%) of any amount recovered on behalf of the City.  As an added incentive, the new law also permits the private plaintiff to be awarded attorneys fees and costs incurred in bringing the action.


[1] The OSHA training requirement was added to the law in a bill signed by Mayor Nutter on May 14, 2014.  However, the OSHA training requirements do not become effective until November 2015.

[2] Contractors should discuss the additional insured language with their brokers because it may result in an increased premium.

[3] It is unclear what impact, if any, this will have on scope related changes that happen in the field.

Why GAO Bid Protests Are Worth It

Posted in Bid Protests and Disputes

Since 2006, the number of bid protest filed with the Government Accountability Office (“GAO”) has nearly doubled from approximately 1,300 protest filed in 2006 to over 2,400 filed in 2012.

 Many, including the former head of the Office of Federal Procurement Policy, believe bid protests are worth it. Among chief factors that lead many to believe that a protests are warranted:

  1.  The relatively low cost to file a protest with Government Accountability Office (GAO);
  2. An over 40% chance of that the protester will obtain some form of relief; and
  3. The potential to receive a partial or full award of your attorneys fees costs incurred in bringing the protest.

Where: Disappointed bidders on a contract being let by a federal government agency have a choice of filing a bid protest in four different places: (1) the agency giving the award; (2) the GAO; (3) the Court of Federal Claims; and (4) the disappointed bidders local federal district court.

Each forum has it pros and cons. However, the GAO is by far the most popular forum for filing a bid protest on a federal contract award because of the detailed rules for hearing and the speed at which the matter is disposed of. Indeed, the GAO will rule on a bid protest within 100 days of a protest being filed with it. Moreover, with few exceptions, a claim filed with the GAO results in an automatic stay of award of the contract subject to the dispute.

When: A post-award bid protest must be filed with the GAO within ten (10) days. While there is no set time frame for filing a bid protest with either the Court of Federal Claims or a local federal district court, because bid protest filed there seek preliminary injunctive relief, they should be filed as soon as possible. In fact, any delay in filing a bid protest with the federal court may result in the claim being denied.

Snatching Defeat from the Jaws of Victory

Posted in Bid Protests and Disputes, Public Bidding

Sports fans are familiar with the scenario.  A team stands only seconds away from victory. It is so close many are already celebrating.  Suddenly, fate intervenes and a ball bounces off a glove, a half court shot swishes through the net, or a receiver catches a heaved touchdown pass.   That is what the losing team calls: snatching defeat from the jaws of victory.

Snatching defeat from the jaws of victory could also be used to describe the circumstances of a recently decided Pennsylvania Commonwealth Court decision in Allan A. Myers, LP v. Montgomery County.  The case involved the award of a county road paving contract.  Allan A. Myers was the apparent low bidder and winner of the contract.  In fact,  the County Commissioners passed a resolution announcing that Myers was the low bidder and awarded the contract to it.

However, before the paving contract could be formerly signed, the County entertained a bid protest from a disappointed bidder.  As a result of the protest, the County Commissioners adopted another resolution.  This one rescinded the prior resolution awarding the contract to Myers and awarding the contract now to the disgruntled bidder.

Not surprisingly, litigation ensued.  The trial court dismissed Myers’ case stating that as a matter of law “the mere act of awarding a public contract normally creates no binding obligation on the awarding entity without the proper contracting authorities going further and entering into and executing the contract.”

Myers appealed and argued that, under basic public contract principles, an enforceable contract existed when the County awarded the contract to Myers in the resolution.  The Commonwealth Court disagreed and affirmed the trial court’s dismissal of Myers’ action.  The Commonwealth Court explained that “where a statute prescribes the formal mode of making public contracts it must be observed, otherwise they cannot be enforced against the government agency involved.”

Looking to the statute governing the award of the paving contract, the Commonwealth Court reasoned that the language indicated that the Legislature intended that all contract be executed in order to be enforceable.

The take away.  Before you start celebrating a bid award, if the statute governing the award of your contract requires it to be executed to be enforceable, bird dog the government agency to get you that executed contract.

Minor Ambiguity in Bid Spec Leads to Successful Bid Challenge

Posted in Bid Protests and Disputes

A recent Pennsylvania Commonwealth Court decision underscores how even a minor bid specification ambiguity can lead to a significant bid challenge.

In Greenstar Pittsburgh LLC v. Allegheny County, the Commonwealth Court considered whether the following section of a bid specification was ambiguous, thereby creating an uneven bidding playing field:

“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.”

In the case, Greenstar, a disappointed bidder and individual taxpayer brought suit to enjoin the award of a contract for the processing of recycling materials.  Greenstar challenged the award of the contract to PRS, the apparent lowest responsible bidder, on the grounds that three sections of the bid specifications were ambiguous and gave PRS an unfair advantage in the bidding process.

In part, Greenstar claimed the term “facility” was open to two reasonable interpretations.  It claimed that facility could mean its home office or a processing site.  The trial court agreed and enjoined the award of the contract to PRS.  On appeal, the Commonwealth Court affirmed and the contract award remained enjoined.

The Commonwealth Court explained that “if a provision in bidding specifications denies the public the benefit of a fair and just competitive process by which the public authority can select the lowest responsible responsive bidder due to its ambiguity, the only remedy is to enjoin performance of the contract between the successful bidder and the public authority.”  The rationale underlying this principle is that “fairness lies at the heart of the bidding process, and all bidders must be confronted with the same requirements and be given the same fair opportunity to bid in free competition with each other.”

The definition of the term “facility” is not one that most bidders would likely seize on in attacking bid award.  Usually, contractors focus on ambiguities involving some portion of the bid itself, like a unit price or other line item.  Greenstar raises the question as to whether disappointed bidders should look elsewhere in the bid specification to challenge an award.  Surely, in every bid specification there exists one, if not several instances, of minor ambiguities that a disappointed bidder could use to challenge a bid award.

The lesson:  if you want to challenge a bid, look beyond the obvious ambiguities.

 

 

 

Greenstar Pittsburgh, LLC v. Allegheny Cnty., 1890 C.D. 2012, 2014 WL 346613 (Pa. Commw. Ct. Jan. 30, 2014)