March 2013

My age makes me part of perhaps the last generation to go to college where computers, the internet, and email were not in widespread use.  Before the internet age, Villanova University, where I went to undergraduate and law school, would notify students of the time and location of final exams by posting several small print pages that you would need to decipher to find the date, time, and location of your final exam.  The date, time, and location of the final exam for every class Villanova offered appeared on these print outs.  You can imagine what they must  have looked like.  I can remember trying to find my class and then following the small print line over to find the date, time, and location when it would be held.

On one occasion, most likely attributable to a few Yuengling’s the night before, I wrote down the wrong place and time for my final exam.   I showed up on at the time and location when I thought the exam should begin only to find the classroom empty and locked.  Luckily, I was able to contact the professor, which required me to actually call or go see him in person — no email, and he agreed to let me take the final exam.  However, I still ended up with a C, in a class when I should have done much better.  The grade was no doubt influenced by my failure to show up at the right place and time.

Moral of the story – don’t be in the wrong place at the wrong time.  This adage applies to bid protest litigation involving the Commonwealth of Pennsylvania as well.   In Scientific Games Intern, Inc. v. Commonwealth of Pennsylvania, the Pennsylvania Supreme Court held that under the Pennsylvania Procurement Code the Commonwealth Court did not have jurisdiction over a successful bidder’s claim for specific performance.

The case involved an award of a bid for a computer system to monitor slot machine’s for the Department of Revenue.  The plaintiff, SGI, was submitted the winning bid and contract negotiations ensued.  Eventually, an agreement on terms was reached and the Office of Chief Counsel transmitted a copy to SGI for execution.  SGI signed the contract and returned it to the Commonwealth.  However, before the Commonwealth could fully execute the contract.  The Commonwealth cancelled the contract under Section 521 of the Procurement Code.  SGI then brought an action against the Commonwealth in Commonwealth Court seeking specific performance of the contract.  The Commonwealth raised preliminary objections challenging the Commonwealth Court’s jurisdiction to hear the dispute, which the Commonwealth Court overruled.  On appeal the Supreme Court overturned the Commonwealth Court and explained:

“The Procurement Code establishes administrative processes to address disputes arising in the procurement setting. On account of the doctrine of sovereign immunity, however, contractors, bidders, and offerors have limited recourse and remedies. Relative to controversies in matters arising from procurement contracts with Commonwealth agencies, the Board of Claims retains exclusive jurisdiction (subject to all jurisdictional prerequisites), which is not to be supplanted by a court of law through an exercise of original jurisdiction.As to challenges to cancellations of solicitations asserted under Section 521 of the Procurement Code, the Legislature did not implement any waiver of sovereign immunity and afforded no remedy to aggrieved bidders and offerors which have not yet entered into an executed contract with a Commonwealth agency. For those attaining the status of contractor—which we find should be deemed to occur at the time a contract is executed by all parties (as that event is also understood for purposes of Section 521)—the remedial procedure is via Section 1712.1, subject to review within the exclusive jurisdiction of the Board of Claims.”

As a result, the plaintiff’s claim was dismissed.  When dealing with a challenge to an action involving the Procurement Code it pays to file your claim at the right place at the right time.

 

 

You end up paying $1.15 million to the Justice Department to settle claims that you violated the False Claims Act.  As reported by ENR, Caddell Construction of Montgomery, AL, agreed to pay the Justice Department $1.15 million to settle charges that it violated the False Claims Act by —  you guessed it — committing DBE fraud.  According to the story:

The company agreed to pay $1,150,000 to settle allegations that it violated the False Claims Act by falsely reporting to the Army Corps of Engineers that it hired and mentored a Native American-owned company to work on Fort Bragg and Fort Campbell projects.

As is typical in DBE fraud cases, the Native American firm that Caddell certified as a DBE was merely a “pass through” entity who was performing no commercially useful function.

Perhaps as significant as the fine, is that the charges also led to the indictment of two Caddell Construction executives on federal fraud charges.  This story underscores how serious firms must take participation in government DBE programs.  Fines are bad, jail time is worse.

Here is one I have not seen before, a project that threatens to get derailed because the general contractor proactively included M/WBE goals in its contract.  The story reported in the Baltimore Business Journal  involves M/WBE hiring goals in Whiting-Turner’s contract to build the Horseshoe Casino in Baltimore.  According to the story, Whiting Turner, the project’s general contractor, preemptively set M/WBE participation goals before the Maryland Lottery and Gaming Control Commission, the state agency in charge of the project, set its official M/WBE hiring goals.  Whiting-Turner established a 25% MBE goal and a 2% WBE goal.  However, the Maryland Minority Contractors Association believes that goal is arbitrary and too low and is threaten to bring suit to prevent the project from proceeding until the state sets its official hiring goals for the project.  Interestingly, the Maryland Governors office concedes that state’s MBE regulations apply to the project.

There are several interesting aspects of this story.  First, there is the issue of standing.  As a threshold matter, the MCA must demonstrate that it has a protected right or interest that the Gaming Commission actions has harmed.  However, the MCA has no “right” to have a certain amount of work set aside to its members.  In fact, strict quotas and set aside are invalid.

Second, if Whiting-Turner already has a contract with the Gaming Commission with W/MBE hiring goals that the Commission accepted, the Commission would be in a tough legal position to demand that Whiting -Turner change those goals.  Whiting-Turner would be on sound legal ground to refuse any change to the W/MBE goals in its contract with the Commission.

Finally, the legal theory that the Minority Contractors Association is positing to challenge the goals is interesting.  The MCA claims that the State must establish hiring goals based upon a disparity study and is apparently relying upon the Maryland District Court’s holding in Associated Util. Contractors of Maryland, Inc. v. Mayor & City Council of Baltimore, 83 F. Supp. 2d 613, 622 (D. Md. 2000).  What’s interesting is that case involved the challenge to MBE program by a — largely — non-minority contractor’s association, who claimed that their non-minority members would be injured by the program.  The holding in that case reaffirmed the long standing proposition that in order to survive constitutional muster courts would apply a strict scrutiny analysis to MBE programs and that in order to survive such scrutiny that state proposing the race based program needs to come forward with compelling evidence of discrimination, i.e. a disparity study.

Here, a challenge to Whiting-Turner’s contract based on this theory could very well blow up in the MCA’s face because a disparity study is used to just the constitutionality of the program.  If the Court comes back and requires a disparity study which shows that the goals should be less than what Whiting Turner proposed, it could trigger a lawsuit by non-minority firms while also decreasing the number of minority firms participating on the project.

The MCA may want to rethink their strategy here.

So concludes an upcoming report by the former Dan Gordon, the former head of the Office of Federal Procurement Policy.

According to Gordon, among the pro’s of a bid protest are:

Protests introduce a relatively low-cost form of accountability into acquisition systems by providing disgruntled participants a forum for airing their complaints;

They can increase potential bidders’ confidence in the integrity of the procurement process if the GAO is directly responsive to participants’ complaints, leading more players to participate;

Protests can increase the public’s confidence in the integrity of the public procurement process; –The known availability of the protest avenue empowers those in contracting agencies who face pressure to act improperly;

Protest decisions made public provide a high level of transparency into what is happening in the federal procurement system; and

Protests provide guidance.

Contractors considering a GAO bid protest frequently grapple with whether the protest will hurt their chance for future contracts. The conclusion from this study seems to be that this is not a valid concern.  Could this report push even more contractors to protest bids with the GAO?

Besides generating some interesting SEO results it address comments I received concerning why I mentioned Milton Friedman in an early post about domestic oil and natural gas drilling.  Watch this famous discussion by Professor Friedman and then apply the principals to how the construction industry will be impacted by domestic oil and natural gas production.

In recent years, as private work has become more scare, the competition for public projects has increased.  In turn, so have the number of bid disputes challenging the awards of those public contracts.  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.

 The rules for challenging a contract award and bringing a bid protest depends on the whether the contract is a federal, state, or local government contract.  This blog post gives an overview filing a bid protest for a federal government contract.

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 disposing of the protest and the speed at which the matter is disposed of.  Indeed, the GAO will rule on a bid protest within 100 days of a bid 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.

 

Last week I took PennDot to task for not mentioning Pennsylvania’s new public private partnership legislation when it was complaining about the lack of financing available for infrastructure projects because one of the main purposes of the act is to finance transportation projects.  In this weekend’s Wall Street Journal Money magazine, there is an article “How to  Buy a Toll Road,” about uber-wealthy families investing in infrastructure projects in emerging markets.  It fails to mention that there are opportunities for not only wealthy families, but also hedge funds, pension funds, and private equity, to invest in infrastructure project right here in the good ole’ USA.

Pennsylvania accepts unsolicited public private partnership proposals.  This means investors can approach the Commonwealth with a plan to invest in an infrastructure project. There is even a guide on how to submit a proposal.  I would imagine investing in US based infrastructure projects is would be preferred because there is less risk.  For example, there is real risk that an infrastructure project in an emerging country never gets completed because of civil unrest in that country, like a coup.

However, if States are serious about funding infrastructure projects with private dollars then they need to do a better job of letting those capable of investing in them that the opportunity to do so.

I love everything about our Country’s oil and natural gas boom.  This commercial is a great example of how domestic energy production is transforming America  (the only thing that could have made this ad better would have been a Robert DeNiro voiceover). Drilling opponents should be forced to watch it. The men and women in this commercial represent the men and women who built America and who have traditional formed the backbone of our Nation’s middle class. (On a side note it is also a 30 second case study of Milton Friedman supply side economics at work.) Like many others, they are benefiting from the good paying jobs that increased domestic oil and natural gas production creates. Jobs that alternative (green) forms of energy just do not create. That is why the green energy/anti-drilling crowd always strikes me as a bit elitist — among other things

 

The explosion of oil drilling in the Bakken Shale is causing a construction boom in East Coast rail yards.   Oil terminal work is particular hot in the Philadelphia area.  According to ENR:

In Eddystone, Pa., Enbridge is turning the site of a shuttered coal plant into a rail terminal able to take delivery of about 80,000 barrels of oil per day by this fall; it will take about 100 construction workers to complete the job. Instead of closing a South Philadelphia refinery as planned, Sunoco is building a high-speed-rail loading facility. PBF Energy, Parsippany, N.J., recently completed a rail terminal that will take delivery of about 80,000 barrels of oil per day (bpd) of Bakken and Canadian crude

What is your firm doing to cash in on domestic oil drilling?

The Pennsylvania Department of Transportation recently released its first ever “Transportation Performance Report, a detailed rating of the state’s efforts in safety, mobility, system preservation and accountability, with the results underscoring the need for additional transportation investment.”

According to the report “In the categories of system capacity enhancements, local bridge conditions, pavement reconstruction and transit infrastructure, the state’s performance is rated as “low” due to limited resources and magnitude of need.”  A point that PennDot Secretary Barry Schoch underscored “we still have significant needs that we can’t address with the resources we have.”

Is PennDot aware that last year Pennsylvania passed a public private partnership act for this very reason?  You would think that this report would serve as a perfect platform for PennDot to promote the new P3 and get private industry interested in investing in infrastructure project.