Articles Posted in Government Contracts

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Appellant City of Allentown (City) contracted with appellee A. Scott Enterprises, Inc. (ASE), to construct a new public road. After arsenic-contaminated soil was discovered at the worksite, the City suspended work on the project. Following testing, it was determined construction could resume if precautions were taken. Accordingly, the City instructed ASE to obtain revised permits and proceed with the project. However, the existing contract did not include terms regarding the potential for contaminated soil, despite the fact the City was aware there might be contamination prior to entering into the contract, and ASE declined to proceed, explaining it would incur substantial additional costs due to the contaminated soil. The parties made several attempts to reach an agreement in which ASE would continue the construction, but to no avail. Consequently, ASE sued the City to recover its losses on the project, alleged breach of contract, and sought compensation under theories of quantum meruit and unjust enrichment, as well as interest and a statutory penalty and fee award for violations of the prompt pay provisions of the Procurement Code. After a trial, a jury found the City breached its contract with ASE and also withheld payments in bad faith. In this discretionary appeal, the issue this case presented for the Supreme Court's review was whether an award of a statutory penalty and attorney fees under the prompt payment provisions of the Commonwealth’s Procurement Code was mandatory upon a finding of bad faith, irrespective of the statute’s permissive phrasing. The Court held such an award was not mandatory, and therefore reversed the order of the Commonwealth Court and remanded the case to the trial court for further proceedings. View "A. Scott Enterprises v. City of Allentown" on Justia Law

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In 2010, the United States Department of the Navy entered into an agreement with Contracting Systems, Inc. II ("CSI"), per which CSI served as the general contractor for the construction of an addition to, and renovations of, the Navy/Marine Corps Reserve Training Center in the Lehigh Valley. CSI, in turn, subcontracted with Appellee, Clipper Pipe & Service, Inc. for the performance of mechanical and heating, ventilation, and air conditioning work. Clipper filed suit against CSI and its surety, the Ohio Casualty Insurance Company (collectively "Appellants"), in the United States District Court for the Eastern District of Pennsylvania, asserting that CSI had failed to pay approximately $150,000 to Clipper, per the terms of their agreement. Among other claims, Clipper advanced one under the Contractor and Subcontractor Payment Act (CASPA). Appellants moved for summary judgment, arguing that CASPA did not apply to public works projects, because a governmental entity does not qualify as an "owner" under the statutory definition, as such an entity is neither a "person" nor an "other association." The federal district court denied relief on Appellants' motion. Among other aspects of its holding, the court followed "Scandale Associated Builders & Eng'rs, Ltd. v. Bell" which held that a governmental entity may be an "owner" under CASPA, since the statutory definition of "person" does not exclude the federal government, and the purpose of CASPA is to protect contracting parties. Clipper prevailed at the subsequent jury trial, and the district court awarded interest, penalties, and attorney fees. Appellants appealed to the United States Court of Appeals for the Third Circuit. The Pennsylvania Supreme Court accepted certification from the Third Circuit to determine whether a CASPA applied to the public works project in this case. After review, the Supreme Court concluded that CASPA did not apply to a construction project where the owner was a governmental entity. View "Clipper Pipe v. Ohio Casualty Ins." on Justia Law

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In this case, the trial and intermediate courts determined that a general contractor was not a statutory employer relative to an employee of its subcontractor. The issue before the Supreme Court centered on the tension between such rulings and the Supreme Court’s longstanding jurisprudence that conventional subcontract scenarios serve as paradigm instances in which the statutory-employment concept applies. Appellant Worthington Associates, Inc., was hired as the general contractor for an addition to a Levittown church. Worthington, in turn, entered into a standard-form subcontract with Patton Construction, Inc., of which Appellee Earl Patton was the sole shareholder and an employee, to perform carpentry. While working at the construction site, Mr. Patton fell and sustained injuries to his back. Subsequently, the Pattons commenced a civil action against Worthington contending that the company failed to maintain safe conditions at the jobsite. Worthington moved for summary judgment on the basis that it was Mr. Patton’s statutory employer and, accordingly, was immune from suit. After the motion was denied, trial proceeded during which Worthington reasserted its claim to immunity in unsuccessful motions for a nonsuit and a directed verdict. "Having set up an errant dichotomy for the jurors, the [trial] court proceeded to instruct them concerning the differences between independent contractors and employees at common law. In doing so, the trial court compounded the underlying conceptual difficulties it had engendered, because [the Supreme] Court has long held that, for the salient purposes under Sections 203 and 302(b) of the WCA, the term 'independent contractor' carries a narrower meaning than it does at common law." The jury returned a verdict in favor of the Pattons in the amount of $1.5 million in the aggregate. Post-trial motions were denied, and Worthington appealed. A Superior Court panel affirmed. The Supreme Court reversed, finding that Mr. Patton’s relationship with the owner here was undeniably a derivative one, arising per a conventional subcontract with a general contractor (Worthington). "[U]nder longstanding precedent, neither Patton Construction, Inc., nor Mr. Patton was an 'independent contractor' relative to Worthington." View "Patton v. Worthington Associates" on Justia Law

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In an interlocutory appeal, the issue before the Supreme Court in this case concerned the "contours" of the Board of Claims' exclusive jurisdiction pertaining to procurement litigation against state agencies. Specifically, the Court was asked to determine whether such jurisdiction foreclosed original-jurisdiction proceedings in Commonwealth Court, challenging an Department of General Services' (DGS) cancellation of a request for proposals and request for declaratory and injunctive relief. The matter arose from a 2010 DGS request for proposals for the design, development, implementation, and maintenance of a computer control system to monitor slot machines at gaming venues across the Commonwealth. The plan was to replace an existing system which had been provided by Intervenor-Appellant, GTECH Corporation. GTECH and Appellee Scientific Games International, Inc. (SGI), each submitted proposals, and DGS selected SGI for the award and proceeded with contract negotiations. GTECH was informed that the contract had been awarded to SGI and submitted a protest. Two months later, DGS’s Deputy Secretary for Administration issued a final determination denying GTECH’s protest in material part, with prejudice. GTECH appealed the determination and requested, among other things, that the request for proposals be cancelled. Subsequently, DGS announced that it was canceling the request for proposals and sent a letter to SGI indicating "with little elaboration" that the cancelation was in the best interests of the Commonwealth. Subsequently, SGI commenced an action seeking declaratory and injunctive relief against the Departments of Revenue and General Services in the Commonwealth Court’s original jurisdiction and petitioned for a preliminary injunction. Upon review, the Supreme Court concluded that contractors, bidders, and offerors have limited recourse and remedies: "[r]elative 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." View "Scientific Games Int'l v. GTech Corp." on Justia Law

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The State Ethics Commission (Commission) appealed from an order of the Commonwealth Court that reversed the Commission's findings that Appellee Kenneth Kistler had violated two provisions of the Public Official and Employee Ethics Act (Act). Appellee was a member of the Carbon-Lehigh Intermediate Unit's (CLIU) board of directors from 1998 to 2002. As chairman of the building committee, Appellee was charged with pursuing the board's interests in various construction projects. Appellee also owned two building supply businesses. In late 1999, the board explored the possibility of constructing a garage in which to house its buses. The project's architect contacted Appellee as possible supplier for the project. Subsequently, Appellee resigned from his position with CLIU as a possible conflict-of-interest. At a board meeting, the solicitor for the CLIU opined that Appellee could "properly participate" in construction of the garage, but that he should abstain from any votes relating to that project. More projects were planned, and Appellee's businesses were again considered as suppliers. By this time, Appellee had withdrawn completely from participation with the CLIU's building committee. In 2004, the Commission notified Appellee that he was being investigated for possible violations of the Ethics Act. The Commission thereafter concluded that Appellee unintentionally violated the Act three times. The Commonwealth Court reversed the Commission’s decision. In its interpretation of the Ethics Act, the court found no evidence that Appellee's participation in the building committee's discussions lead to the committee's choosing his private businesses for its building projects. Upon review, the Supreme Court concluded that the Commonwealth Court correctly interpreted the Ethics Act and affirmed its decision. View "Kistler v. State Ethics Comm'n" on Justia Law