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Mistakes to Avoid When Evaluating an Adverse Commonwealth Procurement Decision

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The Legal Intelligencer - July 19, 2016

In-House Counsel

By: Chris Carusone

Mark Twain once famously said: "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." The same can be said for corporate counsel tasked with evaluating an adverse procurement decision from a commonwealth agency. While you may think that you know what mistakes to avoid in the critical days following notice that the company's bid has been rejected or its proposal has not been selected for negotiation, do you really know for sure?

With few exceptions, the procurement of supplies, services, and construction by commonwealth agencies is governed by the Commonwealth Procurement Code, 62 Pa.C.S. Section 101 et seq. The rules governing protests of solicitations and awards are set forth in Sections 1711.1 and 1711.2 of the code. Section 1711.1(a) provides that a "bidder or offeror, a prospective bidder or offeror or a prospective contractor that is aggrieved in connection with the solicitation or award of a contract, except as provided in Section 521 (relating to cancellation of invitations for bids or requests for proposals), may protest to the head of the purchasing agency in writing." Following the filing of a timely protest, the purchasing agency is tasked with evaluating the protest and issuing a written determination specifying the reasons for the agency's decision. If the head of the purchasing agency determines prior to execution of a contract that the solicitation or award was conducted in a manner contrary to law, a company's remedies are limited to cancellation of the solicitation or proposed award or revision of the solicitation or proposed award to comply with the law. If the agency head denies the protest, the company can appeal to the Commonwealth Court, which may cancel the solicitation or award and declare void any resulting contract that is made contrary to the law.

The days following the receipt of an adverse procurement decision from a commonwealth agency are absolutely critical. Here are the top five errors to avoid in conducting your evaluation during this early stage so that your protest is not over before it starts.

• Failure to adhere to the seven-day rule.

While you may be aware of the general rule that a disappointed bidder or offeror has seven days to file a protest with the head of the purchasing agency, several lesser-known corollaries to that general rule are equally important. For example, the seven-day period for the filing of a protest begins to run the date the disappointed offeror or bidder knew or should have known of the grounds of the protest. This is true regardless of whether the contract was awarded and even if the protest was filed within seven days of any contract award. It is also true if the grounds for the protest arose prior to the formal bid opening or selection. Moreover, the fact that a disappointed bidder or offeror may not have subjectively understood that it had grounds for protest does not delay the running of the seven-day period, as in Bureau Veritas North America v. Department of Transportation, 127 A.3d 871 (Pa.Cmwlth. 2015). Indeed, if the protestant should have known of the facts giving rise to the protest more than seven days before filing the protest, the protest is barred. Finally, a protest is "filed" on the date it is received by the purchasing agency, not the date it was sent to the agency. Since government attorneys are conditioned to raise issues of timeliness whenever possible, these lesser-known corollaries to the seven-day rule are critically important.

• Failure to exhaust all administrative remedies.

It is well known that exhaustion of all available administrative remedies is often a condition precedent to filing a petition for review against a state agency in the Commonwealth Court of Pennsylvania. It is equally well known in a procurement context that the protest procedures set forth in Section 1711.1 of the Commonwealth Procurement Code are intended to be the exclusive procedure for ­protesting the solicitation or award of a contract by a commonwealth agency. But what if a purchasing agency official wrongfully determines that the bid protest remedy is ­unavailable? (See 62 Pa.C.S. Section 102 (relating to application of part)). Does that mean that the disappointed bidder or offeror can immediately run to Commonwealth Court and file a petition for review? Maybe not. Under the General Rules of Administrative Practice and Procedure: "Actions taken by a subordinate officer under authority delegated by the agency head may be appealed to the agency head by filing a petition within 10 days after service of notice of the action," as in 1 Pa.Code Section 35.20. Failure to exhaust this administrative remedy in cases where a purchasing agency official determines that the bid protest remedy is inapplicable can result in dismissal of the company's lawsuit before the Commonwealth Court has an opportunity to address the merits of the dispute.

• Failure to verify a stay of the contract award.

It is fairly well known that Section 1711.1(k) of the Commonwealth Procurement Code provides that the filing of a protest ­operates as a stay of the procurement during the pendency of the protest. But are there any exceptions to that rule? In fact, there are two. If the head of the purchasing agency makes a written determination that the ­protest is clearly without merit, the automatic stay triggered by the filing of the protest is ­dissolved and the agency can move forward with awarding the contract. Moreover, if the agency head determines in writing that that award of the contract without delay is "­necessary to protect the substantial interests of the commonwealth," the agency may move forward with the procurement. In such cases, it may be necessary to immediately challenge this determination in Commonwealth Court to reinstate the stay.

• Failure to consider federal or state laws and regulations outside of the Commonwealth Procurement Code.

As set forth above, it is well established that the Commonwealth Procurement Code generally governs the procurement of supplies, services, and construction by Commonwealth agencies. However, the code is by no means the only source of law governing the ­procurement process. The purchasing agency may have its own regulations governing the procurement of supplies or services that extend above and beyond the Commonwealth Procurement Code. Moreover, if the procurement is funded in whole or in part by monies received from the federal government for a specific program, federal regulations may impose further requirements on state procurements made with those federal funds that are above and beyond those imposed by the Commonwealth Procurement Code.

• Failure to consider the Commonwealth Procurement Handbook.

Finally, while it should come as no surprise that the commonwealth has established certain policies and procedures that supplement the Commonwealth Procurement Code, corporate counsel may not be aware how often the Pennsylvania courts rely upon the Pennsylvania Procurement Manual published by the Pennsylvania Department of General Services as the authoritative guide for ­conducting Commonwealth procurements. Failure to consult the handbook may result in missed opportunities, such as the right to request a debriefing conference with the ­purchasing agency to learn more about why the company's bid or proposal was rejected. This handbook is available online and often serves as a valuable source of practical information on how the company can plot out its strategy for evaluating and possibility challenging an adverse procurement decision by a commonwealth purchasing agency. 

Reprinted with permission from the “July 19, 2016” edition of the “The Legal Intelligencer”© 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 -reprints@alm.com or visit www.almreprints.com.