As many contractors know, Pennsylvania’s attempt to formulate and use innovative procurement methods has incurred a series of setbacks from the Commonwealth’s appellate courts. The latest setback came when the Pennsylvania Supreme Court found that PennDot’s Design-Build Best Value (DBBV) procurement method violated the Pennsylvania Procurement Code.
Unless there is a potential for harm to the travelling public, Pennsylvania agencies, such as PennDot, are prohibited from procuring construction contracts through DBBV. Traditional methods of procurement require that contracts be awarded to the lowest responsible and responsive bidder. DBBV, however, allowed agencies to pre-qualify a short-list of design-build teams, and then select a design-build team’s proposal utilizing a best-value assessment methodology, that includes subjective and objective factors, to determine which proposal supplies the best value for the cost of the bid.
In the case of Brayman Construction Corp., et al. v. Commonwealth of Pennsylvania Department of Transportation, the Supreme Court of Pennsylvania enjoined Pennsylvania agencies from using DBBV because the practice does not comply with the Procurement Code’s requirement that construction contracts be awarded through the processes of sealed competitive bidding or sealed competitive proposals.
What Is PennDot’s Design-Build Best Value Bid Procedure?
DBBV is outlined in PennDot’s “Publication 448, Innovative Bidding Toolkit” (Publication 448) Publication 448 describes various innovative bidding methods for selecting contractors for highway projects. It explains that innovative bidding seeks, among other things, to account for social costs, such as disturbance to the traveling public, in addition to taxpayer dollar costs.
According to Publication 448, DBBV provides the agency “with the most potential for multiple design solutions and innovation in the use of materials.” Its goal is to “reduce overall time from design start to completion of the project, which provides for a shorter project completion time at a lower cost.”
DBBV is a two step process. The first step is aimed at creating a “short list” of three to five design-build teams which will eventually submit proposals for the contract. Prospective design-build teams submit statements of interest detailing their qualifications, the resumes of key personnel, and organizational charts. The statements of interest do not include a monetary bid. From the statements of interest, PennDot picks a short list of three to five teams that it considers best suited for the project.
In the second step, each short-listed team submits a technical approach and a price, which becomes the basis for a negotiated stipend agreement. To accomplish this, PennDot enters into a separate stipend agreement with the teams on the short list to develop a proposed design for the project. Thereafter, the design partner for each team develops a proposed technical approach and submits it, along with a price bid, to PennDot. PennDot then selects a design-build team based on which proposal offers the best value, not on a lowest competitive price basis.
Why Did the Supreme Court Severely Limit DBBV?
The general rule for procurement under Pennsylvania’s Procurement Code is that “[u]nless otherwise authorized by law, all Commonwealth agency contracts shall be awarded by competitive sealed bidding under section 512[.]”. One notable exception allows a procuring agency to contract for design professional services through a two-step proposal process.
In the case of Brayman v. PennDot, Brayman challenged PennDot’s attempt to procure design-build services urgently needed for replacement of the Six Mile Creek Bridge in Erie county. PennDot had proposed to select a design-builder via the DBBV process. As part of DBBV’s first step, Brayman, and its design partner, submitted a statement of interest. However, PennDot did not select Brayman for its short-list, and therefore, Brayman was precluded from submitting a proposal for the project.
Brayman initiated a lawsuit in an effort to prevent PennDot from awarding the bridge contract through the DBBV process. Brayman claimed that DBBV violated the Commonwealth Procurement Code. PennDot argued that the Procurement Code did permit public procurement on a design/build basis, and did not prohibit best-value selection. Alternatively, PennDot argued that design/build services were professional services, which were exempted from the competitive bidding requirements of the Procurement Code. The Commonwealth Court rejected PennDot’s arguments, holding that design-build contracts, because they include construction and not merely professional engineering and architectural services, were subject to the Procurement Code’s requirement of competitive sealed bidding.
The Commonwealth Court’s order enjoined PennDot from awarding design/build contracts “using the best-value method or any other ‘innovative method’ that does not award the bid based on sealed competitive bids.” On appeal, the Pennsylvania Supreme Court agreed that the design-build contract was a construction contract and therefore its procurement must comply with the objective requirements of competitive sealed bidding.
However, both the Commonwealth and Supreme Courts refused to enjoin PennDot’s award of the contract for the Six-Mile Creek Bridge project because the new bridge was so urgently needed to prevent a potential catastrophe.
What Does the Curtailment of DBBV Mean for Contractors?
The bottom line is that Commonwealth procurement agencies must use the competitive sealed bid process of the Procurement Code for all construction-contracts, including design-build contracts, unless the contract or project falls within an express statutory exception to competitive bidding or where there is an imminent danger to the public. While the Commonwealth appears determined to utilize non-traditional methods of procurement which it believes allows for a more rapid and efficient project delivery, for now, bidding on public road projects will be business as usual until PennDot is able to develop innovative methods that comply with existing procurement laws.
This article is the first of a series on Pennsylvania bid procurement practices and protests. Please look for part two of this series coming in August.