Pennsylvania Supreme Court Reverses Commonwealth Court Ruling Barring Use of RFP Process for Procurement of Construction Work

Pa. Associated Builders and Contractors, Inc. v. Dep’t of Gen. Servs
2007 Pa. LEXIS 2175 (Oct. 17, 2007)

On October 17, 2007 the Pennsylvania Supreme Court ruled that a lower court decision misinterpreted the state’s Procurement Code and that the Commonwealth Department of General Services (DGS) should be allowed to use a sealed proposal process to procure construction contracts.

In April, 2005, DGS initiated the use of the request for proposal (RFP) process to award construction contracts on larger projects (exceeding $5 million). In October 2005, Associated Builders and Contractors (ABC), a trade association of contractors and subcontractors, filed suit in the Commonwealth Court to enjoin DGS from using the RFP process for construction contracts, asserting that by statute construction work could only be awarded by competitive bidding requiring an award to the lowest competitive bidder. The Commonwealth Court held that the Procurement Code does not extend the RFP process to construction contracts, and, accordingly, enjoined DGS from utilizing the competitive sealed proposal bidding/RFP process on any future construction project under its policy determination. DGS appealed the Commonwealth Court’s decision.

The Sumpreme Court opinion began with an overview of the applicable sections of the Procurement Code and the Separations Act. Section 511 of the Procurement Code requires that all Commonwealth agency contracts be awarded by competitive sealed bidding, except as provided for in specified Code exceptions. Section 513 is one such exception and provides that when competitive sealed bidding is not practicable or advantageous to the Commonwealth, a “contract” may be entered into by competitive sealed proposals. Although Section 513 does not specifically refer to construction contracts, the Code defines the word “contract” to include those for construction. The court reasoned that there was nothing to indicate that the word “contract” as used in Section 513 means something other than its Code definition. Accordingly, the court held that Section 513 encompasses construction contracts.

Next, the court looked at Section 322(6) of the Procurement Code which requires compliance with the Separations Act in procuring “construction contracts,” except for those less than $25,000. The Separations Act requires competitive bidding and separate awards of public contracts to the lowest responsible bidder for certain branches of trade work. Accordingly, the court agreed that under Section 322(6), construction contracts equal to or in excess of $25,000 must be awarded to the lowest responsible bidder, as the Separation Act requires.

Finally, the court recognized that Section 513 and 322(6) conflict in the respective rules that they set for the procurement of construction contracts Specifically, as explained above, Section 322(6) requires construction contracts be awarded to the lowest responsible bidder while Section 513 allows DGS to select a person other than the lowest responsible bidder by using an RFP process to procure construction contracts.

The court found these provisions irreconcilable and relied on the principle that a special provision prevails over a general provision when two statutory provisions conflict. The court found that Section 322(6) is the general provision since it applies to all construction contracts and that Section 513 is the special provision since it applies to only certain construction contracts in specified exceptional circumstances As such, Section 513 prevails and is an exception to Section 322(6). Accordingly, the Court held that contracts for the procurement of construction may be entered into by DGS through the sealed proposal process.

The majority opinion was joined in by three justices, and one justice concurred in the result, while two justices dissented. The concurring justice noted in his separate opinion that the constitutionality of the RFP process would still require examination on remand.

Click here to view full opinion as PDF (provided with the permission of LexisNexis).

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