Leonard S. Fiore, Inc. v. DGS ( 2022 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Leonard S. Fiore, Inc., :
Petitioner :
v. : No. 489 C.D. 2022
: Submitted: September 23, 2022
Department of General Services, :
Respondent :
BEFORE: HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE WALLACE FILED: December 19, 2022
Leonard S. Fiore, Inc., (Fiore) filed a petition for review (Petition) of the May
5, 2022 Final Determination of the Deputy Secretary of Public Works (Secretary)1
denying Fiore’s bid protest, which Fiore filed pursuant to the Commonwealth
Procurement Code (Procurement Code), 62 Pa. C.S. §§ 101-2311.2 After review,
we affirm the Secretary’s Final Determination.
1
Robert A. Carr, the Deputy Secretary of Public Works for the Department of General Services
issued the final determination in this matter. According to Section 1711.1(f) of the Commonwealth
Procurement Code (Procurement Code), 62 Pa. C.S. §§ 101 - 2311, the head of the purchasing
agency or his designee shall issue a written determination within 60 days of a bid protest and this
determination constitutes the final order of the purchasing agency. 62 Pa. C.S. § 1711.1(f).
Accordingly, we refer to the final determination in this case as that of the Secretary.
2
Where a bidder or prospective bidder is “aggrieved in connection with the solicitation or award
of a contract, [the bidder] . . . may protest to the head of the purchasing agency in writing.” 62 Pa.
C.S. § 1711.1(a).
BACKGROUND
In October 2021, the Department of General Services (DGS) issued a Request
for Proposal (RFP) to obtain bids for the construction of an Information Commons
Building, Project No. DGS 405-58.1 Phase 1, at East Stroudsburg University
(Project). Certified Record (C.R.) at 355. The RFP contained a Small Diverse
Business (SDB) participation goal of 8% and a Veteran Business Enterprise (VBE)
participation goal of 3%. Id. The RFP included SDB and VBE submittal packets
that bidders had to complete and submit with their proposals. Id. The submittal
packets included instructions and a request for Good Faith Efforts Waivers for the
SDB and VBE goals. Id.
The RFP’s instructions required the SDB and VBE submittals to include either
the “[SDB or VBE] Utilization Schedule, the Good Faith Efforts Documentation to
Support Waiver Request, or both.” C.R. at 17. The instructions also indicated that
bidders had to meet the SDB and VBE participation goals in full or demonstrate they
made Good Faith Efforts by completing the Good Faith Efforts Waiver. C.R. at 31.
The RFP defined “Good Faith Efforts” to meet the VBE participation goal as
follows:
The “Good Faith Efforts” requirement means that when requesting a
waiver, the [bidder] must demonstrate that it took all necessary and
reasonable steps to achieve the VBE participation goal. Those steps are
considered necessary and reasonable when their scope, intensity, and
relevance could reasonably be expected to obtain sufficient VBE
participation, even if those steps were not fully successful. The Issuing
Agency and Department of General Services’ Bureau of Diversity,
Inclusion and Small Business Opportunities [(the Bureau)] will
determine whether or not the [bidder] requesting a Good Faith Efforts
[W]aiver made adequate Good Faith Efforts by considering the quality,
quantity, and intensity of the [bidder’s] efforts. Mere pro forma efforts
are not Good Faith Efforts to meet the VBE participation requirements.
The determination concerning the sufficiency of the [bidder’s] Good
2
Faith Efforts is subjective; meeting quantitative formulas is [sic] not
required.
C.R. at 109.
Among its instructions, Section VI of the RFP identified the following four
“fatal errors:”
The following errors will result in rejection of a bid or proposal as
nonresponsive:
a. Failure to submit a completed SDB Participation Submittal
(SDB-2);
b. Failure to submit an SDB Utilization Schedule (SDB-3),
unless the bidder or offer[or] is seeking a complete Good Faith
Efforts [W]aiver;
c. Failure to make commitments to and list DGS-verified SDBs
that will be used to meet the SDB participation goal, unless the
bidder or offeror’s commitments to other DGS-verified SDBs
meet or exceed the SDB Participation goal;
....
d. Failure to submit a Good Faith Efforts [W]aiver request when
not fully meeting the SDB participation goal.
C.R. at 84-85.
On December 10, 2021, DGS received the proposals for the RFP. Id. at 356.
Both Fiore and Skepton Construction, Inc., (Skepton)3 submitted bids for the Project.
Id.
In Skepton’s bid submission packet, Skepton indicated that it would meet the
SDB participation goal and identified the five DGS-certified SDB firms that it
committed to utilize toward meeting the SDB participation goal. Id. In fact, Skepton
indicated the commitment to those firms totaled 8.5% of the contract value, which
exceeded the 8% SDB goal. Id. However, Skepton also included its letters of
commitment with the five identified firms and listed the dollar value of the
commitment to each firm. Id. The total dollar value of its commitment to the SDB
3
Skepton has intervened in this matter.
3
firms totaled $3,961,778, while its cost was $50,085,000, translating to a 7.91% SDB
participation goal. Id. DGS admits to the mathematical discrepancy. C.R. at 361.
Regarding the VBE requirements, Skepton requested a full waiver of the VBE
participation goal of 3%. Id. With its request, Skepton included information
indicating that it reached out to seven VBE firms via electronic mail (e-mail) on two
occasions to attempt to solicit them. C.R. at 356-57. Skepton indicated that all
trades were advertised to all VBE subcontractors using a variety of bidding
applications, but that it received no VBE quotes in response to its outreach efforts.
Skepton reported that each of the listed VBE firms were unavailable, unable to
prepare a proposal, or did not respond to its efforts. Id.
The Bureau reviewed the SDB and VBE participation packets. Id. at 357. The
Bureau determined that Skepton’s SDB packet satisfied the mandatory requirements
and deemed its submission to be responsive. Id. Additionally, the Bureau
determined Skepton demonstrated sufficient Good Faith Effort to meet the VBE
participation goal. Id. After deeming Skepton’s proposal to be most advantageous
to the Commonwealth, DGS awarded the contract to Skepton. Id.
In response, Fiore filed its bid protest, in which it alleged Skepton did not
submit a responsive bid. Id. Specifically, Fiore asserted Skepton’s bid failed to meet
the RFP’s SDB requirements because the dollar value of the SDB commitments only
added up to 7.91% and, therefore, Skepton failed to meet the 8% goal. Id.
Additionally, Fiore alleged Skepton failed to demonstrate sufficient Good Faith
Effort to support its request for waiver of the VBE goal. Id.
On May 5, 2022, the Secretary issued a Final Determination concluding
Skepton’s proposal was responsive to the RFP and denying Fiore’s bid protest. Id.
at 364. The Secretary reasoned Skepton’s mathematical error was not one of the
4
errors listed in the RFP’s instructions that would have caused DGS to deem the
submittal nonresponsive. Id. The Secretary found DGS’s waiver of the calculation
error and reliance on the percentage commitment was not an abuse of discretion
where the contract documents express, monitor, and enforce the SDB participation
goals as percentages rather than dollar amounts. Id. The Secretary concluded there
was no unfair advantage to Skepton since Skepton complied with the mandatory
SDB requirements by making an 8.5% commitment, despite its calculation error and,
therefore, DGS properly deemed its proposal responsive. Id. The Secretary outlined
that:
The terms of the RFP further allow DGS to waive any informality or
technical deficiencies. Pennsylvania law also allows governmental
bodies to waive technical defects where such a waiver would not afford
an unfair advantage to the offeror. A mathematical error between the
percentages and corresponding dollar values is [a] technical defect that
may be waived by DGS.
Id. at 361. Additionally, the Secretary determined the information Skepton
submitted with its VBE Good Faith Effort Waiver request was adequate to
demonstrate Good Faith Effort to meet the VBE goal, and it was within DGS’s
discretion to grant the waiver. Id. at 364.
ARGUMENTS ON APPEAL
On appeal, Fiore argues the decision by DGS to award the contract to Skepton
was an arbitrary and capricious exercise of its discretion and contrary to the law,
because Skepton’s bid did not comply with the material and mandatory provisions
of the RFP, DGS’s waiver of the bid defects directly contradicts the language in the
RFP, DGS’s waiver ensures that the contract will not be performed in accordance
with the requirements of the RFP, and Skepton’s failure to comply with the RFP
5
gave Skepton a competitive advantage over Fiore and other bidders. Fiore’s Br. at
12.
In response, DGS argues the mathematical errors in the SDB submittal did not
require DGS to reject Skepton’s bid because it did not fall under one of the “fatal
errors” identified in the RFP. DGS’s Br. at 5. DGS asserts that its decision to grant
Skepton a Good Faith Effort Waiver for the VBE participation goal was not an
arbitrary and capricious exercise of agency discretion because Skepton satisfied the
basic requirements for the waiver under the terms of the RFP. Id.
DISCUSSION
In deciding appeals from final determinations on bid protests, this Court will
affirm the determination of the purchasing agency so long as it is clear from the
record certified by the purchasing agency “that the determination is [not] arbitrary
and capricious, an abuse of discretion or [ ] contrary to law.” Section 1711.1 of the
Procurement Code, 62 Pa. C.S. §1711.1.
Under the Procurement Code, a “responsible offeror” is an offeror “that has
submitted a responsive proposal and that possesses the capability to fully perform
the contract requirements in all respects and the integrity and reliability to assure
good faith performance.” 62 Pa. C.S. § 103 (emphasis added). A “responsive
proposal” is defined in the Procurement Code as a proposal “which conforms in all
material respects to the requirements and criteria in the [RFP].” Id.
For a bid proposal to be valid, it must comply with any mandatory
qualifications set forth in the RFP. Glasgow, Inc. v. Pa. Dep’t of Transp., 851 A.2d
1014, 1017 (Pa. Cmwlth. 2004). A violation of mandatory bidding instructions
constitutes a legally disqualifying error for which a purchasing agency may reject a
bid. Id. Thus, in Pennsylvania, it has traditionally been held that where a term or
6
condition in an RFP is “mandatory,” a bidder must strictly adhere to the requirement
to be awarded the contract. See Dragani v. Borough of Ambler, 37 A.3d 27, 31 (Pa.
Cmwlth. 2012). Notwithstanding, our Supreme Court explained that,
courts have not eliminated the discretionary aspect of executive
decision making when the government is confronted with a non-
compliant bid that it might choose to consider to achieve effective
utilization of the public fisc. In describing the available latitude,
conceptions of materiality and competitive advantage have been
utilized, both of which [ ] are closely tied to the legislative objectives
underlying competitive bidding statutes. Accordingly, the following
two considerations are widely accepted as central in determining
whether a non-compliant bid for public work may be accepted or cured:
first, whether the effect of a waiver would be to deprive the
municipality of its assurance that the contract will be entered into,
performed and guaranteed according to its specified requirements, and
second, whether it is of such a nature that its waiver would adversely
affect competitive bidding by placing a bidder in a position of
advantage over other bidders or by otherwise undermining the
necessary standard of competition.
Gaeta v. Ridley Sch. Dist., 788 A.2d 363, 367-68 (Pa. 2002) (internal citations
omitted).
Thus, a purchasing agency has discretion to waive non-material bid defects
where the bidder’s noncompliance “(1) does not deprive the agency of the assurance
that the contract will be entered into and performed and (2) does not confer a
competitive advantage on the bidder.” Glasgow, Inc., 851 A.2d at 1017 (citation
omitted). However, the purchasing agency may only waive a bid defect where the
defect does not involve a mandatory requirement that the bid instructions treat as
non-waivable. Id. Where the RFP’s instructions indicate a bid will be rejected if
certain qualifications are not met, the agency does not have discretion to waive those
qualifications. Id.7
It is well settled that purchasing agencies have discretion to decide which
criteria are mandatory and which criteria are waivable in an RFP. KPMG LLP v.
Dep’t of Hum. Servs., 276 A.3d 308, 314-15 (Pa. Cmwlth. 2022). This Court
addressed an issue similar to the one we address here in Language Line Services,
Inc. v. Department of General Services, 991 A.2d 383 (Pa. Cmwlth. 2010). In
Language Line Services, we outlined the following:
[The rejected bidder] argues that [the purchasing agency] erred in
awarding the contract to [the successful bidder] when its proposal failed
to meet several nonwaivable requirements set forth in the RFP.
Specifically, [the rejected bidder] alleges that [the] proposed program
manager did not have the required minimum experience, [the successful
bidder] failed to identify its customer service personnel or demonstrate
that they had the required experience, and it failed to provide
information directly requested by the RFP. However, there were only
two mandatory responsiveness requirements in the RFP at issue—
timeliness of receipt and proper signature execution. [The successful
bidder] met both of these requirements. Our Supreme Court has noted
that imperatives in bid documents are not necessarily dispositive of
materiality. Therefore, even if the RFP in this case indicated that a
proposed program manager “must” have a certain level of experience,
such language would not necessarily make this requirement material or
nonwaivable. None of the issues [the rejected bidder] raises amount to
mandatory requirements and none were indicated as such in the RFP.
Id. at 390 (emphasis added; internal citations omitted). We applied this reasoning
to the facts of Language Line Services and held that because the RFP specifically
indicated the timely receipt and proper signature execution were the only two
mandatory requirements and the successful bidder met those two requirements, the
successful bidder submitted a responsive bid. Id. Thus, in accordance with the plain
language of the RFP, we held the successful bidder’s failure to include other
information required in the RFP was waivable by the agency. Id. Further, this Court
outlined in Rainey v. Borough of Derry, 641 A.2d 698, 702 (Pa. Cmwlth. 1994), that
8
a deficiency in a bid can be waived or cured unless the waiver would deprive the
purchasing agency of its assurance that the contract will be performed or the waiver
would adversely affect the competitive bidding by placing a bidder in a competitive
advantage.
Here, we review the plain language of the RFP to determine whether the
Secretary erred in his determination that Skepton satisfied the mandatory
requirements of the RFP for the SDB and VBE submissions. First, we consider
whether Skepton’s mathematical error related to its SDB participation goal rendered
its bid proposal nonresponsive. The RFP specifies the SDB participation goal as
8%. C.R. at 172. Throughout the RFP, the SDB and VBE participation goals are
expressed as percentages, rather than dollar amounts. Id. at 359. By committing to
8.5%, Skepton committed to an SDB goal of more than the minimum 8% required
by the RFP. While Skepton’s error in the mathematical calculation of the proposed
numbers yields a result that is below 8%, it was the percentage commitment required
by the RFP, not a specific dollar amount awarded.
Further, as outlined above, Section VI of the RFP specifically identifies the
four “fatal errors” which will result in rejection of a bid or proposal as
nonresponsive. First, Skepton submitted a completed SDB Participation submittal,
albeit with a mathematical error in its calculation. Second, Skepton submitted an
SDB utilization schedule. Third, Skepton made commitments to and listed DGS-
verified SDBs that will be used to meet the SDB participation goal. Fourth, Skepton
was not required to submit a Good Faith Efforts Waiver request because it committed
to fully meeting the SDB participation goal. Because Skepton complied with the
RFP’s percentage commitment requirement and did not commit any of the four “fatal
errors” identified in the RFP, the mathematical calculation error is not a material or
9
nonwaivable defect. Thus, any error in the calculations and proposed dollar amounts
is a deficiency that can be waived or cured by DGS at its discretion.
Additionally, we conclude DGS’s waiver of the mathematical defect in
Skepton’s submission did not deprive the Commonwealth of any assurance that the
contract will be performed according to its specific requirements as Skepton
committed to the 8.5% SDB participation goal and the contract documents reflect
the percentage commitment rather than any dollar amounts. There is no indication
that Skepton will not perform the contract to its specified requirements. Further,
DGS’s waiver of the mathematical error in Skepton’s bid proposal did not bestow a
competitive advantage to Skepton over Fiore or other bidders because, again, it
committed to the 8.5% SDB participation goal.
Finally, DGS had discretion in its consideration of Skepton’s Good Faith
Efforts Waiver as the RFP’s instructions specify that the Bureau “will determine
whether or not the [bidder] requesting a Good Faith Efforts Waiver made adequate
Good Faith Efforts by considering the quality, quantity, and intensity of the
[bidder’s] efforts.” C.R. at 109. Along with its Good Faith Efforts Waiver request,
Skepton identified VBE firms that it reached out to via e-mail and indicated that it
received no VBE quotes in response to its outreach efforts. Skepton reported that
each of the listed VBE firms were either unavailable, unable to prepare a proposal,
or unresponsive. Because the RFP indicates that the sufficiency of the Good Faith
Efforts to meet the VBE participation requirements is “subjective” and that “meeting
qualitative formulas is not required[,]” it was at DGS’s discretion to determine
whether Skepton’s Good Faith Efforts were sufficient. Fiore has not shown that
DGS abused that discretion.
10
Based on the plain language of the RFP requirements and Skepton’s proposal
submission, we conclude that Skepton submitted a responsive bid. As such, the
Secretary properly determined that DGS did not engage in arbitrary or capricious
conduct, or otherwise commit legal error, in awarding the contract to Skepton.
Accordingly, we affirm the Secretary’s Final Determination.
______________________________
STACY WALLACE, Judge
11
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Leonard S. Fiore, Inc., :
Petitioner :
v. : No. 489 C.D. 2022
:
Department of General Services, :
Respondent :
ORDER
AND NOW, this 19th day of December, 2022, the Deputy Secretary’s
May 5, 2022 Final Determination of the Pennsylvania Department of General
Services denying Leonard S. Fiore, Inc.’s bid protest is AFFIRMED.
______________________________
STACY WALLACE, Judge