In Ribarchak v. Monongahela, 44 A.3d 706 (Pa. Commw. Ct. 2012), the Commonwealth Court held that a subcontractor (Ribarchak) could not assert a breach of contract claim against a general contractor (or the owner) based on the fact that the general contractor used the subcontractor’s quote (and identified the subcontractor) in its bid to the owner. Furthermore, even though the contract between the owner and the general contractor required that the general contractor substitute any subcontractors within thirty days after contract award date, the owner decided to permit the general contractor to make a substitution five months after the award, and the Court held that Ribarchak was not a third-party beneficiary of the 30-day substitution provision and therefore could not pursue a claim against the general contractor and/or the owner. This case means that absent a general contractor’s express acceptance of a subcontractor’s bid, there is no contract between the subcontractor and the general contractor.
Pursuant to the Public Works Employment Verification Act (Senate Bill 637), as of January 1, 2013, all contractors and subcontractors on every public works project, including any state, county, municipal or school project, are required to verify employability through the federal government’s online E-Verify system, an Internet-based system that allows businesses to determine the eligibility of their employees to work in the United States. Under the new law, before being awarded a public works contract, a contractor will be required to provide the public body/owner with a verification form acknowledging its responsibilities in relation to verification of employment eligibility through the E-Verify Program. Subcontractors on the project must also provide a verification form prior to commencing work on the project.
In order to ensure compliance, the Secretary of the Department of General Services will conduct complaint-based and random audits of public works contractors and subcontractors. Penalties for violations of this Act range from public warning letters, to various periods of debarment depending on the number of violations, to civil penalties.
In Pepco Energy Services, Inc. v. Department of General Services, 49 A.3d 488 (Pa. Commw. Ct. 2012), the Commonwealth Court held that the Department of General Services (“DGS”) properly declared Pepco Energy Services, Inc.’s (“Pepco”) proposal to DGS non-responsive based on certain qualifying statements contained in its bid. DGS had issued a Request for Proposal for a Design-Build Contractor for a Combined Heating, Cooling, and Power Plant project to serve the State Correctional Facility in Montgomery County (SCI-Phoenix). In its proposal, Pepco conditioned its proposal on having the opportunity to negotiate certain terms of the agreement with DGS prior to being selected. After seeking clarification of these qualifications from Pepco, DGS rejected Pepco’s proposal as being non-responsive. Pepco pursued a bid protest and ultimately appealed to the Commonwealth Court based on the language in section 513(g) of the Procurement Code, which states that the “responsible offeror” that submits the proposal that is determined “to be the most advantageous” to the owner “shall be selected for contract negotiation.” 62 Pa. C.S. § 513(g).
The Commonwealth Court agreed with DGS and ruled that Pepco’s attempt to negotiate terms of contract prior to selection rendered its proposal non-responsive. This decision represents another step by the Commonwealth Court to fairly implement the request for proposal process contemplated by the Procurement Code.
On July 5, 2012, Governor Tom Corbett signed legislation that authorizes public-private partnerships (“P3”) for road, transit and other transportation related projects.
The Pennsylvania P3 Act, 74 Pa. C.S. §§ 9101-9124, applies to “transportation facilities,” which includes typical transportation structures such as bridges, roads and parking lots, but which also includes multimodal facilities, airports, terminals and ports, together with their associated structures. Under the Act, the rights for use or control of a P3 transportation facility are transferred from PennDOT to another public owner or to a private development entity.
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As the natural gas industry expands in the region, energy and midstream companies and their contractors need to be aware of the unique Pennsylvania construction law issues that may impact development.
Although Pennsylvania courts have not yet addressed whether natural gas construction activities constitute an “improvement” under the Pennsylvania Mechanics’ Lien law, contractors and subcontractors may have mechanics’ lien rights for services rendered. Thus, it is undecided whether the lien would attach to the fee simple interest of the owner of the real property at issue, or whether a lien claimant is limited to attaching its lien to the leasehold interest of either the lessee or easement holder.
Although also not yet addressed by a Pennsylvania appellate court, it seems clear that the Pennsylvania Contractor and Subcontractor Payment Act (CASPA) applies to contracts entered into for natural gas development. Under CASPA, owners of construction projects must pay contractors according to the terms of their contracts. If owners fail to do so, courts may award the contractor interest along with penalty fees and attorneys’ fees. Furthermore, under CASPA a venue and/or choice of law provision selecting a venue outside of Pennsylvania or seeking to apply non-Pennsylvania law is unenforceable.
In both Pennsylvania and West Virginia, a design professional impliedly warrants to a contractor that its plans and specifications have been prepared with ordinary care, skill and diligence. A design professional owes a duty of care to the contractor as a design professional and can forsee that a contractor preparing a bid on a project would rely on the design professional’s design documents. Bilt-Rite Contractors v. The Architectural Studio, 866 A. 2d 270 (Pa. 2005); Eastern Steel Contractors v. City of Salem, 549 S.E. 2d 266 (W. Va. 2001)
Although mere non-performance of a contract does not constitute a fraud, a breach of contract may give rise to an actionable tort where an independent fraud such as the submission of fraudulent invoices takes place. A fraudulent scheme of bogus invoices that are submitted on one project to pay off pre-existing debts from another project justifies a multi-million dollar award of punitive damages. J.J. Deluca v. Toll Naval Assoc., 2012 Pa. Super. 222 (Oct. 12, 2012)
Two agencies are primarily responsible for regulating the safety of natural gas pipelines in Pennsylvania: (1) the Pipeline and Hazardous Materials Safety Administration (PHMSA) and (2) the Pennsylvania Public Utility Commission (PUC).
PHMSA is the agency that administers the federal gas pipeline safety program. Its responsibilities include establishing comprehensive minimum federal safety standards for natural gas pipelines, performing inspection, compliance, and enforcement activities, and overseeing the nation’s 51 state gas pipeline safety programs. In Pennsylvania, PHMSA’s specific responsibilities include inspecting interstate gas pipelines for compliance with the federal safety standards and taking appropriate enforcement actions against operators who violate these standards.
PUC is the agency that administers the Commonwealth’s state gas pipeline safety program. Under the terms of its annual certification with PHMSA, PUC has assumed responsibility for regulating intrastate gas gathering, transmission and distribution lines. These lines are subject to the minimum federal safety standards, as well as any additional or more stringent state safety standards, and PUC has the authority to impose administrative sanctions on intrastate gas pipeline operators who commit safety violations.