May 29, 2020

Standing to Protest P3 Award: The Clearwater Case and the Disappointed Offeror

A recent Pennsylvania case examined whether an unsuccessful offeror on a county project has standing to file a protest under Pennsylvania’s Public-Private Transportation Partnership Act (PA P3 Act) 74 Pa. Stat. and Cons. Stat. Ann. § 9109.

In Clearwater, the Northampton County General Purpose Authority (the Authority), on behalf of the Northampton County Department of Community and Economic Redevelopment (the County), issued an RFP under the PA P3 Act seeking replacement, rehabilitation and/or maintenance of 33 bridges in Northampton County. Clearwater Constr., Inc. v. Northampton County Gen. Purpose Auth., 166 A.3d 513, 514 (Pa. Commw. Ct. 2017)

Clearwater Construction, Inc. and Northampton County Bridge Partners, LLC (collectively, Clearwater) and Kriger Construction, Inc. (Kriger) were among four offerors who responded to the RFP and submitted proposals. Id. Kriger was ultimately selected to negotiate a public-private partnership agreement with the Authority to complete the bridge project. Id. at 515.

Upon discovering it was not selected, Clearwater commenced an action protesting the award of the contract to Kriger pursuant to Section 9109(n) of the PA P3 Act. Id. In response, the Authority argued Clearwater lacked standing to file its protest. Id. The trial court sided with the Authority and dismissed Clearwater’s claim due to lack of standing. Id. at 516.

The matter was appealed to the Commonwealth Court of Pennsylvania to determine whether Clearwater had standing to bring its protest. Id. at 515. The court began its analysis by noting, “[a]bsent a statutory provision, a disappointed offeror lacks standing because he has no property interest in a public contract and, therefore, has suffered no injury that would entitle him to redress in court.” Id. at 516. (Note: An aggrieved taxpayer of the municipality does have standing to protest the award.)

Clearwater argued it did have a statutory basis as a disappointed offeror under Section 9109(n) of the PA P3 Act, which provides:

If a development entity is aggrieved by a selection under this section and the proprietary public entity in the contract is an entity other than the Commonwealth, a development entity may file a claim with the court of common pleas where the proprietary public entity is located.

Id. (quoting 74 Pa. Stat. and Cons. Stat. Ann. § 9109(n) (emphasis added)). The Authority and Kriger argued “the plain language of the [PA] P3 Act limits challenges in municipal government projects to a ‘development entity,’ which is defined by the [PA] P3 Act as a party to a contract awarded under the [PA] P3 Act.” Id.

Clearwater implored the court to allow for a broader reading of the term “development entity” because “otherwise only the developer that is selected and enters into a contract would be able to challenge its own selection, which is an absurd result that the [Pennsylvania] General Assembly could not have intended.” Id. at 517.

The court analyzed the legislative history and intent of the statute before ultimately determining the Pennsylvania General Assembly intended the narrow statutory definition of “development entity” controls Section 9109(n). Id. at 519. The court noted Section 9109(m), the paragraph preceding the provision at issue, offers relief for prospective offerors and offerors aggrieved by a selection. Id. Section 9109(m) provides:

If a prospective offeror, offeror or development entity is aggrieved by a selection under this section and the public entity or proprietary public entity in the invitation or contract is a Commonwealth agency, the prospective offeror, offeror or development entity may file a protest or a claim, as appropriate, in accordance with 62 Pa.C.S. Ch. 17 (relating to legal and contractual remedies).

Id. at 519–20 (quoting 74 Pa. Stat. and Cons. Stat. Ann. § 9109(m) (emphasis added)). The PA P3 Act defines an “offeror” as “[a] person that submits a proposal or a response in answer to a request for proposals or transportation projects.” Id. at 520 (quoting 74 Pa. Stat. and Cons. Stat. Ann. § 9102). Pursuant to the Act, disappointed offerors have standing to protest an award only when a contract is awarded by the Commonwealth. Id. To that end, the court declared, “[i]f this case involved a Commonwealth project, Clearwater, as an offeror, would be entitled to file a protest challenging the invitation process. However, this case involves a local government unit and, consequently, Section 9109(m) does not apply.” Id.

Clearwater offers an important reminder apart from the obvious rule that disappointed offerors on Pennsylvania municipal projects lack standing to protest: P3s are grounded in new and custom enabling legislation that will alter and incorporate rules from traditional delivery systems and public financings, and the tension created by this must be reviewed carefully before and during procurement. Additionally, enabling legislation should be reviewed prior to responding to an RFP to determine whether a disappointed offeror will be granted standing, as standing for disappointed offerors varies from state to state and within state and local governments.

For more information on this topic, or for additional citations, see 1 Bruner & O'Connor Construction Law, § 2:177: Standing to protest.

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