On January 11, 2019, the Commonwealth Court of Pennsylvania held that absent extraordinary circumstances, requiring contractors to execute a project labor agreement (a "PLA") in connection with a bid for a public construction project violates the Pennsylvania Constitution and Commonwealth Procurement Code. See Allan Myers, L.P. v. Pennsylvania Department of Transportation, No. 314 C.D. 2018. Further, a bid that favors a particular general trade union constitutes discrimination against nonunion and other trade union contractors and violates the Commonwealth’s competitive bidding laws.
The Pennsylvania Constitution and Section 512(a) of the Commonwealth Procurement Code (the "Procurement Code") requires (except for in very limited situations) all agencies of the Commonwealth to award contracts by "competitive sealed bidding." The competitive bidding process must result in the "lowest responsible bidder" being awarded the contract. A "responsible bidder" is a bidder that submits a responsive bid and possesses the capability to fully perform all of the contract requirements in good faith. The "lowest" responsible bidder is the bidder whose business, financial and reputational capabilities best fit the project. The competitive bidding process seeks to protect against favoritism, improvidence, extravagance, fraud and corruption in the awarding of contacts that are for the benefit of the Commonwealth’s taxpayers and property holders.
The project at issue involved the Pennsylvania Department of Transportation’s ("PennDOT") improvements to Markley Street (Route 202) in Montgomery County, Pennsylvania (the "Project"). A nonunion contractor won and completed the first phase of the Project. In August 2017, PennDOT issued a bid solicitation for the second phase of the Project that included a provision requiring all contractors to sign a PLA with the Building and Construction Council of Philadelphia and Vicinity (the "Council"). The Council represents 11 local unions identified in the PLA (the "Local Unions"). The PLA required bidding contractors to hire craft labor personnel through the Local Unions and to be bound by the Local Union’s collective bargaining agreements. Multiple contractors, both union and nonunion, filed bid protests, and petitions for injunctive relief due to the PLA requirements in the bid.
PennDOT withdrew its August 2017 bid solicitation and issued a new solicitation in December 2017. The December solicitation again required contractors to sign a PLA with the Council, to hire through the Local Unions, and to be bound by the Local Union’s collective bargaining agreements. However, the December solicitation also added a new provision that exempted bidders who already had a collective bargaining agreement with the United Steelworkers trade union from complying with the hiring and workforce requirements under the PLA. In addition to the PLA requirements, the December bid also stated that "[t]ime is of the essence for the Project" and that "any qualified contractors may bid or perform work on [the] Project, regardless of whether or not they are affiliated with the [Council] or its Local Unions."
On December 27, 2017, Allan Myers filed a bit protest, and among other arguments, asserted that PennDOT’s bid was unlawful and arbitrary because the PLA requirements discriminated against nonunion contractors by effectively precluding them from bidding and unduly favoring contractors affiliated with United Steelworkers. PennDOT countered this claim by arguing that case law permits the use of a PLA in bids for public construction contracts and that the carve-out for United Steelworkers contractors was not intended to limit the pool of contractors; rather PennDot contended that the carve out was designed to avoid conflicting and overlapping requirements in cases where a successful bidder might have the impossible job of complying with two different union contract requirements (i.e. both the PLA and the United Steelworkers’ contract requirements). In a final determination dated February 26, 2018, the Pennsylvania Secretary of Transportation dismissed Allan Myers' bid protest.
Allan Myers appealed to the Commonwealth Court. The Court held that the PLA requirement in the bid solicitation for the project violated the Commonwealth’s competitive bidding requirements because it favored United Steelworkers contractors. Despite the bid’s language that all contractors were invited to bid, the Court agreed with Allen Myers that the exemption for United Steelworkers contractors "tilts the playing field" and creates a bidding process where United Steelworkers contractors do not bid "on an equal footing" with other contractors. This lack of a same opportunity for all contractors directly violated the integrity of Pennsylvania’s competitive bidding process and frustrated the purpose and protections of competitive bidding.
Moreover, the Court held that the use of a PLA is permitted only in cases where the contracting agency can establish "extraordinary circumstances" existed. The Court cited to its prior decisions in three cases where it held that the use of a PLA in a public contract did not violate the state’s competitive bidding requirements. The Court differentiated this case from its previous precedent citing it to be "factually distinguishable" from such cases. In one case, a convention center authority risked losing state funding and an anchor tenant if convention center renovations were not completed in a set timeframe. In another case, a school district needed renovations for two school buildings to be completed before the start of a new school year. A final case was distinguished by the need for the Commonwealth’s Department of General Services to complete prison renovations on an expedited basis due to prison overcrowding and safety concerns. A common theme to each case where a PLA was permitted was the existence of a critical deadline for the construction project, which the court deemed to create an extraordinary circumstance. The Project in this case involved long term road improvements. The Court noted that all road improvement projects inconvenience motor vehicle operators, but inconvenience is insufficient to give rise to "extraordinary circumstances." Further, the Court made clear that blanket statements in a bid like “time is of the essence” are also insufficient to establish a critical deadline leading to an extraordinary circumstances.
The Court’s decision lays the foundation for a number of important guidelines for contracting agencies moving forward. While PennDOT has the ability to appeal the Court’s decision, the legality of many public contracts could now be in question.
