Litigation

By: Daniel P. Dwyer

There is a joke often repeated in government contracting circles.  While considering some aspect of the work, someone will almost always say, “Remember – all of this work was done by the low bidder.”  This punchline is not exactly accurate: the general rule is that government contracting work is awarded to the lowest responsible bidder.  The purpose of this post is to address what this distinction means and why it is important to both government entities requesting bids and the contractors who submit them.

Decisions about which bidder is the low bidder are objective:  the bottom line prices of the bidders are compared and the lowest wins.  The government entity requesting bids has little discretion in making this determination.  However, a decision about whether the lowest bidder is also a responsible is not so objective.

The lowest responsible bidder is the bidder whose bid is lowest in dollars among the bids of those who are able to perform the contract promptly, faithfully, skillfully and according to plans.  The entity requesting the bids can base this decision on information elicited through pre-qualification, questionnaires included in the bid package, first-hand knowledge that it has of this bidder’s performance or, in some instances, post-bid investigation.  This aspect of the bid decision is subjective and requires the exercise of discretion by the awarding entity.

The question is, “How is this discretion to be exercised?”  On one hand, the government must maintain a “level playing field” for all bidders that does not allow any aspect of favoritism or personal preference.  On the other hand, the government must also get the best value and product for the taxpayer – not just the least expensive.  Although the law is not clear, some requirements can be extrapolated: 1) the government cannot waive any material defects; 2) when it awards a contract to a responsible bidder who is not the lowest, the government must be able to enunciate a clear reason for having done so, and; 3) where this determination is not the product of first-hand knowledge, investigation must be undertaken that gives rise to a substantial reason for not awarding the contract to the lowest bidder.

In conclusion, bidders and government officials alike should always be aware that they are not bound to the lowest number.  The government can, and is obligated to, assure that the bidder can perform.  These officials and bidders must also be aware, however, that this inquiry should be undertaken with care so as not to abuse their discretion.

If you would like more information about this topic or have any questions, please contact Dan Dwyer at ddwyer@utbf.com.

Daniel P. Dwyer

Dan Dwyer is an associate at Unruh, Turner, Burke and Frees, Dan practices in the areas of Pennsylvania Commercial Litigation, and Pennsylvania Governmental Law. The firm maintains law offices in Malvern, Phoenixville, and West Chester Pennsylvania which serve the Main Line, and many surrounding communities such as Devon, Exton, West Chester, Ardmore and others.

By: Daniel P. Dwyer

Contractors, subcontractors and material providers have various legal remedies for protecting themselves against general contractors and/or property owners who fail to pay for construction services and materials. One of these remedies is the Pennsylvania Mechanics Lien Law. This law permits contractors, subcontractors and material men, under some circumstances, to place a lien on the real property for which they provided work or materials for which they were not paid. Although the statute is essentially in the same form as it was when originally enacted in the early 1900s, and so can be difficult to navigate, significant changes were made in 2007 and, more recently, in October 2009. To view a more in depth discussion about the recent amendments, please click here.

Please contact Daniel Dwyer for more information.

In a recent post, we discussed the impact of Kvaerner Metals v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006), upon general contractors and others vis-à-vis the coverage afforded by commercial general liability policies for claims involving damage caused by faulty workmanship. In light of that decision, insurance coverage for such claims no longer exists. However, in response to the obvious gap in coverage that presently exists under standard CGL policies, insurers are beginning to offer endorsements that may bridge that gap and restore the protection that previously existed before Kvaerner and its progeny. Caution should be exercised, however, when evaluating whether or not to purchase an endorsement as certain endorsements may only offer limited protection and may be very costly. For more information on this topic, please contact our office.

By: Christopher L. Turner

It cannot be denied that the struggling economy has adversely affected the real estate market. As a result, some sellers of residential real property who are desperate to sell their property are failing to disclose known defects with their home. These defects cover a broad range and include, but are not limited to defects with the Seller’s roof, basement, water/sewage systems, plumbing, electric, heating and air conditioning as well as damage to the structural integrity of the home caused by termite infestation. Buyers damaged by such defects are naturally wondering “what can I do?”

If you have recently purchased residential real property and have been affected by defects to such property, you should be aware of the Pennsylvania Real Estate and Seller Disclosure Act (the “Act”) and its underlying rationale. Under the Act, a Seller who intends to transfer an interest in real property is required to disclose to the Buyer any material defects with the property which are known to the Seller by completing all applicable items in a property disclosure statement. The Act requires that such seller property disclosure statement be provided in all residential real estate transfers except for certain fiduciary transfers and transfers of new residential construction that have not been previously occupied and have been inspected for building code compliance and received a certificate of occupancy or code compliance.

A Seller of residential real property will be liable in the amount of actual damages suffered by the Buyer if such Seller willfully or negligently violates or fails to perform any duty prescribed by the Act. However, a Buyer’s action for damages against a Seller for violations of the Act must be commenced within a certain time period that begins to run from the date of final settlement on the affected property.

In addition to a cause of action under the Act, liability may also be imposed under alternative legal theories. There may also be causes of action against the Seller’s Agent and/or the Buyer’s Agent. Such options should be discussed with an attorney.

For more information, please contact Chris Turner in our litigation department.

By: Donald C. Turner

If you are involved in the design, planning, supervision or construction of improvements to real estate in Pennsylvania, you should know that there are state laws that limit the time period to make claims based on defective design or construction and for injuries that arise out of design or construction defects. For more information on this 12-year statute of repose that provides significant protection to Pennsylvania construction and design businesses, read the full article that is posted on our website, or contact our office.

Update on coverage for claims involving faulty workmanship under commercial general liability policies

On December 30, 2008, the Pennsylvania Supreme Court denied the Petition for Allowance of Appeal from the Order of the Pennsylvania Superior Court in the case of Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 941 A.2d 706 (Pa. Super. 2007). In Miller, the Pennsylvania Superior Court found no coverage under the insured builder’s commercial general liability (CGL) policy for claims made against it by homeowners who alleged that their homes were built with defective stucco exteriors, windows and other artificial seals, resulting in water damage to the interior of the homes.

The Pennsylvania Superior Court applied the Pennsylvania Supreme Court’s holding in Kvaerner Metals v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006), in which the Court held that a contractor’s alleged faulty workmanship in building a coke oven battery for a steel company was not an “accident” and, therefore, was not an “occurrence” within the meaning of the contractor’s CGL insurance policy. In doing so, the Court explained that faulty workmanship claims lacked the degree of fortuity contemplated by the ordinary definition of accident.

In light of the Court’s decision in Miller, there is no longer any uncertainty with respect to the exclusion of coverage for faulty workmanship claims under CGL policies. Builders and others who previously thought their CGL policies protected them against such claims should be careful in hiring and supervising the work of subcontractors as they may no longer look to their insurance carriers for protection. There is a “subcontractor exception” which may preserve coverage that would otherwise not exist.

More on the subcontractor exception next month…

Welcome to the Litigation Section’s blog. Our firm is located in West Chester, Chester County, Pennsylvania, and Phoenixville, Chester County, Pennsylvania. This blog is intended to provide a litigator’s perspective on a wide range of specific legal issues, along with commentary on emerging legal trends. The content is intended to be useful to individuals and small businesses wanting to learn more about exposure to liability, avoiding liability, the process of civil litigation, and alternative dispute resolution options.

Disputes arise in a variety of settings. Our team of litigators is experienced in contract and business disputes, employment, real estate, banking and creditor’s rights, construction, mortgage foreclosures, commercial leasing, and estate and orphan’s court matters.

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Brian D. Boreman

James C. Dalton

Daniel P. Dwyer

Nancy J. Glidden

John K. Fiorillo

Daniel M. Hanifin

Stephen P. Lagoy

Shannon M. Reilly

Christopher L. Turner

Donald C. Turner