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COMMONWEALTH PENNSYLVANIA v. HARAMBEE (10/27/75)

decided: October 27, 1975.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, APPELLANT,
v.
HARAMBEE, INC., APPELLEE



Appeal from the Order of the Board of Arbitration and Claims in case of Harambee, Inc. v. Commonwealth of Pennsylvania, Department of Public Welfare, Docket No. 372.

COUNSEL

Barnett Satinsky, Deputy Attorney General, with him Robert P. Kane, Attorney General, for appellant.

Richard N. Weiner, with him Hudson & Wilf, for appellee.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by President Judge Bowman.

Author: Bowman

[ 21 Pa. Commw. Page 431]

The Department of Public Welfare (DPW) appeals from an award of the Board of Arbitration of Claims (Board) in favor of Harambee, Inc. (Harambee), a Maryland corporation, relating to a contract between DPW and Harambee, the "legality" of which is disputed by DPW.

Mismanagement or disregard of the law on the part of responsible Commonwealth officials cast the destiny of this disputed contract from its very inception. These departures have thus produced the anomalous but not necessarily legally unsound position asserted by the Commonwealth that it should not be bound by the contract. A brief history surrounding the contract, its execution, Harambee's performance thereunder, and the pitfalls it encountered, follows.

On January 1, 1973, Harambee's president affixed his signature to a memorandum of contract and thereby committed his company to the development and operation of two child welfare service facilities to be located in the city of Harrisburg. Although performance of Harambee's contractual duties was to commence immediately upon execution (and, in fact, did so commence), no one signed the contract on behalf of DPW or the Commonwealth until March of 1973. During this interim period, the contract's

[ 21 Pa. Commw. Page 432]

    contents were being subjected to examination and analysis. At this time, an analyst within the governor's budget office reviewed the contract and concluded that a proposed source of partial funding for the project was not legally available for its anticipated use. Prior to March of 1973, this conclusion was communicated to at least one of the Commonwealth's signators, but final execution of the contract nonetheless occurred.

The contract contemplated a total cost to DPW of $1.348 million, payable monthly upon the submission of invoices of expenses incurred by Harambee. From January 1, 1973 through July 31, 1973, Harambee submitted seven such invoices totaling $208,625.00 and received full remuneration from DPW. However, invoices totaling $110,980.00, for expenses incurred during the months of August through December, 1973, drew no response from DPW. In September of 1973, the Commonwealth, through the Department of the Auditor General, began to publically entertain serious doubts as to the propriety of the contract, but no attempt was made by Commonwealth officials directly concerned to discourage Harambee from continuing its performance. On October 23, 1973, Harambee received a letter from the then chief counsel of DPW, advising the company that the Justice Department viewed the contract as "illegal," but that alternative arrangements might be possible. Harambee continued to perform until January 14, 1974, when a letter unequivocally terminating the contract was received from the Justice Department.

On March 22, 1974, Harambee filed a complaint with the Board, demanding payment of its expenses incurred during the months of August through December of 1973, as well as its anticipated profit upon full performance of the contract. DPW answered, and, by way of new matter and counterclaim, demanded Harambee's return of all moneys paid it ...


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