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Clairton Slag, Inc. v. Dep't of General Services

July 28, 2010

CLAIRTON SLAG, INC., PETITIONER
v.
DEPARTMENT OF GENERAL SERVICES, RESPONDENT



The opinion of the court was delivered by: Senior Judge Flaherty

Argued: March 15, 2010

BEFORE: HONORABLE RENEE COHN JUBELIRER, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE JIM FLAHERTY, Senior Judge.

OPINION

This matter comes before this Court on cross-petitions for review from a decision of the Pennsylvania Board of Claims (Board). Clairton Slag, Inc. (Clairton Slag) is the designated petitioner. The Department of General Services (DGS) is the designated respondent. The Board's decision characterizes Clairton Slag's claim regarding orders for materials placed by DGS with Lane Construction (Lane) and Golden Eagle Construction (Golden) as the "First Issue" and Clairton Slag's claim in connection with materials placed with other vendors as the "Second Issue." Clairton Slag appeals the portion of the Board's order that denied most of the damages sought by Clairton Slag relating to the "First Issue" and denied Clairton Slag's claim for damages regarding the "Second Issue" respectively. DGS appeals the Board's ruling on liability against DGS for breach of contract and an award of reasonable attorney's fees.

DGS enters into and administers a Statewide Asphalt Supply Contract on a yearly basis. The parties refer to this contract as the "SSC" and we shall do so as well throughout this opinion. The primary purpose of these contracts is to provide the Pennsylvania Department of Transportation (PennDOT) with an ongoing and convenient source of paving materials. Each year, DGS selects qualified vendors through its annual bid and award process for the SSC going into effect that year. DGS announces when bids will be accepted. Each willing vendor participates in the process by furnishing two prices for various types of paving materials to DGS: a price per ton for material to be picked up from the plant by PennDOT (F.O.B./source) and a price per ton with a mileage factor for material to be delivered to PennDOT's work sites (F.O.B./destination). These contracts are multiple award contracts and every qualified supplier that furnishes a responsive bid is awarded participation in the SSC. Each participating vendor is included in the Contractor List for the SSC in effect for that year and has the opportunity to receive orders in accordance with the SSC terms.

DGS awards contracts to vendors through a competitive sealed bidding process. In December of 2000, Clairton Slag, which had submitted a bid yearly for twenty years, did not submit a bid for the 2001 SSC. Following unsealing of the 2001 bids, Clairton Slag contacted DGS and objected to the bid awards as DGS had failed to notify it of the bid deadline. Clairton Slag also requested that it be included in the 2001 Contractor List. DGS determined that Clairton Slag had been inadvertently omitted from a notification list. DGS nonetheless denied Clairton Slag's request to be included on the 2001 Contractor List stating that Clairton Slag's failure to submit a timely bid made it ineligible to participate as a vendor under the 2001 SSC. Clairton Slag did not provide any bituminous material to PennDOT under the 2001 SSC.

Clairton Slag timely submitted a bid for the 2002 SSC. The bids for the 2002 SSC were opened and subsequently DGS notified Clairton Slag that it would be part of the vendor group for the 2002 SSC. The notification award contained a list of all suppliers for the 2002 SSC. When Clairton Slag received notification of its award, it realized that two of its competitors were not on the list, Lane and Golden. They did not submit bids for the 2002 SSC. Thereafter, Clairton Slag called Bonnie Stellfox, the DGS official responsible for administering the contract. Ms. Stellfox confirmed that Lane and Golden had not submitted bids and that consistent with past practice vendors that had not submitted bids would not be permitted to participate in the 2002 SSC.

Following the bid opening, however, five vendors in addition to Lane and Golden had also contacted DGS to complain that they had not been notified of the bid deadline and/or to file a bid protest.*fn1 Two vendors requested that DGS rebid the 2002 SSC. DGS declined to rebid the 2002 SSC and decided, instead, to renew the 2001 SSC awards with select vendors.

Clairton Slag filed a letter objecting to the inclusion of Lane on the 2002 Contractor's List. DGS notified Clairton Slag by letter that the inclusion of Lane on the 2002 Contractors List was not the result of a solicitation of a bid or the award of a new contract, but rather the renewal of Lane's 2001 contract. DGS further stated that it did not consider Clairton Slag's letter to raise a bid protest issue.

On April 11, 2002, Clairton Slag submitted another letter to DGS as a notice of contract claim generated by the inclusion of Lane and Golden in the asphalt vendor group for the 2002 SSC. DGS' Contracting Officer denied the claim in July of 2002. Clairton Slag thereafter filed a claim with the Board.

Clairton Slag's claim alleged a breach of contract due to PennDOT ordering asphalt materials from vendors not properly on the 2002 SSC asphalt vendor list.*fn2 Clairton Slag sought to recover lost profits plus interest arising from orders that were improperly diverted from it and placed with competitors that were not properly on the 2002 SSC asphalt vendor list; i.e., Lane and Golden (the aforementioned "First Issue"). In addition, Clairton Slag asserted, at hearing, a claim for lost profits and interest resulting from purchases of asphalt materials from vendors who had bid and, thus, were properly on the 2002 SSC, but which purchases were improperly diverted from Clairton Slag in contravention of the vendor selection terms of the 2002 SSC (the aforementioned "Second Issue"). In support of the Second Issue, Clairton Slag asserted that the Commonwealth failed to order from the lowest priced bidder and/or failed to record factors considered other than the bid price when purchasing asphalt product from vendors other than the lowest priced bidder.

The vendors which supplied materials to PennDOT during 2002-2003 in Clairton Slag's area of service were Clairton Slag, Golden, Lane, Better Materials, Lindy Paving, and Marsh Asphalt. All six of these vendors submitted prices to PennDOT to supply various types of bituminous material on an as-needed basis. In the case of Lane and Golden, the prices charged during 2002-2003 were established as part of the "renewal process" of Lane and Golden's 2001 SSC contracts.

Following trial, the Board ruled that DGS was required to have a separate competitive sealed bidding process to purchase materials outside the 2002 SSC. It determined that DGS could not utilize the renewal clause in the 2001 SSC to selectively renew the contract with only a few of the original qualified participating vendors. It noted that the renewal clause was ambiguous and that DGS' interpretation would render a subsequent part of the SSC mere surplusage. Specifically, the Board explained the SSC stated the contract would be awarded to each qualified vendor. In addition, the Board explained that DGS' decision to renew the 2001 SSC with only a portion of the qualified vendors ran contrary to the Procurement Code, 62 Pa. C.S. §§101-4604. It concluded Lane and Golden were not part of the 2002 SSC, that the 2001 SSC was not properly renewed, and no other competitive bidding process took place to purchase materials outside the 2002 SSC. The Board found any purchases made by the Commonwealth from these two entities during 2002 and 2003 were not made in compliance with the Procurement Code.*fn3 By diverting asphalt orders to vendors not properly on the 2002 SSC, the Board concluded the Commonwealth breached the contract causing financial damage to Clairton Slag.

To prove damages, the Board indicated Clairton Slag must establish what portion of lost business it should have properly received under the terms of the 2002 SSC. In terms of F.O.B./source purchases, asphalt material to be picked up at the source plant, the Board indicated that the SSC indicated the bid price was only one factor to be considered. It recognized that factors such as length of haul and dead haul were to be considered when determining the lowest possible cost to the Commonwealth. To establish it was entitled to any portion of the F.O.B./source purchases made with Lane and Golden in 2002 and 2003, the Board indicated that Clairton Slag must not only establish its bid price per ton was lower than its three other local competitors that were part of the 2002 SSC, but that the combination of its bid price and the distance to its plant also presented a lower cost to the Commonwealth than any of its competitors.

According to the Board, Clairton Slag failed to present sufficient evidence to establish what portion of the F.O.B./source purchases made with Lane and Golden should have been allocated to Clairton Slag as providing the lowest responsible cost. Therefore, it concluded that Clairton Slag failed to sufficiently establish any damages on this issue.

Conversely, the Board found Clairton Slag was able to establish damages in regard to F.O.B./destination orders whereupon asphalt is delivered to a location. It concluded Clairton Slag established it was entitled to lost profits for 2,451 tons of asphalt improperly ordered from Lane and Golden. The Board awarded Clairton Slag $16,600.87 in lost profits and $6,787.30 in interest for a total of $23,388.17. In so finding, the Board explained Robert Schaefer, a representative of Clairton Slag, reviewed MORIS reports, foreman's logs, and straight line diagrams. It added Mr. Schaefer drove the routes to various job sites from Clairton Slag's plant and from Lindy, Better Materials, and Marsh asphalt to measure mileage for asphalt delivery. Using this information, the Board explained Clairton Slag calculated each vendor's total cost to PennDOT for these materials and established its cost was the lowest on three purchase orders.

The Board also awarded attorney's fees to Clairton Slag with respect to claims made on the "First Issue." It further rendered an award of costs.

The Board determined that it was without jurisdiction to entertain Clairton Slag's claim for damages for purchases of asphalt materials from vendors who were properly included in the 2002 SSC when the asphalt materials allegedly should have been purchased from Clairton Slag; i.e., the "Second Issue." The Board acknowledged that testimony was admitted without objection on this issue that was not covered in the pleadings. Although there was a variance between the pleadings and the proof, the Board determined DGS waived any objection based on a variance between the pleadings and the proof. Nonetheless, it noted that a defense based on the failure to exhaust an administrative remedy can be raised at any time by a party or a court, sua sponte. The Board concluded that because Clairton Slag failed to present the Second Issue in its claim to DGS prior to commencing its action with the Board, it failed to exhaust all administrative remedies. Consequently, the Board explained it was without personal jurisdiction over the parties with respect to the Second Issue. These appeals followed.*fn4

CLAIRTON SLAG'S ARGUMENTS

A. Clairton Slag argues that the 2002 SSC required PennDOT to purchase materials from the vendor that charged the lowest cost per ton for asphalt material. It contends that the Board erred in failing to award the extent of claimed damages for F.O.B./source purchases made with Lane and Golden in 2002 and 2003.

Clairton Slag challenges the Board's finding that the 2002 SSC did not require PennDOT to purchase material from the vendor providing the lowest cost per ton. According to Clairton Slag, the 2002 SSC unambiguously indicated that the vendor with the lowest per ton price for F.O.B/source orders would be awarded the work. Inasmuch as the language was unambiguous, it contends the Board erroneously chose to rewrite the contract to indicate other factors were to be considered by PennDOT in determining where to purchase asphalt. In the alternative, Clairton Slag posits that if the 2002 SSC was ambiguous, it should be interpreted against the drafter. Clairton Slag suggests its interpretation of the contract is the only appropriate interpretation.

Three provisions in the 2002 SSC, Sheets F, H and I, discuss the award of purchase orders. Sheet F provides in relevant part:

AWARD: The F.O.B source cost per ton will be the price the department of transportation will pay for bituminous materials purchased "FOB source of supply/loaded on department trucks". A contract award will be to each qualified contractor source bid. after (sic) award, the county maintenance manager will issue a field purchase order, on an as needed basis, for loading material in a department truck. The department will normally haul material from the source that represents the lowest responsible cost to the department after taking into consideration length of haul and dead haul. However, in some instances, the department may select the most economic source based upon other considerations such as, but not limited to, differences in haul time due to terrain or urban congestion; length of wait at the source; cooling due to length of haul; crew productivity based on truck availability and haul distance, details of such transactions shall be the responsibility of the county maintenance manager, will be on file in the county, and are subject to review by any awarded contractor on this contract.

Reproduced Record (R.R.) at 557a. (Emphasis added).

Clairton Slag points to Sheet H of the Invitation to Bid which states:

IMPORTANT

Refer to bid conditions for "Delivery Time F.O.B. Destination/Department Paver" for explanation of contract requirements for minimum and maximum time per hour.

All references to Department Paving Equipment shall include Department Wideners.

F.O.B. Source Cost/Ton is used to determine the contractor that will be awarded the Purchase Order.

Payment and applicable discounts will be adjusted prices if a Price Adjustment (excalator/descalator) is in effect at the time of delivery.*fn5

R.R. at 535a. (Emphasis added).

Clairton Slag relies on the language in Sheet H to support its position that the bidder with the lowest cost per ton would be awarded each purchase order for F.O.B/source material. It contends that the ...


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