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Pepco Energy Services, Inc v. Department of General Services

June 29, 2012


The opinion of the court was delivered by: P. Kevin Brobson, Judge

Argued: June 4, 2012



Pepco Energy Services, Inc. (Petitioner) petitions for review of a final determination of the Department of General Services (Department), dated November 1, 2011, denying Petitioner‟s bid protest under the Commonwealth Procurement Code (Code), 62 Pa. C.S. §§ 101-2303, on the basis that the bid protest is without merit. We now affirm the Department‟s decision denying the bid protest.

The bid protest at issue relates to a Request for Proposal for a Design Build Contractor (RFP) for a Combined Heating, Cooling, and Power Plant (CHCP) project to serve the proposed State Correctional Facility (SCI-Phoenix), to be located in Montgomery County, Pennsylvania, on the existing property of SCI-Graterford.*fn1 (Reproduced Record (R.R.) at 15a-16a.) The Department issued the RFP pursuant to Section 513 of the Code, 62 Pa. C.S. § 513, relating to competitive sealed proposals.*fn2

The RFP provides that, pursuant to Section 322 of the Code, 62 Pa. C.S. § 322, the Department seeks "an energy services company to design, finance, construct, own, operate, and maintain a state-of-the-art" CHCP "to provide electricity, steam, hot water and chilled water" to the new SCI-Phoenix. (R.R. at 16a.) According to the RFP, "[i]t is anticipated that the solicitation process will culminate in the selection of a firm that will design, build, own and operate a CHCP facility developed in accordance with the specifications set forth in the . . . Design Criteria Document." (Id.) The CHCP is to supply its entire output to SCI-Phoenix pursuant to the terms of a Design Build Contract, Ground Lease Agreement, and Energy Services Agreement, drafts of which are attached to the RFP. (Id. at 16a-17a.) The RFP provides that "[t]he language of the Design Build Contract is not negotiable." (R.R. at 30a.)

Petitioner submitted a proposal (Proposal) in response to the RFP, in which Petitioner stated:

Note that we have based our proposal on the understanding that, prior to selection, the successful proposer will be afforded the opportunity to negotiate terms of the Energy Services Agreement (ESA) and Ground Lease together with the Surety Agreement (Parent Guaranty). Terms for negotiations include, without limitation, the collateralization-requirements of the Surety Agreement, provisions authorizing judgment by confession, consequential-damages exclusions, and automatic-default (i.e., no-cure) provisions in the ESA and Ground Lease. (R.R. at 157a.)

By letter dated October 18, 2011, the Department requested that Petitioner clarify its statement that the Proposal is based on an understanding of an opportunity to negotiate. The Department advised Petitioner that "the Energy Services Agreement, the Ground Lease, the Design-Build Construction Contract, and the Surety Agreement documents are not negotiable." (R.R. at 162a.) The Department further explained to Petitioner that requests for information "were answered in Bulletins stating that these documents were non-negotiable." (Id.) Notwithstanding the Department‟s position, Petitioner responded that it was requesting discussions "over terms and conditions to assure that the overall project procurement can be financed and constructed as intended by the RFP." (R.R. at 163a.) On October 19, 2011, the Department advised Petitioner that it had included in its Proposal "conditional language," thereby constituting an "alternative proposal," and that Petitioner‟s Proposal was being rejected as "non-responsive." (R.R. at 4a.)

Petitioner then filed a bid protest pursuant to Section 1711.1 of the Code, 62 Pa. C.S. § 1711.1, asserting that contract negotiations are contemplated as part of the request for proposal process, and, therefore, the Department erred in determining that its Proposal was non-responsive. (R.R. at 2a-3a). The Department denied the bid protest, and Petitioner filed the subject petition for review with this Court.

On appeal,*fn3 Petitioner argues that the Department committed an error of law when it rejected the Proposal as non-responsive. Petitioner asserts that its attempt to negotiate key terms and conditions was entirely valid under Section 513(g) of the Code.

Section 513 of the Code, which governs a state agency‟s issuance of a request for proposal, provides:

(a) Conditions for use.--When the contracting officer determines in writing that the use of competitive sealed bidding is either not practicable or advantageous to the Commonwealth, a contract ...

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