           IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Michael Regester, President Regester’s :
Heating and Air Conditioning, LLC,     :
                         Petitioner    :
                                       :
            v.                         :    No. 2344 C.D. 2015
                                       :    Submitted: August 12, 2016
Department of Military                 :
and Veterans Affairs,                  :
                         Respondent :


BEFORE: HONORABLE P. KEVIN BROBSON, Judge
        HONORABALE JULIA K. HEARTHWAY, Judge
        HONORABLE DAN PELLEGRINI, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE BROBSON                            FILED: October 31, 2016



            Petitioner Michael Regester, President of Regester’s Heating and Air
Conditioning, LLC (Regester), petitions for review of an order of the Department
of Military and Veterans Affairs (Department). The Department denied Regester’s
bid protest, which challenged the award of a bid by the Department to another
bidder, B&W, Inc., for heating, ventilation, and air conditioning services at Ft.
Indiantown Gap. We affirm the Department’s order.
            On or about August 21, 2015, the Department issued a request to
advertise solicitation (invitation to bid (ITB)) for the provision of “[o]n-[c]all
HVAC services to various buildings at Fort Indiantown Gap.”          (Reproduced
Record (R.R.) at 3a-116a.) Regester and B&W submitted the only responses.
Following the submissions of bids, the Department awarded the contract to B&W.
On or about September 11, 2015, Regester filed a bid protest, asserting that
B&W’s bid was nonresponsive to the ITB based upon a requirement in the ITB
that “[t]he contractor will be certified in Siemens LMV 53 boiler systems and will
have minimum of (3) three years working experience with listed equipment.”
(R.R. at 191a; emphasis added.) In responding to the award of the bid to B&W,
Regester contended, B&W did not establish that it was certified with regard to the
maintenance of Siemens LMV 53 boilers. Instead, Regester asserted, B&W was
proposing to use a subcontractor, Mountainside Heating, which in turn, he claimed,
intended to use Jeffrey and Jesse Howell (Mountainside Heating’s apparent
owners) to perform such service. (R.R. at 187a.)
             Regester complained that the ITB does not permit a successful bidder
to satisfy the certification requirement by using a subcontractor. (R.R. at 187a.), In
fact, Regester asserted, the ITB provides that “[t]he contractor will directly
perform all work for the . . . On-Call HVAC service contract” and that
“[s]ubcontracting will not be authorized.” (R.R. at 192a.) Regester asserted that
he has two Siemens LMV 53 boiler-certified employees.               (R.R. at 188a.)
Additionally, Regester recommended that the Department, in reviewing his claims,
request that the Howells or that B&W submit payroll documents to confirm that
the Howells are employees rather than subcontractors. In response to Regester’s
protest, the Department’s Chief Procurement Officer sent a letter to Regester
indicating that “the Adjutant General, or his designee” would review the protest
and issue a written determination addressing the protest. (R.R. at 199a.)
             In a September 30, 2015 determination, the Department’s Chief
Procurement Officer issued a response to Regester’s bid protest. First, the Chief
Procurement Officer rejected Regester’s claim that B&W’s bid was nonresponsive


                                          2
based upon the alleged lack of employee certification in the subject boiler system,
stating that B&W demonstrated it had the capability to perform the contract
requirements in accordance with Section 517 of the Commonwealth Procurement
Code (Procurement Code).1 By way of explanation, the Chief Procurement Officer
stated
                  As part of its due diligence in determining responsibility
                  to award [the contract], [the Department] reviewed the
                  submittals included with each bid. B&W included
                  certificates reflecting certification on the Siemens LVM
                  53 Boiler System in the names of Jeffrey L. Howell and
                  Jesse J. Howell. This submission meets the requirements
                  of the bid.

(R.R. at 202a-203a.) With regard to Regester’s complaint that the ITB prohibits
the use of subcontractors, the Chief Procurement Officer concluded that Regester
had made that claim without providing any evidence or information to substantiate
the assertion. Additionally, the Chief Procurement Officer indicated that she saw
no basis for providing a hearing, noting that she had the discretion to decide
whether to conduct a hearing and that Regester did not “assert any material facts
that are in dispute that would require a hearing and . . . does not identify any
evidence that it must present in a hearing.” (R.R. at 203a.)
                  Regester disputed the Chief Procurement Officer’s conclusions. (R.R.
at 208a-209a.) In response to Regester’s objections, B&W indicated that the
Howells are employees. Regester then questioned whether B&W had hired the
Howells before B&W submitted its bid. Regester also suggested that the Howells
as owners of Mountainside Heating could not also be B&W’s employees.


         1
             62 Pa. C.S. §§ 101-1913.



                                              3
                 On or about November 13, 2015, Dee McPherson, the Department’s
Deputy Secretary, issued a final determination. In that determination, the Deputy
Secretary acknowledged that the Howells were not employees of B&W at the time
B&W submitted the bid, but were certified to perform the Siemens boiler system
work and that they are now B&W employees. The Deputy Secretary concluded
that it was not necessary for the Howells to be employees of B&W at the time of
bid submission and that B&W had hired the Howells as employees following the
award of the bid. Based upon that conclusion, the Deputy Secretary determined
that B&W’s bid was responsive to the ITB and that the designation of the Howells
in the bid did not violate the ITB’s prohibition against the use of subcontractors.
                 Regester petitioned for review with this Court,2 raising the following
issues: (1) whether the Department failed to abide by the terms of the ITB by
accepting the bid of a company that had neither three years of working experience,
nor—on the bid submission date—individuals working for it who were certified to
service the subject boiler system; and (2) whether the Department erred in refusing
to hold a hearing, based upon Regester’s claim that evidence is conflicting.
                 The general thrust of Regester’s claim is that the Department did not
award the contract to a “responsible bidder” under the Procurement Code. Section
103 of the Procurement Code3 defines the term “responsible bidder” as

       2
         As indicated by Section 1711.1(i) of the Procurement Code, 62 Pa. C.S. § 1711.1(i), our
review is limited to a review of “the record of determination certified by the purchasing agency.
The Court shall affirm the determination . . . unless it finds from the record that the
determination is arbitrary and capricious, an abuse of discretion or is contrary to the law.”
Section 1711.1(l) of the Procurement Code, 62 Pa. C.S. § 1711.1(l) provides that the “provisions
of 2 Pa. C.S. (relating to administrative law and procedure) shall not apply to this section.”
       3
           62 Pa. C.S. § 103.



                                               4
             A bidder that has submitted a responsive bid and that
             possesses the capability to fully perform the contract
             requirements in all respects and the integrity and
             reliability to assure good faith performance.

Section 103 of the Procurement Code also defines the term “responsive bid” as “[a]
bid which conforms in all material respects to the requirements and criteria in the
invitation for bids.”
             Regester contends that B&W was not a responsible bidder and that the
Department failed to abide by the terms of the ITB by accepting a bid that did not
comply with the ITB based upon:         (1) B&W’s alleged lack of three years’
experience with the Siemens boiler systems for which maintenance service was
sought; and (2) B&W’s lack of employees properly certified for the boiler system
service at the time B&W submitted the bid. Regester contends that, even if the
Department was correct in reasoning that B&W’s bid complied with the ITB by
having certified employees on the payroll before B&W signed the contract with the
Department, B&W did not demonstrate that the certified employees have three
years of experience. Regester complains also that the designation of the Howells
for the purpose of complying with the certification requirement violated the
provision in the ITB prohibiting the use of subcontractors.
             In response to these arguments, the Department first contends that
Regester waived the argument that B&W does not have three years’ experience
because he did not raise this argument before the Deputy Secretary before the
Department’s final determination was issued. In considering whether a party has
preserved or waived consideration of the three-years’ experience question, we note
our comments in Arnold v. Workers’ Compensation Appeal Board (Lacour
Painting, Inc.), 110 A.3d 1063 (Pa. Cmwlth. 2015):


                                         5
             We may not consider an issue on appeal unless it has
             been preserved at every stage of a proceeding below. Pa.
             R.A.P. 1551(a); GMS Mine Repair & Maintenance, Inc.
             v. Workers’ Compensation Appeal Board (Way), 29 A.3d
             1193, 1197 (Pa. Cmwlth. 2011). However, the question
             here is not whether Claimant raised a completely new
             issue on appeal—there is no dispute that Claimant sought
             specific loss benefits before the WCJ and the Board—but
             rather whether Claimant’s specific loss claim has
             transformed into something fundamentally different on
             appeal. Our courts permit a litigant to make new
             arguments on appeal in support of a preserved issue,
             Wert v. Department of Transportation, Bureau of Driver
             Licensing, 821 A.2d 182, 186 n.9 (Pa. Cmwlth. 2003);
             Doe-spun, Inc. v. Morgan, 502 A.2d 287, 289 (Pa.
             Cmwlth. 1985), but do not permit a party to advance an
             entirely new and different theory of relief for the first
             time on appeal. Foster v. Mutual Fire, Marine and
             Inland Insurance Co., 676 A.2d 652, 658 (Pa. 1996);
             Fatzinger v. City of Allentown, 591 A.2d 369, 371 (Pa.
             Cmwlth. 1991).

Arnold, 110 A.3d at 1071 (emphasis in original).          “[L]ogic dictates that an
appellant can raise new arguments so long as they relate to the same issue.”
Wert, 821 A.2d at 186 n.9. The primary question here appears to be whether B&W
is not a responsive bidder based upon Regester’s claim that the bid proposal is not
a responsive bid. One aspect of that claim relates to Regester’s initial assertion
that B&W did not have certified employees at the time it submitted its bid. Later,
in his appeal to this Court, Regester asserted that B&W is not a responsive bidder
also because it allegedly does not have three years’ experience. Although these
two alleged claims appear to relate to the general issue of bid responsiveness, the
latter claim is also a new theory of relief, because Regester raised it for the first
time on appeal and also because, as a consequence of Regester not identifying the
potential claim earlier, the record does not appear to contain any factual
information that would provide insight into the resolution of that claim.
                                          6
                In this matter, Regester, at the agency level, never sought to challenge
B&W’s indication in its bid that it satisfied the three-year-experience requirement,
and the Department did not exercise its discretion to conduct an evidentiary
hearing. The Deputy Secretary communicated with the parties for the purpose of
addressing Regester’s primary complaint at the agency level—that B&W was
required to have actual certified employees on its staff (rather than a subcontractor)
at the time it submitted its bid. Thus, at the time the Deputy Secretary was
considering Regester’s challenge from the initial decision of the Chief
Procurement Officer, she could also have engaged in an investigation regarding the
requirement that the successful bidder have three years of experience, but did not
do so apparently because of Regester’s failure to communicate that objection.
Thus, Regester’s failure to assert the claim at that time divested the Deputy
Secretary of the opportunity to request the parties to address that requirement and
to consider whether facts might support Regester’s claim.4
                We also note the language of the Procurement Code relating to the
content of bid protests:
                (c) Content of protest.—A protest shall state all grounds
                upon which the protestant asserts that the solicitation or
                award of the contract was improper . . . .

62 Pa. C.S. § 1711.1(c). This language suggests that a disappointed bidder must
provide to the contracting agency any and all grounds for challenging the award of
a bid.       In this case, the claim by Regester that B&W does not satisfy the

         4
         The Department notes that B&W provided HVAC services under contract from June
2005 through June 2010 and suggests that evidence of this experience would have been offered if
Regester had raised this factual issue during the bid protest proceedings. (Department Brief
at 9.)



                                              7
three-years’ experience requirement constitutes a ground upon which Regester is
claiming that the contract award was improper. Consequently, based upon waiver
principles and the statutory language of the Procurement Code, we conclude that
Regester failed to preserve the claim that B&W does not satisfy the three-years’
experience requirement in the ITB.
             We proceed now to consider whether the Department erred in
awarding the contract to B&W when it appears that B&W did not hire the Howells
until after the Department awarded the contract to B&W. Section 1711.1 of the
Commonwealth Procurement Code, 62 Pa. C.S. § 1711.1, provides, in pertinent
part:
             (a) Right to protest.—A bidder . . . that is aggrieved in
             connection with the solicitation or award of a contract . . .
             may protest to the head of the purchasing agency in
             writing.
             ...
              (e) Evaluation of protest.—The head of the purchasing
             agency or his designee shall review the protest and any
             response or reply and may request and review such
             additional documents or information he deems necessary
             to render a decision and may, at his sole discretion,
             conduct a hearing . . . .
             ...
             (h) Record of determination.—The record of
             determination for review by the court shall consist of the
             solicitation or award; the contract, if any; the protest; any
             response or reply; and additional documents or
             information considered by the head of the purchasing
             agency or his designee; the hearing transcript and
             exhibits, if any; and the final determination.

             First, we note that the actual language of the ITB uses the future tense
in referring to the service qualifications: “The contractor will be certified . . . .”
The use of the future tense suggests that the drafter of ITB anticipated that a
                                          8
responsive bid and/or responsible bidder was not required to demonstrate
satisfaction of the certification requirement at the time of bid submission. Rather,
it is reasonable to interpret the language as requiring the selected contractor to have
certified employees either at the time the contract was signed or by the time the
service begins. Such an interpretation is reasonable in light of the pragmatic
realities of contract bidding and awards, as it may not be reasonable to expect a
contractor to commit to hiring new employees or obtain expensive new equipment
when uncertainty exists regarding whether an agency will award a contract to a
bidder.
               Finally, with regard to Regester’s complaint that the Deputy Secretary
did not conduct a hearing, we note that the decision to hold a hearing is one that
rests in the sole discretion of the Deputy Secretary. Section 1711.1(e) of the
Procurement Code, 62 Pa. C.S. §1711.1(e). Regester’s primary claim regarding
the factual record relates to the timing of B&W’s hiring of the Howells. As we
held above, however, we find no merit to the claim that B&W was required to have
certified employees at the time of the bid. Consequently, we conclude that no
hearing was necessary in order for the Deputy Secretary to issue a final
determination.
               Accordingly, we affirm the Department’s order rejecting Regester’s
bid protest.




                                 P. KEVIN BROBSON, Judge




                                           9
          IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Michael Regester, President Regester’s :
Heating and Air Conditioning, LLC,     :
                         Petitioner    :
                                       :
            v.                         :   No. 2344 C.D. 2015
                                       :
Department of Military                 :
and Veterans Affairs,                  :
                         Respondent :



                                  ORDER


            AND NOW, this 31st day of October, 2016, the order of the
Department of Military and Veterans Affairs is AFFIRMED.




                              P. KEVIN BROBSON, Judge
