Court Opinion

ID: 4965569
Source: CourtListenerOpinion
Date Created: 2021-09-24 16:16:09.812502+00
Date Added: 2024-06-11T08:16:07.139128
License: Public Domain

DISSENTING OPINION BY
Judge LEAVITT.
Respectfully, I dissent. The two-year extension of the waste services contract between the Township of Warminster (Township) and Solid Waste Services, Inc. d/b/a J.P. Mascaro & Sons (Mascaro) did not trigger another round of competitive bidding requirements when the contractor, the low bidder, agreed to further reduce its low-bid price during the extension period. This is because, as the trial court *127concluded, the extension was a term addressed in the original bidding procedure. Further, because the amendment did not affect the scope or type of services being provided, the trial court held that the amendment did not effect a new contract. Because the trial court’s reasoning is consistent with case law precedent, I would affirm.
The facts of this case are undisputed. As the lowest responsible bidder, Mascaro was awarded a five-year waste services contract by the Township with the option of a two-year extension for 2010 and 2011. After five years, the Township and Masca-ro executed Amendment No. 1, which extended the contract for two more years but froze the contract prices at their 2009 level. Because all bidders to the original contract were put on notice that there could be a two-year extension and because the agreement to freeze prices was not a material amendment, the trial court refused to grant Hanisco relief.
To reach the opposite conclusion, the majority relies upon Louchheim v. City of Philadelphia, 218 Pa. 100, 66 A. 1121 (1907), and Shaeffer v. City of Lancaster, 754 A.2d 719 (Pa.Cmwlth.2000). These cases begin with the well-established principle that “all bidders must ... be given the same fair opportunity to bid in free competition "with each other.” Shaeffer, 754 A.2d at 723. Competitive bidding effects a “fair and just competition between bidders, and at the same time [closes], as far as possible, every avenue to favoritism and fraud in its varied forms.” Louchheim, 218 Pa. at 103, 66 A. at 1122 (quoting Mazet v. City of Pittsburgh, 137 Pa. 548, 20 A. 693 (1890)). The trial court’s holding is not inconsistent with these sound and well-established principles.
Louchheim and Shaeffer each involved private negotiations that were done prior to the award of a contract. Here, by contrast, Mascaro was awarded the waste services contract after it was competitively bid. Louchheim and Shaeffer do not address the crucial question presented here, which is to what extent, if any, the parties to a competitively bid contract may amend its terms after the contract is properly awarded.
On this question, two rulings of our Supreme Court are instructive. The first is Bevilacqua v. Clark, 377 Pa. 1, 103 A.2d 661 (1954), and the second is On-Point Technology Systems, Inc. v. Department of Revenue, 569 Pa. 236, 803 A.2d 1175 (2002).
In Bevilacqua, a licensee of a concession at a golf course owned by the City of Philadelphia made permanent improvements to the concession stand at his own expense; in return the City agreed to extend the concession contract for two additional years without a rent increase. A taxpayer challenged the extension as viola-tive of competitive bidding requirements because the terms of the extension were negotiated by the parties. Our Supreme Court disagreed. It held that the terms of the contract extension could be negotiated after the contract was awarded because the possibility of an extension was expressed in the bid proposal and because the contract itself limited the term of any negotiated extension to four years. The Supreme Court could have held that any post-award negotiations violated competitive bidding, but it did not. The Court approved the parties’ negotiated contract extension terms, which included price. The lessee’s negotiated rent increase took the form of the lessee’s building improvements.1
*128In On-Point Technology, the Department of Revenue, on behalf of the Pennsylvania Lottery, requested bids and awarded a contract for an online games system to the lowest bidder. The parties then negotiated a separate contract for the use of vending machines to sell lottery tickets. The Supreme Court held that the new contract was not a valid amendment to the first contract because use of vending machines was excluded from consideration in the original contract award.
Contrary to the majority’s suggestion, Bevilacqua and On-Point Technology do not stand for the proposition that a competitively bid contract price cannot be amended. The general principle is that so long as amendments to competitively bid contracts do not effect a new undertaking, they are permitted. 64 C.J.S., Municipal Corporations § 918 (Westlaw 2011). Only material amendments to a competitively bid contract may effect a new contract that requires a new round of competitive bidding. 64 Am.Jur.2d Public Works and Contracts § 120 (LEXIS 2010).2
The Pennsylvania Supreme Court has expressly acknowledged that amendments to public contracts can be made, so long as they do not constitute a “new undertaking.” It has explained:
True, municipal authorities may, without advertising for bids, provide for work incidental to that covered by the original contract, or for such minor changes and additions thereto as may become reasonably necessary, but cannot so authorize what amounts to a new undertaking.
Commonwealth ex rel. Met-Con Co. v. Jones, 283 Pa. 582, 586, 129 A. 635, 636 (1925) (citation omitted). The Court continued:
These officers [municipal officers] must act honestly, reasonably and intelligently, and a new departure must not so vary from the original plan or be of such importance as to constitute a new undertaking, which the act controls, and where fairness could only be reached through competitive bidding.
Id. (quoting Hibbs v. Arensberg, 276 Pa. 24, 27, 119 A. 727, 728 (1923)).
However, in Jones, the Supreme Court recognized there is a limit to valid contract amendments. There, the contract in question contemplated the construction of highway guardrails and retaining walls and, thus, could not be amended to include excavation to eliminate dangerous curves in the highway. The Supreme Court reasoned that such excavation work was “entirely outside the original contract” such that the “bidders at that time ... could have had no knowledge of it.” Jones, 283 Pa. at 585-586, 129 A. at 636. Stated otherwise, the Supreme Court employed the material amendments doctrine in Jones and concluded that the amendments in question were material, ie., effected a *129new undertaking.3
The Massachusetts Supreme Court’s holding in Morse v. City of Boston, 253 Mass. 247, 148 N.E. 813 (1925), is instructive on the material amendments doctrine. In Morse, the City of Boston awarded a competitively bid contract “to fill certain land with earth and gravel and loam, with other improvements.” 253 Mass, at 249, 148 N.E. at 814. After the project began, the contract was amended to require the delivery of so much additional earth and gravel that it increased the cost of the contract by one-third. The Massachusetts Supreme Court held that these amendments effected a new contract, explaining that
[t]he alterations permissible under [the material amendments doctrine] are such in nature, magnitude and expense as bear a reasonable subsidiary relation to the work originally covered by the contract. When a contract is to be modified so as in substance and effect to be made new and different in main aspects, that cannot be done under the guise of an amendment or alteration.
Id. at 253, 148 N.E. at 815-816 (emphasis added). In short, where an amendment increases the contract cost by one-third, the parties have effected a new undertaking that requires competitive bidding.
Under the above-reviewed authority, a competitively bid contract can be amended so long as the changes are not so substantial that they result in a “new undertaking” and are not of such magnitude that they undermine the goals of competitive bidding. In Jones, 283 Pa. 582, 129 A. 635, the Pennsylvania Supreme Court employed the material amendments doctrine analysis, and this analysis would not have been undertaken if the doctrine were not viable in Pennsylvania. Indeed, our Supreme Court has had many opportunities to announce that public contracts cannot be amended, most recently in On-Point Technology, but it has not done so. The majority does not even mention the material amendments doctrine.4 It has never been held, so far as can be determined, that after a contract price has been set by competitive bidding, it cannot be further reduced.
*130In 2005, Mascaro presented a bid in accordance with the Township’s bid specifications. It was the lowest responsible, indeed only, bidder. The two-year extension of the contract was expressly included in the bid request, and all potential bidders were on notice of the possible extension. Hanisco does not dispute these points. He also acknowledges that the Township could have exercised its contractual extension option by paying the 2010-2011 prices stated in the contract, which were higher than the 2009 levels set in Amendment No. 1. Hanisco objects to the extension solely because the parties mutually agreed to reduce the low-bid prices even further.
The subject matter of the contract, the scope of services and frequency of collection provided by Mascaro remained exactly the same. The extension itself was contemplated in the original contract. The more favorable prices in Amendment No. 1 did not represent a “material” change or effect a “new undertaking.” The total bid price for the entire five-year contract plus the two option years was $23,326,104, and Amendment No. 1 reduced the total price to the Township by $797,592, which is 3.4 percent of the total contract price. This amount does not constitute a material change, and given the short duration of two years, falls within the holding in Bevi-lacqua,5
The majority points out that there is no way of knowing if the Township might have realized greater monetary savings by rebidding the contract rather than executing the amendment. The Township considered a rebid but concluded that given the high degree of satisfaction among Township residents with the service being received and the fact that the pricing trends were moving upwards, it made better sense to stay put.6 All agree that the Township could have stayed put for two more years simply by paying an additional $800,000. Courts do not inquire into the wisdom of a municipality’s action.
That a court might have a different opinion or judgment in regard to the action of the agency is not a sufficient ground for interference; judicial discretion may not be substituted for administrative discretion.
American Totalisator Company, Inc. v. Seligman, 489 Pa. 568, 575, 414 A.2d 1037, 1041 (1980) (quoting Blumenschein v. Pittsburgh Housing Authority, 379 Pa. 566, 573, 109 A.2d 331, 335 (1954)) (emphasis added).
The trial court concluded that it was absurd to allow the Township the discretion to extend the contract for two years at the original low bid price but deny it the discretion to negotiate an even lower price. The majority’s holding will require rigid adherence to a contract’s price terms and has the value of creating a predictable rule for public contracting. It does so, however, by depriving the government of any *131discretion to achieve an even better price for taxpayers after the prices have been set by competitive bidding. This elimination of discretion seems more than is necessary to preserve competitive bidding.
I would affirm the trial court’s decision to allow the Township discretion to reduce the already low-bid contract price even further, for a limited period of time.

. The Supreme Court noted that the rental amount did not change. In fact, by having his lease extended two years without a rent *128increase, the lessee paid a different, and negotiated, rent for the concession.

. Specifically, it states:
In general, under the "material amendments doctrine,” competitively bid contracts involving state resources cannot be materially amended. So, for example, by seeking to modify its original bid and negotiate a more favorable agreement for itself, after it has already secured a public works contract as the low bidder, a contractor is, in effect, improperly attempting to secure an unfair competitive advantage over the other legitimate bidders and to conduct a type of post bid negotiations that violate the practice of competitive bidding.
64 Am.Jur.2d Public Works and Contracts § 120 (LEXIS 2010). Thus, an attempt by a contractor to negotiate higher prices, after it has been awarded the public contract for its low bid, would violate the material amendments doctrine.

. The Supreme Court of Alaska has provided a helpful explanation of the concept of material amendments as follows:
Not all amendments to competitively bid contracts are prohibited, only those regarded as material. The concept of materiality in this context has not been satisfactorily captured in a single phrase. One court has spoken of "an essential change of such magnitude as to be incompatible with the general scheme” of competitive bidding; another has phrased the question to be whether the amendment "so varied from the original plan, was of such importance, or so altered the essential identity or main purpose of the contract, that it constitutes a new undertaking.” These formulations simply recognize that the materiality concept prohibits those changes which tend to be subversive to the purposes of competitive bidding.
Kenai Lumber Company, Inc. v. LeResche, 646 P.2d 215, 221 (Alaska 1982) (emphasis added) (footnotes omitted).

. The majority incorrectly states that a contract option cannot be modified. A contract option keeps open the possibility of future performance and “limits the promisor's power to revoke an offer.” Restatement (Second) of Contracts § 25. An option is
nothing more than an irrevocable offer, which, for the time agreed upon, cannot be unilaterally withdrawn, revoked, or rescinded by the offeror, and may only be modified, released, or rescinded by agreement of the parties.
17A Am.Jur.2d Contracts § 53 (LEXIS 2011) (emphasis added). Applying these principles here means only that Mascaro could not refuse to honor its option prices for 2010-2011. Parties can, however, by mutual agreement, modify option terms, and they did so here.

. There does not appear to be any prior holding in Pennsylvania that a contract price is the one term to which the material amendments doctrine cannot be applied. Perhaps it would be wise to forbid parties to an in-force public contract from ever reducing the contract price, but that does not appear to be the law today. As such, there is nothing to preclude a holding that the reduction of the low bidder’s price, after the contract has been awarded, is not a material change.

. The Township’s research showed that nearby municipalities receiving the same number of pickups as the Township had seen their prices increase from 1.5 percent to 16 percent per year, with the average increase being 5 percent. The Township Solicitor reported that the highest price paid by five neighboring townships was $341.76 per household, per year. However, the Solicitor pointed out that this was not an "apples to apples” comparison because none of the other five townships had the same frequency of pickups or the same range of pick up services.