Before the 1998 Commonwealth Procurement Code, the Administrative Code governed the process of contracting with the Commonwealth or an agency of the Commonwealth. The Procurement Code governs any transaction in which the Commonwealth purchases goods and services or expends funds, except when the Commonwealth is making grants or investments.
Of particular importance is the Procurement Code’s applicability to construction contracts exceeding $500,000.00 between private contractors and the Commonwealth and its agencies or subdivisions. Displacing a patchwork of prior law, the Procurement Code was enacted to streamline the purchasing/contracting process and to provide a “uniform and mandatory” system for the administration of public contracts in the Commonwealth.
The Code defines “construction” as “[t]he process of building, altering, repairing, improving or demolishing any public structure or building or other public improvements of any kind to any public real property.” Importantly, “construction” for the purposes of the Procurement Code does not include routine operation or maintenance of existing structures. Note also that the Procurement Code applies to lower-tier contracts between prime Contractors and Subcontractors where the party in place of the owner is the Commonwealth or Commonwealth agency.
In sum, the Procurement Code entitles a Contractor which performs in conformity with the contract to payment from the Commonwealth, Commonwealth agency, or subdivision. The Procurement Code proceeds to provide an aggrieved contractor with a means to effectuate proper payment, and to set payment deadlines if the contract between the parties is silent as to this term. The “teeth” of the Procurement Code, and what most often piques private Contrators’ interest, are the provisions of the Code which provide a remedy of interest, penalties, and attorneys’ fees in favor of a Contractor where the Commonwealth has withheld payment in bad faith after payment has become due. In the aggregate, an award of a penalty, interest, and attorneys’ fees can greatly reduce the harsh negotiating tactics employed in other contexts with private owners, or where the prime Contractor has been fully paid but leverages such a position to the disadvantage of Subcontractors.