Md. State Highway Administration v. Brawner, No. 1643, September Term 2019, Argument Date: 11/6/20
Procurement Law
A subcontractor is entitled to make a contract claim against a procurement agency only if there is a direct contract between the claimant and that agency. The subcontractor had a contract with a contractor to provide materials on a state highway project. Although the state agency had approved the materials the subcontractor would use in state highway noise barrier wall, that did not suffice to create a contract between the subcontractor and the agency. As such, the subcontractor did not have standing to present a claim against the agency. The mere approval of a company’s product as being acceptable for a project does not make that company a procurement contractor with standing to make a claim.
Timeliness
In construction contracts, a contractor must file written notice of a claim against a procurement agency within 30 days after the basis for the claim is known or should have been known and the support for the claim itself must be filed within 90 days after submission of the notice of the claim. The subcontractor alleged the contractor was obligated to pass through its complaints to the procurement agency. The court affirmed the decisions of the Maryland State Board of Contract Appeals to dismiss the claim as untimely because the contractor failed to file a written pass-through notice with the 30 days. Circuit Court for Baltimore City Case No. 24-C-19003208 REPORTED IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1643
September Term, 2019
MARYLAND STATE HIGHWAY ADMINISTRATION
v.
BRAWNER BUIILDERS, INC.
Beachley, Gould, Wilner, Alan M. (Senior Judge, Specially Assigned),
JJ.
Opinion by Wilner, J.
Filed: December 18, 2020
Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic.
Suzanne Johnson 2020-12-18 15:41-05:00
Suzanne C. Johnson, Clerk This case arises under the State procurement law. The State Highway
Administration (SHA) rejected claims filed by appellees Brawner Builders, Inc.
(Brawner) and Faddis Concrete Products, Inc. (Faddis) on the grounds that (1) Faddis had
no procurement contract with SHA and therefore had no standing to file a procurement
claim, and (2) the claims filed by Brawner and Faddis were untimely. In an appeal by
appellees, the Maryland State Board of Contract Appeals (MSBCA) agreed with SHA on
both of those issues and entered a Summary Decision affirming SHA’s rejection of the
claims.
In a judicial review action, however, the Circuit Court for Baltimore City had a
different view. It concluded, (1) as a matter of law, that Faddis did have a procurement
contract with SHA and was entitled to file a claim, and (2) that there was a genuine
dispute of material fact as to whether the claims were timely. It therefore vacated the
MSBCA summary decision and remanded the case for a hearing on the merits of the
claims. Before us is SHA’s appeal from that judgment. We shall reverse the Circuit
Court judgment and remand with instructions to affirm the MSBCA order.
BACKGROUND
The project that spawned this dispute was the construction of a 0.38-mile noise
barrier wall along a stretch of I-95 in Howard County. Noise abatement measures along
State highways are required both for Federal funding of highway construction projects
and by State law. As a result, in August 2011, SHA issued a Highway Noise Policy that set forth substantive requirements for precast concrete products and a procedure for SHA
certification of plants producing those products. Pre-approval of a plant by SHA was
required in order for a manufacturer to be eligible to bid on SHA highway projects.
Certification was good for one year, subject to renewal following an annual inspection of
the plant and subject also to the manufacturer continuing to operate the plant in
conformance with the SHA specifications through a Quality Control Plan. SHA charged
a cost reimbursement fee for the cost of inspection and certification. Pursuant to that
process, SHA, at some point, certified Faddis’s plant in Downingtown, Pennsylvania as
“Qualified for Sourcing on State Projects” and included that plant on its list of pre-
approved manufacturers of noise barrier systems.
The prime contract for the construction of the 0.38-mile section (Contract No.
H02485126) was entered into with Brawner on November 19, 2012. That contract, for
whatever reason, was not placed in evidence in the court proceeding and therefore is not
included in the record. In February 2013, Brawner and Faddis entered into a subcontract,
evidenced by a purchase order, for Faddis to furnish 40,910 noise wall panels and three
access doors. All materials and work were required to be in conformance with the
conditions and specifications pertaining to the prime contract. The purchase order was
contingent on SHA approval of Faddis as a supplier and made clear that Brawner was
obligated to pay for all products ordered, produced, and shipped regardless of any
payment to Brawner by SHA. There were to be no set-offs. Brawner reserved the right
2 to cancel the subcontract if Faddis was in breach of any of its obligations, including the
performance or delivery of non-conforming work or materials.
In September 2013, Faddis furnished SHA with a sample panel which, on
September 27, SHA approved for use on the project. Based on that approval, Faddis
began manufacturing the panels for Brawner to erect pursuant to its (Brawner’s) contract
with SHA.
SHA employed an outside agency to furnish inspectors to assure compliance with
the SHA standards, one of whom was Nick Patras. Mr. Patras was stationed at Faddis’s
Downingtown plant for the purpose of inspecting panels destined for the SHA project.
No panels were to be shipped without his approval. It appears, at least from SHA’s
perspective, that Mr. Patras was not doing his job properly, and he eventually was
dismissed. In March 2014, SHA’s Office of Materials and Technology concluded that
panels manufactured by Faddis after November 27, 2013 contained aggregate from an
unapproved source, which was a violation of the noise barrier standards, and, as a result,
the required strength of the panels could not be determined. Investigations led the
Assistant Division Chief for Field Operations (Christopher Gale) to conclude, among
other things, that, throughout the production of the panels, Faddis had (1) failed to
provide adequate documentation of the source material for the exposed aggregate panels,
(2) altered cylinder test data to reflect values higher than what the material actually
achieved, (3) used a mix design that did not meet SHA specifications, and (4) was
extremely uncooperative about making changes to meet specifications.
3 On May 2, 2014, SHA’s District Engineer, David Coyne, informed Brawner of
those conclusions and requested a response as to how Brawner intended to remedy the
problem. Faddis was not copied on that letter. Brawner’s project manager responded six
days later, on May 8, that the problem was not Brawner’s to remedy, that it involved
instead “a breakdown in the fabrication, inspection, and acceptance procedure at an SHA
pre-approved concrete precast facility.” The letter requested a temporary partial
shutdown of the project and advised that Brawner was reserving its rights to extended
contract performance, including monetary compensation. Brawner added that “we are
not requesting either at this time but reserve our right to do so should it become
necessary.”
On May 9, in a letter to Kevin Iddings, Faddis’s Operations Manager, Mr. Gale set
forth in detail the concerns of SHA, which included failure to provide adequate
documentation regarding the exposed aggregate material used in the panels, mixing
concrete “of inconsistent and questionable quality,” failure to comply with Faddis’s own
Quality Control Plan, and using a coarse aggregate from an unapproved source that was
not in conformance with Maryland Department of Transportation standards. The letter
gave notice that further purchases were suspended for 180 days during which Faddis
would be required to take certain specified remedial action. On May 21, Mr. Iddings
responded to the points made by Mr. Gale, asserting that, although Faddis “disagree[d]
with many of the representations made in the SHA letter,” it remained committed to
resolving the outstanding issues to SHA satisfaction.
4 Exacerbating the situation, on June 9, 2014, SHA’s Chief of Concrete Technology
Division, Michelle Armiger, sent e-mails to officials at the Virginia and Pennsylvania
Departments of Transportation advising them of the problems SHA had been having with
Faddis and asking whether they had experienced similar issues. Ten days later, the
Director of SHA’s Office of Materials Technology sent an e-mail to those agencies
clarifying that the issues mentioned by Ms. Armiger were in dispute, that there was an
administrative process in which SHA and Faddis were engaged, and there had been no
final determination by SHA.
The next event in this drama consisted of three letters from Faddis on June 23,
2014. One was to SHA’s District Engineer, David Coyne, which stated that it
supplemented “notices of claims previously submitted by Brawner,” and advised that
SHA’s action had “impacted Faddis as it specifically relates to the contract between
Faddis and Brawner” (emphasis added) and had resulted in losses for which “Faddis
reserves the right to recover damages for all costs including those related to the idling of
Faddis’s plant and equipment and interferences with other contracts and Pennsylvania’s
and Virginia’s Departments of Transportation.” Faddis insisted that SHA “take
immediate steps to abate the harm to Faddis and address these claims and impacts due to
its directions and actions.”
The second letter was to Brawner, asking that it provide Faddis with “the notice of
claim letter” sent to SHA related to the contract between SHA and Brawner and that it
furnish SHA with a copy of “this letter which serves to supplement the prior notice and
5 advise the SHA” of continuing damages. The letter did not identify the alleged notice of
claim letter to which it referred. The third letter was from Faddis’s attorney, Paul Logan,
to Scott Morrell, the Assistant Attorney General who represented SHA. In that letter, Mr.
Logan took issue with the conclusions reached by SHA as specified in Mr. Coyne’s May
2 letter to Brawner, contended that SHA had acted precipitously and without legal or
factual justification, and insisted that (1) all suspensions be lifted, (2) Faddis’s panels be
accepted, and (3) the project be deemed complete with no liquidated damages or
penalties.
Mr. Morrell responded the next day through an e-mail advising Mr. Logan that
any procurement claim against SHA had to be filed with the SHA procurement officer by
Brawner – the prime contractor with which SHA had a contractual relationship – and that
any tort claim had to be filed in accordance with the Maryland Tort Claims Act.
The next event occurred on July 16, 2015, when Faddis filed a civil action against
Brawner in the U.S. District Court for the Eastern District of Pennsylvania. That action
later was transferred to the U.S. District Court for the District of Maryland. The
Complaint was based on Brawner’s failure to “pass through” Faddis’s claim to SHA,
thereby precluding Faddis’s claim from being considered by SHA. In that regard, the
Complaint alleged that, at all relevant times, “Faddis had a direct contract with Brawner,
but no direct contract with SHA” that, in accordance with COMAR regulations, “where
claims are being pursued on behalf of suppliers and subcontractors, the claim must be
initiated by the prime contractor” and that “Brawner was obligated to pass through all of
6 Faddis’s claims against the SHA and not impede the rights of Faddis to recover the
damages it sustained.” Although Faddis alleged that it was entitled to damages due to
SHA’s wrongful interference with Faddis’s status as an approved and prequalified
supplier, the action was solely against Brawner; SHA was not a party to the action.
On August 11, 2015, counsel for Brawner sent a copy of the Federal Complaint to
SHA’s District Engineer who, on August 21, acknowledged receipt and accepted it as a
Notice of Claim by Brawner. The Federal case was settled and dismissed on December 7,
2017. The record before us does not reveal the terms of the settlement. No action was
taken by SHA on the claim. On May 31, 2018, counsel for Faddis, on behalf of both
Faddis and Brawner, requested that SHA issue a written decision on the pending claims.
When SHA declined to do so, Faddis and Brawner filed an appeal with MSBCA on
September 6, 2018.1
Through a Motion for Summary Disposition, SHA argued that:
(1) Except for “contract claims” permitted under the State Finance and Procurement Article (SFP) and implementing regulations in COMAR, SHA enjoys the State’s sovereign immunity;
1 As SHA explains in its brief (p. 8, notes 1 and 2), where a claim satisfying the Code and COMAR requirements for a procurement claim is filed, the procurement agency is required to issue a written decision within 180 days after receipt of the claim. If it fails to do so, the failure may be “deemed” a denial that may be appealed to MSBCA. See SFP § 15-219(g)(2). At issue in such an appeal, if raised, is whether the claim was a cognizable one that was timely filed. 7 (2) Only a person having a contract with a procurement agency may file a contract claim, and Faddis, as a mere subcontractor with Brawner, does not have that status; (3) Even if it did have that status, having settled its Federal suit against Brawner, Faddis has received a recovery for any contract damages due to SHA’s conduct, and any damages sought as a result of having contacted the Pennsylvania and Virginia departments would not be in the nature of a contract claim; and (4) Brawner was a procurement contractor that could have filed a claim on behalf of Faddis but failed to do so timely.
Faddis and Brawner acknowledged that only a procurement contractor may file a
procurement claim, but, inconsistently with Faddis’s position in the Federal action, they
claimed that Faddis was a procurement contractor entitled to file a claim directly and that
it did so. They based that argument on Faddis’s pre-certification by SHA and the
agency’s approval of Faddis’s panels for use in SHA construction projects, which meant
that it was, in effect, agreeing to purchase those panels. They asserted that Brawner had
given notice of Faddis’s claim in the May 8, 2014 letter and that the forwarding of the
Complaint in the Federal action on August 11, 2015 constituted the claim itself.
MSBCA rejected that argument. It noted that, under COMAR 21.10.05.06D(2), it
was authorized to grant a proposed summary decision – the administrative equivalent of a
summary judgment entered by a court – if it finds, after resolving all inferences in favor
of the party against whom the motion is made, that there is no genuine issue of material
fact and that the moving party is entitled to prevail as a matter of law.
8 As noted, the Board cited two grounds for its decision: first, that, as a
subcontractor, Faddis had no standing to make a direct claim against SHA; and second,
that Brawner’s pass-through claim on Faddis’s behalf was untimely. With respect to the
first issue, citing its earlier decision in Appeal of Jorge Company, Inc. MSBCA No. 1339
(1982), it concluded:
“Faddis does not have a written ‘procurement contract’ with Respondent. Accordingly, Faddis does not have standing to file a contract claim directly with Respondent. Any contract claim Faddis had concerning the Project had to be filed as a pass-through claim by Brawner on behalf of Faddis.”
With respect to timeliness, the Board found that Faddis had actual knowledge of a
claim at least by June 23, 2014, as evidenced by its letter to Brawner on that date, in
which it expressly asked Brawner to forward the letter to SHA to supplement what it
believed was a prior notice filed by Brawner. As noted, at the time, Faddis accepted the
premise that any claim by it had to be passed through by Brawner. That required that
notice to SHA of such a claim be presented by July 24, 2014 (30 days later). The Board
rejected Faddis’s argument that Brawner’s letter of May 8, 2014, in response to SHA’s
letter of May 2, could constitute the actual filing of a claim, noting that the letter merely
reserved Brawner’s right to file a claim some time in the future. The Board found that
the pass-through claim on behalf of Faddis was not filed until August 11, 2015, long past
the deadline.
In the judicial review action, the Circuit Court correctly identified the principal
issue as being whether Faddis had a procurement contract with SHA. The court regarded
9 that as an issue of law subject to de novo review. It turned to the definitions of
“procurement” and “procurement contract” in SFP §§ 11-101(n) and (o).2 In relevant
part, “procurement” means the process of buying or otherwise obtaining supplies,
services, construction, construction related services and includes “the solicitation and
award of procurement contracts and all phases of procurement contract administration.”
With exceptions not relevant here, “procurement contract” means “an agreement in any
form entered into by a State Executive Branch agency authorized by law to enter into a
procurement contract] for procurement.”
The court construed the relationship between Faddis and SHA as falling within the
ambit of those definitions. It arrived at that conclusion not just on Faddis’s supply of
panels for this particular project but on the premise that it had been approved as “a
qualified source of its product for a multitude of purposes, not just the project that is
before the board in this dispute.” That, the court said, constitutes “an independent
procurement contract” founded on its “entitle[ment] to be possibly selected for use in a
contract with the State through another contractor.” On that premise, the court held that
the Board erred as a matter of law in its determination that Faddis was not a procurement
contractor entitled to file a claim directly with SHA.
2 At the time of those events, those definitions were codified as subsections (m) and (n) of § 11-101. Effective October 1, 2019, they were re-codified respectively and without textual change as subsections (n) and (o) due to a new definition in subsection (e) that required the relettering of subsequent definitions. We shall use the current designations. 10 Turning then to the issue of timeliness, the court concluded that the Board
inappropriately weighed evidence on whether there was timely notice of Faddis’s claim.
In reaching that conclusion, the court relied on Engineering Mgt. v. State Highway, 375
Md. 211 (2003) for the proposition that “there should be a full hearing on the merits,
where the issue of untimely notice is a defense.” On those twin grounds, the court
“reversed and vacated” the MSBCA summary decision and remanded the case for a
hearing on the merits.
DISCUSSION
Standard of Review
The standard of review by an appellate court of the decision of an administrative
agency, such as MSBCA, was succinctly stated in Comptroller v. Science Applications,
405 Md. 185, 193 (2008), and confirmed more recently in Motor Vehicle Admin. v.
Pollard, 466 Md. 531, 537 (2019) and Burr v. Retirement & Pension System, 217 Md.
App. 196, 203 (2014). We review the agency’s decision directly, not the decision of the
Circuit Court. We will affirm the agency decision if it is supported by substantial
evidence appearing in the record and is not erroneous as a matter of law, and, because
agency decisions are presumed prima facie correct, we review the evidence in a light
most favorable to the agency. Although no deference is required to be given to the
agency’s conclusions of law, courts normally give some deference to an agency’s
interpretations of the laws it is authorized to administer. Nat’l Waste Mgr’s v. Forks of 11 the Patuxent, 453 Md. 423, 441 (2017); Kim v. Board of Physicians, 423 Md. 523, 535
(2011); LVNV Funding v. Finch, 463 Md. 586, 606, n.10 (2019).
If the agency decision under review was in the form of a summary disposition, we
must determine whether that disposition was legally correct, i.e., whether there is no
genuine dispute of material fact and the moving party was entitled to that disposition as a
matter of law. Burr, supra, 217 Md. App. at 203.
Faddis’s Status As A Procurement Contractor
There is a sharp disagreement between the parties regarding Faddis’s status as a
procurement contractor. SHA’s position is that, to be entitled to make a contract claim
against a procurement agency, the claim must arise from a direct contract between the
claimant and a procurement agency and that Faddis had no such contract.
Until late in the game, Faddis accepted that proposition. Its Federal lawsuit
against Brawner was based entirely on that proposition. As noted, Faddis alleged in its
Complaint that the COMAR regulations require that “in instances where claims are being
pursued on behalf of suppliers and subcontractors, the claim must be initiated by the
prime contractor” and that Brawner’s refusal to make such a claim on Faddis’s behalf
precluded Faddis from recovering its losses. At least inferentially, if not directly, that is a
concession that it had no standing to present its claim directly to SHA or MSBCA. Faddis
has clearly abandoned that position. Its current claim is that, by virtue of SHA’s pre-
12 approval and certification of its product, it was a direct procurement contractor and had
the right as such to make a contract claim directly on its own behalf. That takes us,
ultimately to statutory definitions.
As a preface, SHA points out that, until 1976, the State possessed full common
law sovereign immunity from contract actions against the State. See Katz v. Washington
Sub. San. Comm’n, 284 Md. 503, 507 (1979) (“[T]he doctrine of sovereign immunity
from suit, rooted in the ancient common law, is firmly embedded in the law of
Maryland” and “is applicable not only to the State itself, but also to its agencies and
instrumentalities, unless the General Assembly has waived the immunity either directly
or by necessary implication.”)
That immunity was partially, and somewhat indirectly, waived by statute in 1976.
As now codified in Md. Code, § 12-201(a) of the State Gov’t. Article, unless otherwise
expressly provided by State law, it precludes the State and its officers and units from
raising the defense of sovereign immunity “in a contract action, in a court of the State,
based on a written contract that an official or employee executed for the State or 1 of its
units while the official or employee was acting within the scope of the authority of the
official or employee.” See also Md. Code, §5-522 of the Courts and Judicial Proceedings
Article.3 Waivers of immunity, which are in derogation of common law, are strictly
3 It is interesting to note that the waiver of sovereign immunity from tort actions is direct. Section 12-104 of the State Government Article provides that, with certain exceptions, “the immunity of the State and of its units is waived as to a tort action, in a court of the State.” That is a direct waiver by the General Assembly. As we observed, § 12-201 uses different language. It prohibits the State and its units from “rais[ing] the defense of 13 construed in favor of the State. Central Collection v. DLD, 112 Md. App. 502, 513
(1996); Dept. of Public Safety v. ARA, 107 Md. App. 445, 457, aff’d. ARA Health v. Dept.
of Public Safety, 344 Md. 85 (1996).
It is necessarily implicit from applying a narrow construction to the waiver of
immunity that the Legislature may impose conditions and limitations, both substantive
and procedural, on such a waiver, and it has done so with respect to the waiver of
immunity in both tort and contract actions. In particular, it has enacted a comprehensive
set of laws governing the selection of procurement contractors, what may or may not be
included in procurement contracts, the monitoring and enforcement of such contracts, and
the processing of contract claims, spread among eight titles of SFP. This case implicates
several of those statutes, principally those in SFP Titles 11 and 15 dealing with the
structure and procedure for the resolution of procurement disputes.
Both the structure and the procedure hinge on the definition of three terms that
shape the universe we are dealing with – procurement, procurement contract, and contract
claim. SFP § 11-101(n) defines “procurement” as including the process of “buying or
otherwise obtaining supplies, services, construction [and] construction related services”
as well as “the solicitation and award of procurement contracts and all phases of
sovereign immunity in a contract action, in a court of the State.” It is a distinction without a difference, however. In ARA Health v. Dept. of Public Safety, 344 Md. 85, 92 (1996), the Court held that the Legislature may “waive[ ] immunity either directly or by necessary implication, in a manner that would render the defense of immunity unavailable,” and treated § 12-201 as a waiver. See also Katz v. Washington Sub. San. Comm’n, supra, 284 Md. at 507, n.2. 14 procurement contract administration.” With exceptions not relevant here, SFP § 11-
101(o) defines “procurement contract” to mean “an agreement in any form entered into
by a unit for procurement.” Those two definitions obviously need to be read together.
The third critical term is “contract claim,” which is defined in SFP § 15-215 (a) as “a
claim that relates to a procurement contract” and includes “a claim about the
performance, breach, modification, or termination of the procurement contract.”
The structure and procedure begin with the procurement officer, who is the
individual authorized by the agency (unit) to enter into, administer, and make
determinations and findings with respect to a “procurement contract.” SFP § 11-101(o).
With respect to construction projects, this is a two-step process. First, the
contractor must file a written notice of a claim with the procurement officer within 30
days after the basis for the claim is known or should have been known. SFP § 15-219(a).
Within 90 days after submitting that notice, the contractor must submit “a written
explanation that states the amount of the contract claim, the facts on which the contract
claim is based, and all relevant data and correspondence that may substantiate the
contract claim.” SFP § 15-219 (b). See also COMAR 21.10.04.02. The agency then has
a fixed time, depending on the amount of the claim, to investigate and render a decision
on the claim. SFP § 1-219 (d)(2). With an exception not relevant here, a contractor may
appeal an unfavorable decision to MSBCA within 30 days after receipt of the decision or
a deemed denial. SFP § 15-220.
15 Both parties appear to agree that only a “contractor” – a person who has been
awarded a procurement contract – may submit a contract claim and that Brawner
qualifies as such a person. They also appear to agree, and, as we shall note infra,
MSBCA has implicitly recognized as well, that a prime contractor may file, as a pass-
through, a claim by a subcontractor, although we are unable to find any statute or
COMAR regulation that even mentions, must less approves, such a procedure and none
has been called to our attention by the parties.
As we have observed, however, Faddis no longer relies on such a procedure but
insists that it was a procurement contractor in its own right. Its position arises from
SHA’s certification of the Downingtown plant and its acceptance of the sample panel
supplied by Faddis in September 2013. Those events, it maintains, constitute “an
agreement in any form entered into by a unit for procurement,” which thus constituted a
“procurement contract” that was entered into by a procurement agency for the acquisition
of construction or construction-related services. The Circuit Court stressed that those
events made Faddis a contractor not just for this particular SHA project but for all SHA
noise control projects.
SHA, of course, takes a very different view, insisting that “procurement contract”
means a contract entered into directly between the procurement unit and the contractor
for a particular project or set of projects. Mere approval of a company’s product as being
acceptable for some future project or even a project for which the unit has already
selected and contracted with another contractor does not make that company a
16 procurement contractor with standing to make a claim. In the proceeding before the
MSBCA, Faddis admitted that its compensation for supplying the panels would come
from Brawner, not SHA. Its purchase order subcontract confirms that point. By
interlineation, it precludes “set-offs” and specifies that “Buyer [Brawner] shall pay seller
[Faddis] for all products ordered, produced & shipped regardless of payment to buyer by
owner [SHA].”
Neither side cites a case that controls this issue, and we have found none. There
are, however, two prior decisions of MSBCA that are relevant and that were relied on by
MSBCA in this case. Appeal of Jorge Company, Inc. involved a sub-subcontractor
whose claim was rejected by the Mass Transit Administration and who appealed to
MSBCA. The Board dismissed the appeal for lack of jurisdiction, holding that, as the
statute defined a contractor as “any person having a contract with a State agency” and as
Jorge did not have such a contract, it was not entitled to appeal to the Board. The Board
observed that, ordinarily, it could dismiss the appeal “without prejudice to the right of the
subcontractor to refile its appeal in the name of the prime contractor,” but declined to do
so because the claim also was untimely.
That is the case in which MSBCA, at least implicitly, recognized the pass-through
procedure for presenting claims of subcontractors. The rulings in Jorge were confirmed
by MSBCA in Appeal of Davidsonville Diversified Services, MSBCA 1339 (1988).
There, too, a subcontractor was on a SHA project. When its subcontract was terminated
by the prime contractor, it filed an appeal to MSBCA based on SHA’s approval of the
17 termination, without ever filing a claim with SHA. It argued that, by reason of the
extensive day-to-day control over its work by SHA’s field engineer, an implied contract
had been created between it and SHA. Citing Jorge, the Board reaffirmed the conclusion
that a subcontractor that does not have a contract with a State agency cannot maintain the
appeal in its own name. It concluded as well that it had no jurisdiction over implied
contracts, but only written ones with a procurement agency. Citing yet another of its
decisions, in Boland Trane Associates, Inc., MSBCA 1084 (1985), it stated:
“Since the Legislature sets the terms under which it waives sovereign immunity, it may prescribe what type of contracts with the State may properly be within the ambit of this Board’s jurisdiction and what contracts are to be excluded.”
Pre-approval of eligibility to provide materials, work, or services does not, in our
view, constitute a contract to do so. The State procurement law and regulations provide
for the pre-approval or certification of various classes of would-be contractors or their
products.4 Pre-approval of an entity’s status or products – of eligibility to act as a
supplier or even a preferred supplier – does not make the entity a procurement contractor
if it is not, in fact, selected by a procurement agency, through a written contract, to
provide materials, work, or services to the agency. Many of those entities may end up as
4 See, for example, (1) SFP Title 14, Subtitle 2 and COMAR 21.11.01 providing for the certification of small businesses eligible for preference under the Small Business Preference Program; (2) SFP Title 14, Subtitle 3 and COMAR 21.11.03. providing for the certification of minority businesses eligible for participation in Minority Business Enterprise Program; (3) SFP 14-415, providing a preference for certified recyclers. 18 subcontractors or sub-subcontractors that have no direct contract with the procurement
agency.
We note as well COMAR 21.10.04.02D, dealing with contract claims and
disputes, that requires each procurement contract to provide notice of the time
requirements for filing claims, acceptable methods of filing a claim, and limitations on
filing claims electronically, none of which were part of the pre-approval or certification
of Faddis’s Downingtown plant or acceptance of the test panel.
From a fair and reasonable construction of the statutes and COMAR regulations,
we believe that MSBCA was correct in its conclusion, as a matter of law, that Faddis had
no procurement contract with SHA and, as a result, was not a procurement contractor
entitled to file an independent claim with SHA or to appeal to MSBCA. Faddis’s own
assertion of that proposition in its Federal complaint against Brawner powerfully supports
that conclusion, although we do not rely on it because we do not need to do so.
That leaves the question of whether a timely claim was made on Faddis’s behalf
by Brawner. We start with the requirement in SFP § 15-219 (a) that, with respect to
construction contracts, a contractor must file written notice of a claim within 30 days
after the basis for the claim is known or should have been known and the requirement in
§ 15-219 (b) that support for the claim itself must be filed within 90 days after
submission of the notice of the claim.
19 As noted, the court believed that there was disputed evidence on that issue that
required a full evidentiary hearing. SHA acknowledged Brawner’s forwarding of
Faddis’s Federal Complaint on August 11, 2015 as a Notice of Claim “regarding the
matter of Faddis Concrete, Inc. v. Brawner Builders, Inc.” The question is whether there
was evidence of any earlier notice of claim by Brawner on behalf of Faddis.
Correspondence between Faddis and SHA that was not part of any submission by
Brawner doesn’t count.
Three documents are dispositive. The first is Faddis’s June 23, 2014 letter to
Brawner reciting, at least in general terms, Faddis’s damages from the actions of SHA
and requesting that Brawner forward that letter to SHA and advise SHA of the damages
suffered by Faddis. That shows the latest date when Faddis and Brawner both were
aware that Faddis had a claim that needed to be presented on its behalf by Brawner.
The second document is Brawner’s May 8, 2014 letter to SHA, responding to Mr.
Coyne’s May 2 letter informing Brawner of SHA’s conclusions regarding the
unacceptability of Faddis’s panels. In that May 8 letter, Brawner essentially said that
“it’s not our problem.” The letter acknowledged SHA’s position, advised that Brawner
and Faddis both had been harmed by SHA’s conduct, and asserted that “we reserve our
rights” to extended contract duration and monetary compensation “but are not requesting
either at this time but reserve our right to do so should it become necessary.” Though
recognizing that, in considering a summary disposition, the Board needed to resolve all
inferences in favor of Brawner and Faddis, the Board nonetheless concluded that
20 “nothing in [that] language could be construed to be a proper notice of Faddis’ claim by
Brawner to [SHA].” We agree. It is a direct negation of any attempt to make a claim at
that point.
The third document is Faddis’s Federal Court complaint, filed July 16, 2015,
which fully supports that conclusion by the Board. In that Complaint, Faddis alleged that
Brawner was obligated to pass through all of Faddis’s claims against SHA and not
impede Faddis’s right of recovery (¶ 33), that Faddis had provided multiple timely and
proper notices to Brawner with requests that they be presented to SHA (¶¶ 37, 38), and
that “for reasons still undisclosed to Faddis, upon information and belief, Brawner
refused to act, as of the date of this Complaint, continues to refuse to facilitate the pursuit
of any claims by or on behalf of Faddis against SHA.” (¶ 43). There can be no clearer
admission that, as of that date, no written pass-through notice of claim had been filed by
Brawner on behalf of Faddis.
It is evident, then, that Brawner failed to file the notice of claim within 30 days
after the basis for Faddis’s claim was known to Brawner, in violation of SFP 15-219 (a)
and COMAR 21.10.04.02B. The COMAR regulation states explicitly that “[a] notice of
claim, that is not filed within the time prescribed in Regulation .02 of this chapter shall be
dismissed.” (Emphasis added). There is no exception to that statement and no ambiguity
as to its meaning. Following its earlier decision in Appeal of David A. Bramble, Inc.,
MSBCA 2823 (2013), the Board held that provision mandatory. That is a reasonable
construction of the COMAR regulation.
21 We therefore conclude that there was no flaw in the Board’s findings of fact or
conclusions of law or in the entry of a summary decision. The relevant documents speak
for themselves. We acknowledge the problem that subcontractors may face when they
have a legitimate claim and the prime contractor, whether negligently or deliberately,
fails or refuses to file a timely claim on the subcontractor’s behalf. On the other hand, as
SHA acknowledged in oral argument, there may be circumstances where the prime
contractor could have a conflict of interest in filing a pass-through claim. There may be
ways to deal with that problem without allowing persons having no direct contractual
relationship with a procurement agency to file claims against that agency, but any
solution must come from the Executive or the Legislative Branch.
JUDGMENT REVERSED; CASE REMANDED TO CIRCUIT COURT FOR BALTIMORE CITY FOR ENTRY OF JUDGMENT AFFIRMING DECISION OF MARYLAND STATE BOARD OF CONTRACT APPEALS; APPELLEE TO PAY THE COSTS.