Duane Morris’ Charles Fastenberg to Present Lorman Educational Services Webinar on “Understanding New York Public Contracts and Procurement Regulations”

Duane Morris special counsel Charles Fastenberg of the firm’s New York office will present the Lorman Educational Services webinar, “Understanding New York Public Contracts and Procurement Regulations,” on Thursday, October 6, 2016, from 1:00 p.m. to 2:30 p.m. (Eastern time). This webinar will provide insights for contractors and vendors so they are aware of unanticipated issues they may face when submitting bids for contracts.

For more information, please see the event posting on the Duane Morris website.

“Illegal But Equitable” To the Rescue?

At the continued urging of a New York City official, and to meet certain deadlines, a contractor performed substantial quantities of work for the City before the contract was signed, and without the contract even having been publicly bid. The work, which was satisfactorily performed, called for the construction of “close to home” housing facilities for youths adjudicated as delinquents by the Family Court. At the point at which approximately two thirds of the price had been paid to the contractor, the contract – – by this time signed – – could not be registered with the Comptroller’s office because it had not been publicly bid and thus was “illegal.” Consequently, the contractor’s then pending requisitions for approved work could not be paid.[i]

The contractor discontinued its work and filed an action against the City for breach of contract based on non-payment of the pending requisitions. However, the action was dismissed on the ground that the contract was illegal and unenforceable for not having been publicly bid; and the contractor’s related claims, including quantum meruit, were dismissed on related grounds. Notwithstanding its dismissal of the claims, the court noted that in urging the contractor to perform the work without a public bidding of the contract, the City “acted unlawfully and treated… [the contractor] unfairly.”[ii]

The “illegal but equitable” provision of the New York City Administrative Code, §7-206, provides a possible remedy in this scenario. Section 7-206 provides that a claim against the City may fully or partially be paid if the Comptroller first certifies that the claim “is illegal or invalid, but that it is equitable and proper that such claim be paid in whole or in part.” While payment under the “illegal but equitable” theory is discretionary with the designated City officials, §7-206 nevertheless should be considered where an irregularity in the formation of a contract with the City impedes payment for the work provided.[iii]

[i] Michael R. Gianatasio, P. E., P.C. v. City of New York, 2016 N.Y.Misc. LEXIS 3110 (Sup. Ct., N. Y. Co., Aug. 26, 2016)

[ii] The City had designated a private party – – the manager of the youth housing facilities that were being built — as the entity that would enter into the construction contract with the contractor. This, arguably, would have dispensed with the need for public bidding and the other formalities that are required for contracts entered into with a governmental body. However, the City itself mistakenly signed the contract, thus triggering the need for public bidding and other public contract requirements.

[iii] See also Prosper Contracting Corp. v. Bd. of Educ., 73 Misc.2d 280 (Sup. Ct., N. Y. Co., 1973), aff’d, 43 A. D.2d 823 (1st Dep’t 1974), recognizing a contractor’s equitable position in a similar fact pattern.

Duane Morris Attorneys Contribute to Construction & Engineering Law 2016

Charles Lewis and Jeffrey Hamera have authored a chapter on USA Construction Law in the recently published book, International Comparative Legal Guide to: Construction & Engineering Law 2016

Construction & Engineering Law covers common issues in construction and engineering laws and regulations – including making construction projects, supervising construction contracts, common issues on construction contracts and dispute resolution – in 29 jurisdictions.

The USA chapter includes the following sections: 1. Making Construction Projects; 2. Supervising Construction Contracts; 3. Common Issues on Construction Contracts; 4. Dispute Resolution.

To read the full text of the chapter online, please visit the ICLG website.

Is a Public Contractor Entitled to an Administrative Review Before Being Debarred? Not Necessarily

A vendor to the City of New York was terminated from its existing contracts and disqualified from future contracts following internal City correspondence and a front page article in the New York Times indicating alleged irregularities in the vendor’s procurement of certain City contracts. The vendor filed an action in federal court claiming, among other things, deprivation of its liberty interest without due process under the 14th Amendment and seeking injunctive relief. The ground for the liberty interest claim was that the City in effect debarred the vendor on the spot, without initiating the administrative reviews that are called for by the City’s own procedures. The procedures in question were designed specifically to provide “due process” to vendors whose eligibility for City contracts is in question.[i]

The district court granted the vendor’s request for injunctive relief, but the Second Circuit reversed. The Second Circuit held that even though no administrative review had been undertaken prior to the debarment, the vendor nevertheless was afforded due process since it could have filed an Article 78 proceeding in state court challenging the debarment after the debarment was effectuated; that this is an adequate “post-deprivation” remedy. Where the deprivation of constitutionally protected rights is random or unauthorized, and a pre-deprivation remedy is not available, a post-deprivation remedy, if “meaningful,” may suffice.[ii]

[i] See Hellenic Amer. Action Neighborhood Action Committee v. City of New York, 933 F. Supp. 286 (S.D.N.Y.), rev’d 101 F.3d 877 (2d Cir. 1996), cert. dismissed, 521 U.S. 1140 (1997).

[ii] Where the deprivation or debarment is not “random” or “unauthorized,” but is pursuant to established procedure, a “post-deprivation” remedy may not be sufficient. See A.F.C. Enterprises, Inc. v. NYC School Constr. Auth., 2001 WL 1335010, * 14-16 (E.D.N.Y., Sept. 6, 2001). In view of the holding in Hellenic that “due process” had been provided, the Second Circuit did not reach the issue whether the plaintiff’s liberty interests had been violated.

No-Prejudice Standard For Application Of Public Construction Contract Notices Now Required by New York

New York’s State Legislature has just passed a bill that would require a no-prejudice standard be applied in determining the application of notice provisions in public construction contracts. [1]

The bill amended current statutes [2] so as to require that unless the public owner can show they have suffered material prejudice as a result of a contractor’s (or/and subcontractor’s) failure to provide timely notice, rights are not barred. If the required notice is received more than 180 days after the time required under the contract, the burden to establish no-prejudice shifts to the contractor/subcontractor.

The Legislature Memo prepared to explain and support the bill referred to current notice provisions as one-sided and unfair “gotcha” provisions. The Memo further contended that some public owners were getting “free work” when contractors or subcontractors are barred from pursuing claims due to non-compliant notices.

Another significant element of the bill appears in the definitional section where it is provided that a “public owner’s actual knowledge of the events in question shall preclude a claim of material prejudice due to any lack of notice.” Some city and state contracts often specifically provide that actual knowledge cannot relieve contractors of the strict requirements of the notice provisions.

The bill will not become effective, however, until 180 days after it is signed by the Governor and becomes law and then only as to contracts awarded after that date.
The text of the bill is here .

1. The bill is A10136 and S6906 which passed on June 18, 2016.
2. The bill amends the Public Authorities Law, the General Municipal Law, the Public Service Law and the State Finance Law.

Department of Labor’s Expansive Interpretation Of The Davis-Bacon Act Is Struck Down

In District of Columbia v. Department of Labor, No. 14-5132 (D.C. Cir. April 5, 2016), the U.S. Court of Appeals for the District of Columbia Circuit struck down the U.S. Department of Labor Administrative Review Board’s overly expansive and unsupported interpretation of that statute as applied to the construction of a private high end commercial, retail, and residential project on land leased from the D.C. Government. The D.C. Circuit, applying the plain language of the statute that mandates prevailing wages for construction workers on government projects, stated that in order for the Davis-Bacon Act to apply there must be (1) a construction contract entered into by the District of Columbia or the United States Government involving (2) a public work. Continue reading Department of Labor’s Expansive Interpretation Of The Davis-Bacon Act Is Struck Down

Battery Park City Authority Seeks On-Call Contractor

The Hugh L. Carey Battery Park City Authority is seeking an on-call general construction contractor for 2016. The notice states in part:

“Tender Details: Tender are invited for Provide on-call general construction services. The On-Call GC Services shall include, but not be limited to: (1) general interior construction; (2) civil/site work including excavation; (3) emergency response demolition and repairs, if necessary; (4) small-scale construction and demolition work; (5) testing/probes; (6) masonry; (7) miscellaneous repairs and alterations; (8) leak repair and waterproofing; and (9) provision of subcontractors for MEP and other specialized work as needed.”

A pre-proposal meeting is scheduled for March 30, 2016. Questions must be submitted by email by April 6, 2016. Interest must be expressed by May 4, 2016.

The notice from the Authority can be found at
Tender Notice: HUGH L. CAREY BATTERY PARK CITY AUTHORITY Seeks “2016 On-Call General Construction Contractor”

NYC Issues Crawler Crane Safety Requirements

Following another recent crane accident, New York City issued interim regulations addressing crawler crane safety requirements. These now include obligations to monitor forecasts and wind speed measurements, cease operations when wind speed thresholds are exceeded, generally 30 mph, with exceptions. There are additional requirements for crawler cranes with special configurations including prohibitions of use and the required presence on site of a licensed professional engineer. End of day records are required to be created by the operator. Notifications are required to be provided to the building department when twelve specified events regarding the use of a crawler crane occurs. The requirements can be found here http://www1.nyc.gov/assets/buildings/pdf/commissioner_order_crane_safety_req.pdf

Moody’s: U.S. Public Private Partnership Market (P3s) Set For Growth

According to a Moody’s Investors Service, the U.S. market for public-private partnerships (P3s) is equipped for growth and positioned to become one of the world’s largest. According to a new report from Moody’s important factors like availability of new state and federal resources, political support, the underlying legal structure to enforce P3 contracts and a strong capital market shape the necessary foundations for steady growth.

“State-level P3 activity has risen over the last three years, and nearly all P3 projects have been completed early or on time,” said John Medina, Moody’s VP – Senior Analyst “The need for more inter- and intra-government P3 best practice sharing remains key for the US P3 market’s long-term development compared to other markets where infrastructure development and funding may be more centrally aligned.”

The announcement of Moody’s Investors Service’s report can be seen here.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law.. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

Amendments to Rules of the Commercial Division of the New York Supreme Court Now in Effect

By Michael L. Chartan, partner in the Duane Morris LLP New York office

Effective December 1, 2015, the Commercial Division of the Supreme Court of the State of New York, County of New York amended its rules. First, home improvement construction contract disputes (one to four family homes or individual units  in any residential building including cooperatives and condominiums ) will not be heard by the Commercial Division irrespective of the dispute involving $500,000 or more. Second, the Commercial Division will hear, pursuant to article 75 of New York’s Civil Practice Law and Rules,  applications to stay or compel arbitration and to affirm or disaffirm awards and injunctive relief irrespective of the $500,000 monetary threshold provided the arbitration agreement requires the arbitration to be heard outside the United States.

The impact of these amendments will be to eliminate access to the Commercial Division for owners and contractors among others where the dispute involves a home improvement contract. At the same time, the Commercial Division will open its doors to arbitration proceedings conducted outside the United States thereby affording parties access to a specialized court in Manhattan. Parties are still free to agree in their arbitration agreements where issues related to arbitration will be heard. If the parties provide for these issues to be heard in New York County, then the Commercial Division will be available to them.

To read the full text of the Administrative Order, please visit the New York Courts website.