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A05991 Summary:

BILL NOA05991
 
SAME ASNo Same As
 
SPONSORPichardo
 
COSPNSRSayegh
 
MLTSPNSR
 
Add §103-h, amd §§103 & 35, Gen Muni L; add §164-a, St Fin L
 
Ensures compliance with competitive bidding law by municipalities.
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A05991 Actions:

BILL NOA05991
 
03/04/2021referred to local governments
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A05991 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A5991
 
SPONSOR: Pichardo
  TITLE OF BILL: An act to amend the general municipal law and the state finance law, in relation to ensuring compliance with the competitive bidding law   PURPOSE OR GENERAL IDEA OF BILL: To ensure that local governments and their taxpayers receive the cost savings benefits of competitive bidding in local government purchasing by providing political subdivisions with comptroller's opinions on specific procurement actions and by holding political subdivisions accountable for complying with the competitive bidding law.   SUMMARY OF SPECIFIC PROVISIONS: Section one of the bill names this law the "Municipal Competitive Bidding Enforcement Act." Section two creates a new General Municipal Law § 103-h, which provides for the Comptroller to issue an opinion as to the legality of a political subdivision's proposed procurement action, authorizes the Attorney General to enjoin an illegal procurement action, allows a good faith bidder who should have won a contract to sue for damages, establishes a civil penalty for a willful and intentional violation of the law, and sets a fee for initiating a Comptroller's opinion. Section three clarifies how brand names may be used in bid specifications. Section four clarifies that bids are public records. Section five establishes that a political subdivision shall respond to a Comptroller's audit that finds a violation of the competitive bidding law. Section six provides that the office of general services should supply bid specifications to political subdivisions.   JUSTIFICATION: There is currently no effective means of ensuring that local governments comply with the municipal competitive bidding law, which is designed to keep the cost of public contracts as low as reasonably possible. General Municipal Law § 103(1) requires that a political subdivision competi- tively bid public works contracts of more than $20,000 and purchase contracts of more than $10,000. The term "political subdivision" includes a municipal corporation, school district, district corporation and BOCES. GML § 100(1). The purpose of the competitive bidding law is "to assure the prudent and economical use of public moneys for the bene- fit of all the inhabitants of the state and to facilitate the acquisi- tion of facilities and commodities of maximum quality at the lowest possible cost." GML § 100-a. The means to this end is to buy in the market, with the benefit of market forces on prices. The businesses that bid on contracts have an important role to play in this scheme. While the competitive bidding statute was not enacted for the benefit or enrichment of bidders "logic and experience teach that competition for public contracts may be promoted only by fostering a sense of confidence in potential bidders that their bids will be fairly considered." FISCHBACH & MOORE V. N.Y.C. TRANSIT AUTHORITY, 79 A.D. 2d 14, 20. Several studies have found a high incidence of violations of the compet- itive bidding law. The staff of the Assembly Committee on oversight, Analysis and Investigation examined audits of individual municipalities that the Comptroller filed during a thirteen month period in 1991-92.Out an total of 852 municipalities audited, the Comptroller found compet- itive bidding violations in 206, or 24%, of the municipalities. The kinds of violations included improper bid splitting, abuses of change orders, overly restrictive bid specifications and simply not bothering to competitively bid when it was required. Many of the municipalities were repeat offenders; in 27 cases a previous Comptroller's audit had cited the municipality for violating the competitive bidding law. The Oversight Committee survey confirmed findings that the comptroller had made in a 1988 study entitled: STATEWIDE SURVEY OF LOCAL GOVERNMENT: PURCHASING PRACTICES: The Comptroller found that: The results of our survey confirmed the continuation of a long-standing problem with municipal purchasing prac- tices, namely the failure to competitively bid those purchases required by law.... The seriousness of the problem is demonstrated by the fact that many of our regularly scheduled audits have repeatedly disclosed instances where items should have been competitively bid but were not. SURVEY, at 7. In 1994, Assemblyman Robert K. Sweeney issued a report which also found violations of the competitive bidding laws by school and local government officials. The Assemblyman's report focused partic- ularly on abuses involving overly restrictive bid specifications that limited bidding to only specified brand names. The report noted the lack of any effective mechanism for assuring compliance-with the law. The absence of an enforcement mechanism is a key element in how the competitive bidding law can be ignored. The Comptroller does perform audits of municipalities and those audits do address competitive bidding issues. However, when the Comptroller does find, violations, he has no power to require that the situation be corrected. Indeed, .a municipality is not even required to respond to a Comptroller's audit. See GML § 35 Subd. 4(b) (1). The Attorney General does not have jurisdiction over governmental violations of the compet- itive bidding law, unless the abuse rises to the level of criminal conduct, such as bribe-taking, A frustrated bidder or taxpayer may sue to stop a contract, but a frustrated bidder has no right to contract award or to damages. If the court finds an illegally let contract, the municipality can generally just redo the bidding and contracting proc- ess. There is no meaningful incentive for the frustrated bidder to bear the expense of litigating to enforce the competitive bidding law. See, E.G., JANVEY & SONS. COUNTY OF NASSAU, 60 N.Y.2d 887. The bill approaches the problem in two ways. First, the bill tries to help poli- tical subdivisions to follow the law by providing them with informed opinions on the legality of procurement actions and with particularized information on proper bid specifications. Secondly, the bill creates an enforcement mechanism that holds a political subdivision accountable when it ignores warnings of illegal conduct. The cornerstone of the bill (GML § 103-g) is a new procedure that allows a taxpayer or frustrated bidder to obtain a Comptroller's opinion on the legality of a proposed procurement action. The Comptroller has a great deal of expertise in municipal procurement due to the Comptroller's auditing in this area. The proposed Comptroller's opinions, like municipal audits, would enable the Comptroller to better perform his duty of supervising the accounts of political subdivisions. If the Comptroller opines that the proposed procurement action is illegal, the hope is that the political subdivi- sion would refrain from so acting. If the political subdivision chooses to disregard the Comptroller's warning, there may be two consequences. First, the Attorney General is authorized to sue to enjoin the procurement action. Second, a frustrated bidder, who should have won the contract, may sue for damages of three times the amount of its lost profits. In either case, the court would grant relief only if the court independently finds that the procurement action was illegal. The potential for money damages does entail the possibility that the political subdivision, and its taxpayers, would experience a monetary loss in the short term. This is the incentive for a political subdivision to adhere to the law. However, it is expected that adherence to the competitive bidding laws in the long term will result in a net gain for the political subdivision and its taxpayers, recognizing that a primary goal of competitive bidding laws is to ensure for the municipality the best price for the goods being purchased. It bears emphasizing that a municipality may easily avoid any loss simply by abiding by the Comptroller's opinion. The bill (GML § 103-g(4) (b)) also allows a Court to award limited damages to a frustrated bidder when there has been no Comptroller's opinion of illegality and the court nevertheless finds the procurement action to be illegal. In the rare case where a court voids a contract for illegality after a municipality has already received performance, the court ordinarily awards the performing party its costs, which usual- ly results in the municipality saving money off the contract price. The bill allows a frustrated bidder, without a supporting Comptroller opin- ion, to recover no more than the amount saved by the political subdivi- sion by the voiding of the contract. The bill (GML § 103-g (6)) includes a one hundred dollar fee for filing a complaint initiating a Comp- troller's opinion. The fee is designed to fund the Comptroller's work, as well as to provide a mechanism for screening out frivolous complaints. The bill (GML 103-g(5)) also establishes a civil penalty for a govern- mental official who willfully and intentionally violates the competitive bidding law. The problem of overly restrictive bid specifications is specifically addressed in the bill. Section three codifies the case law rule that specifications may not be unduly restrictive and clarifies how brand names may be used in bid specifications. Section six allows poli- tical subdivisions to make greater use of the expertise of the office of general services in developing bid specifications. Other provisions of the bill clarify that bids are public records (section four) and would require a response to a Comptroller's audit finding that a political subdivision violated the competitive bidding law (section five).   LEGISLATIVE HISTORY: 2012: S.3452 - Kruger 01/06/16 referred to local governments   FISCAL IMPLICATIONS: The additional work of the Comptroller will be funded by fees paid by those who avail themselves of the new procedures.   EFFECTIVE DATE: The first of January next succeeding the date on which it shall have become law; provided, however, the amendments to subdivision 2 of section 103 of the general municipal law made by section four of this act shall not affect the expiration and reversion of such subdivision as provided in subdivision (a) of section of part X of chapter 62 of the laws of 2003, as amended, when upon such date the provisions of section five of this act shall take effect.
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A05991 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          5991
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                      March 4, 2021
                                       ___________
 
        Introduced by M. of A. PICHARDO, SAYEGH -- read once and referred to the
          Committee on Local Governments
 
        AN  ACT to amend the general municipal law and the state finance law, in
          relation to ensuring compliance with the competitive bidding law
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  Short  title. This act shall be known and may be cited as
     2  the "municipal competitive bidding enforcement act".
     3    § 2. The general municipal law is amended  by  adding  a  new  section
     4  103-h to read as follows:
     5    §  103-h. Enforcement of competitive bidding law. 1.  Definitions. (a)
     6  "Procurement action" means any transaction which is claimed  to  consti-
     7  tute  a  contract  for public work involving an expenditure of more than
     8  twenty thousand dollars or a purchase contract involving the expenditure
     9  of more than ten thousand dollars which should be awarded to the  lowest
    10  responsible  bidder,  as  provided  by section one hundred three of this
    11  article.
    12    (b) "Good faith bidder" means any person who has submitted  a  bid  in
    13  response to an advertisement for sealed bids, or who could submit a good
    14  faith bid on a procurement action.
    15    2. Comptroller's opinions. Upon a complaint filed by a taxpayer of the
    16  political  subdivision  or by a good faith bidder, the state comptroller
    17  shall issue an opinion on whether a proposed  procurement  action  by  a
    18  political subdivision complies with the competitive bidding requirements
    19  of section one hundred three of this article. The complaint shall speci-
    20  fy the procurement action that is claimed to violate section one hundred
    21  three  of  this article. The taxpayer or good faith bidder shall serve a
    22  copy of the complaint on the political subdivision prior to serving  the
    23  complaint  on  the  comptroller.  Upon the filing of a prima facie valid
    24  complaint with the comptroller, the comptroller shall notify  the  poli-
    25  tical subdivision. Upon receipt of such notice from the comptroller, the
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08336-01-1

        A. 5991                             2
 
     1  political  subdivision may not proceed with the complaint of procurement
     2  action for a period of thirty days. In rendering his or her opinion, the
     3  comptroller may consult  with the office of general services as  to  the
     4  reasonableness  and  validity of any bid specifications. The comptroller
     5  shall issue a written opinion pursuant to this subdivision within thirty
     6  days of such notice to the  political  subdivision  and  shall  promptly
     7  serve  copies  of  the  opinion  on the political subdivision and on the
     8  complaining party.
     9    3. Attorney general. If the comptroller's opinion is that the procure-
    10  ment action would violate section one hundred three of this article, the
    11  comptroller shall transmit a copy of the opinion to the attorney  gener-
    12  al.  Notwithstanding any other provision of law, the attorney general is
    13  authorized to bring a special proceeding in the supreme court to have  a
    14  procurement action enjoined or declared null and void on the ground that
    15  it is in violation of section one hundred three of this article.
    16    4.  Damages  to  good  faith  bidder. A good faith bidder may bring an
    17  action in the supreme court to recover damages and attorney's fees  from
    18  a  political  subdivision,  which  engages in a violation of section one
    19  hundred three of this article. The court shall award damages and  attor-
    20  ney's fees if the court finds that the good faith bidder would have been
    21  the  lowest  responsible  bidder,  but  for  the political subdivision's
    22  violation of section one hundred three of this  article.  The  court  is
    23  authorized  in  any such action to declare an illegally awarded contract
    24  to be null and void.
    25    (a) If the comptroller has issued  an  opinion  that  the  procurement
    26  action  would be in violation of section one hundred three of this arti-
    27  cle and the political subdivision  has  thereafter  proceeded  with  the
    28  procurement action, the measure of damages shall be three times the good
    29  faith bidder's lost profits.
    30    (b)  If the comptroller has not issued an opinion that the procurement
    31  action would be in violation of section one hundred three of this  arti-
    32  cle,  the  measure  of damages shall be the lesser of (i) the good faith
    33  bidder's lost profits and (ii) the difference between the price  of  the
    34  nullified  contract  and  any amount that the court awards to the person
    35  who performed on the nullified contract.
    36    5. Civil penalty. Any person  who  shall  wilfully  and  intentionally
    37  violate  the  competitive  bidding  requirements  of section one hundred
    38  three of this article shall be personally liable for a civil penalty  of
    39  not  more than one thousand dollars. In a proceeding brought pursuant to
    40  this section, the comptroller's opinions and audits may be admitted into
    41  evidence on the issue of the respondent's state of mind,  provided  that
    42  (a)  the opinion or audit was issued prior to the alleged violation, (b)
    43  the opinion or audit was issued no more than  ten  years  prior  to  the
    44  alleged  violation, and (c) the opinion or audit concerned the same kind
    45  of item or same kind of practice as the alleged violation.
    46    6. Complaint fee. Whenever the comptroller  accepts  a  complaint  for
    47  filing  pursuant  to  this  section,  the  comptroller shall require and
    48  collect a fee of one hundred dollars, which shall be paid into the state
    49  treasury and which shall, so far as is necessary, be appropriated  annu-
    50  ally  by  the  legislature to the comptroller to be used in implementing
    51  this article.
    52    § 3. Section 103 of the general municipal law is amended by  adding  a
    53  new subdivision 14 to read as follows:
    54    14.  Except as otherwise expressly authorized by this article, a poli-
    55  tical subdivision shall not require that bids conform to unduly restric-
    56  tive specifications. All  specifications  shall  be  drafted  so  as  to

        A. 5991                             3
 
     1  promote  overall  economy  for  the  purposes  intended and to encourage
     2  competition in satisfying the needs  of  the  political  subdivision.  A
     3  brand  name  may  be  used  as a specification only if the specification
     4  clearly  states that the brand name or equivalent is acceptable. Where a
     5  brand name or equivalent specification is used in  a  bid  solicitation,
     6  the  solicitation  shall  contain explanatory language that the use of a
     7  brand name is for the purpose of describing  the  standard  of  quality,
     8  performance  and characteristics desired and is not intended to limit or
     9  restrict competition. In  any  opinion,  proceeding  or  action  brought
    10  pursuant  to section one hundred three-h of this article, a bid specifi-
    11  cation developed and provided by the office of general services shall be
    12  deemed valid.
    13    § 4. Subdivision 2 of section 103 of the  general  municipal  law,  as
    14  amended  by  section 1 of chapter 367 of the laws of 2014, is amended to
    15  read as follows:
    16    2. Advertisement for bids and offers shall be published in  the  offi-
    17  cial  newspaper  or  newspapers,  if any, or otherwise in a newspaper or
    18  newspapers designated for such purpose  and  may  be  published  in  the
    19  procurement  opportunities  newsletter pursuant to article four-C of the
    20  economic development law. Such advertisement shall contain  a  statement
    21  of  the  time  when  and  place where all bids received pursuant to such
    22  notice will be publicly opened and read and where the  identity  of  all
    23  offerers  will be publicly disclosed, and the designation of the receiv-
    24  ing device if the political subdivision or district has  authorized  the
    25  receipt of bids and offers in an electronic format. Such board or agency
    26  may by resolution designate any officer or employee to open the bids and
    27  offers  at  the  time  and  place specified in the notice. Such designee
    28  shall make a record of such bids and offers in such form and  detail  as
    29  the  board  or  agency  shall prescribe and present the same at the next
    30  regular or special meeting of such board or agency.  All  bids  received
    31  shall be publicly opened and read at the time and place so specified and
    32  the identity of all offerers shall be publicly disclosed at the time and
    33  place so specified. All bids received and opened shall be public records
    34  and  shall be available for public inspection and copying. At least five
    35  days shall elapse between the first publication  of  such  advertisement
    36  and  the  date  so  specified  for  the  opening and reading of bids and
    37  offers.
    38    § 5. Subdivision 2 of section 103 of the  general  municipal  law,  as
    39  amended  by  section 2 of chapter 367 of the laws of 2014, is amended to
    40  read as follows:
    41    2. Advertisement for bids and offers shall be published in  the  offi-
    42  cial  newspaper  or  newspapers,  if any, or otherwise in a newspaper or
    43  newspapers designated for such purpose  and  may  be  published  in  the
    44  procurement  opportunities  newsletter pursuant to article four-C of the
    45  economic development law. Such advertisement shall contain  a  statement
    46  of  the  time  when  and  place where all bids received pursuant to such
    47  notice will be publicly opened and read and where the  identity  of  all
    48  offerers  will be publicly disclosed. Such board or agency may by resol-
    49  ution designate any officer or employee to open the bids and  offers  at
    50  the  time  and place specified in the notice. Such designee shall make a
    51  record of such bids and offers in such form and detail as the  board  or
    52  agency  shall  prescribe  and  present  the  same at the next regular or
    53  special meeting of such board or agency.  All  bids  received  shall  be
    54  publicly  opened  and  read  at  the time and place so specified and the
    55  identity of all offerers shall be publicly disclosed  at  the  time  and
    56  place so specified. All bids received and opened shall be public records

        A. 5991                             4
 
     1  and  shall be available for public inspection and copying. At least five
     2  days shall elapse between the first publication  of  such  advertisement
     3  and  the  date  so  specified  for  the  opening and reading of bids and
     4  offers.
     5    § 6. Subparagraph 1 of paragraph (b) of subdivision 4 of section 35 of
     6  the  general  municipal  law,  as  amended by chapter 692 of the laws of
     7  1989, is amended to read as follows:
     8    (1) Not later than ninety days after  presentation  to  the  governing
     9  board  of  a  report of examination performed by the office of the state
    10  comptroller, or receipt by the governing  board  of  any  report  of  an
    11  external  audit  performed  by  an  independent public accountant or any
    12  management letter in conjunction with such an audit, the governing board
    13  may, in its discretion, provide to the  comptroller,  and  file  in  the
    14  office  of the clerk, or with the secretary if there is no clerk, of the
    15  municipal corporation, industrial development agency,  district,  agency
    16  or  activity, a written response to the findings and recommendations, if
    17  any, in the report or letter. Provided, however, that if such report  or
    18  letter  contains  a finding that the competitive bidding requirements of
    19  section one hundred three of this chapter were violated,  the  governing
    20  board  must  file  a  written  response. In the case of municipal corpo-
    21  rations, industrial development agency, districts,  agencies  or  activ-
    22  ities subject to examination by the commissioner of education, any writ-
    23  ten response shall also be provided to such commissioner.
    24    § 7. The state finance law is amended by adding a new section 164-a to
    25  read as follows:
    26    §  164-a. Providing bid specifications to political subdivisions.  The
    27  commissioner of general services shall provide to any political subdivi-
    28  sion, at no charge, any specification that the commissioner  has  devel-
    29  oped for items to be let for bids in purchase contracts. The commission-
    30  er may develop additional specifications at the request of any political
    31  subdivision  and may provide such specifications to the political subdi-
    32  vision and may charge the political subdivision for the cost of develop-
    33  ing such specifications.
    34    § 8. If any clause, sentence, paragraph, section or part of  this  act
    35  shall  be adjudged by any court of competent jurisdiction to be invalid,
    36  such judgment shall not affect, impair or invalidate the remainder ther-
    37  eof, but shall be confined in its operation  to  the  clause,  sentence,
    38  paragraph,  section or part thereof directly involved in the controversy
    39  in which such judgment shall have been rendered.
    40    § 9. This act shall take effect on the first of January next  succeed-
    41  ing the date on which it shall have become a law; provided, however, the
    42  amendments  to subdivision 2 of section 103 of the general municipal law
    43  made by section four of this act shall not  affect  the  expiration  and
    44  reversion  of such subdivision pursuant to subdivision (a) of section 41
    45  of part X of chapter 62 of the laws of 2003, as amended, when upon  such
    46  date the provisions of section five of this act shall take effect.
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