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.
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.
