Judge Bars Price Advantage To Minority Bids in New York


A State Supreme Court judge has ruled that the city cannot offer a 10 percent "price preference" to bidders for municipal contracts that are owned by women or minorities.

The ruling, issued on Monday by Justice Walter B. Tolub of Manhattan, came less than a week after Mayor Rudolph W. Giuliani issued an executive order eliminating the price preference, saying it cost taxpayers too much money.

Justice Tolub’s decision came in a lawsuit filed by the Atlantic Legal Foundation, a nonprofit organization that says it represents issues involving individuals’ rights, that had sued on behalf of Seabury Construction Corporation of Yonkers. Seabury bid last year for three contracts, totaling $1.7 million, from the city’s Department of Environmental Protection to repair waste-water treatment plants.
Although the Yonkers company submitted the lowest bids for each of the contracts, the city awarded the work to bidders that were joint-venture enterprises involving concerns owned by minorities. Although the selection of contractors was announced in June, no work has been performed.
Justice Tolub found that the city, in rejecting Seabury’s low bids, had violated a state law that requires it to accept the lowest bids for city work as long as the bidders can demonstrate that they are capable of performing the work required.

"This is a victory for the time-honored method of awarding contracts," said Douglas Foster, an Atlantic Legal Foundation lawyer who represented Seabury. He said the ruling would "prevent favoritism and give the taxpayer the biggest bang for his buck."

Colvin W. Grannum, a lawyer on the staff of the city’s Corporation Counsel who represented the Department of Environmental Protection in the case, said yesterday that his office had not yet decided whether to appeal the ruling.

But at City Hall Mayor Giuliani’s press secretary, Cristyne Lategano, said the court decision buttressed the Mayor’s belief that the price preference rule, begun in mid-1992, had been a mistake on both financial and legal grounds.

Justice Tolub did not order the city to pay monetary damages to Seabury, but instead instructed it to return to square one in the bidding process for repairs on its water-treatment plants. The judge said the city could either simply award the work to Seabury, or begin the bidding process anew without offering anyone a price preference.

One open question yesterday was whether the ruling in favor of Seabury would lead to suits by other companies that were denied city work under the program even though they submitted low bids. Mr. Grannum said he expected "few, if any" other suits. One reason, he said, was that in most of the contracts, besides that awarded to Seabury, work had already begun on projects or services had been delivered. Therefore, he said, lawsuits would not lead to new negotiations of the original contracts.

In a report issued by the administration of Mayor David N. Dinkins in September, the city said its affirmative action program, then little more than a year old, had sharply increased the participation in city work by concerns certified as owned by women and minorities. With $270 million allocated for contracts during the prior year, it said, the certified companies had been awarded 17.5 percent of the work, up from 9 percent the year before.

The city did not disclose how many companies had benefited from the price preference rule. But it did say that it had paid $2.7 million, or 1 percent of the budget for contracts, more during the year because of the selection of companies that had not offered the lowest bids.

The city’s goal under the affirmative action program is to have concerns owned by women and minorities performing at least 20 percent of its contractual work. Mr. Giuliani said last week that he had not retreated from that goal, even though he had eliminated a price preference.

Thomas J. Lueck