Contract Preference Violated State Law- Provision for Women, Minorities Ruled Invalid

NEW YORK CITY’S contract award program offering preference to minority-owned and women-owned businesses bidding within 10 percent of a lowest responsible bid violates state law, a state judge in Manhattan has ruled. The decision will be published tomorrow. In Matter of Seabury Construction Corp. v. Department of Environmental Protection (DEP), filed Monday in Supreme Court, New York County, IA Part 2, Acting Justice Walter B. Tolub vacated the agency’s award of contracts to repair three sewage treatment facilities that had been granted last summer to two qualifying joint ventures, the Halcyon Construction Corp./Hirani Contracting Corp. and Biltwel General Contracting Corp./Haider Consulting. But the judge said he did not have the authority to order DEP to award the contracts to the plaintiff, Seabury Construction Corp., the low bidder on each project. He remanded the matter to the agency for further proceedings.

Mayor Giuliani said last week that he would no longer use the affirmative action program, which was added to the City Charter in 1991, to give priority in awarding city contracts to companies owned by minorities or women. The regulations implementing Charter 1304 permit an agency to state in its invitation for contract bids that if a bid is submitted by a firm that has been certified as a minority-owned or woman-owned business enterprise or a qualified joint venture, and the bid is within a "target percentage" (usually 10 percent) of the lowest responsible bid, the agency shall refer the bids to the Mayor or his designee to decide whether it is in the best interest of the city to award the contract to someone other than the lowest bidder.

Mr. Giuliani has indicated he will not exercise that discretionary power. However, Justice Tolub found that the regulation violates General Municipal Law 103, the state law requiring public contracts for more than $ 20,000 to go to the lowest responsible bidder. An exception to the low-bid rule is provided in the General Municipal Law for any local laws adopted before Sept. 1, 1953, or according to a 1981 opinion of the State Comptroller, if a new law is "essentially a mere revision, simplification, consolidation, codification or restatement" of a law adopted before Sept. 1, 1953.

Transfer of Power The city argued that its power to award contracts to someone other than the lowest responsible bidder dated to a charter passed in 1897. The power to bypass the lowest bidder was vested in a Board of Public Improvements which was later replaced by the Board of Estimate and Apportionment. The Board of Estimate was abolished when voters passed a new charter on Nov. 7, 1989, and the power to bypass the lowest bidder was then vested in the mayor.

Justice Tolub defined the issue as whether the transfer of the bypass authority from a quasi-legislative body, the Board of Estimate, to the executive, the mayor, was such a significant change that it was not a mere revision of a pre-1953 statute. And, he concluded that it was.

"[Although] the bypass authority continued in the New Charter is in theory the same as the contained in the Old Charter, the fact that the decision-making process with respect to such authority has been transferred from the Board of Estimate to the mayor alone represents a significant departure from the balance of power originally provided for under the Old Charter," he wrote.

"Under the Old Charter, the bypass authority could only be triggered by a ‘super majority’ vote of the Board of Estimate. On the other hand, the New Charter vests the power to implement the bypass authority in a single individual, namely the mayor or the mayor’s appointee," the judge said.

The change was not a "mere revision [or] simplification" of the old charter because it altered the balance of power rather than simply continued a specific type of governmental power, he said. Thus, the new charter was subject to the competitive bidding requirements of the General Municipal Law.

Seabury construction Corp. was represented by Martin S. Kaufman of the Atlantic Legal Foundation in Manhattan. Assistant Corporation Counsel Colvin W. Grannum appeared for the city defendants.