A recent decision of the state Appellate Division in Albany is bad news for taxpayers and those concerned with fairness in the awarding of state contracts.
The Appellate Division essentially slammed the courthouse door in the face of a local contractor who challenged the state Department of Transportation on contract terms that required a project labor agreement.
PLAs typically require 85 percent of workers be hired from union halls, which often means open-shop contractors won't bid, since they can't use their own employees.
The court said the contractor, Lancaster Development of Richmondville, wasn't allowed to challenge the contract rules — relying on legal "standing" principles — because it didn't submit a bid. Only the state's highest court, the Court of Appeals, can remedy this issue in order to protect taxpayers.
Traditional legal requirements pertaining to standing are important to ensure that only parties who are actually affected by the matter or controversy are able to litigate. However, if the lower court ruling stands, there is little that will stand in the way of government agencies essentially tilting contract rules to ensure that only favored bidders compete for contracts.
Why is the Lancaster case important? The answer is simple: Taxpayers benefit from open, fair competition for state contracts. Vendors have to make sure they make their most reasonable bid to keep taxpayer costs low. Procurement rules ensure both a level playing field and that public agencies don't use arbitrary contract rules to favor some bidders over others.
The case involved a contract for the Exit 122 highway project in Orange County and was originally advertised for bid in February 2011. The DOT commissioned an outside consultant to evaluate whether a PLA was desirable for this contract. The consultant issued its analysis in January 2011 and found no basis for using a PLA on this job. Then, a month later, with barely any change the report, the consultant recommended a PLA. It was obvious that someone in state government instructed the consultant to alter its recommendation.
Then, in March 2011, the DOT issued a contract amendment instructing prospective bidders to agree to sign a PLA when they submitted bids. Lancaster, a non-union, open-shop firm, submitted its bid with explicit provisions that it wouldn't sign a PLA. When bids were opened, Lancaster was low bidder at $68 million, $4.5 million below the next lowest bidder.
DOT rejected Lancaster's bid as non-responsive, even though it had extensive heavy highway construction experience around the state and a good record of performance on state contracts.
Lancaster successfully litigated against the DOT on its initial attempt to require a PLA. A blistering opinion by Supreme Court Justice Joseph Teresi, threw out that contract after the DOT refused to award the contract to Lancaster despite the fact that it was the low bidder.
Rebuffed by Judge Teresi, DOT had a different consultant firm do another PLA study; the firm recommended a PLA, but never even referenced Lancaster's prior low bid or the bids submitted by other firms. The DOT proceeded to issue new bid specifications requiring a PLA. Lancaster again sued — this time before the bid date — and did not bid because it would have risked being deemed "non-responsive" by DOT.
But, the lower court said Lancaster had no right to contest the bid terms since it didn't bid — even though legal "standing" is determined as of the date the lawsuit is commenced, and on that date, since it was before the bid date, it would have been impossible for anyone to have been a bidder. Submitting a bid on a contract with an unlawful PLA would be a futile and expensive act for an open-shop contractor — that is not and should not be the "price" of standing.
The Exit 122 job in question is still not completed, and because of DOT's actions, the project is now costing taxpayers over $90 million. Unless the Court of Appeals takes up this case, taxpayers and state contractors will lose their ability to challenge runaway public agencies when they unfairly draft wasteful contract specifications. This will open the door to pay-to-play favoritism, higher costs and public scandal.
Someone in state government is attempting to rig the Exit 122 contract. The Court of Appeals needs to stop them in their tracks.