Petitioners Nelcorp Electrical Contracting Corp., J & K Plumbing and Heating Co., Inc., Piccirilli, Slavik & Vincent Plumbing & Heating, Inc., Empire State Chapter of Associated Builders and Contractors, Luciano Piccirilli, Individually, and Kenneth P. Doris, Individually (hereinafter collectively "petitioners") commenced this Article 78 proceeding seeking a judgment: (1) directing that no bids be taken and no contracts be awarded for a public works project to reconstruct the George Harvey Justice Building in the City of Binghamton; (2) directing that if disposed to let contracts for the project that such bids be drawn in compliance with General Municipal Law and Labor Law; and (3) declaring that the project labor agreement is void and unenforceable.

This special proceeding was commenced upon the filing of an Order to Show Cause dated December 19, 2007 and Verified Petition dated December 18, 2007. By way of said Order to Show Cause, together with a subsequent Amended Order to Show Cause dated January 2, 2008, this court issued a temporary restraining order staying the awarding of any construction contracts on this project pending a determination of this matter. Respondent County of Broome ("County") submitted a Verified Answer dated January 11, 2008 with objections in point of law pursuant to CPLR § 7804 (f).

The court heard oral argument from counsel on January 30, 2008.^[FN1]

The County is the owner of the George Harvey Justice Building located in the City of Binghamton which is the subject of a public works project estimated to cost $16,900,000 (hereinafter the "Project"). The County hired C & S Architects, Engineers & Land Surveyor, PLLC (hereinafter "C & S") to furnish design and construction management services in connection with the Project. The project was divided into two parts that were independently bid. [*2]The first phase of the Project was one of remediation involving interior demolition and asbestos removal. As of the date of this Petition, the first phase has been completed at a cost of approximately $2.8 million.

The second phase of the Project involves reconstruction of the remediated building for an estimated cost of $10.4 million.^[FN2] Separate and apart from this Project, on June 26, 2007, the County had adopted Resolution No. 372 of 2007 establishing a policy that required the consideration of a project labor agreement on any project estimated to cost in excess of $1 million.^[FN3] In light of said Resolution, the County requested that C & S explore the possibility of using a project labor agreement with respect to the second phase of this Project.

At the urging of C & S, the County agreed to retain an engineer, Robert Kukenberger, as a consultant to assist in determining the feasibility of a project labor agreement. Using estimated total labor cost based upon an average wage rate and man hours provided by the County and C & S, Mr. Kukenberger prepared an estimate of potential cost savings based on the draft PLA by way of a memorandum dated October 8, 2007 (hereinafter "Kukenberger Memorandum"; Answer, Exhibit B). The Kukenberger Memorandum, which will be reviewed in depth hereinbelow, estimated a potential savings of $392,000 with the implementation of the PLA.

Based upon the Kukenberger Memorandum the County prepared a "Due Diligence Report" in the form of a four page letter from Henry D. Weissmann, Commissioner of Broome County Public Works, for consideration by the Broome County Legislature (Petition, Exhibit E). The Due Diligence Report will be reviewed in depth hereinbelow.

Based upon said Due Diligence Report, on November 20, 2007, the Broome County Legislature adopted Resolution No. 707 of 2007 authorizing the use of a PLA on phase two of this Project (Petition, Exhibit E).

Phase two of the Project moved forward quickly when the County approved bid documents consisting of three spiral bound volumes dated November 26, 2007, as well as various drawings and an Addendum No. 1 dated December 13, 2007 (hereinafter collectively "Bid Documents"). The Information for Bidders set forth that a PLA had been negotiated and executed between the County and various unions requiring that all work to be performed on said Project would fall within the coverage of the PLA. The bid opening date was scheduled for December 19, 2007 at 2:30 p.m., but subsequently stayed by these proceedings. [*3]

After the commencement of this special proceeding, Mr. Kukenberger submitted a revised set of cost savings estimates lowering his prior estimate of a $392,000 potential cost savings downwards to a potential cost savings of only $217,550.

After discussion with counsel, the parties have focused their arguments on three respective areas, namely: (1) whether the County has failed to provide a complete set of bid documents in violation of General Municipal Law § 103; (2) whether the PLA in this Project is legal; and (3) whether the PLA is discriminatory.

Petitioners argue that the County's Bid Documents are materially incomplete in violation of Labor Law § 220 (3) and General Municipal Law § 103. More specifically, petitioners contend that the Bid Documents do not have attached thereto the prevailing wage schedule, the local collective bargaining agreements, the plan and trust documents regarding union fringe benefit funds, and/or the PLA itself.

The County concedes that hard copies of these documents were not attached to the Bid Documents, but argues that they were available via either the NYS Department of Labor website and/or at the offices of the County Department of Public Works. The County argues that the incorporation of these schedules and wages is common practice within the industry and satisfies the competitive bidding requirements. In any event, the County asserts that petitioners were obligated to locate these documents and/or to contact the County with any questions as instructed in the Bid Documents.

It is well-settled that Labor Law § 220 (3) requires, in pertinent part, that:

[i]t shall be the duty of the fiscal officer, as defined in this section, to ascertain and determine the schedules of supplements to be provided and wages to be paid workers, laborers and mechanics on such public work, prior to the time of the advertisement for bids, and such schedules shall be annexed to and form a part of the specifications for the work [emphasis added].

The court finds that Labor Law § 220 (3), when read in conjunction with General Municipal Law § 103, requires that the schedule of supplements and wages shall be annexed to and form a part of the specifications. Although the court finds that the County presents a logical argument, especially in this digital age, the County presents no authority from which this court can conclude that it can ignore the plain meaning of the statutory provision as written. In other words, this court finds that the language of Labor Law § 220 (3) which states "[a]nd such schedules shall be annexed to and form a part of the specifications for the work" means exactly what it states, namely that the schedules and wages shall be annexed - or attached - to the Bid Documents themselves. Finally, the court finds the County's arguments relative to petitioners' lack of standing on this issue are without merit (Suit-Kote Corp. v City of Binghamton Bd. of Contract and Supply, 216 AD2d 831 [1995]; Eldor Contracting Corp. v East Meadow Union Free School Dist., 278 AD2d 492 [2000]). Consequently, the court finds that the County's Bid [*4]Documents were incomplete and, as such, violative of Labor Law § 220 (3) and General Municipal Law § 103.

II.PROJECT LABOR AGREEMENT (PLA)

The issue presented here is whether the PLA adopted by the Broome County Legislature on November 20, 2007 for use on phase two of this Project is valid or void as inconsistent with the competitive bidding statutes. Petitioners contend that the County has failed to demonstrate more than a rational basis for the need for a PLA on this Project. In opposition, the County asserts that the record adequately supports the use of a PLA on this Project. For the reasons stated below, this court finds that the PLA in this Project violates New York's competitive bidding statutes and is thus void.

There is no dispute as to the legal parameters applicable to this issue. In the first instance, the County as a political subdivision, is bound to follow New York's competitive bidding statutes which mandates that all public works projects involving an expenditure of more than $20,000 shall be put out to competitive bid and awarded to the lowest responsible bidder (General Municipal Law §§ 100 et seq.). It is well-settled that New York's competitive bidding statutes promote the public interest by: (1) protecting the public fisc by obtaining the best work at the lowest possible price; and (2) preventing favoritism, improvidence, fraud and corruption in the awarding of public contracts (York State Chapter, Inc. v New York State Thruway Authority, 88 NY2d 56 [1996]; [for ease of reference the court shall hereinafter sometimes refer to said case as the "Thruway Case"]).

In the seminal Thruway Case dealing with project labor agreements, the Court of Appeals described project labor agreements generally as follows:

[a] prebid contract between a construction project owner and a labor union (or unions) establishing the union as the collective bargaining representative for all persons who will perform work on the project. The PLA provides that only contractors and subcontractors who sign a prenegotiated agreement with the union can perform project work. A PLA thus generally requires all bidders on the project to hire workers through the union hiring halls; follow specified dispute resolution procedures; comply with union wage, benefit, seniority, apprenticeship and other rules; and contribute to the union benefit funds. In return for a project owner's promise to insist in its specifications that all successful bidders agree to be covered by a PLA, the union promises labor peace through the life of the contract [citations omitted].

(York State Chapter, Inc., 88 NY2d at 65).

In other words, the Court of Appeals recognized that project labor agreements are by their very nature anti-competitive, but nevertheless are permitted in limited circumstances. However, the use of a project labor agreement can be justified only upon a showing of "more than a rational basis" in relation to the twin purposes underlying the competitive bidding statutes, namely protection of the public fisc and prevention of fraud, favoritism and the like in the awarding of public contracts (York State Chapter, Inc., 88 NY2d at 68-69). [*5]

A closer examination of this standard of "more than a rational basis" as explained in the Thruway Case is warranted. The Thruway Case was comprised of two underlying cases - one involving the Thruway Authority and the other the Dormitory Authority. The Court of Appeals upheld the use of a PLA in the Thruway Authority portion of the case finding the public authority demonstrated a "[d]etailed focus on the public fisc both cost savings and uninterrupted revenues the demonstrated unique challenges posed by the size and complexity of the project, and the cited labor history collectively support the determination that this PLA was adopted in conformity with the competitive bidding statutes" (Id. at 71). The Court of Appeals rejected the use of a PLA in the Dormitory Authority portion of the case finding a failure, among other things, to provide a projection of cost savings, any unique feature of the project, or any threat of labor unrest (Id. at 74). Thus, taken together, it is apparent that the Court of Appeals focused on several factors including costs savings, the uniqueness and complexity of a project, and the history of labor unrest in determining whether the public authority established "more than a rational basis" for the use of a project labor agreement in relation to the twin purposes of the competitive bidding statutes.

The court must now take these clearly enunciated principles of the Thruway Case and apply them to the record presented here. The County's approval of the use of a PLA on phase two of this Project was based upon the Kukenberger Memorandum and the County's Due Diligence Report which will be the focus of the court's analysis.

As noted above, Mr. Kukenberger issued two separate cost savings estimates, the first in the Kukenberger Memorandum dated October 8, 2007 and then by way of an affidavit submitted after the commencement of this special proceeding in January 2008. A comparison of Mr. Kukenberger's two reports reveals the following cost saving estimates:

Oct 2007Jan 2008

1.Apprentice Ratio$ 17,000$ 43,700

2.Flexibility for 4-10 hour days$100,000$138,700

3.No overtime pay for 2nd shift$266,100$ 27,900

4.Ratio of workers to foremen$9,000$7,250

Total Estimated Savings$392,000$217,550

(Petition, Exhibit E; Answer Exhibit B).

In the first instance, the court notes that Mr. Kukenberger's own words best describe the degree of reliability to which his initial cost saving estimates are entitled, namely that "there were serious time constraints and my analysis was based on the information available at the time" (Kukenberger Affidavit sworn to January 10, 2008, ¶ 6). The court further notes that Mr. Kukenberger's revisions in January 2008 could not have informed the County's deliberations since it was submitted after the approval of the PLA and after the commencement of this special proceeding.

The court will now address in seriatim the issues raised in both the Kukenberger Memorandum and Due Diligence Report as justifications for the use of a PLA. With respect to [*6]the estimated savings associated with the use of apprentices, the Due Diligence Report states that the unions have agreed to maximize the use of apprentices which should "achieve some additional savings". However, petitioners argue that non-union contractors also have apprentice programs and, in any event, since each bidder was required to submit a lump sum bid there can be no separate cost savings. The court agrees and finds that these purported cost savings are not factually related to the Bid Specifications for this Project.

With respect to the estimated savings associated with flexible work weeks, the Due Diligence Report claims a savings of $100,000 from the use of a PLA because the County would have the flexibility to use four ten hour work days, rather than a five day eight hour week. However, the Bid Specifications as drafted by the County prohibit an employee from working more than an eight hour day (Petition, Exhibit F [Contract IV, 6.02 B.1]). Once again, the court finds that these purported cost savings are not factually related to the Bid Specifications for this Project.

With respect to the estimated savings associated with eliminating shift differentials, the Due Diligence Report asserts the use of a PLA will save the County $266,100 by eliminating shift differentials for a second shift. However, there is nothing in these Bid Documents nor is any of the anticipated work in the nature of which would require a second shift. Moreover, Mr. Kukenberger's revision of the cost savings under this category downwards from $266,100 to $27,900 speaks volumes. The court finds that these purported cost savings are not factually related to the Bid Specifications for this Project.

The Due Diligence Report also makes reference to avoiding labor unrest such as strikes, lockouts, and picketing. More specifically, the Due Diligence Report states "[t]he PLA will also guarantee that there will be no labor disruptions during the construction of the GHJB. This is a concern, because there was picketing at two of the County's last major construction projects-The Public Safety Facility and the Annex to the Broome County Court House" (Due Diligence Report, pp 2-3). In this court's view, however, this passing reference to past picketing does not in and of itself support the conclusion that labor unrest rises to the level necessary to support the need for a PLA. Petitioners properly point out that phase one of this Project was completed without a hitch and without the necessity of adopting a PLA. Further, petitioners argue that there is nothing in said report indicating whether said picketing had any adverse impact on work performance (York State Chapter, Inc, 88 NY2d at 75). In short, there is nothing in this record demonstrating any history of labor unrest such that the project's completion dates would be jeopardized absent this PLA.

The Due Diligence Report also recites the County's desire to have this Project completed in a timely manner. However, the Court of Appeals recognized that to justify a PLA by the simple desire for labor stability so that work will be completed on time is tantamount to wholesale approval of PLAs because "[e]very public entity wants its projects completed on time, and public projects are presumptively important to the public. The competitive bidding requirements, however, demand that something more be shown in order to justify the significant restrictions imposed by PLAs" (York State Chapter, Inc, 88 NY2d at 75). None of the County's [*7]underlying reports or analysis demonstrate anything other than the general desire of every project owner to have a project completed on time.

A final issue is the size, complexity and/or uniqueness of the Project. There is nothing contained in either the Kukenberger Memorandum nor the Due Diligence Report to support the conclusion that phase two on this Project is of such a size, complexity and/or uniqueness as to warrant the use of a PLA.

Consequently, based on this record, the court can not say that there was more than a rational basis for the adoption of this PLA. It appears that the only factors considered by the County were based upon a preliminary review and not extremely in depth analysis of projected financial cost savings contained in the Kukenberger Memorandum and incorporated into the Due Diligence Report. Moreover, the County's own expert, Mr. Kukenberger, indicated in his subsequent submission to this court that the first set of figures relied on by the County were preliminary in nature and that a further review and greater analysis after the adoption of the PLA resulted in less savings than his preliminary draft.^[FN4] Mr. Kukenberger essentially admits that his October 2007 Memorandum is unreliable by cutting his initial projected cost savings in half. In other words, the court finds that the Kukenberger Memorandum falls far short of supporting the required showing of more than a rational basis. Parenthetically, the court notes that the Kukenberger Memorandum could not even support the lesser standard of merely a rational basis. Consequently, on the issue of cost savings alone, the figures upon which the County rely were dubious at best, relatively fluid and unreliable at the time the same were presented to the legislature for approval.

Even assuming that there may well have been some monetary savings to be gained by the use of a PLA (and even this is questionable based upon this record), in reality there is no showing of any other circumstances which would warrant or justify the anti-competitive impact embodied in this PLA. To the contrary, it appears that this PLA results in simply undercutting competition in favor of unions. Instead of protecting the public fisc, this PLA actually engages in favoritism of union over non-union labor.

In conclusion, the standard of "more than a rational basis" requires just that, a more detailed, in depth study and analysis and cannot be based on loose projections, unverifiable calculations or a project which lacks a unique history or complexity such that the otherwise applicable provisions of the General Municipal Law should be ignored. Here, the legislature when adopting this PLA, based its decision on unverifiable dollars, lack of a history of labor [*8]unrest, and the lack of showing of any type of unique complexity to this Project. Thus, these omissions make it impossible for the County to establish that their actions were even reasonable, let alone more than rational. Based upon the foregoing record, the court finds that the PLA involved in this Project is, in fact, void. As such, the court finds that it need not reach petitioners' third cause of action.

For the reasons stated, the petition is granted to the extent that the court finds that the Bid Documents were materially incomplete and the project labor agreement approved by the Broome County Legislature on November 20, 2007 is void and unenforceable as a bid specification.

The foregoing constitutes an order of the court.

It is so ordered.

Dated: March 6, 2008

Binghamton, New York

s/ Ferris D. LebousHon. Ferris D. Lebous

Justice, Supreme Court