Contracts - Public Works Contracts - Impermissible Use of Piggybacking for Public Works Project

Hinman Howard & Kattell LLP, Binghamton (Paul T. Sheppard of counsel), for petitioners.

Alario & Fischer, P.C., Manlius (Harris Lindenfeld of counsel), for Board of Education of the Maine-Endwell Central School District and another, respondents.

Barclay Damon, LLP, Buffalo (James P. Domagalski of counsel), for Smith Site Development, LLC, respondent.

{**86 Misc 3d at 508}Petitioners, Daniel J. Lynch, Inc., Kelly Lynch, Slavik & Co. Inc., George J. Slavik, Jr., Andrew R. Mancini Associates, Inc., Louis N. Picciano & Son, Inc., and William H. Lane Incorporated (hereinafter collectively petitioners), have filed this special proceeding pursuant to CPLR article 78 seeking, among other things, to set aside a construction contract awarded by respondents Board of Education of the Maine-Endwell Central School District and the Maine-Endwell Central School District (hereinafter the School District) and Smith Site Development, LLC (hereinafter Smith) pursuant to the General Municipal Law and State Finance Law. More specifically, the petition seeks to set aside the contract for violation of competitive bidding requirements through the use of a "piggyback" contract for a construction project. Respondents oppose the petition in all respects.

In December 2022, voters approved a $64 million bond referendum to support capital improvements at the School District's various buildings and facilities over the span of five years, from 2023 through 2027 (hereinafter the Project). The Project was to occur in six phases with the initial construction slated for the School District's high school and one of its elementary schools named Maine Memorial. The School District retained a construction management company, nonparty LeChase Construction Services, LLC (hereinafter LeChase), and nonparty architectural firm, King + King Architects, LLP, to plan the Project.

In July 2023, in lieu of using a more traditional competitive bidding process, the School District adopted a resolution to enter a "piggyback" contract with The Interlocal Purchasing System (hereinafter TIPS) to facilitate work under phase one of the Project, which consisted of replacing a sewer line and installing a new parking lot at the high school for $2.5 million, during the summer recess. TIPS was created in 2002 by the State of Texas as a municipal agency that offers contracts and contractual proposals it has procured to other municipalities around the country. TIPS has grown from a regional entity into an organization with national scope through [*2]which other governmental units outside of Texas are able to "piggyback" their own construction needs onto contracts already let, or proposals secured, by TIPS. Once a municipality joins TIPS, it submits specifications for its project to TIPS, which then conducts a search of its approved contractors to find companies{**86 Misc 3d at 509} that can handle the member's project based on a scoring system. TIPS makes clear to contractors that their pricing proposals are intended for municipal piggybacking among TIPS's members. In essence, TIPS serves as a matchmaker between its municipal members and contractors based on project and performance information they provide to TIPS. Once TIPS matches a member with a contractor, those parties negotiate an agreement to perform the municipality's project pursuant to a pricing schedule the contractor provided to TIPS. The School District became a member of TIPS in 2021.

Based on its July 2023 resolution, the School District went through TIPS and retained Smith to perform phase one of its Project (work on the high school sewer line and parking lot) for $2.2 million. The School District did not solicit bids from other contractors for phase one, but rather contracted directly with Smith via TIPS. The School District was pleased with Smith's work on phase one that summer and in September 2023 it inquired with LeChase whether Smith could handle the work for phase two, which consisted of extensive air conditioning and HVAC renovations at Maine Memorial at a cost of $8.9 million. The School District also decided to proceed with an additional component of phase two, namely the construction of four classrooms at Maine Memorial for $4.5 million. The plans for phase two were submitted to the NYS Education Department (hereinafter NYSED) for review and approval, with construction planned to occur during the summer and fall of 2024.

As of March 2024, the School District was still awaiting NYSED's approval to proceed with phase two of the Project. In fact, NYSED's approval had been pushed back to late May. The School District became concerned that if phase two could not be timely commenced for the 2024 construction season, the Project would be put off until 2025 and result in increased costs. Accordingly, the School District decided to work through TIPS to secure a contractor, namely Smith, for the HVAC portion of phase two. In addition, LeChase reached out to 18 contractors in the areas of general construction, plumbing, electrical and maintenance about the classroom construction portion of phase two, as required by General Municipal Law § 101.

NYSED approval for the HVAC portion of phase two was delayed until June 26, 2024. On July 2, 2024, the School District awarded the contract for said work to Smith via TIPS{**86 Misc 3d at 510} and Smith began work shortly thereafter. As of December 2024, when the present motion was argued, Smith had completed approximately 44% of the HVAC work, amounting to nearly $4 million under its contract with the School District.^[FN1]

This petition was filed on September 23, 2024. The court signed the order to show cause on September 24, 2024, setting the return date for oral argument to November 13, 2024, which was subsequently adjourned to December 18, 2024. On December 4, 2024, the School District and Smith filed their respective verified answers to the petition with papers in opposition. The court heard oral argument of counsel on December 18, 2024, and reserved decision.[*3]

The discrete issue at the core of this proceeding is whether "piggybacking" is a permissible means to award a public works contract under General Municipal Law § 103 (16) and, if so, whether the School District complied with the required steps and safeguards in awarding the HVAC component of phase two to Smith. If either of those questions is answered in the negative, the court must determine what remedy is appropriate concerning the contract awarded to Smith.

I. Statutory Construction

Before analyzing the parties' arguments regarding General Municipal Law § 103 (16) the court must determine the meaning of the key phrases "public works," "public works contract," and "public works project." As a starting point, the court notes that General Municipal Law article 5-a is entitled "Public Contracts" and sets out the requirement and process for competitive bidding by municipalities. General Municipal Law § 100 contains the definitions for article 5-a and states that school districts are political subdivisions subject to competitive bidding requirements, but it has no definitions for the terms "public works," "public works contract" or "public works project."^[FN2]{**86 Misc 3d at 511}

Lacking statutory guidance, the court is left to interpret the meaning of "public works," "public works contracts," and "public works projects" as they are used in the context of General Municipal Law article 5-a and related statutes, as well as common usage and comprehension. The Court of Appeals has stated:

"[W]ell-established rules of statutory construction direct that the [court's] analysis begins with the language of the statute. This is because the primary consideration is to ascertain the legislature's intent, of which the text itself is generally the best evidence. A court should construe unambiguous language to give effect to its plain meaning. Further, a statute must be construed as a whole and its various sections must be considered together and with reference to each other." (Colon v Martin, 35 NY3d 75, 78 [2020] [internal quotation marks, brackets, ellipsis, and citations omitted].)

Lacking any specific definition, the court will define the terms "public works," "public works contracts," and "public works projects" to mean construction or repair projects undertaken by municipalities on their infrastructure that are subject to the competitive bidding process. The court finds this interpretation consistent with General Municipal Law § 101 (1), entitled "Separate specifications for certain public work" and applies to the "erection, construction, reconstruction or alteration of buildings," and the plain meaning of those terms.[*4]

II. General Municipal Law § 103 (16)

It is through the foregoing lens that the court will analyze General Municipal Law § 103 (16), which provides, in pertinent part:

"Notwithstanding the provisions of subdivisions one, two and three of this section, and section one hundred four of this article, any officer, board or agency of a political subdivision or of any district therein authorized to make purchases of apparatus, materials, equipment or supplies, or to contract for services related to the installation, maintenance{**86 Misc 3d at 512} or repair of apparatus, materials, equipment, and supplies, may make such purchases, or may contract for such services related to the installation, maintenance or repair of apparatus, materials, equipment, and supplies, as may be required by such political subdivision or district therein through the use of a contract let by the United States of America or any agency thereof, any state or any other political subdivision or district therein if such contract was let to the lowest responsible bidder or on the basis of best value in a manner consistent with this section and made available for use by other governmental entities . . . ."

The purpose of General Municipal Law § 103 (16) is to permit municipalities within New York to "piggyback" on contracts previously entered by federal, state, or local governments to buy "apparatus, materials, equipment or supplies, or to contract for services related to the installation, maintenance or repair of apparatus, materials, equipment, and supplies" so long as the underlying contract was let to the lowest responsible bidder or provided the best value "in a manner consistent with this section," and expressly provides that its terms are available to other governmental entities (emphasis added). Thus, General Municipal Law § 103 (16) allows New York municipalities to forgo the formalities of the competitive bidding process if certain conditions have been met, which the court will now examine.

First, General Municipal Law § 103 (16) expressly applies to the "purchase" of specific classes of things, namely apparatus, materials, equipment and supplies, as well as service contracts related to those specific things. It does not identify or include the "purchase" of public works, public works contracts, or public works projects, which the court interprets as construction or repair projects undertaken by municipalities on their infrastructure and are clearly distinct in nature and scope from apparatus, materials, equipment, and supplies. The court views the plain language both included and excluded from General Municipal Law § 103 (16) as deliberate choices by the legislature to define and limit what is available for piggybacking.^[FN3] In the court's view, public works, public works contracts, and public{**86 Misc 3d at 513} works projects are not available for piggybacking based on the plain language and meaning of the statute. The contracts for such projects or works can only be let [*5]after strict compliance with the procedures set out in General Municipal Law §§ 101 and 103 (1) and (2), and other applicable provisions. Such an interpretation of General Municipal Law § 103 (16) accords with General Municipal Law § 101, entitled "Public Works" and sets out the framework for bidding building projects, as opposed to buying things, such as apparatus, materials, equipment and supplies and services related thereto.

Second, General Municipal Law § 103 (16) requires that the contract to be piggybacked must have been let "in a manner consistent with this section," namely General Municipal Law § 103. This language is key because it confirms that subdivision (16) is a narrowly tailored exception to, not an exemption from, the requirements of General Municipal Law § 103, which includes subdivisions (1), requiring sealed bids, and (2), requiring public advertising of projects (Jericho Water Dist. v One Call Users Council, Inc., 10 NY3d 385, 391 [2008] ["exceptions to generally applicable statutory provisions should be strictly construed" (citation omitted)]). Respondents' focus on the "notwithstanding" clause that introduces subdivision (16) is too expansive. The court interprets the "notwithstanding" introduction to mean that municipalities can contract for apparatus, materials, equipment, supplies, and related services if another municipality has already gone through the underlying competitive bidding process to procure those items. To interpret General Municipal Law § 103 (16) as respondents urge would give municipalities a free pass for public works projects that the statute does not provide (Luck Bros., Inc. v City of Plattsburgh, Sup Ct, Clinton County, Dec. 5, 2012, Ryan, J., index No. 12-0702, annexed as appendix to NY St Cts Elec Filing [NYSCEF] Doc No. 20).^[FN4]{**86 Misc 3d at 514}

The court finds that respondents' reliance on NYSED's administrative decision in Appeal of Crisorio (63 Educ Dept Rep, Decision No. 18,405) is misplaced for the reasons set forth above, namely that it reads General Municipal Law § 103 (16) too broadly and includes public works contracts within the exception provided for purchase and related service contracts. A review of pertinent publications of the NYS Comptroller supports the court's conclusion. For example, in its guide for local governments entitled "Seeking Competition in Procurement," the Comptroller states "it appears that services, other than those necessary for the completion of a public works contract governed by the prevailing wage requirements of article 8 of the Labor Law (e.g., building construction), are now generally categorized under the statute as 'purchase contracts' and not 'contracts for public work' " (Office of the New York State Comptroller, Local Government Management Guide: Seeking Competition in Procurement at 29 n 8, https://www.osc.ny.gov/files/local-government/publications/pdf/seeking-competition-in-procurement.pdf [emphasis added]). Furthermore, in its October 2021 memorandum entitled " 'Piggybacking' Law - Exception to Competitive Bidding," the Comptroller analyzes municipalities' interactions with "vendors" (NYSCEF Doc No. 13). The court deems the Comptroller's use of the term "vendor" to mean suppliers of apparatus, materials, equipment, supplies and services related thereto, as opposed to "contractors" seeking to erect, construct, reconstruct or alter buildings through works of plumbing and gas fitting, steam heating, hot water heating, ventilation and air conditioning apparatus, or electric wiring and standard illumination fixtures.

Based on the foregoing, the court finds that the School District's award of the phase two contract to Smith was improper because the use of TIPS was an impermissible use of [*6]piggybacking for a public works project.

The court has considered the remaining arguments and finds them to be without merit.^[FN5]{**86 Misc 3d at 515}

III. Remedy

Next, the court must now address the appropriate remedy for the improperly let contract by the School District to Smith. Initially, the court rejects respondents' position that this proceeding should be barred by the doctrine of laches or found to be prejudicially late. The court finds the petition was filed well within the limitations period provided by CPLR 217 (1) and there is insufficient proof that petitioners calculated their filing to cause undue harm to respondents.^[FN6]

That being said, the court finds that disrupting the Project, which is nearly halfway to completion, would not be in the public interest, nor would imposing any type of monetary award against the School District or Smith, especially when there have been no allegations, let alone proof, that the Project has been performed inefficiently or in a manner otherwise injurious to the taxpayers. In addition, the court finds there is no evidence of malfeasance on respondents' part concerning the letting of the contract to Smith.

Accordingly, the court exercises its discretion and holds that Smith may complete the HVAC work on phase two as contracted without disgorgement, payment of attorney's fees, or other award against respondents. However, the School District is enjoined from using TIPS, or other similar consortiums or processes, to award any further public work, as set forth hereinabove, on the Project. Rather, it must follow the competitive bidding procedures set out in General Municipal Law § 101 and pertinent sections of General Municipal Law § 103.

Accordingly, it is hereby ordered and adjudged that the petition is granted to the extent of finding that the contract between the School District and Smith was improperly let and the School District is enjoined from using TIPS, or other similar {**86 Misc 3d at 516}consortiums or processes, to award any further public works portions of the building project. The remainder of the relief sought in the petition is denied.

"The maxim expressio unius est exclusio alterius applies in the construction of the statutes, so that where a law expressly describes a particular act, thing or person to which it shall apply, an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded. In other words, the doctrine is an interpretive maxim that the inclusion of a particular thing in a statute implies an intent to exclude other things not included. The maxim is typically used to limit the expansion of a right or exception—not as a basis for recognizing unexpressed rights by negative implication" (Colon, 35 NY3d at 78 [internal quotation marks and citations omitted]).