Proceeding against Body or Officer - Mandamus - Challenge to Award of Municipal Contract - No Violation of Procurement Rules Where Decision-Making Process was Reasoned, Multiple Vendors were Considered and Most Suitable Vendor Chosen

Municipal Corporations - Procurement - Negotiated Acquisition - No Particular Set of Negotiation Procedures Mandated by New York City Procurement Policy Board Rules (9 RCNY) § 3-04

Parties - Necessary Parties - Proceeding to Challenge Award of Municipal Contract - Vendor to Which Contract Awarded

Daniel J. Horowitz for petitioner.

Michelle Soo Yeon Lee for respondent.

Petitioner, Sprague Operating Resources LLC (Sprague), brings this CPLR article 78 mandamus proceeding (mot seq No. 001) to challenge the determination of the New York City Department of Citywide Administrative Services (DCAS) in awarding the subject contract, alleging that DCAS failed to comply with the negotiated acquisition procedures outlined in section 3-04 of the New York City Procurement Policy Board (PPB) Rules (9 RCNY). Specifically, Sprague asserts that DCAS failed to negotiate with Sprague, and as such failed to comply with PPB Rules (9 RCNY) § 3-04 (b) (4). Respondent cross-moves to dismiss the petition, arguing that it fully complied with the applicable rules and properly considered petitioner's application.

Approved Oil Co. of Brooklyn (Approved), the recipient of the contract, also moves in motion sequence No. 002 to intervene as a respondent in the action as it asserts it is a necessary party to the action.

For the reasons set forth below, respondent's cross-motion to dismiss is granted, and the petition is denied.

Respondent initiated a negotiated acquisition process pursuant to section 3-04 (b) (2) of the PPB Rules, which allows for direct negotiation with vendors under certain circumstances, including [*2]time constraints, limited vendor availability, and other exigencies. The solicitation was publicly posted, and two vendors, Sprague and Approved, submitted applications for consideration (NY St Cts Elec Filing [NYSCEF] Doc No. 12).

Judicial review of an administrative determination in an article 78 proceeding is limited to whether the determination was made "in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" (CPLR 7803 [3]). In Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County (34 NY2d 222, 231 [1974]), the Court of Appeals held that an action is "arbitrary and capricious" when it is "without sound basis in reason and is generally {**87 Misc 3d at 563}taken without regard to the facts." If the court finds that the determination is supported by a rational basis, it must sustain the determination. (Id.)

Moreover, in mandamus to compel proceedings like the one here, "a petitioner . . . must have a clear legal right to the relief demanded and there must exist a corresponding nondiscretionary duty on the part of the administrative agency to grant that relief." (Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 757 [1991].) For Sprague to prevail, it must demonstrate (1) that it had a clear legal right to further negotiation and (2) that the award of the contract was nondiscretionary. (Id.) The Court of Appeals has held that a mandamus to compel may be issued to ensure that administrative agencies "perform a ministerial duty, but does not lie to compel an act which involves an exercise of judgment or discretion." (Matter of Brusco v Braun, 84 NY2d 674, 679 [1994].)

In this article 78 proceeding, this court reviews DCAS's denial of Sprague's vendor protest on September 20, 2023 (NYSCEF Doc No. 4). To the extent that the parties herein contend otherwise, the court may only review DCAS's determination to award contract No. MA1-857-20248801663 to Approved, and the subsequent upholding of that decision.

The act of issuing a contract is not one which is ministerial or otherwise nondiscretionary such that a mandamus to compel would ordinarily be appropriate. However, a mandamus to compel may be available if this court were to find that DCAS did not follow the rules set forth by statute or pursuant to the solicitation process in its award of the contract (Matter of ACME Bus Corp. v Orange County, 28 NY3d 417, 425 [2016]).

Sprague argues that DCAS failed to comply with section 3-04 of the PPB Rules. Sprague's complaint in chief concerns DCAS's alleged lack of negotiation following initial discussions between Sprague and DCAS. However, the PPB Rules do not impose an affirmative duty on an agency to respond to every vendor's individual inquiries. Rather, the rules require that the agency (1) conduct a reasonable review of all qualified applications, (2) negotiate with vendors as necessary to achieve favorable terms for the City, and (3) document its selection process. In fact, in the only applicable published case dealing directly with PPB Rules § 3-04, the Court found that procurement completed under the express negotiated acquisition process outlined in section 3-04 dispenses with many of the formalities{**87 Misc 3d at 564} of the standard sealed proposal procedures found in section 3-03 of the PPB Rules (see Matter of Giuliani v Hevesi, 276 AD2d 398, 398 [1st Dept 2000]).

Here, the administrative record demonstrates that DCAS reviewed petitioner's submission (NYSCEF Doc No. 4 at 3). DCAS, in its response to Sprague's vendor protest, cited specific points related to Sprague's proposal, stating that

"Sprague's proposal again raised issues with the City's testing and deduction requirements. Specifically, Sprague (1) requested reducing penalty deductions and/or deviation tolerances; (2) stated it would not accept the biogenic carbon testing method required by the Specifications and that biogenic carbon testing method would have to be [*3]mutually agreed upon by the parties; (3) stated it would not accept DCAS' required deductions in the Specifications for failure to comply with the biogenic carbon content requirements; (4) stated it would not accept any deduction required by the Specifications for the biodiesel blend content during the transitional period prior to and after winter blend deliveries; and (5) stated it would work with DCAS to address any deviations to the winter blend rather than comply with the winter cloud point set forth in the Specifications." (Id.)

That respondent ultimately did not select petitioner's proposal does not render its decision arbitrary or capricious. Nor does the lack of further communication with Sprague following initial discussions constitute a procedural violation. Indeed, nothing in the language of section 3-04 of the PPB Rules mandates that DCAS follow any particular set of negotiation procedures.

The record before this court establishes that respondent engaged in a reasoned decision-making process, considered multiple vendors—including petitioner—and made a selection that it determined to be most suitable. Petitioner has failed to show that the agency's determination was arbitrary, capricious, or contrary to law.

In light of the foregoing, the court finds that respondent acted within its lawful discretion and in accordance with the PPB Rules and that petitioner's application was duly considered. As such, petitioner's article 78 petition is denied.{**87 Misc 3d at 565}

As petitioner's article 78 petition is denied, motion 002 by Approved to be joined as a necessary party is denied as moot. Courts must consider whether a necessary party has been joined and may dismiss a petition without prejudice if it finds that a necessary party has not been joined (City of New York v Long Is. Airports Limousine Serv. Corp., 48 NY2d 469 [1979]; CPLR 1003, 3211 [a] [10]). However, "dismissal for nonjoinder of a necessary party is a last resort." (Swezey v Merrill Lynch, Pierce, Fenner & Smith, Inc., 87 AD3d 119, 132 [1st Dept 2011], affd 19 NY3d 543 [2012].)

Parties should be joined if their presence is either required to accord complete relief between the parties to the action or if the nonparty would be "inequitably affected by a judgment in the action." (CPLR 1001 [a].) As Sprague seeks to annul the contract between DCAS and Approved, Approved could have been inequitably affected had the court ruled for Sprague. Moreover, courts have found that contract awardees are necessary parties when the action seeks to nullify or otherwise challenge the award of said contract. (See Matter of McQuay Group, McQuay-Perfex v New York Convention Ctr. Dev. Corp., 87 AD2d 507, 508 [1st Dept 1982]; Matter of New York State Assn. of Plumbing-Heating-Cooling Contrs. v Egan, 86 AD2d 100, 104 [3d Dept 1982], affd 60 NY2d 882 [1983].) While this court finds that Approved is a necessary party, its motion to intervene is unnecessary given the denial of petitioner's article 78 petition.

Accordingly, it is hereby ordered that motion sequence 001 by petitioner seeking declaratory relief against respondent related to the granting of contract No. MA1-857-20248801663 and vacatur related to contract No. MA1-857-20248801663 is denied; and it is further ordered that respondent's cross-motion to dismiss is granted, and the petition is dismissed in its entirety, with prejudice; and it is further ordered that motion 002 by Approved to intervene and dismiss is denied as moot.