Lead Opinion
OPINION OF THE COURT
Two interrelated law questions are presented on this appeal. Does private utility interference work constitute “public work” under General Municipal Law § 103 (1), when municipalities determine the “lowest responsible bidder” by combined assessment of amounts bid for utility interference work and street reconstruction work? Additionally, in satisfaction of General Municipal Law § 103 (1), does bypass contractor selection authority survive solely as the Mayor’s responsibility, under revised New York City Charter § 313 (b) (2)? We answer both questions in the negative.
Petitioner Diamond Asphalt Corp. sued to annul the award of certain public works contracts to competitors. Affected utility companies moved to intervene in the lawsuit. Supreme Court granted the intervention, denied annulment of the contracts, and dismissed the lawsuit. The Appellate Division affirmed. This Court granted Diamond leave to appeal and we now reverse and grant declaratory relief only.
This case involves the legal classification and public works nature of reconstruction work on New York City streets in conjunction with related utility interference work. It is undisputed that private utility companies serving the City and its residents have a practical and historic statutory and common-law obligation to pay all costs associated with protecting their facilities during street repair projects; these obligations include the removal, protection and relocation of their utility equipment (see, Administrative Code of City of NY § 19-143 [b]; § 24-521 [b]; see also, Matter of Consolidated Edison Co. v Lindsay,
It is further undisputed that until 1992, utility interference work was considered private work and was separately contracted for by the utility companies. The process worked generally as follows: the City would select the lowest bidder contractor to perform the necessary street reconstruction work and then notify affected utility companies, who would in turn hire their own contractors to perform the related utility work. The utility interference work was not included in the public works contract between the City and its selected contractor; the agreement between the latter was, as customary, governed by the “lowest responsible bidder” restrictions.
According to the arguments of the City and the utilities before us, this arrangement resulted in lengthy delays to public improvement projects and inflated costs to utility companies. They explain that affected utility companies would customarily contract with the City’s contractors, who often submitted artificially low bids to the City, expecting to adjust and recoup from the utility companies with respect to profits or losses resulting from the low bid used to win the contract.
Related to the matter at hand, the City entered into a joint bidding agreement in 1992 with Con Edison, New York Telephone, and Empire City Subway. The joint bidding agreement covers City construction projects “mutually agreed upon” between the City and the utility companies. Under the arrangement, the City solicits bid specifications for all aspects of the work involved in a public project, including utility interfer
Under the agreement, the City is required to award the contract to the contractor submitting the lowest aggregate bid, irrespective of the discrete costs associated with the formerly public work street portion alone. The City is obliged to pay the successful contractor for the entire project, including the necessary utility interference work. The utility companies, in turn, must reimburse the City for the amount allocated by the contractor for the utility interference work. Additionally, the utilities must pay the City a pro rata portion of the contractor’s enumerated general expenses and a 5% administrative charge.
Importantly, the accepted over-all low bidder is often not the lowest bidder for the City’s share of the work; rather, the rejected bids include lower amounts for City reconstruction work. This is what occurred in the instant case — Diamond submitted the lowest bid on the City work portion alone, but its discrete portion for utility interference work bumped Diamond above the lowest bid in the aggregate.
The aggregate bidding arrangement does not fully protect against scenarios which may be potentially adverse to the taxpayers. For example, the agreement does not require utilities to reimburse the City for the difference between the accepted over-all low bidder’s higher price for public street work and the lowest bid received for City work. Therefore, under the formal aggregate bidding agreement, the City may be required to accept a bid for the traditional public work which is not the “lowest” bid, solely because the aggregate bid spreads out as an over-all lowest bid.
The City rationalizes its acceptance of bids for City work which are not the “lowest” bids, by reference to what it has termed “commitment letters.” These postbid letters, appended to the specific transactions challenged in this proceeding, were sent by the New York City Department of Transportation to the various utility companies. In the respective letters, the Roadway Engineering Bureau informs the utilities that the subject contract will be awarded to the named contractor. The letters add that the cost of the utility’s share of the work includes a “pro-rated adjustment based on the difference between the overall low bidder’s price for the City’s share of the work and the lowest price received on the City’s share of the
IL
In 1996, the City solicited public bids on three reconstruction projects for streets in Brooklyn and Queens. Prospective bidders were provided with proposed contracts for each project. They included a “Special Notice to Bidders” which expressly provided that “[t]he Contractor is responsible for all Utility Work for the affected Utility Facilities and shall be paid by the City for such work based on the prices bid.” The bid schedule required each contractor to state separate amounts for each of the itemized bid components, which expressly included specifications for utility interference work, in addition to the gross sum for the entire work project.
Appellant Diamond submitted a substantially higher over-all bid compared to those submitted by other bidders. Diamond, however, submitted the lowest bid on the traditional public street work portion of each contract. The high utility work portion of its bid raised its aggregate bid above the competing bids. The City awarded each contract to the lowest aggregate bidder for the corresponding project.
Thereafter, the City Chief Procurement Officer informed Diamond by letter that it was not selected. Candidly, the respective letters for each of the contracts stated as follows:
“Pursuant to Section 313 (b) (2) of the New York City Charter and Section 3-02 (u) of the Procurement Policy Board (PPB) Rules, a City agency letting a contract by competitive sealed bidding shall award the contract to the lowest responsive and responsible bidder, unless the Mayor determines that it is in the best interest of the City that a bid other than that of the lowest responsive and responsible bidder be accepted. The Mayor has delegated this authority to the City Chief Procurement Officer.
*252 “In the matter of the above contract let by the Department of Transportation (DOT), I have determined that it is in the best interest of the City to award the contract to * * * a firm that is the overall lowest responsive and responsible bidder for the combined City and Utility interference construction work, although the price allocated * * * to the City’s work is greater than that incorporated into your firm’s bid” (emphasis added).
He added that the selection was “based on” the agreement reached in the “commitment letters executed by the City and the utility companies.”
In this format, the City expressly invoked its bypass authority in awarding the respective contracts to contractors that were not the lowest bidders for the City public street portion of the work (see, City Charter § 313 [b] [2] [when a contract is awarded to other than the lowest bidder, notice must be given to the lowest bidder]). Significantly, this diversionary exercise of the award was not explicitly based on the theory the City now advances — that private utility work may be defined as “public work” for purposes of lowest bidder assessment in public works contracts, when conjoined with the purely public street work.
Diamond immediately commenced this CPLR article 78 proceeding challenging the City’s selection of other contractors. It sought a preliminary injunction to prevent the certification of the let contracts. The municipal respondents opposed in all respects and moved to dismiss the petition. In the interim, intervenor-respondent utility companies entered the case and joined the effort to dismiss the petition.
Supreme Court denied preliminary injunction relief and granted the motions to dismiss. Supreme Court held that the utility interference work in each contract was not “public work” within the meaning of General Municipal Law § 103 (1) and, thus, the City could not consider the amount bid by each contractor for utility interference work in the aggregate as a method to determine which contractor was the “lowest responsible bidder” under that statute. Justice Freedman summarized as follows:
“The statute [ ] unequivocally states that the lowest responsible bidder’ shall be awarded ‘contracts for public work,’ i.e., work done on behalf of the City and citizenry. The Utility Work included in the*253 project contracts is not ‘public work’; the Utility Work directly benefits and is on behalf of privately-owned Utilities, and any benefit to the City is indirect. To claim that bidders to project contracts are not ‘responsible’ under GML § 103 (1) merely because they fail to submit the lowest joint bids begs the question as to whether considering the Utility Work price in awarding the contract is legal under GML § 103 (1)” (citing Matter of HUM Assocs. v Appleton,157 Misc 2d 759 ).
Nonetheless, Supreme Court held that the Mayor enjoys a “bypass” authority, pursuant to Charter § 313 (b) (2), to award contracts to higher bidders.
The Appellate Division affirmed (
In addition, and contrary to Supreme Court’s holding, the Appellate Division upheld the joint bidding agreement protocol, finding that “examination of the ‘ “total character of the arrangement” ’ convinces us that the utility interference work called for in the contracts did constitute ‘public work’ within the meaning of General Municipal Law § 103 (1)” (id., quoting Matter of Citiwide News v New York City Tr. Auth.,
m.
We first address two threshold matters. While this injunctive proceeding is moot because the work under the contracts at issue is completely or substantially done, we are satisfied that we should convert this proceeding into a declaratory judgment action (see, CPLR 103 [c]; Matter of Lewis Tree Serv. v Fire Dept.,
The City, in response, points to the assertion in its answer that “[e]ach of the contracts which are the subject of this proceeding was awarded to the lowest responsible bidder in accordance with General Municipal Law § 103.” It urges that this statement sufficiently alerted its adversary and the trial court to its over-all claim that utility interference work constitutes “public work” in this “combined” work and bidding ritual.
We are satisfied that the public work argument is sufficiently preserved under these unusual circumstances, since both courts plainly ruled on it, and everyone was manifestly aware of its potential significance.
IV.
Turning to the merits, Diamond argues that utility interference work does not constitute “public work” under General Municipal Law § 103 (1) because utility work is inherently private and solely benefits utility companies. Diamond urges that municipalities may not consider the discrete amounts bid for utility interference work and City street work in the aggregate to determine which bidder is the “lowest responsible bidder” on a contract for public work. Rather, it suggests that the City must choose the lowest bidder on the public portion of the work, as it did before 1992 when the bidding arrangements were kept separate.
Both the City and the utilities, in turn, contend that utility interference work may be fitted into the statutory framework of “public work.” Initially, they propose that utility interference work included in City contracts is “public work,” which is itself subject to competitive bidding requirements under City Charter § 310 (1). They note that section 310 (1) mandates competitive bidding by the City for projects paid with moneys under the control of or collected by the City. Additionally, they propose that utility work constitutes “public work” because it is functionally inseparable from the street reconstruction work and has public consequences. Their theory is interwoven with policy considerations, essentially that aggregate bidding
The governing statute is General Municipal Law § 103 (1). It provides that all contracts for “public work” must be awarded to the “lowest responsible bidder.” Neither the statute nor legislative history provide a definition of “public work.” Therefore, in determining whether traditional private utility work may be deemed and converted into “public work” for purposes of General Municipal Law § 103 (1), it is useful to examine the nature of the public bidding process in precedential context. This Court from time to time has been called upon to determine whether a particular contract constitutes “public work.” In making these rulings, the Court has articulated and applied the purposes of the competitive bidding statutes.
Matter of Signacon Controls v Mulroy (
“The agreement made between the county and [a private company] also opens the door to fraud, corruption, and favoritism, albeit there is no sign of such a situation in the case at bar. One of the purposes of the competitive bidding statutes is to eliminate the opportunity for fraud, favoritism or corruption by office holders. And no matter how one views this agreement, it is still a public contract given to a private contractor without competitive bidding. A wayward public official could use the secrecy and ambiguity inherent in any agreement not requiring public advertising and bidding to do great mischief.” (Id., at 415 [citations omitted].)
The Court concluded that “[t]o exempt this type of agreement from the competitive bidding requirements of section 103 of the General Municipal Law would allow public officials to do indirectly what they cannot do directly” (id., at 416). We cautioned that “[s]uch an exemption would make it quite simple for most sellers and public officials, who wish to avoid the statute’s requirement, to adopt an ‘arrangement’ whereby the governmental unit would pay no money but would be used
Next, in Matter of Exley v Village of Endicott (
The Court in Exley began its analysis by noting that section 103 of the General Municipal Law must be read in conjunction with the underlying purpose set forth in Signacon — to “safeguard the public interest” by “invit[ing] competition, and discouraging] favoritism, improvidence, extravagance, fraud and corruption” (id., at 431). The Court noted, however, that “it also must be recognized that competitive bidding statutes constitute a substantial imposition on the activities of municipal governments,” and thus the Court should “not extend the coverage of the statute into areas unintended by the Legislature” (id. [emphasis added]).
The Court in Exley held that “the acquisition of the phone system [could not] without contextual strain be classified as a public work contract” (id.). The Court reasoned that “the installation of the system was not a substantial aspect of the contract, and the contract did not otherwise involve performance of services or specialized skills” (id.). Moreover, although the agreement had attributes of both a lease and a sale, the Court looked to the “total character of the arrangement” and concluded that the agreement was not a “purchase contract” within the scope of the competitive bidding statute because the transaction was “in the nature of a true lease” (id., at 432-433).
Matter of Citiwide News v New York City Tr. Auth. (
The Court found it “appropriate to look to the ‘total character of the arrangement’ in determining whether the master license, having attributes of both a typical license and a public work contract, falls within the scope of the competitive bidding statute” (id., at 472, citing Matter of Exley v Village of Endicott,
Notably, the Court stated that neither the Public Authorities Law (at issue there) nor General Municipal Law § 103 (at issue here) “offers any definition of ‘contract for public work’ or otherwise indicates the specific nature of the contracts falling within the public bidding requirement” (id.). The Court determined, however, that the expenditure of public money is a factor to be weighed (id.). We stated: “‘A contract which provides for a lesser income to a governmental unit than a competing contract might provide, is an “expenditure” within the meaning of [the competitive bidding statute]”’ (id., at 471, quoting Matter of Signacon Controls v Mulroy,
Furthermore, the Court in Citiwide stressed that, in ascertaining the reach of public bidding requirements, it is
Most recently, in Matter of AT/Comm, Inc. v Tufo (
The Court acknowledged that under Citiwide it is necessary to examine “the ‘total character of the arrangement’ to determine whether the projects under review fall within the ambit of competitive bidding statutes” (id.). In applying this standard, we again stressed the need to consider the underlying purposes of the public bidding statute (see, id.). The Court concluded that the nature of the contract there was more similar to a “procurement” contract — one “for the acquisition of goods or services” (id., at 6-7). Therefore, in defining and applying “public work” concerns, this Court has always preeminently emphasized that the values underlying the competitive bidding process must not be violated.
A.
The rationales in our precedents substantially pave the way for our conclusion that private utility work does not constitute “public work” in this case. We have bound the courts to construe public bidding statutes strictly in order to encourage, participate in and enforce the achievement of the stated objectives of the Legislature. The Legislature has in no way indicated an intention or authorization for the. City to unilaterally and informally determine, define and alter the contours of “public work” matters. Quite to the contrary, the purposes of the competitive bidding process are placed in jeopardy when a municipality is permitted to unilaterally alter the terms of the accepted process. To be sure, this Court has more than once cautioned against allowing public officials to “indirectly” circumvent public bidding policies and prescriptions by “Lego-like” rearrangements of the pieces of traditional contractual relationships and obligations (see, Matter of Citiwide News v New York City Tr. Auth.,
The City concedes that utility work, prior to the creation of the joint bidding technique in 1992, did not constitute “public work.” The City essentially argues then that the joint bidding agreement and the side addendum with the utilities effected a transformation of this part of such work projects and its scope into “public work.” We disagree. Practical and unilaterally perceived policy objectives, however desirable, cannot bring about that legal conversion by endorsement from the courts— only the Legislature is empowered to effect policy-driven changes of this magnitude. Irrespective of the asserted “integration” aspect of the public contracts, and any direct, incidental or indirect benefits to the City derived from aggregate bidding, the nature of the utility work remains unchanged — it is private, and for the essential benefit of a private entity.
Notably, the Legislature has exercised its appropriate power in analogous circumstances. For example, in the Gas Facility Cost Allocation Act (GFCAA), the Legislature authorized the City to enter into agreements with gas utilities to share the
Additionally, the dissent attempts to distinguish the GFCAA by arguing that “[t]he agreements at issue in this case do not contemplate a cost-sharing scheme;” rather, utility companies remain responsible for the cost of interference work and “for the difference between the actual cost of the reconstruction portion of the contract and the low bid submitted for that work” (dissenting opn, at 271, 272, n). To the contrary, critical reliance on the informal letters is very troublesome, due to the possible playouts under which the City would be left to absorb the cost of a higher bid for street reconstruction work.
Assuming that this Court were to sanction the City’s novel reorganization of the contractual relationships and responsibilities, this would be the first judicial approbation in theory and as applied; the holding would invest the City with unusual authority for these public bidding agreements. The authorization for this unconventional and unlimited process could thus become the template for all future multimillion dollar dealings. That sweeping consequence would contradict this Court’s express warnings and pertinent prohibitions, and its respectful acknowledgment of the distinctive legislative prerogatives governing this area of governmental authority.
B.
Furthermore and appropriately, we are concerned that the City’s creative formulation, including the side letter agree
For example, the City argues that there is no additional expenditure of public money as a result of the joint bidding scheme (see, Matter of Signacon Controls v Mulroy,
As noted, this “agreement” was not made part of the formal joint bidding agreement and does not even reference it. Rather, the letter exchange is an informal postbid addendum, entered into by separate parties (the City and the utilities). Thus, utility companies are given an opportunity to review the accepted bid and the differential in the constituent parts of the bid before signing onto the side-bar letter. This appendage is inherently contradictory to the public bidding process and provides an open invitation to manipulation and other temptations. Allowing an informal, postbid agreement between the City and a private company to affect or dictate the public bidding regularities between the City and its contractor is bad policy, bad law and may even be bad business, though that is not a direct concern or within the expertise of the courts.
Curiously, if the utilities were to refuse to “commit” to the informal postbid proposition or thereafter flatly refuse to reimburse the City for the difference between the public work bids, it is unclear how, if at all, the City would enforce reimbursement for the differential, except perhaps through litigation or other dispute resolution mechanisms. In this eventuality, the City might end up awarding a City contract to a contractor who submitted a bid on the public work portion which far
The dissent urges that “on the facts before us there is no sign of any evil at work in this case, nor does the Court identify any” (dissenting opn, at 272-273). The dissent disregards, however, this Court’s definitive declaration that there need not be fraud or even a “sign” of fraud in a particular case; rather, the competitive bidding statutes are intended to guard against the “opportunity’ for fraud (Matter of Signacon Controls v Mulroy,
Moreover, even assuming the existence of a provision in the joint bidding agreement which attempts to protect against the unlawful expenditure of public funds by requiring reimbursement for any differential, the City’s scheme still falters because it improperly allows the City to unilaterally allocate and direct the funds obtained and paid during the public bidding process. That fundamentally alters the nature of the process. Pushing the envelope to its extreme, the City goes even further in the joint bidding agreement by agreeing to consult with the utilities regarding bids. The agreement between the City and the utilities states: “[t]he City agrees to consult with the Companies as to what constitutes an excessive or unbalanced bid and as to what action the City, in its discretion, should take in the event of the submission of an excessive or unbalanced bid.”
Providing private companies with such an interactive, consultative role in the public bidding process is contrary to the generally above-the-board nature of the process. The General Municipal Law and this Court’s precedents forbid or should deter the City from playing with such fire. Otherwise, the process could be manipulated by private, investor-owned, profit-seeking third-party companies, such as utilities and
C.
The dissent further urges that the entire scheme in the instant case is one for “public work” solely because, in its view, “the total character of the arrangement is of a ‘public work’ nature” — i.e., utility interference work is “incidental” to and a “necessary component” of street reconstruction projects (see, dissenting opn, at 270). We believe that the dissent has omitted a vital part of the requisite analysis.
Although the “total character of the arrangement” test has been used by this Court to determine whether a particular contract is a public works contract, in each application the Court has stressed the importance of ensuring that the underlying purposes of the competitive bidding statutes are not violated — i.e., that there is no potential for fraud and that the Legislature’s objectives are complied with. In AT /Comm, Citiwide and Exley, the Court confidently concluded that there was no potential for fraud and that the Legislature had not intended to include such contracts within the ambit of the respective public bidding statutes. The Court in each case, therefore, determined that the competitive bidding requirements did not apply at all.
The situation in the instant case is quite different. Here, there is an obvious potential for fraud and the Legislature has in no way indicated an intent to allow such informal bidding agreements to trump the public bidding process. The core of the subject transactions here are public works and are unquestionably subject to public bidding requirements under the General Municipal Law. The wide twist in the analytical road and precedential path then is whether the City may unilaterally transform the well-settled public bidding process by devising an informal scheme, whereby the City may accept a bid from a contractor that is not the “lowest” bid for City reconstruction work or “public work,” by artfully combining traditionally public work with formerly undisputedly private work to arrive at an enlarged public work project.
Under the City’s and the dissent’s proposed theory, anything could be deemed a public work simply by including it in a public work contract. Indeed, the essential character of this arrangement was merely the joinder of bids for the purely private work with those for the public work. That cannot as a matter of law convert, as the dissent suggests, what has historically
The public bidding process must be protected from creative efforts by a municipality, as here, to skate around the process, however well intentioned the City’s policy, fiscal or practicality grounds.
VL
Having concluded that utility interference work does not constitute “public work,” we must now address the alternative ground invoked by both lower courts to sustain the City’s actions. We believe that bypass authority, under New York City Charter § 313 (b) (2), is not continued in these circumstances under General Municipal Law § 103 (1) (i.e., transferred from the defunct New York City Board of Estimate to the Mayor alone).
Prior to 1989, bypass authority was vested in the Board of Estimate under a different Charter provision. That Board was abolished after its structure was found unconstitutional by the United States Supreme Court (see, New York City Bd. of Estimate v Morris,
“The agency letting the contract may reject all bids if it shall deem it for the interest of the city so to do; if not, it shall, without other consent or approval, award the contract to the lowest responsible bidder, unless the mayor shall determine in writing, justifying the reasons therefor, that it is in the best interest of the city that a bid other than that of the lowest responsible bidder shall be accepted.”
The dispute in the instant case springs out of General Municipal Law § 103 (1). It clearly provides that all contracts for “public work” must be awarded to the lowest responsible bidder, “[e]xcept as otherwise expressly provided by an act of the legislature or by a local law adopted prior to [Sept. 1, 1953].”
Diamond argues that because Charter § 313 (b) was passed by the electorate in 1989, it constitutes a law adopted after
Diamond points to Matter of Seabury Constr. Corp. v Department of Envtl. Protection (
The City relies on trial court authority which concludes that “§ 313 (b) of the current Charter retains its viability after the recodification of the Charter in 1989 and may, for purposes of GML § 103, be considered a local law adopted prior to September 1, 1953” (Trocom Constr. Corp. v Giuliani, NYLJ, Aug. 1, 1996, at 22, col 3, at 23, col 1; see, Matter of HHM Assocs. v Appleton,
The Legislature has not.classified Charter § 313 as a mere “revision, simplification, consolidation, codification or restatement” of the Old Charter. We do not believe it can be so easily labeled since it effects a substantive power reallocation with substantive legal effects and dispensative avoidance of generally applicable and important regulatory and fiscal principles. The transfer of bypass authority from the Board of Estimate to the Mayor would represent a major shift in the balance of authority originally provided for under the defunct Charter. Therefore, we hold the view that to override the plain language of the General Municipal Law, an express or definitive declaration would be required to establish that the Legislature intended to continue and transfer bypass authority of such sweeping proportions and nature, as is presented in this case, solely to the chief municipal executive or designee.
Even assuming Charter § 313 constitutes a mere revision or recodification, neither this Court nor the Legislature has seen fit to answer the second step of necessary analysis — that such enactments fit within the General Municipal Law exception. That determination would also demand some express action or more reasonably definitive direction by the Legislature. We see none. Finally, it is wholly unpersuasive to buttress this claim of a unilateral authority shift on the fallback ground that the Mayor is nevertheless subject to scrutiny by public notification requirements and judicial review under CPLR article 78.
Since the respective rationales offered by the City and intervenors, and employed by the Appellate Division and the Supreme Court, do not sustain the validity of the City’s actions and legal position in this case, we reverse and grant relief to Diamond only insofar as declaring the bid selection process unauthorized and unlawful.
Accordingly, the order of the Appellate Division should be reversed, with costs, the proceeding converted to a declaratory judgment action and judgment should be granted declaring that the bid selection procedures at issue violate General Municipal Law § 103 (1).
Dissenting Opinion
(dissenting). We conclude, as did the Appellate Division, that based on a review of the total character of the arrangement presented, the utility interference work here was “public work” within General Municipal Law § 103
Resolution of the law question properly begins with the facts at issue. Beneath the streets of New York City lie miles and miles of gas pipelines, water, steam and sewage conduits, electrical wiring, and telephone and television cables. When the City undertakes a street reconstruction project, these subsurface facilities — crucial components of a system that delivers vital utility services — often stand in the path of the City’s proposed work, and measures must be taken to protect or relocate them. Without such utility work, street reconstructions cannot proceed. By the same token, but for the City street construction, the incidental utility work would not be necessary.
In general, utility companies have a legal duty to ensure the continuation of their services by arranging and paying for this type of work, referred to as “utility interference work” because it prevents construction efforts from interfering with utility lifelines located under affected streets. Prior to 1992, street reconstruction contracts let out for bid by the City did not include provision for the performance of utility interference work. Rather, following the City’s award of a contract for the street reconstruction work, notices would be issued to the utility companies, informing them that their subsurface facilities needed to be protected or relocated in order for the City’s project to go forward.
As described in City affidavits, and undisputed by petitioner, the utility companies found it impractical and prohibitively expensive to hire separate crews for this work. Instead, they separately negotiated agreements for the utility work with the contractor awarded the City’s street reconstruction contract. The result, however, was that the City’s work was often substantially delayed. Piecemeal contract negotiations between the City work contractor and the utilities slowed the progress of projects, as did disputes among the parties during the work. These conflicts often centered on the extent, impact and value of the utility interference work, as well as the actual time required to clear the interferences. Because these considerations had not been included in the City’s contract, contractors often requested, and were granted, extensions of time due to the “extra work.” As a result, on some major reconstruction projects the City was compelled to extend completion dates in order to accommodate the utility interference work, adding cost and public inconvenience.
In 1992, the City took action in its own interest. Seeking to eliminate unnecessary delays, uncertainties and costs surrounding street reconstruction projects, the City entered into a “Joint Bidding Agreement” (the Agreement) with Consolidated Edison, New York Telephone and Empire City Subway. The Agreement provides that, for certain City construction projects (mutually agreed upon between the City and the utility companies which are parties to the Agreement), the necessary utility interference work is to be included in the public contracts when they are let out for bid. The City is then required to award the contracts to the lowest responsible bidder for the entire project — including both the construction work and the utility interference work. Under the terms of the Agreement, the City must pay the successful contractors for the entire project, including the necessary utility interference work, and in turn the utility companies must compensate the City for the bid amounts attributable to the utility interference work, plus a contract administration charge of 5%.
Pursuant to the Agreement, in 1996 the City invited bids on three street reconstruction contracts. The specifications notified bidders that utility interference work had been included in the contracts and that the bids would be compared on the basis of total price. Although petitioner was the low bidder on the construction portions of each project, it had the highest total bid for all three contracts. This irregular outcome was attributable to petitioner’s high bids on the utility work required under each contract. Indeed, petitioner’s bid for the utility work for one of the projects — the Brookline Boulevard contract — was more than 15 times higher than the other nine bids submitted for the project.
Under the Agreement, the lowest total bidder for each of the three projects was to be compensated for its work by the City. In turn, the utility companies agreed to reimburse the City for the cost of the utility interference work, as well as the difference between the actual street reconstruction work cost and the lowest bid received for that work. The terms of the ar
The legal issue presented here is whether the three contracts providing for both the street reconstruction work and the incidental utility interference work were properly awarded in accordance with the competitive bidding requirements of General Municipal Law § 103 (1). We conclude that they were.
Competitive bidding on public contracts has long formed a part of New York law, having originated in local charters and ordinances as far back as the 1850’s (see, e.g., Brady v Mayor of City of N. Y.,
“this article shall be construed in the negotiation of contracts for public works and public purchases to which political subdivisions or [any] district therein is a party so as to assure the prudent and economical use of public moneys for the benefit of all the inhabitants of the state and to facilitate the acquisition of facilities and commodities of maximum quality at the lowest possible cost” (General Municipal Law § 100-a).
To that end, section 103 (1) of the General Municipal Law provides that all contracts for “public work” involving an expenditure of more than $20,000 shall be awarded to the lowest responsible bidder. The majority concludes that the contracts under review here cannot be awarded pursuant to the competitive bidding requirements of General Municipal Law § 103 (1) because the utility interference work included in those contracts does not constitute “public work.” We disagree.
Neither the General Municipal Law nor its legislative history defines the term “public work.” This Court has, however, previously determined when an agreement involving both municipal and private work should be considered a contract for a “public work” under the competitive bidding statute. Our test for determining a “public work” in that context should control here.
As we held in Matter of Exley v Village of Endicott (
That same test was applied in Matter of Citiwide News v New York City Tr. Auth. (
Here the total character of the arrangement is of a “public work” nature. The single, overriding goal of the contracts at issue is to reconstruct the City’s streets. The incidental utility interference work — less than 10% of the cost of the street reconstruction projects — is a necessary component of that work and does not alter the public purpose of the projects. The utility interference work is not an end unto itself, but merely a necessary means to achieve the public purpose. Indeed, the utility interference work has no independent usefulness to the City or the utility companies.
In the end, the majority’s conclusion rests entirely on dire predictions which are wholly without basis.
First, on the law, it is a curious argument that subjecting these City street reconstruction projects to competitive bidding as public works under General Municipal Law § 103 (1) — as we would do — multiplies the opportunities for corruption, fraud and favoritism. The opposite is true. As is plain from the majority’s own references, the underlying purpose of such bidding is to safeguard the public interest (see, e.g., majority opn, at 256); the public bidding requirements are more, not less, onerous to assure that objective (see, e.g., majority opn, at 257-258).
The majority’s reliance on this Court’s fraud discussion in Signacon (
Second, beyond the ample case law establishing the salutary effects of public bidding, on the facts before us there is no sign
The majority, moreover, makes much of the purported inadequacies of the commitments executed by the utility companies, characterizing them as risky security blankets (majority opn, at 261-262). By signing the commitment letters, the utility companies contractually bound themselves to the terms set forth thereunder, including the obligation to pay “the difference between the overall low bidder’s price for the City’s share of the work and the lowest price received on the City’s share of the work.” The majority’s perceived risks, again, are unfounded. The utility companies have powerful incentives to assure the success of these arrangements, among them their continuing relations with the City (as owners of the underground pipelines, conduits, wiring and cables) and their desire to avoid reverting to the prior situation. The joint arrangements are advantageous to them as well as to the City.
Finally, there is no foundation for the prediction that these arrangements will have sweeping consequences, and will become the “template for all future multimillion dollar dealings” (majority opn, at 260). The test that defines the matter before us as a “public work” was sufficient in Exley, Citiwide and ATI Comm — and remains sufficient — to identify arrangements that were in fact private. There can be no doubt that the inclusion of utility interference work in the publicly bid reconstruction contracts here is consistent with the public interest and assures “the prudent and economical use of public moneys for the benefit of all the inhabitants of the state” (General Municipal Law § 100-a; see also, Matter of Conduit & Found. Corp. v Metropolitan Transp. Auth.,
By including all necessary work in one contract, the City ensured the timely and efficient completion of the public works projects at the lowest net construction cost available through competitive bidding. The fact that the utility companies also stand to benefit from the inclusion of utility work in these contracts does nothing to diminish the benefits received by
Judges Titone, Smith, Levine and Ciparick concur with Judge Bellacosa; Chief Judge Kaye dissents and votes to affirm in a separate opinion in which Judge Wesley concurs.
Order reversed, etc.
Notes
Nor does the Gas Facility Cost Allocation Act (the GFCAA) (L 1988, ch 357) signal that only the Legislature can authorize the City to make utility interference work part of a “public work” contract (majority opn, at 259-260). Significantly, the GFCAA authorized the City to enter into complex agreements with gas utilities for the purpose of sharing the costs of gas line interference work necessary to perform City water and sewer projects. The legislative history reveals that the GFCAÁ was the end product of long-running negotiations between the City and Brooklyn Union Gas over who should bear the cost of such gas line interference work. The GFCAA .replaced the common-law rule requiring gas utilities to pay for the costs of the interference work and allowed an agreement between the City and Brooklyn Union Gas — establishing “a roughly 50%-50% division of costs” between them — to go forward (Bill Jacket, L 1988, ch 357, Mem of Legislative Representative James Brenner, Office of Mayor of City of NY, reprinted in 1988 McKinney’s Session Laws of NY, at 2030; Letter of Assemblyman G. Oliver Koppell; Mem of New York State Department of Public Service).
The agreements at issue in this case do not contemplate a cost-sharing scheme, nor do they shift the financial responsibility for the utility interference work, which, by law, must be borne by the utility companies. Indeed, the utility companies not only remain responsible for the cost of the interfer