Contractors For MTA May Be Exposed To Debarment

Manny A. Frade heads up Meltzer Lippe’s Construction Practice Group. He serves contractors throughout the industry, many of whom perform work for public authorities including the MTA.

The NYS legislature passed a law that can effectively result in prohibiting contractors from performing government work for five years. The new law provides that if MTA contractors fail to actually substantially complete their work within merely 10% of the adjusted time frame or look like they will be unable to complete their work within 10% of the adjusted time frame; or assert a claim(s) for additional payment that the MTA deems is invalid (and the total of the claim(s) is 10% or more of the adjusted contract price) the MTA “must commence a debarment procedure where there is any evidence” of a violation. In other words, if you submit claims, the total of which exceeds the adjusted price by more than 10%, that the MTA ultimately rejects, you will be debarred. If the MTA believes that you delayed the project by more than 10%, not only are you subject to liquidated damages, you will be debarred. In fact, if an MTA employee even believes that (a) you will not complete your work within the adjusted schedule; or, (b) dependent upon the amount of the claim, that you submitted an invalid claim, he/she must start the debarment process.
In short, the law has turned every day construction project disputes into landmines that can destroy one’s construction business with the government. Think of it this way: if there is a greater than 10% delay, the MTA’s project manager will have to choose between commencing a debarment proceeding or conceding that you are not the cause of the delay. Which do you think he/she will likely choose?

Of course, debarment is not automatic. Contractors do have the right to a hearing not before a Judge, but rather before three managerial level employees of the MTA. If the panel issues a determination of debarment, the panel will send the determination to MTA Board to be ‘ratified’ or ‘remitted for further consideration.’
Can the Courts help? Sure, but only in the unlikely event that the MTA’s decision was not only wrong, but also arbitrary and capricious. This proceeding is commonly known as an ‘Article 78 Proceeding,’ and anyone that has ever been involved in one knows that the burden of establishing that a determination by a government agency was ‘arbitrary and capricious’ is extremely high and that the success rate of these proceedings is real low.

It gets worse. Every other government agency in New York (and perhaps elsewhere) will be aware of the debarment; so there is a good chance disqualifying you as a ‘non-responsible bidder’ on future bids from any government agency will follow; and that branding will disqualify you with every government agency.
Finally, if you think that the new law does not apply to your current contract, think again. The regulations apply to “all contracts that were in effect on, or entered into after, April 12, 2019.”

Manny A. Frade

This blog posting is for informational and educational purposes only. It is general in nature and not person or circumstance specific. This blog posting is not intended nor should it be construed as rendering independent investment, legal or tax advice. It may but does not necessarily constitute attorney advertising.

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