Making Sure Your Claim is Ripe

It is imperative that before a contractor begins the dispute resolution process, it needs to obtain a final determination by the engineer which it can properly dispute.

By Henry L. Goldberg, Esq

It is axiomatic that obtaining a final determination by the authorized agency representative, normally the engineer, is a basic precedent to a dispute arising with a New York City agency. However, this is often easier said than done. Many resident engineers simply do not deal with the problem in a timely fashion. No decision on a thorny construction issue is often the norm. What is a contractor to do? Many, in frustration, have attempted to invoke the New York City dispute resolution process without first obtaining a final decision from the engineer of the agency with whom they are contracting.

In dealing with NYC agencies, Article 27 of the Standard Construction Contract defines the process. Article 27, which is basically identical to Section 4-09 of the Procurement Policy Board Rules, mandates that before a contractor can file a notice of dispute with a commissioner, it must first receive written notice of the engineer's determination or action which is the subject of the dispute. If the contractor fails to receive a determination by the engineer, any claim that is subsequently brought by the contractor will be rejected as premature. There is no dispute yet to be resolved. This can be extremely difficult for a construction company that has poured its resources into a disputed issue and has waited months, or even years, for a determination from the engineer.

This concept of 'ripeness' was recently considered by NYC's Contract Dispute Resolution Board. In that case, the contractor filed a notice of dispute with the NYC-DDC. However, the agency advised the contractor that the subject matter of the dispute was under review. Not wanting to be put off any longer, the contractor submitted the dispute to the NYC Comptroller's Office. The comptroller did not render a determination. The contractor then filed its application with the CDRB. The CDRB ruled that the petitioner's claim for resolution of its dispute was not properly before the board. The DDC's alleged failure to respond to the contractor's submission was not the type of dispute contemplated by the dispute resolution procedure. The DDC had not as yet denied any of the contractor's claim. A dispute only arises when the commissioner's representative makes a final determination with which a contractor disagrees. The CDRB held that because the engineer had not rendered a decision, there was no ìjusticiable disputeî and nothing for the CDRB to decide.

A related problem is that many contractors do not confirm who is the "Article†31" engineer designated by the particular agency for a particular project. Often a letter to the commissioner seeking confirmation of the identity of the engineer is the best way to protect your interests. On major projects there are simply too many agency representatives with apparent authority to take a chance in this regard. There can only be one resident engineer on the project with the required authority to make a final determination.

An unfavorable determination by the engineer creates the dispute between the agency and the contractor. Within 30 days of receiving notice of the determination, the contractor must file a notice of dispute with the agency's commissioner. It is interesting to note that a commissioner (unlike his subordinate, the engineer) is limited to 30 days after he has received all materials and information from both the contractor and engineer of the agency to make his determination. Article 27 of the Standard New York City Construction Contract states that, the "[f]ailure to make such determination within the time required by this article shall be deemed a non-determination without prejudice that will allow application to the next level." In other words, if the commissioner or comptroller fails to render a decision within prescribed period of time, the claim may be deemed denied, which allows the contractor to appeal its claim to the next level, i.e., the comptroller or CDRB.

Within 30 days of the contractor receiving a determination by the commissioner, it must file a notice of claim with the comptroller. The comptroller shall have 45 days from receipt of all materials and information from the parties to investigate the claim. This time period can only be extended for an additional 45 days if agreed to by both the contractor and comptroller. If the claim has not been settled or adjusted by the comptroller within the time period provided in Article 27, the contractor may then petition the CDRB to review the commissioner's determination.

In sum, it is imperative that before a contractor begins the dispute resolution process, it needs to obtain a final determination by the engineer which it can properly dispute. Otherwise, in the eyes of the Comptroller's Office or the CDRB, there is simply no dispute to be decided. If your company has been hemorrhaging significant sums for months while one of these disputes is "under consideration," this can be extremely vexing. Since there is no provision for "deeming" a resident engineer's inaction a denial, every effort should be made in the name of fairness to elicit a determination. Certainly, pushing for a final decision from a resident engineer may raise concerns about receiving a timely, but adverse, decision. But not to do so dooms the efforts of any contractor to timely employ the available NYC dispute resolution procedures.

(Joseph J Sisca III, Esq., an associate with Goldberg & Connolly assisted with preparation of the article.)