New York Gives Contractors a Chance to Start Fresh

by Henry L. Goldberg

A new rule helps to close a black hole that kept negative information swirling around indefinitely in New York City's Vendex contractor database.

In a marked softening of the approach taken in years past by the Giuliani Administration, the New York City Mayor's Office of Contract Services is providing more flexibility in the contractor "responsibility" vetting process.

The primary change is that the unit, formerly known as the Office of Contracts, now permits contractors that once had been designated as "non-responsible" to be "rehabilitated" under what it deems to be appropriate circumstances, thus making the companies eligible to win awards for contracts from the city.

The concept of "responsibility" stems from New York's General Municipal Law, which requires public owners within the state to award contracts to "the lowest responsible bidder" after an open and competitive process. It is important to distinguish between the question of whether a bidder is "responsible," which addresses the contractor's integrity, and whether it is "responsive," which addresses whether the company's proposal conforms to the requirements of the bidding specifications.

A finding of non-responsiveness has no ramifications beyond the contract for which a company submitted a bid. However, a finding of non-responsibility has potentially broad ramifications, such as requiring disclosure by the contractor on all of its future city contract bids. It can serve as a de facto bar to doing business with the city government for years.

This approach has, on occasion, gotten the city into trouble. At one point during Mayor Rudolph Giuliani's tenure, a significant regional fuel and oil supplier was deemed "non-responsible." The city informed vendors under municipal contracts that they could not purchase products from that supplier, which controlled a large portion of the New York market.

However, local fuel supply shortages at the time created pressure that forced the administration to back away from its stance. The city eventually permitted its contractors to use the supplier, while the city itself made no direct purchases from this "non-responsible" vendor.

Determinations of non-responsibility are entered in the Vendex system, a database containing information relating to all contractors bidding on municipal work. City agencies must review Vendex prior to awarding a contract.

Contractors say the system's weakness is that once a determination of non-responsibility or other negative information appears in Vendex, it becomes a self-perpetuating stigma.

As a result, city agencies could end up relying on outdated information that marks a contractor non-responsible for a new award, even if it has already resolved the original integrity problem. In the bigger picture, the city's pool of "eligible" contractors and vendors could get smaller, potentially stifling competition and increasing the relative cost of the contracts.

The administration of Mayor Michael Bloomberg issued Procurement Policy Board Rule 2-08 in 2004 in an effort to address this problem, and it amended the rule twice last year. Under the rule, a company seeking to demonstrate its integrity and be "rehabilitated" may apply to the city's Chief Procurement Officer for a "Declaration of Rehabilitation."

Under the new rule, a contractor can demonstrate to the chief procurement officer that it has appropriately corrected existing findings of non-responsibility or other cautions in Vendex. The officer, after consulting with the city's Department of Investigation, is able to issue the declaration of rehabilitation that will also post to the database.

While the process does not remove prior negative findings, and while the declaration does not by itself constitute a finding of "responsibility" for the contractor, it does allow agency contracting officers to use the declaration to mitigate and explain outdated negative responsibility information.

This procedure is an excellent reform that provides an efficient way for a contractor to cleanse its Vendex profile of various "skeletons in the closet," whether minor or major, offering a chance to move past outdated information.

One should be cautious, however, and consult with counsel prior to contacting the contract services office with regard to obtaining a Declaration of Rehabilitation. The procurement officer could also deny an application for such relief, and that determination would also become part of the Vendex record.

Therefore, to the extent practicable, a contractor should make efforts to ascertain whether the Office of Contract Services may be favorably disposed toward its application. <<

Henry Goldberg is managing partner of Goldberg & Connolly, a construction and government contracting law firm based in Rockville Centre, N.Y. His e-mail address is hlgoldberg@goldbergconnolly.com.