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New York State Contracts: Common Clauses and What They Mean Part I

contract negotiation lawyer

The State is a buying behemoth, purchasing everything from paper clips to computers, brimming with opportunity for merchants and contractors, alike. As of FY’2015, there are over 1,500 New York State centralized “requirements” contracts for commodities, services and technology.[1] In FY’2014, the State purchased $1.6 billion in centralized contracts.[2] And, in FY’2013, the New York State Comptroller reviewed nearly 23,000 transactions, including about 8,500 new contracts.[3] All of this represents a vast opportunity for profit. However, these business ventures are not without their share of headaches. Government contracts are long, burdensome, and often very confusing. Here are samples of some of the more common contract clauses in New York State, and a short explanation of what it’s really about.

Disclaimer: The following information does NOT constitute legal advice and is only for general educational purposes. Each situation is different and specific legal issues usually require additional research and investigation, so do not rely on this article to address a particular legal issue; use it as a starting point to gain a general understanding.

1. Executory Clause

Typical Wording: In accordance with Section 41of the State Finance Law, the State shall have no liability under this contract to the Contractor or to anyone else beyond funds appropriated and available for this contract.[4]

What Is It? Agencies of the State of New York have their overall budgets approved by the New York State legislature, which often includes line by line expenditures. Therefore, when a State agency issues a Request for Proposal or an Invitation for Bid or similar document, that money often has been pre-approved. Therefore, if the contract ran over-budget, or if it is some kind of multi-year project, or if the State entered into the contract *anticipating* (but not yet receiving) the money, the contract may not be completely funded, or not funded for all years or for the entire proposed scope.

Does It Affect Me? If you do business with a State agency covered by this provision, absolutely! If there is no money available or if funding has been cancelled, the State very likely will be able to terminate an existing contract, avoid renewing or continuing such a contract,[5] possibly even avoid paying you for expenses that you already have rendered. If possible avoid doing any work until you have *written* assurance the project is funded.However, issues with proving funding availability can cut both ways (for and *against* the State), and budgetary allocations are often unclear, meaning if there is confusion whether or not the money was there, that *could* work in your favor.[6] That will require some fancy discovery work and reading of intricate line budgets, but could be the difference between getting paid and not.

2. Non-Assignment

Typical Wording: In accordance with Section 138 of the State Finance Law, this contract may not be assigned by the Contractor or its right, title or interest therein assigned, transferred, conveyed, sublet or otherwise disposed of without the State’s previous written consent, and attempts to do so are null and void. Notwithstanding the foregoing, such prior written consent of an assignment of a contract let pursuant to Article XI of the State Finance Law may be waived at the discretion of the contracting agency and with the concurrence of the State Comptroller where the original contract was subject to the State Comptroller’s approval, where the assignment is due to a reorganization, merger or consolidation of the Contractor’s business entity or enterprise.The State retains its right to approve an assignment and to require that any Contractor demonstrate its responsibility to do business with the State. The Contractor may, however, assign its right to receive payments without the State’s prior written consent unless this contract concerns Certificates of Participation pursuant to Article 5-A of the State Finance Law.[7]

What Is It? State Finance Law Section 138 which *requires* this clause to be inserted into government contracts to prevent “contract brokering,” the practice of one company bidding on a project with the intent of handing it off to someone else and pocketing some kind of “finders fee” for it. Basically, at all times, the State wants to know with whom it will be doing business,[8] for reasons of efficiency, honesty and transparency.

Does It Affect Me? Definitely. If you contract with the State, you best be prepared to do the work yourself. That doesn’t mean you can’t hire subcontractors (although your contract most likely will have restrictions on that as well), but you can’t just hand off the work entirely, either. If you do, the State may be relieved from most or all of its obligations to pay you. However, note, that you can often get permission to transfer the contract to a successor or merged entity. Also, generally, you can assign payment, for instance to creditors, without permission, so it’s possible to use the contract revenue as security, for instance.

3. Comptroller’s Approval

Typical Wording: In accordance with Section 112 of the State Finance Law (or, if this contract is with the State University or City University of New York, Section 355 or Section 6218 of the Education Law), if this contract exceeds $50,000 (or the minimum thresholds agreed to by the Office of the State Comptroller for certain S.U.N.Y. and C.U.N.Y. contracts), or if this is an amendment for any amount to a contract which, as so amended, exceeds said statutory amount, or if, by this contract, the State agrees to give something other than money when the value or reasonably estimated value of such consideration exceeds $10,000, it shall not be valid, effective or binding upon the State until it has been approved by the State Comptroller and filed in his office. Comptroller's approval of contracts let by the Office of General Services is required when such contracts exceed $85,000 (State Finance Law Section 163.6-a). However, such pre-approval shall not be required for any contract established as a centralized contract through the Office of General Services or for a purchase order or other transaction issued under such centralized contract.[9]

What Is It? You signed a contract with some State agency and now you have a deal right? Not so fast. The State Comptroller needs approve it. Why? It’s a check and balance; that is, having someone with no stake in it, review the contract to ensure there was nothing funny going on, that proper procedures were followed, and that everything is generally on the up and up.[10]

Does It Affect Me? Only if you want to do business with the State. However, as long as everything is on the up and up and not too complicated the Comptroller usually turns around approvals in a relatively short period of time, perhaps 11-13 days.[11] The more accurate and trouble free your compliance information is (Vendor Responsibility forms, etc.) the easier a time you will have with the review. So, do yourself a favor, and be honest and up-front with any issues you know will come up during a proper investigation. If you perform work before the NYS Comptroller approved the contract, you might not ever get paid and the State could keep the benefit of your work.[12] So be careful.

4. Worker’s Compensation Benefits

Typical Wording: In accordance with Section 142 of the State Finance Law, this contract shall be void and of no force and effect unless the Contractor shall provide and maintain coverage during the life of this contract for the benefit of such employees as are required to be covered by the provisions of the Workers' Compensation Law.[13]

What Is It? Workers Compensation is insurance the employer must provide to covered employees, at no cost to the worker and to which the worker is entitled to collect, even if their own carelessness caused the accident.[14]

Does It Affect Me? Virtually all employers have to provide coverage and the list of covered workers is very large.[15] The purpose is " to surely and swiftly compensate an injured employee or a dependent of a deceased employee."[16] So, make sure you have insurance as required by this provision, or you could lose your contract.

5. Non Discrimination Requirements

Typical Wording: To the extent required by Article 15 of the Executive Law (also known as the Human Rights Law) and all other State and Federal statutory and constitutional non-discrimination provisions, the Contractor will not discriminate against any employee or applicant for employment because of race, creed, color, sex (including gender identity or expression), national origin, sexual orientation, military status, age, disability, predisposing genetic characteristics, marital status or domestic violence victim status. Furthermore, in accordance with Section 220-e of the Labor Law, if this is a contract for the construction, alteration or repair of any public building or public work or for the manufacture, sale or distribution of materials, equipment or supplies, and to the extent that this contract shall be performed within the State of New York, Contractor agrees that neither it nor its subcontractors shall, by reason of race, creed, color, disability, sex, or national origin: (a) discriminate in hiring against any New York State citizen who is qualified and available to perform the work; or (b) discriminate against or intimidate any employee hired for the performance of work under this contract. If this is a building service contract as defined in Section 230 of the Labor Law, then, in accordance with Section 239 thereof, Contractor agrees that neither it nor its subcontractors shall by reason of race, creed, color, national origin, age, sex or disability: (a) discriminate in hiring against any New York State citizen who is qualified and available to perform the work; or (b) discriminate against or intimidate any employee hired for the performance of work under this contract. Contractor is subject to fines of $50.00 per person per day for any violation of Section 220-e or Section 239 as well as possible termination of this contract and forfeiture of all moneys due hereunder for a second or subsequent violation.[17]

What Is It? Basically you can’t discriminate against people in hiring them or how you treat them. Discrimination includes “segregating” affecting persons, or decisions regarding apprenticeship programs, discharging them, inquiring about their status if it is protected as above.[18] It’s basically common sense.

Does It Affect Me? If you don’t like a worker for a reason that’s protected above (for instance, their domestic status, race or religion) be prepared to suck it up. Otherwise the State could terminate your contract and you might not be able to collect money due you (and you might be liable for fines, also, as well as open yourself up to civil suit). That’s a very hefty price to pay. It's still ok not to like them and fire them for "good" cause (they show up late all the time, they start fights, damage tools, steal from you, are incompetent, etc.), or even in some instances, "no cause" (i.e., I don't like them, and neither does anyone else) (and by the way, that's some cases, NOT all; please don't do this on the basis of this paragraph alone!) ; however, you definitely cannot fire or punish them for "bad" cause (discrimination on a protected class).

Final Thoughts: These are just a handful of the provisions that are currently standard in many New York State contracts. Stay tuned for further installments on this topic.



[2] (see page 77).

[3] (page 3).

[4] NYS Standard Provisions, Appendix A, Section 1 (January 2014).

[5] Amarnick Co. v. The State of New York, 372 N.Y.S.2d 947, 950 (NY Court of Claims 1975) (“in early correspondence between the Claimant and the Commission (State's Exhibits D and E), Claimant was informed that his request for a contract for a period of ten years could not 'be guaranteed because required funds for operation must be made available by the Governor and the Legislature each fiscal year. Income from the Bottling Plant must be deposited in a State fund and cannot be used for operation.'”).

[6] Bronx Historical Society v. State of New York, 2009 NY Slip Op 51857(U) (Court of Claims) (in case where it was confusing whether or not an approved $30,000 grant was supposed to go to Claimant or someone else, “The Court also concludes that triable issues of fact exist with respect to whether funds were "appropriated and available" under contract #495, thereby precluding an award of summary judgment to defendant.”).

[7] NYS Standard Provisions, Appendix A, Section 2 (January 2014).

[8] National Guardian Security Services Corp. v. City of New York, 218 A.D.2d 549, 550 (1st App. Div., 1995); Penn York Construction Corp. v. State, 92 A.D.2d 1087 (3rd Dept. 1983).

[9] NYS Standard Provisions, Appendix A, Section 3 (January 2014).

[10] City of New York v. State of New York, 87 N.Y.2d 982, 985 (1996) (“The statute's purpose is to protect the public from governmental misconduct and improvidence”).

[11] (page 3).

[12] Hamlin Beach Camping v. State of New York, 303 A.D.2d 849 (N.Y. App.Div. 2003) (“while claimant, and others doing business with [the State], may occasionally suffer what appears to be the unjust consequences of State Finance Law § 112, the overall benefit accruing to the citizens of [defendant] from its application has been determined, by the Legislature, to be worth the risk of such a casualty.”).

[13] NYS Standard Provisions, Appendix A, Section 4 (January 2014).



[16] Nova Casualty v. New York State, 2011-015-257, Claim No. 117464, Motion Nos. M-79647, M-79680

Court of Claims of New York (September 30, 2011).

[17] NYS Standard Provisions, Appendix A, Section 5 (January 2014).



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