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Common Clauses in New York State Contracts and What They Mean, Part III

November 28, 2015

 

 

This is the third installment in the series of articles dedicated to the types of clauses you likely will find with New York State government Requests for Proposals, and from other public institutions in this state.  Government issued contracts often include many of the same standard provisions, although Invitations for Bids, Requests for Proposals and other types of specific procurement inquiries may have slight differences.  Clauses ##1-10 were addressed in Parts I and II of this series.  This installment will pick-up with Clause #11 and continue until Clause #15.[1]

 

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.

 

 

11. Identifying Information And Privacy Notification

 

Typical Wording: (a) Identification Number(s). Every invoice or New York State Claim for Payment submitted to a New York State agency by a payee, for payment for the sale of goods or services or for transactions (e.g., leases, easements, licenses, etc.) related to real or personal property must include the payee's identification number. The number is any or all of the following: (i) the payee’s Federal employer identification number, (ii) the payee’s Federal social security number, and/or (iii) the payee’s Vendor Identification Number assigned by the Statewide Financial System. Failure to include such number or numbers may delay payment. Where the payee does not have such number or numbers, the payee, on its invoice or Claim for Payment, must give the reason or reasons why the payee does not have such number or numbers. 

 

(b) Privacy Notification. (1) The authority to request the above personal information from a seller of goods or services or a lessor of real or personal property, and the authority to maintain such information, is found in Section 5 of the State Tax Law. Disclosure of this information by the seller or lessor to the State is mandatory. The principal purpose for which the information is collected is to enable the State to identify individuals, businesses and others who have been delinquent in filing tax returns or may have understated their tax liabilities and to generally identify persons affected by the taxes administered by the Commissioner of Taxation and Finance. The information will be used for tax administration purposes and for any other purpose authorized by law. (2) The personal information is requested by the purchasing unit of the agency contracting to purchase the goods or services or lease the real or personal property covered by this contract or lease.  The information is maintained in the Statewide Financial System by the Vendor Management Unit within the Bureau of State Expenditures, Office of the State Comptroller, 110 State Street, Albany, New York 12236.

 

What Is It? Well, for once, here’s a provision that comes with a fairly clear explanation of the reason it exists, i.e. ensuring the State knows with whom it’s doing business and to ensure that individual or entity is up to date with their taxes.  Incidentally, the secret reason that this provision is so clear is that New York State has a number of privacy laws that interact with each other and require this level of clarity here.  For instance, one of these laws says that agencies may collect personal data only if it is relevant to their function and then, even so, the agency needs to list their authority to do so.[2] 

 

Does It Affect Me? Absolutely.  Providing false tax ID information for payment or on NYS’s Vendor Responsibility Questionnaire can be grounds for a determination of Non-Responsibility, contract suspension or termination or both, and possible criminal penalties.[3]  Also, a State agency generally cannot award a contract to a Non-Responsible vendor.[4] These are all bad outcomes. So, first off, provide the correct info. The State will run your ID to determine if you have unpaid taxes or unpaid fines; failure to clear these may result in a loss of the contracting opportunity.  I personally have seen million dollar contracts held-up in the award process because a vendor forgot or wasn’t unaware of a $50 fine they left unpaid - no kidding.  So, please make sure you provide the correct information, and try to clear all of your open liabilities to the government.

 

12. Equal Employment Opportunities

For Minorities And Women


Typical Wording: In accordance with Section 312 of the Executive Law and 5 NYCRR 143, if this contract is: (i) a written agreement or purchase order instrument, providing for a total expenditure in excess of $25,000.00, whereby a contracting agency is committed to expend or does expend funds in return for labor, services, supplies, equipment, materials or any  combination of the foregoing, to be performed for or rendered or furnished to the contracting agency (ii) a written agreement in excess of $100,000.00 whereby a contracting agency is committed to expend or does expend funds for the acquisition, construction, demolition,replacement, major repair or renovation of real property and improvements thereon; or (iii) a written agreement in excess of $100,000.00 whereby the owner of a State assisted housingproject is committed to expend or does expend funds for the acquisition, construction, demolition, replacement, major repair or renovation of real property and improvements thereon for such project, then the following shall apply and by signing this agreement the Contractor certifies and affirms that it is Contractor’s equal employment opportunity policy that:

 

(a) The Contractor will not discriminate against employees or applicants for employment  because of race, creed, color, national origin, sex, age, disability or marital status, shall

make and document its conscientious and active efforts to employ and utilize minority group members and women in its work force on State contracts and will undertake or continue existing programs of affirmative action to ensure that minority group members and women are afforded equal employment opportunities without discrimination. Affirmative action shall mean  recruitment, employment, job assignment, promotion, upgradings, demotion, transfer, layoff, or termination and rates of pay or other forms of compensation; (b) at the request of the contracting agency, the Contractor shall request each employment agency, labor union, or authorized representative of workers with which it has a collective bargaining or other agreement or understanding, to furnish a written statement that such employment agency, labor union or representative will not discriminate on the basis of race, creed, color, national origin, sex, age, disability or marital status and that such union or representative will affirmatively cooperate in the implementation of the Contractor's obligations herein; and (c) the Contractor shall state, in all solicitations or advertisements for employees, that, in the performance of the State contract, all qualified applicants will be afforded equal employment opportunities without discrimination because of race, creed, color, national origin, sex, age, disability or marital status.

 

Contractor will include the provisions of "a", "b", and "c" above, in every subcontract over $25,000.00 for the construction, demolition, replacement, major repair, renovation, planning or design of real property and improvements thereon (the "Work") except where the Work is for the beneficial use of the Contractor. Section 312 does not apply to: (i) work, goods or services  unrelated to this contract; or (ii) employment outside New York State. The State shall consider compliance by a contractor or subcontractor with the requirements of any federal law concerning equal employment opportunity which effectuates the purpose of this section. The contracting agency shall determine whether the imposition of the requirements of the provisions hereof  duplicate or conflict with any such federal law and if such duplication or conflict exists, the contracting agency shall waive the applicability of Section 312 to the extent of such duplication or conflict. Contractor will comply with all duly promulgated and lawful rules and regulations of the Department of Economic Development’s Division of Minority and Women's Business Development pertaining hereto.

 

What Is It? Basically, if you’re selling something to the State in excess of $25,000, or providing construction work in excess of $100,000, you need an Affirmative Action policy that (1) states you will not discriminate on the basis of, “race, creed, color, national origin, sex, age, disability or marital status” and you also need to have programs in place to (2) ensure minority group members and women are afforded equal employment opportunities without discrimination.  Both provisions are more fully defined above. This policy dates back to the 1988 adoption of NYS Executive Law Article 15-A, which was attempting to eliminate discrimination and promote minority / women economic opportunity.[5] 

 

Does It Affect Me? While many Americans favor anti-discrimination laws, government contracting quotas remain controversial.[6]  A recent Supreme Court decision, Schuette v. Coalition to Defend Affirmative Action (2014)[7], even has some thinking that this decision could be used to challenge government contracting preferences made on race or other similar categories.[8]  However, Schuette, involved a case where the voters of the State of Michigan, passed an electoral Proposition, to amend Michigan State’s Constitution, to prohibit "all sex-and race-based preferences in public education, public employment, and public contracting."[9] The public clamor for such a law in largely liberal New York State, appears unlikely. 

 

Further, Article 15 of the Human Rights Law generally prohibits discrimination, anyway;[10] although the Human Rights Law doesn’t specify racial or gender preferences, employers might use preferences to avoid litigation alleging discrimination.  So, the bottom line is, love them or hate them, for the foreseeable future, you need to deal with these requirements.  In practice, agencies often provide guidance, of what “goals” (i.e.,  targeted quotas of “minorities and women”) for which they are seeking on a given project.  Failure to meet such goals can result in adverse ratings at the end of a project, although in practice, some agencies care more than others.  Also, unions and other third parties can be quite vocal if they feel you are not taking such goals seriously, so be careful and don’t just blow off these requirements.

 

13. Conflicting Terms

 

Typical Wording: In the event of a conflict between the terms of the contract (including any and all attachments thereto and amendments thereof) and the terms of this Appendix A, the terms of this Appendix A shall control.

 

What Is It? This is not very fancy, but is very standard legalese, called a “Supremacy Clause.”  Often times government contracts can be lengthy, and put together from many different sources, from a variety of authors, editors and negotiators, and it’s very easy to miss a conflict of terms, even with computerized word searches - trust me on this one.  This provision ensures that if the person or persons with authority in the agency screwed up and missed a problem resulting from conflicting terms, “Appendix A” wins. 

 

For example: the contractor submits a response to an RFP, that by incorporation becomes part of the contract; however, the contractor’s terms specify lawsuits must be brought in Kansas and are controlled by Kansas law.  An astute State agency lawyer or contracting officer simply should delete that portion of the contractor’s response or make sure there is a phrase that specifically negates that errant Kansas clause.  However, even if that agency professional missed it, this “Supremacy Clause” provision will ensure that there is no confusion and that Appendix A will control, so that New York law will control.

 

Does It Affect Me? It’s standard boiler plate.  It doesn’t really impose any specific extra duties on you, but just be aware in a “battle of forms” you may very well lose because of this.  However, this particular provision does not mean all provisions of the government contract will control over your terms; only terms listed in “Appendix A” (the source of all these government provisions which this article series is reviewing) will control over your terms.  However, if the agency did its job properly, there should be another provision in the contract that actually does say *all* terms (not just Appendix A) of the government’s contract control over anything submitted by the contractor. Government agencies always will want the last word, no matter what.  In my experience, the only time this is not the case, is when, either: (1) the contractor has a unique skill or service and the government needs them desperately, or (2) there is some kind of immovable industry standard that the government cannot overcome (like requiring overly long warranty periods for which no surety will insure).

 

14. Governing Law

 

Typical Wording: This contract shall be governed by the laws of the State of New York except where the Federal supremacy clause requires otherwise.

 

What Is It? Again, super standard.  Any state (or local) government is going to want their state law to govern.  Again, the state almost always wins on this one, although occasionally enormous utilities or super-powerful companies can negotiate their way out of this one.  Oddly, this clause does not specify venue, i.e. where you can bring the case.  Most government contracts I have seen also specify that a lawsuit or proceeding should be brought in their state as well.  Even though it’s missing from Appendix A, you’re likely to find it buried somewhere in the contract.

 

Does It Affect Me? Yah, but no worries.  I mean, unless you are a super-duper legal sharpshooter and really know the differences in state to state law, for the type of specific contract or transaction (or problem that you are afraid of having), does it really make an enormous difference to negotiate a change of state law, beforehand?  Of more concern for most contractors, is *where* a case will be heard, rather than what law will govern it, since out of state contractors don’t want to be hauled all the way into New York.

 

15.  Late Payment

 

Typical Wording: Timeliness of payment and any interest to be paid to Contractor for late payment shall be governed by Article 11-A of the State Finance Law to the extent required by law.

 

What Is It? Oh boy.  You really don’t want to know.  Article 11-A has a bunch of confusing cross references that will keep you flipping back and forth for awhile.  All it really means is that if the State is late paying you, you should get about 2% in interest.  Don’t believe me? Have fun with this: http://law.onecle.com/new-york/state-finance/STF0A11-A_A11-A.html.  The best part is that at some point[11] this Article sends you to the NYS Tax Law, §1096(e), which then[12] redirects the reader to the NYS Tax Law, §§213, 213(b), 258, 263, 294, 1084, 1463.  Or you could just go to the NYS Department of Taxation and Finance to see the rates they actually set, which is currently 2% for overpayments.[13]  By the way, I know it says “over” payment,[14] even though the State is “under” paying you, but the State uses “underpayment” to mean, *you* underpaid the State with something you owe; and of course, the interest rates are much higher for underpaying than overpaying, because the State is a taxation monopoly.

 

Does It Affect Me? You’re thinking, it’s all about you.  Well … yeah and no.  Generally speaking, the State agency has 15 calendar days, from the date the agency receives your invoice, to review it and identify any issues,[15] and if none are found, the State must pay you within 30 calendar days (from the date it received the invoice, i.e. 15 days review plus 15 days more).[16]  If the State fails to pay you on time, huzzah! You are entitled to interest on the money owed,[17] currently 2%.[18]  However … if part of the payment due to you is owed to a subcontractor, than you have to pay the subcontractor their proportionate share interest; so, you don’t just get to keep all of that interest for yourself.[19] 

 

Also, if the government finds an issue in its fifteen day review period, the government will be allowed sufficient time to investigate and resolve any of these problems before having to pay interest.[20]  These issues could be with the invoice, the services or materials that the contractor provided, the authorized funding for the project, improprieties of any kind, etc.  So, on the one hand, you are entitled to your payment in a very timely fashion.  On the other hand, 2% interest is not a lot to collect, you will need to pay subs their share, and if the delay is your fault or caused by a lack of funding, then you might not collect the interest. 

 

If it makes you feel any better, agencies late paying contractors, are reported to the Governor and State Legislature, by the Comptroller,[21] something agencies really do not like - oh no, not at all.  So, agencies will try to pay you on time; be warned though - if they don’t, they will try and come up with an excuse to pin their delay on you, so that they do not appear to be at fault to the Governor or Legislature.

 

***

 

[1] Standard Clauses For New York State Contracts (Appendix A) (Jan 2014).

 

[2] NYS Public Officers Law, Article 6A, §94(1)(a) and §94(d)(iii).

 

[3] NYS Vendor Responsibility Questionnaire, p.10: https://www.osc.state.ny.us/vendrep/documents/questionnaire/ac3290s.pdf

 

[4] NYS State Finance Law, §163(1)(i-j); §163(2)(a); §163(3)(a)(ii); 163(4)(d); §163(9)(f); NYS Procurement Guidelines (Part IV: Specific Guidelines, Invitations for Bids) (Step 10) (Page 30) (see following link).

http://www.ogs.ny.gov/bu/pc/Docs/Guidelines.pdf

 

[5] NERA Consulting, The State of Minority and Woman Owned Business Enterprise: Evidence From New York (Prepared for NYS Department of Economic Development), Introduction, I(A), Page 30 of 468 (2010) (see link) http://www.esd.ny.gov/MWBE/Data/NERA_NYS_Disparity_Study_Final_NEW.pdf

 

[6] CQ Researcher, Rethinking Affirmative Action (1995): http://library.cqpress.com/cqresearcher/document.php?id=cqresrre1995042800

 

[7] Adam Liptik, Court Backs Michigan on Affirmative Action, New York Times,  (April 22, 2014): http://www.nytimes.com/2014/04/23/us/supreme-court-michigan-affirmative-action-ban.html?_r=0

 

[8] http://www.law360.com/articles/530967/high-court-affirmative-action-ruling-goes-beyond-schools

(“The U.S. Supreme Court’s recent decision to uphold a Michigan law banning affirmative action programs for university admissions will make it easier for states to pass similar laws banning state-level contracting preferences for minority-owned and women-owned businesses, experts said”).

 

[9] https://www.oyez.org/cases/2013/12-682

 

[10] http://www.dhr.ny.gov/sites/default/files/doc/hrl.pdf

 

[11] NYS State Finance Law, §179(g).

 

[12] NYS Tax Law, §1096(e)(1): “Authority to set interest rates.--The commissioner shall set the overpayment and underpayment rates of interest to be paid pursuant to sections two hundred thirteen, two hundred thirteen-b, two hundred fifty-eight, two hundred sixty-three, two hundred ninety-four, one thousand eighty-four, one thousand eighty-five, one thousand eighty-eight, fourteen hundred sixty-one and fourteen hundred sixty-three of this chapter, but if no such rate or rates of interest are set, such overpayment rate shall be deemed to be set at six percent per annum and such underpayment rate shall be deemed to be set at seven and one-half percent per annum.  Such overpayment and underpayment rates shall be the rates prescribed in paragraph two of this subsection, but the underpayment rate shall not be less than seven and one-half percent per annum.  Any such rates set by the commissioner shall apply to taxes, or any portion thereof, which remain or become due or overpaid on or after the date on which such rates become effective and shall apply only with respect to interest computed or computable for periods or portions of periods occurring in the period during which such rates are in effect.” http://codes.findlaw.com/ny/tax-law/tax-sect-1096.html

 

[13] NYS Department of Taxation and Finance Website: https://www.tax.ny.gov/pay/all/int_curr.htm

 

[14] NYS State Finance Law, §139(g) (“Interest payments on amounts due to a contractor pursuant to this article shall be paid to the contractor for the period beginning on the day after the required payment date and ending on the payment date for those payments required according to this article and shall be paid at the rate of interest in effect on the date when the interest payment is made.  Notwithstanding any other provision of law to the contrary, interest shall be computed at the rate equal to the overpayment rate set by the commissioner of taxation and finance pursuant to subsection (e) of section one thousand ninety-six of the tax law.”); NYS Department of Taxation and Finance (my underlining); Website: https://www.tax.ny.gov/pay/all/int_curr.htm

 

[15] NYS State Finance Law, §179(f)(3); http://codes.findlaw.com/ny/state-finance-law/stf-sect-179-f.html

 

[16] NYS State Finance Law, §179(f)(2); http://codes.findlaw.com/ny/state-finance-law/stf-sect-179-f.html

 

[17] NYS State Finance Law, §179(f)(1); http://codes.findlaw.com/ny/state-finance-law/stf-sect-179-f.html

 

[18] NYS Department of Taxation and Finance Website: https://www.tax.ny.gov/pay/all/int_curr.htm

 

[19] NYS State Finance Law, §179(f)(1); http://codes.findlaw.com/ny/state-finance-law/stf-sect-179-f.html

 

[20] NYS State Finance Law, §179(f)(2); http://codes.findlaw.com/ny/state-finance-law/stf-sect-179-f.html

 

[21] NYS State Finance Law, §179(m)(c)(3); http://codes.findlaw.com/ny/state-finance-law/stf-sect-179-m.html

 


***

 

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