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

contract negotiation lawyer

This is the fifth installment in the series of articles dedicated to the types of standard 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 might have slight differences.

Clauses ##1-20 were addressed in Parts I through IV of this series. This installment will pick-up with Clause #21 and continue until Clause #26.[1] This also wraps up Appendix A, from which these were taken (Appendix A is a standard attachment for many State contracts); there are other appendices and topics we might discuss going forward, but we “bid” you goodbye Appendix A - thank you for an interesting journey through government procurement!

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 this as a starting point to gain a general understanding. This article, although educational in purpose and substance, nevertheless, might be deemed attorney advertising, and prior results do not guarantee future success.

21. Reciprocity and Sanctions Provisions

Typical Wording: Bidders are hereby notified that if their principal place of business is located in a country, nation, province, state or political subdivision that penalizes New York State vendors, and if the goods or services they offer will be substantially produced or performed outside New York State, the Omnibus Procurement Act 1994 and 2000 amendments (Chapter 684 and Chapter 383, respectively) require that they be denied contracts which they would otherwise obtain. NOTE: As of May 15, 2002, the list of discriminatory jurisdictions subject to this provision includes the states of South Carolina, Alaska, West Virginia, Wyoming, Louisiana and Hawaii. Contact NYS Department of Economic Development for a current list of jurisdictions subject to this provision.

What Is It? Certain other State or foreign jurisdictions have laws or practices that the New York Empire State Development Corporation (a.k.a. “ESDC” or “the Department of Economic Development”), believes discriminates against New York companies in some fashion. This discrimination can take the form of a preference or price distorting mechanism to the detriment of or otherwise against a New York state business enterprise, and can include, among other factors, any law, regulation, procedure or practice, terms of license, authorization, funding or bidding rights. To retaliate against and discourage this type of discrimination, the NYS ESDC has the power to prohibit State agencies from doing business with companies located in these discriminatory jurisdictions.

Does It Affect Me? Only if you a vendor whose principal place of business is located in one of these “discriminatory” jurisdictions. However, you can get around this prohibition if:

(i) Goods: you sell or lease goods and the goods are substantially manufactured, produced or assembled in New York State (even if you’re principally located in a discriminatory state); or

(ii) Services: if you provide non-construction services, which are substantially performed within New York State (even if you’re principally located in a discriminatory state).

Note, sorry, even if you perform construction services in New York State, if your principal place of business is in a discriminatory jurisdiction, you’re kinda screwed. Finally, this entire prohibition and be waived if the head of the State agency determines - in writing - that it is in the best interests of the state to do so.  The head of the state agency shall deliver each such waiver to the commissioner of economic development.[2] Basically, if the agency really needs or wants you, you can get around this; otherwise, if you are in a discriminatory jurisdiction, it might not be worth applying.

22. Compliance With New York State

Information Security Breach And Notification Act

Typical Wording: Contractor shall comply with the provisions of the New York State Information Security Breach and Notification Act (General Business Law Section 899-aa; State Technology Law Section 208).

What Is It? Does anyone else think it’s “redundant-redundant” to tell a contractor to comply with a law, with which already they have to comply? <head shake> So, GBL, §899(aa) basically says that if you have private data (such as customer names and birthdays, etc.), and if your computer system has been breached by a hacker so that the information is compromised, you have to disclose the breach, fairly immediately to the affected people and probably consumer reporting agencies (the specifics can get technical so read the statute).[3] The idea behind this law is to notify affected individuals so that they can minimize the damage by taking appropriate action (telling their banks, etc.). STL, §208, applies these basic provisions to State agencies specifically,[4] where as the GBL, 899(aa), is really geared toward private entities.

Does It Affect Me? As my old high school history teacher used to say, “one wonders wonders one” the reason a private contractor should be subject to the STL, since said vendor clearly would not be a State agency. Perhaps since such vendors often manage data for State entities, that’s the reason the STL regulation was included. A better question to ask is why bother including that in Appendix A (i.e. these regulations in this article)?

Technically, there isn’t any additional penalty, except that I guess, theoretically, if the contractor experiences a data breach, and fails to notify affected people, besides the penalties listed in the law (fines of several thousands of dollars per violation up to a maximum), the contractor also could be found to be “non-Responsible” because they violated this Provision #22. But guess what? Any company violating a State law, already could be found non-Responsible. My verdict? More unnecessary government bureaucracy. Repeal this provision from Appendix A!

23. Compliance With Consultant Disclosure Law

Typical Wording: If this is a contract for consulting services, defined for purposes of this requirement to include analysis, evaluation, research, training, data processing, computer programming, engineering, environmental, health, and mental health services, accounting, auditing, paralegal, legal or similar services, then, in accordance with Section 163 (4-g) of the State Finance Law (as amended by Chapter 10 of the Laws of 2006), the Contractor shall timely, accurately and properly comply with the requirement to submit an annual employment report for the contract to the agency that awarded the contract, the Department of Civil Service and the State Comptroller.

What Is It? Basically, if you perform services for the State, the State wants to know how many people you hired, how long they worked, and what you are paying them.[5]

Does It Affect Me? If you perform the services covered, which are essentially white collar in nature. There’s a lot of paperwork, but it’s fairly standard. This helps the State ensure compliance with various laws, validates the contractor’s terms of its RFP, and so forth. There’s really nothing crazy to this one, and it is really cut and dried, and kind of necessary.

24. Procurement Lobbying

Typical Wording: To the extent this agreement is a "procurement contract" as defined by

State Finance Law Sections 139-j and 139-k, by signing this agreement the contractor certifies and affirms that all disclosures made in accordance with State Finance Law Sections 139-j and 139-k are complete, true and accurate. In the event such certification is found to be intentionally false or intentionally incomplete, the State may terminate the agreement by providing written notification to the Contractor in accordance with the terms of the agreement.

What Is It? About 2005, New York State began focusing on procurement ethics, with an eye toward stopping improper influence of contract awards. Part of that effort, was to prohibit “improper” contact. Sections 139 j/k, are bit detailed, but the general gist is that contractors no longer could call a friend in a given State agency to lobby or advocate for their selection as winning bidder for a specific contract. Not only that, if an improper person is contacted, that person must report it. And … contractors and others have to disclose improper contacts on future bid attempts for several years; plus it’s counted against the contractor in their Responsibility assessments. In other words, contractors can only contact the proper “designated contact” for a given procurement, and cannot attempt to win the procurement by contacting someone else.

Does It Affect Me? Absolutely. Do NOT screw around with this. In case, that previous sentence wasn’t clear, let me say it this way: DO NOT SCREW AROUND WITH THIS. Let me give you some scenarios to help. Let’s say Big State Agency has Procurement Officer A, who you previously did amazing work for a couple of years ago, totally above board, with no crooked arrangements or anything. Procurement Officer B is the “Designated Contact” for a new job for which you are bidding. You can NOT contact Procurement Officer A if they are not the Designated Contact. You probably can list them as a reference on your RFP response, but do NOT call or email Procurement Officer A and say, “uh hey, can you put in a good word for me.”

Note: It’s arguably ok if Procurement Officer A calls you and you call them back (because you are prohibited from contacting them, not the other way around), but generally you should be very leery about doing stuff like that, unless it’s very clear that Procurement A properly had permission to call you. Don’t be cute. It can cost you years of trouble. Also, in the NOT ok department: do not call the Commissioner of Big State Agency, who happens to be a friend of yours, to discuss your pending bid; you can still discuss sports and stuff, but just don’t talk about the bid. Also, these restrictions end when the “restricted period” ends, after the bid is awarded.

25. Collect Sales And Compensating Use Tax

By Certain State Contractors,

Affiliates And Subcontractors

Typical Wording: To the extent this agreement is a contract as defined by Tax Law Section 5-a, if the contractor fails to make the certification required by Tax Law Section 5-a[6] or if during the term of the contract, the Department of Taxation and Finance or the covered agency, as defined by Tax Law 5-a, discovers that the certification, made under penalty of perjury, is false, then such failure to file or false certification shall be a material breach of this contract and this contract may be terminated, by providing written notification to the Contractor in accordance with the terms of the agreement, if the covered agency determines that such action is in the best interest of the State.

What Is It? Again this is a bit technical to determine if it applies to you, but once you figure it out, is as easy as filling out two forms. I’m simplifying here, so please do not use this article alone to determine if it applies to you, but if you’re a contractor awarded certain State contracts valued at more than $100,000, and you had sales delivered to locations within New York State of tangible personal property or taxable services having a cumulative value in excess of $300,000, measured over a specified period, you need to certify you are registered to collect sales and use taxes.[7] In addition, contractors must certify to the NYS Department of Taxation and Finance that each affiliate and subcontractor of such contractor exceeding such sales threshold during a specified period, also is registered to collect New York State and local sales and compensating use taxes.[8]

Does It Affect Me? If you meet the thresholds, yes, although certain types of organizations (for instance educational corporations and others), and some types of contracts are exempt.[9] If the law does apply to you, you need to file Form ST-220-CA (with the procuring covered agency) and Form ST-220-TD (with the Tax Department). The covered agency must include Form ST-220-CA in the procurement record for the contract.

26. Iran Divestment Act

Typical Wording: By entering into this Agreement, Contractor certifies in accordance with State Finance Law §165-a that it is not on the “Entities Determined to be Non-Responsive Bidders/Offerers pursuant to the New York State Iran Divestment Act of 2012” (“Prohibited Entities List”) posted at:

Contractor further certifies that it will not utilize on this Contract any subcontractor that is identified on the Prohibited Entities List. Contractor agrees that should it seek to renew or extend this Contract, it must provide the same certification at the time the Contract is renewed or extended. Contractor also agrees that any proposed Assignee of this Contract will be required to certify that it is not on the Prohibited Entities List before the contract assignment will be approved by the State.

During the term of the Contract, should the state agency receive information that a person (as defined in State Finance Law §165-a) is in violation of the above-referenced certifications, the state agency will review such information and offer the person an opportunity to respond. If the person fails to demonstrate that it has ceased its engagement in the investment activity which is in violation of the Act within 90 days after the determination of such violation, then the state agency shall take such action as may be appropriate and provided for by law, rule, or contract, including, but not limited to, imposing sanctions, seeking compliance, recovering damages, or declaring the Contractor in default.

The state agency reserves the right to reject any bid, request for assignment, renewal or extension for an entity that appears on the Prohibited Entities List prior to the award, assignment, renewal or extension of a contract, and to pursue a responsibility review with respect to any entity that is awarded a contract and appears on the Prohibited Entities list after contract award.

What Is it? In 2012, New York State determined it would not tolerate Iran’s nuclear weapons program or human right violations any longer, and passed a bill that dovetailed a similar federal law, to prevent certain of its contractors from doing business with companies that prop up Iran’s regime.[10] Generally speaking, those contractors that provide $20M of business in Iran’s energy sector (or banks, etc. invested for $20M in Iran’s energy sector) are put prohibited from doing business with New York State agencies. [11]

Does It Affect Me: If you invest in Iran or have substantial business in Iran, or use subcontractors that do, it might. Otherwise, just like the MacBride Principles, Provision #19, probably not.


As I said, so ends the analysis of Appendix A. In the future, we probably will cover other scintillating and exciting government procurement issues; yes, there’s a tad bit of facetiousness within, as I realize this stuff is very dry and boring to many. However, don’t let that fool you. The details contain secrets for the watchful and pitfalls for the unwary that literally could be worth millions. So, it’s important to pay attention, even if you need some extra coffee. For now, until next time…



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