By Sarah K. Bloom

The New York legislature recently enacted a statute, along with far-reaching implementing regulations, which should concern all contractors working with the Metropolitan Transportation Authority (MTA). The law requires the MTA to implement regulations imposing debarment as a penalty for construction contractors who fail to substantially complete the work within 10% of the adjusted contract time. N.Y. Pub. Auth. Law § 1279(h).

The implementing regulations, issued on June 5, 2019, provide that the MTA must debar contractors who:

(i) failed to substantially complete all the work within the total adjusted time frame by more than 10 percent of the total adjusted time frame; or

(ii) failed to progress the work in a manner so that it will be substantially complete within 10 percent of the total adjusted time frame and has refused or in the opinion of the Authority is unable to accelerate the work so that it will be substantially complete within 10 percent of the total adjusted time frame, and such refusal or failure is an event of default under the contract; or

(iii) with respect to contracts for goods or services, as to any portion of the goods or services that must be delivered by a deadline, materially failed to deliver such goods or services by more than 10 percent of the total adjusted time frame.

N.Y. Comp. Codes R. & Regs. tit. 21, § 1004.3(a)(1).

The regulations also require debarment where a contractor asserts a claim for additional payment exceeding 10% of the total adjusted contract price and such claim is later found to be invalid under the contract’s dispute resolution procedures. See N.Y. Comp. Codes R. & Regs. tit. 21, § 1004.3(a)(2). The penalty applies even where the claim was submitted in good faith.

Finally, the regulations make clear that where one of these grounds for debarment exists, debarment proceedings “must commence” and “[MTA] and its contracting personnel have no discretion or excuse or justify” the contractor’s actions. N.Y. Comp. Codes R. & Regs. tit. 21, § 1004.3(a)(3).

MTA’s debarment process prohibits contractors from bidding on future contracts for 5 years from the date of debarment.

These new regulations are further complicated by New York Executive Order (EO) 192, issued in January of this year, which directs state agencies to “conduct business only with responsible entities” and directs that agencies “maintain information on contractors, vendors or grantees that have been deemed non-responsible or ineligible to bid on future contracts . . . .”  EO 192 further provides that all state agencies must rely on the determinations of “other State Entities in ascertaining the responsibility, ineligibility, or debarment of a contractor, vendor, or grantee in current and future procurements.” (EO 192). Debarment under the MTA regulations could therefore impact a contractor’s ability to secure contracts with other state agencies.

MTA’s debarment regulations differ significantly from the Federal Acquisition Regulation, which generally imposes debarment in situations indicating intentional, willful, or repeated wrongdoing, or a lack of business integrity. See 48 C.F.R. § 9.406-2.

Contractors should be aware of the stiff consequences of schedule delay when contracting with the MTA. Further, contractors should exercise caution when submitting requests for additional payment or adjustments in the contract price.