Compatibility of New York City Local Law 19 with

Federal Highway Act Competitive Bidding Requirements

New York City Local Law 19, which allows bidders who do not make the lowest bid to be 

awarded contracts in cases where the lowest bidder has not signed an anti-apartheid certificate, is incompatible with § 112 of the Federal Aid Highway Act, which requires that 

contracts for federally funded highway projects be awarded on the basis of competitive 

bidding. The Department of Transportation is therefore obligated to withhold funding for 

such contracts awarded subject to Local Law 19.

When Congress elects to distribute federal funds to states it may attach conditions to their 

distribution and, so long as those conditions are valid and clearly expressed, a state has no 

sovereign right to obtain or retain those federal funds without complying with the stated 

conditions. The Act’s conditioning of federal highway construction grants on compliance 

with competitive bidding requirements is valid and clearly expressed.

By imposing disadvantages on a class of responsible contract bidders, Local Law 19 discourages 

responsible contractors from bidding and undermines the competitive bidding process. This 

departure from competitive bidding procedures was not justified by considerations of costeffectiveness, as required by the Act.

June 30, 1986

M e m o r a n d u m O p i n i o n f o r t h e G e n e r a l C o u n s e l ,

D e p a r t m e n t o f T r a n s p o r t a t i o n

I. Introduction and Summary

This memorandum responds to your request for the opinion of the Attorney 

General on the question whether the Secretary of Transportation must withhold 

approval for payments under the Federal Aid Highway Act (Act) for any 

contract which has been awarded pursuant to a bidding process subject to New 

York City Local Law 19 (Local Law 19).' Section 112 of the Federal Aid 

Highway Act of 1958, as amended, 23 U.S.C. § 112, requires the Secretary to 

withhold approval for contracts for locally administered highway construction 

projects funded in whole or in part by the federal government unless the 

contracts are awarded through competitive bidding.

The provisions of Local Law 19 impose certain disadvantages in the bidding 

process for city contracts on bidders who fail to sign an anti-apartheid certificate stating that they have not, within the previous twelve months and for the

1 The Attorney General has delegated his responsibility for rendering opinions to government agencies to 

the Assistant Attorney General, Office of Legal Counsel. 28 C.F.R. § 0.25.

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term of the impending contract, done business with, and have neither bought 

from nor sold goods to certain agencies of the government of the Republic of 

South Africa or Namibia. Moreover, in the case of a contract to supply goods, 

the City requires the contractor to certify that none of the goods to be supplied 

to the City originated in South Africa or Namibia. 13 N. Y.C. Code § 343.11.0(a).2 

These certification conditions are not required by any federal law or executive 

order.3

Section 343.11.0(b) provides that if a bidder complying with the antiapartheid certification makes a bid no more than five percent higher than a low 

bid submitted by a non-complying contractor, both bids are to be passed on to 

the New York Board of Estimate which “may determine that it is in the public 

interest that the contract shall be awarded to other than the lowest responsible 

bidder.”4 New York City has declared that it will apply Local Law 19 to 

federally funded projects.

2 Section 343.11.0(a) provides:

W ith respect to contracts described in subdivision b and c of this section, and in accordance 

w ith such provisions, no city agency shall contract for the supply of goods or services with any 

person who does not agree to stipulate to the following as material conditions of the contract if 

there is another person who will contract to supply goods o r services o f comparable quality at the 

com parable price:

(1) that the contractor and its substantially owned subsidiaries have not within the twelve 

m onths prior to the award of such contact sold or agreed to sell, and shall not during the term of 

such contract sell or agree to sell, goods o r services other than food or medical supplies directly 

to the following agencies of the South African governm ent or directly to a corporation owned or 

controlled by such government and established expressly for the purpose of procuring such goods 

and services for such specific agencies: (a) the police, (b) the military, (c) the prison system, or 

(d) the departm ent o f cooperation and development; and

(2) in the case o f a contract to supply goods, that none o f the goods to be supplied to the city 

originated in the Republic of South Africa or Namibia.

Although the term “com parable pnce” in this section is not defined, § 343.11.0(b) makes clear that an agency 

must refer any contract in which a complying bid is within five percent of a non-contract bid to the Board of 

Estim ate, which will m ake the final decision as to its award.

3 Executive O rder No. 12S32 forbids governm ent agencies from providing export aid to corporations doing 

business in South A frica unless they certify that they are adhering to certain principles of nondiscrimination 

with respect to their em ployees. The order also forbids the supply of computers to certain South African 

agencies but contains no general prohibition against contracting with these agencies. See 21 Weekly Comp. 

Pres. Doc. at 1051-54 (Sept. 9, 1985).

4 Section 343.11.0(b) provides:

In the case of contracts subject to public letting under sealed bids pursuant to section 343 of the 

charter, whenever the lowest responsible bidder has not agreed to stipulate to the conditions set 

forth in subdivision a o f this section and another bidder who has agreed to stipulate to such 

conditions has subm itted a bid w ithin five percent o f the lowest responsible bid for a contract to 

supply goods or services of comparable quality, the contracting agency shall refer such bids to 

the board o f estim ate which, pursuant to such rules as it may adopt, and in accordance with 

subdivision b o f section 343 of the charter, may determ ine that it is in the public interest that the 

contract shall be awarded to other than the lowest responsible bidder.

Section 343 o f the N.Y.C. Charter requires a two-thirds vote and the approval of the corporation counsel and 

the com ptroller before any such decision is made. New York C ity observes that § 343 o f the charter applies to 

all contracts for goods and services exceeding $5,000 and thus allows the Board of Estimate to award 

contracts to contractors other than the low bidder regardless o f the applicability of Local Law 19. Therefore, 

New York C ity argues. Local Law 19 cannot be deem ed to violate § 112, because it does no more than refer 

certain contracts for consideration under a standing procedure to which the Secretary of Transportation has 

not heretofore objected. The short answ er to this argument is that the Secretary is not disabled from

Continued

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We conclude that application of Local Law 19 to federally funded highway 

projects administered by New York City would violate 23 U.S.C. § 112. 

Section 112 clearly reflects a congressional judgment that the efficient use of 

federal funds afforded by competitive bidding is to be the overriding objective 

of all procurement rules for federally funded highway projects, superseding 

any local interest in using federal funds to advance a local objective, however 

laudable, at the expense of efficiency. By imposing disadvantages on a class of 

responsible bidders, Local Law 19 distorts the process of competitive bidding 

in order to advance a local objective unrelated to the cost-effective use of 

federal funds. Accordingly, the Department of Transportation is obligated to 

withhold funding for highway construction contracts subject to Local Law 19.5

II. Analysis

Under the Supremacy Clause,6 state or local action must give way to federal 

legislation passed pursuant to one of Congress’ enumerated powers where the 

“act of Congress fairly interpreted is in actual conflict with the law of the State” 

or state subdivision. Florida Lime & Avocado, Inc. v. Paul, 373 U.S. 132, 142- 

43 (1963). It is well-settled that Congress, pursuant to its taxing and spending 

powers under Article I, § 8 of the Constitution, is authorized to disburse federal 

funds to the states for particular programs and to “fix the terms on which it shall 

disburse federal money.” Pennhurst State School and Hospital v. Halderman,

451 U.S. 1, 17 (1981). Accordingly, when Congress elects to distribute federal 

funds to states, it may attach conditions to their distribution. So long as the 

conditions are valid and clearly expressed, id., “[rjequiring States to honor 

their obligations voluntarily assumed as a condition of federal funding.. . 

simply does not intrude on their sovereignty.” Bell v. New Jersey, 461 U.S. 

773, 790 (1983). “If the conditions [are] valid, the State has no sovereign right 

to retain [federal] funds without complying with those conditions.” Id. at 791.

4 ( . . . continued)

challenging the application of a provision to federal contracts which has not been brought to her attention 

previously. W hile the issue of the legality of § 343, considered by itself, is not directly before us, we believe 

that its application to federally funded highway projects would raise many of the same issues as does 

application o f Local Law 19. We note, however, that Local Law 19 is different from § 343 in that it singles 

out a specific group o f contractors and declares that, in certain circumstances, their low bids must be referred 

to the Board o f Estimate for potential disapproval. Therefore, the Secretary is wholly justified in being more 

concerned about Local Law 19 than § 343, because the latter does not single out a particular class o f contracts 

for mandatory reference to the Board o f Estimate.

5 This Office has been informed that legislation is being considered by Congress that would direct the 

Secretary to approve payments under the Federal Aid Highway Act for contracts entered by New York City 

before October 1, 1986, regardless o f the application o f Local Law 19. The stated purpose of this legislation 

is to provide time for the Department o f Justice to render an opinion on the issue of the legality of the 

application o f Local Law 19 to federal programs. Our opinion, of course, considers the legality o f Local Law 

19 under existing federal law and does not purport to evaluate the effect of pending legislation on the 

Secretary's obligation or authority to withhold approval for New York City highway construction projects 

using federal funds.

6 U.S. Const, art. VI, § 2.

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The Supreme Court has specifically upheld Congress’ attachment of conditions to the distribution of federal highway funds. In Oklahoma v. United States

Civil Service Comm’n, 330 U.S. 127 (1947), the Court upheld a federal denial 

of highway funds to Oklahoma because of the state’s failure to observe the 

requirements of the Hatch Act. Congress had conditioned states’ receipt of 

federal highway funds on compliance with that Act. The Court stated: “While 

the United States is not concerned with, and has no power to regulate, local 

political activities of state officials, it does have the power to fix the terms upon 

which its .money allotments to states shall be disbursed.” Id. at 143.

New York City does not dispute that the competitive bidding conditions 

imposed by § 112 of the Federal Aid Highway Act are valid exercises of the 

congressional spending power and conditions which DOT is therefore obligated to enforce. Careful examination reveals that Local Law 19 is in clear 

conflict with these conditions.7

Section 112 applies to all highway projects using federal funds “where 

construction is to be performed by the State highway department or under its 

supervision.” 23 U.S.C. § 112(b).8 The first two sentences of § 112(b) provide:

Construction of each project. . . shall be performed by contract 

awarded by competitive bidding, unless the State highway department demonstrates, to the satisfaction of the Secretary, that 

some other method is more cost effective. Contracts for the 

construction of each project shall be awarded only on the basis 

of the lowest responsive bid submitted by a bidder meeting 

established criteria of responsibility.9 

A version of this provision has governed the process for awarding highway 

contracts since 1954, when the Senate insisted on amending the Federal Aid

7 Because our opinion rests on the actual conflict between Local Law 19 and 23 U.S.C. § 112, we need not 

reach the question whether application o f Local Law 19 to federally funded projects impermissibly burdens 

foreign com m erce or intrudes into a field of foreign affairs which is uniquely the concern o f the federal 

government.

8 Section 112(d) makes clear that the phrase “under [the] supervision [of the State highway department]'’ in 

§ 112(a) is intended to make that section apply to local subdivisions, such as New York City, as well as to 

State highway departm ents. Section 112(d) provides:

No contract aw arded by com petitive bidding pursuant to subsection (b) o f this section, and 

subject to the provisions of this section, shall be entered into by any State highway department or

local subdivision o f the State w ithout compliance with the provisions of this section, and without 

the prior concurrence of the Secretary in the award thereof.

(Em phasis added.)

9 The last sentence o f § 1 12(b) provides:

No requirem ent or obligation shall be imposed as a condition precedent to the award of a contract 

to such bidder for a project, or to the Secretary’s concurrence in the award of a contract to such 

bidder for a project, unless such requirem ent or obligation is otherwise lawful and is specifically 

set forth in the advertised specifications.

This sentence was added to the Federal Highway Act o f 1968, Pub. L. No. 90-495, 82 Stat. 830 (1968), in 

order to assure that the federal requirements of equal employment opportunity mandated by Executive Order 

No. 11246 be advertised before the bidding so that contractors would know what was expected of them. See S. 

Rep. No. 1340, 90th Cong., 2d Sess. 16—18 (1968). The provision is manifestly not a carte blanche for the 

state to impose additional requirements o f its own choosing unrelated to cost-effective use of federal funds. 

By the term s o f this provision, any state requirement must be “otherwise lawful” and therefore cannot 

interfere with the com petitive bidding requirement established by the first two sentences of the section.

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Highway Act of 1954 to require competitive bidding “unless the Secretary 

finds some other method is in the public interest.” Pub. L. No. 83-350, § 17,68 

Stat. 71 (1954).10

The Surface Transportation Assistance Act of 1982, Pub. L. No. 97-424, 96 

Stat. 2106 (1983), strengthened the competitive bidding requirement by eliminating the public interest exception and imposing the current requirement that 

departures from competitive bidding be justified by a demonstration by the 

local highway department that the alternative is more cost-effective. The 

legislative report accompanying the amendment reflects the concern of Congress that cost-effectiveness be the only criterion by which to award contracts 

to responsible bidders for highway projects funded by the federal government. 

See H.R. Rep. No. 555,97th Cong., 2d Sess. 11 (1982). The 1982 amendments 

therefore make clear that the efficient use of federal funds is the touchstone by 

which the legality of state procurement rules for federally funded highway 

projects is to be tested.

Local Law 19 contravenes the clear requirement of § 112 that all contracts be 

awarded through a process of competitive bidding to the responsible bidder 

who submits the lowest bid; the local ordinance frustrates the manifest congressional mandate reflected in the statute and its legislative history to make 

the most cost-effective use of federal highway funds.11 By imposing disadvantages on a certain class of contractors, New York City discourages responsible 

contractors from bidding and undermines the competitive bidding process.12 

New York City has failed to justify, as required by the statute, its departure 

from competitive bidding procedures by considerations of cost- effectiveness.13

>0The Senate proposed the amendment requiring competitive bidding. See S. Rep. No. 1093, 83d Cong , 2d 

Sess 14 (1954) (stating that the requirement is designed to prevent “collusion or any other action in restraint 

of free competitive bidding”). After the House acceded to the Senate amendments, one Senator hailed the 

bidding provision as one o f the most important achievements of the entire bill. 100 Cong. Rec. 5124 (1954) 

(remarks of Sen. Gore).

11 New York City argues that this congressional mandate is somehow undercut by 23 U.S.C § 145, which states:

The authorization of the appropriation of Federal funds or their availability under this chapter 

will in no way infringe on the sovereign rights of the States to determine which projects will be 

financed. The provisions of this chapter provide for a federally-assisted State program.

A provision permitting states to choose their own projects obviously has no bearing on the issue of whether 

Congress has restricted the permissible procurement procedures for such projects in the interest of the costeffective use of federal funds.

12 There can be no doubt that an otherwise qualified contractor who fails to furnish an anti-apartheid 

certificate is still a “responsible” bidder. Local Law 19 itself acknowledges that the requirements of the antiapartheid statute are not criteria of responsibility, because § 343.11.0(b) refers to “the lowest responsible

bidder w ho has not agreed to [the anti-apartheid certificate].” (Emphasis added.)

13 Indeed, because the primary purpose of the anti-apartheid certification requirement is “to send a message 

to the government of the Republic o f South Africa and to encourage those who do business there to support 

change,” see New York City Local Law 19, § 2, Local Law 19 is not designed to promote cost efficiency, but 

to express a well-justified abhorrence o f apartheid. To be sure, the ordinance states that it “also seeks to 

protect the financial interest of the city by limiting the number of city contracts which may depend for their 

satisfaction on the internal security of South Africa, where relentless oppression has led to increasing civil 

disturbances, making sabotage of business interests and even revolution possible.” Under certain circum ­

stances, such considerations may very well affect the cost-effectiveness of a given contractual arrangement. 

New York City has not, however, provided the Secretary with any evidence for the proposition that a 

particular com pany's contractual agreement with an agency in South Africa will endanger an unrelated 

contractual agreem ent to be performed in New York City on a highway construction project.

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New York City has attempted to defend the legality of its ordinance by 

observing that all contractors that have bid for its contracts have furnished the 

anti-apartheid certificate and that there is no evidence that any potential bidder 

would not be able to comply with the requirement. Thus, the City argues that its 

anti-apartheid certification requirement has not been shown to affect adversely 

the efficient use of federal funds. This argument is unavailing, however, 

because it attempts to reverse the burden of proof that § 112 requires to justify 

departures from competitive bidding. In order to satisfy this burden, New York 

City must demonstrate that its procedures lead to a more cost-effective use of 

federal funds; it cannot shift the burden to the Secretary of Transportation to 

demonstrate that the City’s procedures detract from cost-effectiveness.14

Second, New York City argues that its ordinance does not violate § 112 

because it is not an absolute bar to the award of contracts to contractors who 

submit the lowest bid for a project but fail to provide an anti-apartheid certificate. According to the provisions of Local Law 19, a non-complying bidder is 

awarded the contract unless a complying bidder is within five percent of the 

low bid. Moreover, New York City emphasizes that even when there is less 

than a five percent differential between a complying and non-complying bidder, the Board of Estimate must still vote by a two-thirds majority to award the 

contract to the complying bidder rather than the non-complying bidder. The 

short answer to this argument is that § 112 requires that the contracts be 

awarded through a process of competitive bidding, not simply that contracts be 

awarded by a process that may lead to the award of the contract to the lowest 

bidder. This distinction is important, because the knowledge that a contract will 

be awarded through a strict process of competitive bidding in itself contributes 

to the cost-effective use of federal funds by encouraging the submission of bids 

by contractors who might not otherwise participate. Conversely, a contractor’s 

knowledge that he may submit the low bid and yet not win the contract would 

deter him from entering the bidding process and incurring bid preparation 

costs.15 Only a process which strictly adheres to the competitive bidding 

requirement comports with Congress’ overriding objective of cost-effective14 W e do not read 28 C.F.R. § 635 108 as a decision by the Secretary through regulation to shoulder the 

burden o f p roof on the issue o f cost-effectiveness. Section 635.108 provides:

N o procedure or requirement for prequalification or licensing o f contractors will be approved 

w hich, in the judgm ent of the Federal Highway Administration, may operate to restrict com petition, to prevent subm ission of a bid by, or to prohibit the consideration of a bid submitted by, any 

responsible contractor whether resident or nonresident of the state wherein the work is to be 

perform ed.

(Em phasis added.)

B ecause the adm inistrator must still disapprove the procedure if the procedure may restrict competition 

(i.e., has the potential to restrict com petition), the burden o f showing that the procedure does not restrict 

com petition still rests with the locality.

15 The contractor w ho does not sign the anti-apartheid certificate know s that in the event of a complying bid 

that is w ithin five percent o f his bid, he w ill have to persuade the Board of Estimate to award the contract to 

him, notw ithstanding his refusal to com ply. The rational bidder would therefore revise his price to reflect the 

costs associated with lobbying the Board o f Estimate on this issue. Thus, even if the contract is awarded to the 

non-com plying bidder, it is reasonable to expect that his bid would be higher than it would be without the 

application o f Local Law 19.

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ness by maximizing the number of contractors who will bid for the contract and 

increasing the likelihood that the contract will be let for the lowest possible 

price.16

Since the provisions of Local Law 19 conflict with the requirement of 

competitive bidding contained in § 112(b), it is clear that 23 U.S.C. § 112(d) 

requires the Secretary to withhold approval for contracts let subject to the 

provisions of Local Law 19.

For the foregoing reasons, we believe that the Secretary of Transportation is 

obligated to withhold federal funds under the Federal Aid Highway Act for the 

payment of contracts whose award is subject to the procurement provisions of 

Local Law 19.

C h a r l e s J. C o o p e r

Assistant Attorney General

Office of Legal Counsel

16 New York C ity’s argument that the Secretary o f Transportation may not disapprove contracts awarded 

under Local Law 19 until New York City actually withholds a contract from a low bidder under that ordinance 

merits a sim ilar response. The Secretary is obligated to act when New York C ity's procurement procedures 

depart from the process of competitive bidding required by federal law, rather than when New York City 

declines to accept a low bid.

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