Opinion ID: 2033758
Heading Depth: 1
Heading Rank: 4

Heading: The Dormitory Authority Case

Text: At issue here is a PLA adopted by respondent DASNY, a public benefit corporation responsible for the financing and construction of facilities for State agencies and other entities for which the Legislature has given authorization ( see , Public Authorities Law § 1677). Among its larger projects is the modernization of the Roswell Park Cancer Institute for the Department of Health, which operates the Institute. The Roswell project contemplated various public works projects on the Institute's 25-acre campus-like setting spanning a period of five years. In August 1993, when DASNY received the Governor's office's memorandum regarding PLAs, it had already begun renovation and in fact had let several contracts in furtherance of the Roswell project through competitive bidding. After DASNY was approached by representatives of the Buffalo Building Construction Trades Council in the fall of 1993 regarding adoption of a PLA for the Roswell project, DASNY's Board of Directors discussed the possibility of a PLA, and the reaction was mixed. Among the negative factors noted were that a PLA might raise the over-all cost of the project; the possibility that skilled labor needed in subsequent project phases might not be available through the PLA; and that upstate, 50% or more of public construction work was nonunion. Barely two months later, local unions picketed two open shop contractors working at Roswell Park. Minutes of a subsequent DASNY Board meeting on February 23, 1994 continued to reflect Board skepticism concerning the need for a PLA at Roswell Park, including the observation that a PLA may affect the price of labor adversely, and made no mention of the picketing. The following month DASNY approached a labor consultant regarding the issue of a PLA for the Roswell Park project. Of suggested negotiating topics, none mentioned cost savings as a goal or provided any cost savings projections. The president of the Building and Construction Trades Council of Buffalo then sent a copy of their proposed PLA to DASNY's Executive Director and requested a meeting. The Executive Director responded that the Authority had not yet made a decision regarding a PLA, noting that [a]ccess of minorities and women to employment and contract opportunities on this project is a high priority of the Authority. Consequently, if we decide to pursue the negotiation of a project agreement or request our construction manager to do so, you should know that our decision will be premised on an understanding that the resulting agreement will contain provisions facilitating those opportunities. On April 14, 1994, negotiation of a PLA for the Roswell Park project commenced and weeks later the agreement at issue was concluded. Not unlike the Thruway Authority PLA, DASNY's PLA made local collective bargaining agreements of each signatory union binding on all successful bidders; signatory unions were to be recognized as the exclusive bargaining representatives of all craft employees working at the project; contractors were required to hire employees exclusively through the local union job referral system (nonunion contractors were permitted to retain one core employee, up to a limit of 10, for every employee hired from the union job referral system). Additionally, all employees hired had to pay union dues and contractors were required to make contributions to union employee benefit funds. Where applicable, a contractor's choice of materials, design, tools or labor-saving devices was limited by local collective bargaining agreements, and the PLA provided uniform work rules for all trades, establishing standard hours of work per day and per week. Lastly, the PLA set forth mandatory dispute resolution procedures, expressly prohibiting strikes or other labor disruptions. Appellants (seven contractor associations and two general contractors from the Buffalo area) commenced an article 78 proceeding seeking invalidation of the PLA. Supreme Court stayed acceptance of Roswell Park bids while the merits of the petition were considered. Thereafter, the court annulled the PLA as violative of the competitive bidding requirements of State Finance Law § 135 and Public Buildings Law § 8. The Appellate Division reversed, holding that as in the Thruway Auth. case the PLA at issue did not violate the competitive bidding statutes because a diminution in competition was permissible, its purpose being rationally related to the public interest promoted by competitive bidding. Disagreeing with that application of the governing principles, we now reverse. Pursuant to Public Health Law § 2420 (read in conjunction with State Finance Law § 127 [2]), contracts involving the Roswell Park project must comply with the requirement in Public Buildings Law § 8 that the awards be made to the lowest responsible and reliable bidder as will best promote the public interest. Additionally, in 1989, the Legislature amended Public Authorities Law § 1680 (2) (a) to require that: [A]ny contract undertaken or financed by the dormitory authority for any construction, reconstruction, rehabilitation or improvement of any building commenced after January first, nineteen hundred eighty-nine for the department of health shall comply with the provisions of section one hundred thirty-five of the state finance law. State Finance Law § 135 mandates that construction contracts be awarded to the lowest responsible bidder. Notwithstanding these requirements, DASNY, like the Thruway Authority, is a public benefit corporation. And as we noted in Schulz v State of New York (84 N.Y.2d 231, 244) public benefit corporations were devised by the Legislature to separate their administrative and fiscal functions from those of the State in order to protect the State from liability and enable public projects to be carried out with a measure of freedom and flexibility. Thus, DASNY's status would allow it to adopt a PLA  provided it satisfied its burden of showing that adopting such an agreement was consistent with the principles underlying the competitive bidding statutes. While the range of discretionary authority granted to a public entity is a factor in determining the validity of a particular PLA, that factor is not dispositive here. What is dispositive is that the record fails to show that DASNY's decision to enter into the PLA had as its purpose the advancement of the interests underlying the competitive bidding statutes. Glaringly absent from this record is DASNY's contemporaneous projection of cost savings as a result of a PLA or any unique feature of the project which necessitated a PLA, an exceptional specification in all events. Although the record contains a few paragraphs identifying how costs would increase if project construction were delayed for one to three months, these projections  apparently done by DASNY's labor consultant in response to the instant litigation  appear in an affidavit submitted to the trial court nearly four months after the PLA was approved. In fact, by the time of the PLA, DASNY had already let up to six contracts through competitive bidding on the project with no evidence of reduced efficiencies. Minutes of the DASNY Board through the winter continued to reflect the Authority's own doubt that a PLA was needed. Nor does the record demonstrate labor unrest threatening the project. DASNY's resolution and Board discussions do not even discuss labor unrest, except to mention it was not a concern. Although there is reference in the record to one incident of labor unrest  coinciding with DASNY's consideration of a PLA at Roswell Park and ending with the signing of the PLA  that activity was not claimed to have affected work performance. Rather, the record reflects that local groups used the Roswell Park project as an opportunity to lobby for or against a PLA. Post hoc rationalization for the agency's adoption of a PLA cannot substitute for a showing that, prior to deciding in favor of a PLA, the agency considered the goals of competitive bidding. To say that DASNY's adoption of the PLA is justified simply by its desire for labor stability so that the work will be completed on time is tantamount to wholesale approval of PLAs  every public entity wants its projects completed on time, and public projects are presumptively important to the public. The competitive bidding requirements, however, demand that something more be shown in order to justify the significant restrictions imposed by PLAs. Moreover, DASNY's emphasis on its goals of promoting women and minority hiring through the PLA, although surely laudable, is unrelated to the goals of the competitive bidding statutes and cannot support its adoption of the PLA for this project ( see , Associated Bldrs. , supra ; American Inst. for Imported Steel , supra ). Given the record, the PLA in this instance cannot be sustained.