New York has passed a new law requiring the Metropolitan Transportation Authority (MTA) to debar contractors, consultants, and suppliers that fail to substantially perform their contracts for goods and services. The law, Public Authorities Law Section 1279-h, together with the implementing regulations, requires the Metropolitan Transportation Authority to establish a process for debarment of contractors if specific performance benchmarks are not met.
The new law defines contractors to include consultants and suppliers or vendors to the MTA and applies to all contracts effective on, or entered into after, April 12, 2019 with the MTA and its subsidiary and affiliate agencies including the Long Island Rail Road Company, the Metro-North Commuter Railroad Company, the Staten Island Rapid Transit Operating Authority, MTA Bus Company, MTA Capital Construction Company, the New York City Transit Authority, the Manhattan and Bronx Surface Transit Operating Authority, or the Triborough Bridge and Tunnel Authority.
The new law specifically calls for the debarment of contractors if they:
(i) failed to substantially complete all the work within the total adjusted time frame by more than ten 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 ten 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 ten 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 ten percent of the total adjusted time frame; or
(ii). asserted a claim or claims for payment of additional amounts beyond the total adjusted contract value and one or more of such claims are determined to be invalid under the contract’s dispute resolution process or if no such process is specified in the contract in a final determination made by the chief engineer or otherwise by the Authority, and together the sum of any such invalid claims exceeds by ten percent or more the total adjusted contract value.
The MTA’s contracting personnel must commence a debarment if one or both of the grounds for debarment exist and have no discretion to waive or excuse violations. The regulations issued pursuant to the new law provide for written notice and hearing. The hearing is required to be conducted before a panel of at least three managerial level employees of the MTA and the decision of the panel shall be issued in writing. The MTA panel is also authorized to extend debarment beyond the prime contractor. The contractor’s parents, subsidiaries, and affiliates, any joint venturers and their individual members, and the contractor’s directors, officers, principals, and managerial employees may be disbarred as well. Additionally, any person or legal entity with at least a 10% interest in the contractor may be disbarred at the discretion of the MTA. Once issued, the panel’s decision is sent to the MTA’s board for ratification or nullification. If debarred, a contractor will be prohibited from entering into a contract with the MTA for five years.
This statute poses new and substantial risks for MTA contractors. Since the new law has retroactive effect, contractors currently working with the MTA under contracts in existence prior to the effective date are now subject to these new rules. Any contractors looking to provide goods or services to the MTA should carefully consider the commercial and legal risks of performance associated with the work in light of this new law.