Compatibility of New York City Local Law 19 with Federal Highway Act Competitive Bidding Requirements
| Decision Date | 30 June 1986 |
| Docket Number | 86-12 |
| Citation | 10 Op. O.L.C. 101 |
| Parties | Compatibility of New York City Local Law 19 with Federal Highway Act Competitive Bidding Requirements |
| Court | Opinions of the Office of Legal Counsel of the Department of Justice |
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 cost-effectiveness, as required by the Act.
MEMORANDUM OPINION FOR THE GENERAL COUNSEL DEPARTMENT OF TRANSPORTATIONThis 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).[1] 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 [ 102]
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 anti-apartheid 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. [ 103]
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]
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 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., "[r]equiring 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. [ 104]
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 [ 105]
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] [ 106]
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...
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