Relates to program procurements, clarifying the definition of services, allowing the comptroller to excuse non-material deviations in procurement procedures

Summary of provisions

Section 1 of this bill adds a new Article 11-C to the State Finance Law to establish a statutory framework for the award of State contracts traditionally called "grants" that are awarded without the formal competitive process required by Article 11 of the State Finance Law. Such contracts are referred to as "program procurements."

Section 179-ff of Article 11-C adopts the current Article 11 definitions of "costs," "emergency," "price," "procurement record," "program," "responsible or responsibility," "responsive," "single source," "sole source," "specification or requirement," and "state agency or state agencies," adopts the current General Construction Law definition of "public corporation," and adds a new definition of "program procurement". A program procurement is a procurement which seeks a contract pursuant to which the vendor would provide services or commodities directly to the public or a segment of the public and not directly to a state agency, provided that such service shall not include the construction or reconstruction of buildings, bridges, roads, and appurtenances for use by the state, provides the applicant with discretion in the manner in which the purpose is to be accomplished with few specific limitations on the manner of delivery and has been granted an exemption pursuant to the provisions of section 179-hh of the State Finance Law where such exemption is required by section 1179-gg of the State Finance Law. A program procurement provides the proposer or applicant with wide discretion and latitude in the manner in which the purpose is to be accomplished, with few specific limitations on the scope of the proposal or application. A program procurement is not undertaken by a state agency primarily to obtain commodities, services or technology. Examples of program procurements include foreclosure prevention and mitigation, cancer screening, school-based health initiatives, transportation services, after-school programs, cultural services, nutritional outreach programs, displaced homemaker training, rape crisis and respite services.

Section 179-gg provides that program procurements are exempt from the formal competitive requirements of Article 11 of the State Finance Law if: (i) they are open only to not-for-profit corporations, municipal corporations, district corporations, or public benefit corporations; or (ii) they are open to profit-seeking corporations and granted an exemption by the Comptroller from the requirements of such Article.

Section 179-hh prescribes a procedure for a State agency to submit a written request for an exemption from the requirements of Article 11 of the State Finance Law and for the Comptroller to make a written determination granting or denying an exemption on the basis of the proposed procurement's conformance with the definition of a program procurement.

Section 179-ii specifies the procedures to be used and the conditions that may attach to a program procurement, including: (i) documentation of the method of award prior to the receipt of proposals or applications; (ii) advance public notice in the State Contract Reporter; (iii) a request for proposals or other solicitation document specifying the requirements for a responsive proposal or application and the manner in which evaluations and selections will be made; (iv) selection and contract awards must be made on the basis of technical merit with due consideration given to the reasonableness of costs, consistent with the solicitation document and the award methodology documented in the procurement record, and following a determination by the procuring agency that the selected proposer or applicant is a responsible party; (v) the amount of an award may be reduced in accordance with a methodology defined in the procurement record prior to the receipt of proposals; (vi) discretionary awards in amounts less than $50,000 may be made without a formal competitive process; (vii) contract awards shall be made on the basis of the highest ranking in accordance with the predetermined evaluation methodology, or on an emergency, sole source, or single source basis documented in the procurement record; and (viii) review and approval of program procurement contracts will be conducted by the Comptroller in accordance with Section 112 of the State Finance Law.

Section 2 of this bill amends Subdivision 7 of Section 160 of the State Finance Law to amend the definition of services to exclude those services provided by not-for-profit organizations in accordance with the provisions of Article 11-B of the State Finance Law, or services obtained through a program procurement process in accordance with Article 11-C of the State Finance Law.

Section 3 of this bill amends Subdivision 12 of Section 163 of the State Finance Law to allow the Comptroller to excuse non-material deviations in procurement procedures if the contracting agency determines and certifies, based upon a preponderance of the evidence documented in the procurement

record, that the noncompliance was a non-material deviation from one or more provisions of Article 11 of the State Finance Law. Provides that "non-material deviation" shall mean that such noncompliance (i) did not prejudice or favor any vendor or potential vendor, (ii) such noncompliance did not substantially affect the fairness of the competitive process, (iii) that a new procurement would not be in the best interest of the state, and (iv) the Comptroller concurs in such determination. Such determination by the contracting agency and the comptroller shall be documented in the procurement record.

Section 4 of this bill provides for an immediate effective date.

Prior legislative history

New Bill.

Justification

The Procurement Stewardship Act was enacted sixteen years ago (Chapter 83, Laws of 1995). The Act codified many procurement standards the Office of the State Comptroller was. already using to review and approve State contracts for goods and services. Since passage of the Act, a number of procedural issues have become apparent. These issues, which require legislative resolution, include the lack of statutory authority for the award of program procurements and the inability of the Office of the State Comptroller to waive non-material deviations in a proposed state contract.

Program Procurements: When Article 11 was added to the State Finance Law in 1995, it codified procedures for the procurement of goods and services. Currently there is no statutory authority governing the award of program procurements, commonly known as grants. The Procurement Stewardship Act should be amended to establish a statutory framework for such awards that recognizes that for-profit entities, as well as not-for-profit organizations, often compete for grant-type awards for services that have traditionally been confined to the not-for-profit arena. Currently, the award of grants to fund specific programs run by not-for-profits is not subject to the same competitive standards as the law prescribes for other types of procurements. Once the competition involves for-profit entities, however, the rules of the Procurement Stewardship Act apply even though they may not make sense for this type of procurement. This bill defines such procurements as "program procurements" and provides for consistent treatment whether or not profit-seeking firms are being enlisted to participate in public programs. Since, under this bill, a State agency will be able to conduct a program procurement open to profit-seeking entities only if the Comptroller grants an exemption from the requirements of Article 11, any concern about the possibility that State agencies might abuse the program procurement process should be alleviated.

Comptroller Authority to Waive Non-Material Deviations:

The Office of the State Comptroller regularly encounters circumstances where the contracting agency has unwittingly deviated from formal competitive bidding requirements. Where the agency has otherwise conducted a fair competition and the deviation does not favor the winning proposer or prejudice the losing proposers or potential proposers (or in other words, the deviation is not material to the outcome of the procurement), the Comptroller's staff often attempts to salvage the procurement by approving the resulting contract on a single source basis. The rationale for this approach is that approving such contracts is in the best interests of the State, since in these instances it is highly likely that the same proposer would prevail in a new procurement competition and scarce State resources would be wasted by conducting a new procurement. The bill authorizes the Comptroller to approve such contracts if the procuring agency certifies, on the basis of a preponderance of the evidence documented in the procurement record, that the noncompliance did not prejudice or favor any vendor or potential vendor, such noncompliance did not substantially affect the fairness of the competitive process, that a new procurement would not be in the best interest of the state, and (iv) the Comptroller concurs in such determination. Such determination by the contracting agency and the comptroller shall be documented in the procurement record.

The Comptroller recommends enactment of this bill to improve contracting practices in the State.

Budget implications

This bill has no significant fiscal impact.

Effective date

This bill would take effect immediately.