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New York City Contract Claims: Complying with Dispute Resolution Procedures Requires Care
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May 7, 2007
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By Charles Fastenberg
Thelen Reid Brown Raysman & Steiner LLP
The rules for resolving disputes involving contracts with the City of New York are set forth at §4-09 of the Rules of the City of New York, Vol. 4, also known as the Procurement Policy Board ("PPB") Rules. These rules typically are incorporated at length in the city's contracts. There is no question that the Rules are effective and binding on parties who enter into contracts with the city. Unlike the pre-PPB procedure for resolving disputes - which typically involved the filing of a Notice of Claim (or Bill of Particulars) with the Comptroller and a plenary lawsuit no less than 30 days later - the procedure under the PPB Rules calls for multiple administrative reviews by designated city officers or agencies followed by an Article 78 proceeding if the claimant has not obtained a satisfactory result after the reviews at the administrative level.
This article briefly outlines the dispute resolution procedure under the PPB Rules and draws attention to at least some of the pitfalls a claimant may encounter in attempting to resolve claims under the Rules.
Overview of the Procedure
The dispute resolution procedure under §4-09 is activated upon receiving written notice that a determination has been made or action taken with which the contractor disagrees - e.g., an agency's denial of a request for a change order. PPB Rule §4-09 (d) (1). Once there is a dispute, the contractor has 30 days to present a Notice of Dispute to the agency head (i.e., the commissioner of the relevant agency).
If unsuccessful at the agency head level, the contractor then may seek an adjustment of the claim by filing a Notice of Claim, containing certain required information, with the comptroller within 30 days of receipt of the decision denying the claim by the agency head. PPB Rule §4-09 (e) (1). Presenting the claim for adjustment by the Comptroller is necessary for any further steps to be taken in the prosecution of the claim. PPB Rule §4-09 (e).
The third and final level of administrative review is review by the Contract Dispute Resolution Board ("CDRB"), an impartial, quasi-judicial, administrative body. A petition in the specified format and with the specified content must be filed with CDRB within 30 days after the Comptroller's time for reviewing the claim has expired without an adjustment having been made - arguably an imprecise and possibly even an unknowable filing deadline, as will be discussed below. PPB Rule §4-09 (g) (1). The contractor's sole judicial recourse after review by CDRB is an Article 78 proceeding, which must be commenced within four months of the CDRB decision denying the claim. PPB Rule §4-09 (g) (6).
Filing and Time Deadlines
The time periods for filing claims with the public officers and agencies pose an obvious first line of obstacles to a contractor's successful prosecution of a claim. Under §4-09, as is true of filing deadlines under the city's construction contracts in general, the information required to be filed can be detailed, the time within which to assemble such information and prepare the necessary documentation quite brief, and enforcement of the deadlines strict, even unforgiving. See, A.H.A. General Construction, Inc. v. New York City Housing Authority, 92 N.Y.2d 920, 680 N.Y.S.2d 461 (1998); Kreisler Borg Florman v. Department of Design and Construction, OATH Index Nos. 338, 339 and 340 of 2007 (January 26, 2007) ["The time frames for dispute resolution established by the contract and the... [PPB Rules] may not be disregarded without good cause"]; Samson Construction Co v. Department of Parks and Recreation, OATH Index No. 1327/06 (August 7, 2006). (OATH refers to the New York City Office of Administrative Trials and Hearings.)
Consequently, it is highly advisable to anticipate strict enforcement of the filing deadlines and to err on the side of caution when considering any question concerning timeliness of filings under §4-09. See also, Dell Tech Enterprises v. Department of Environmental Protection, OATH Index No. 427/07 (November 22, 2006).
Moreover, it is important to attach and submit along with the initial Notice of Dispute to the agency head all arguments, documents and materials that not only support the claim but that possibly may be referenced at a later point in the procedure even if not of primary focus in the initial filing. In other words, because the initial submittal by the contractor to the agency head may well "close the record" for the balance of all further reviews, including a subsequent Article 78 proceeding in court, all possibly relevant evidence, issues and arguments need to be anticipated and incorporated to the greatest extent possible in the initial filing with the agency head. See, PPB Rule §4-09 (d) (1), (e) (1) and (g) (3).
A separate timing issue arises in connection with the procedure for moving from the investigation of the claim by the Comptroller (administrative review No. 2) to the hearing of the claim before CDRB (administrative review No. 3). The difficulty at this point of the procedure is that a filing with CDRB must be made within 30 days of the time "the claim has not been settled or adjusted within the period provided in this section...." PPB Rule §4-09 (g). In other words, the 30-day period for filing with CDRB commences running upon a non-event or a non-occurrence - the absence of a settlement of the claim by the Comptroller. This is potentially an uncertain date, particularly if there is no formal written denial letter by the Comptroller. In fact, the Rules do not call for written determinations by the Comptroller.
Moreover, the 30-day period for filing with CDRB commences upon the absence of a settlement "within the time period provided in this section" - itself a less than clear time frame. Thus, included within the Comptroller's overall time period for review and settlement of a claim is a period of 45 days from the Comptroller's receipt of supplementary information from the claimant or from the pertinent city agency if such supplementary information is requested by the Comptroller. PPB Rule §4-09 (e) (3) and (4). Since the Comptroller's request for, and receipt of, any supplementary information from the agency may be expected to occur outside the knowledge of the claimant, this 45-day portion of the Comptroller's review may commence or substantially run without any knowledge by the claimant. Consequently, it is important for the contractor whose claim is pending before the Comptroller to adopt a tireless hands on approach, including frequent correspondence requesting claim status, meeting and examination dates, and copies of any responsive materials requested by the Comptroller and furnished by a city agency. 1/
In short, because the time periods affecting the right to proceed before CDRB are tied to non-occurrences and further may be tied to information requests and submittals occurring outside the claimant's knowledge, there is at the least a potential for confusion or jeopardizing of the claim at this leg of the process.
Delay Claims
An entirely separate matter of importance is that "delay" claims have been held not to be within the dispute resolution procedure under §4-09. Rather, delay claims are to be prosecuted the "old-fashioned way," i.e., a Notice of Claim filed with the Comptroller followed by a breach of contract lawsuit. See, New York City Administrative Code §7-203. In the words of the PPB Rules, the coverage under §4-09 is explicitly limited to "...disputes about the scope of work delineated by the contract, the interpretation of contract documents, the amount to be paid for extra work or disputed work performed in connection with the contract, the conformity of the vendor's work to the contract, and the acceptability and quality of the vendor's work...." PPB Rule §4-09 (a) (2). It specifically has been held that this scope of coverage excludes delay claims. See, Samson Construction Co. v. Department of Parks and Recreation, OATH Index No. 1327/06 (May 15, 2006).
The attempt to prosecute a delay claim under §4-09 can be prejudicial to the delay claim itself as well as to other claims the contractor may be asserting (e.g., claims for extra or additional work). One consequence that could arise from such a mistaken assumption is a failure to timely or properly file the notices necessary to preserve the delay claim under the terms of the contract. City contracts often require the filing of a notice containing specified information regarding the underlying delay and resulting damages with the project engineer within a relatively short time period after a condition causing delay is first encountered, followed up by periodic updates during the period the delay continues. This ongoing filing obligation for delay claims is different than the filing requirements under §4-09 and arguably will not be satisfied by the latter filings. In addition, city contracts may provide that to preserve a claim, detailed Notices of Claim and/or Verified Statements of Damages must be filed (and updated) with the agency or project representative within time periods not necessarily the same as the periods for filing under §4-09. These contractual filing requirements may be cumulative with the PPB filing requirements, and prosecuting a delay claim under §4-09 may well derail the claim if the contractual requirements for preserving such claims are overlooked in favor of the PPB Rules.
Given the difference in treatment between delay and non-delay claims inherent in §4-09, it is only a matter of time before a claimant will reach the point where a characterization of claims as being in one class or another is necessary. The claimant should anticipate this need for classification of claims and be pro-active regarding it. In particular, it often is advisable to segregate delay claims from the non-delay claims at the very outset and to pursue the appropriate procedure for each category of claim. Serious difficulties may arise when the question of characterization of claims is belatedly addressed only at the claim-filing stage as a means of accommodating issues that have arisen under §4-09.
Similarly, commingled claims that blur the distinction between delay and non-delay components may create difficulties. For instance, failure to segregate the delay from the non-delay components of a claim at the outset may set the stage for a finding at some later point that the entire claim is one for "delay" and, consequently, subject to dismissal under a "no damage for delay clause." Cf., Expert Electric, Inc. v. Department of Design and Construction, OATH Index No. 1879/02 (October 10, 2002) [rejecting the contractor's contention that a claim previously referred to by the contractor as one for delay was not in fact a delay claim]. Conversely, the sudden or belated identification of a claim as one for "extras" under §4-09 may subject that claim to specific contractual notice provisions for extra costs not previously complied with, thereby jeopardizing the claim. Cf., Gemma Construction Co., Inc. v. City of New York, 246 A.D.2d 451, 668 N.Y.S.2d 195 (1st Dept. 1998).
While this parsing out of claims (or claim components) can present close questions, it should be noted that the leading New York case of Corinno Civetta Construction Corp. v. City of New York, 67 N.Y.2d 297 (1986) defines "delay" claim as any claim that is time-based, which the City will argue encompasses not only conventional "delay" claims but claims for acceleration, out of sequence work, idle labor, inefficiency and related grounds.
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For more information about the issues covered in this report, please contact Charles Fastenberg in our New York office at 212-895-2870 or at cfastenberg@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
ENDNOTE
| 1/ | While §4-09 provides that the claimant has a right to review materials submitted by the agency to the Comptroller, the turnover of such documents may not be immediate. PPB Rule §4-09 (g) (2). |
©2007 Thelen Reid Brown Raysman & Steiner LLP
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