New York State Supreme Court Judge Shlomo Hagler could not have been more clear – the J.B. 4.0 procurement program violates the law and does “not protect the public fisc or safeguard the public interest.”
In his ruling, Judge Hagler found that J.B 4.0, the Department of Design and Construction’s (DDC) primary procurement program, allows multi-billion-dollar utility companies (i.e. Con Ed) and the telecommunications companies (i.e. Verizon and AT&T) to lowball their costs for vital construction projects across all five boroughs.
This fatal flaw will cost taxpayers an estimated $260 million over the next four years and if fully implemented could cause contractors to reduce their workforce and pass on critical projects, leading to delays in vital infrastructure upgrades.
However, despite this ruling, DDC is continuing to use this flawed, illegal and wasteful program rather than using other viable procurement processes already approved in law.
When pressed by City Council Finance Chair Justin Brannan and Majority Leader Keith Powers, the DDC essentially ignored their request for answers as to way the agency is still using J.B. 4.0.
On May 25, the Council leaders wrote:
“Before we delve into the details of your response, we would like to be clear, in our first letter we asked you to explain why you wouldn’t use one of the other current, legitimate bidding processes like those referenced in the judge’s ruling (i.e. Section ‘U’, JB 1.0) until the JB 4.0 issue is settled further in your favor. Instead of providing a specific explanation, you gave a terse defense for continuing to utilize the JB 4.0 bidding method, which was found to be in violation of General Municipal Law 103, citing that the DDC has not been enjoined from bidding under that format and that is why it continued to do so. We find that troubling considering the weight of the judge’s ruling regarding the apparent lack of protection of the public fisc and interest under the JB 4.0 bidding format.”
They added, “it appears that you value the feedback from the private utilities and some of the DDC’s industry partners, yet the feedback from the Supreme Court seems to be discounted in your view… As an agency with over twenty-five years of experience, there must be a better way for the DDC to facilitate infrastructure construction while solving the private utility problems, and without shifting costs to the taxpayers and putting out a bidding format that has been ruled to be in violation of the law.”
Ray Rudolf, Chair of the New York State Road Contractors Association, added “There are existing alternatives that will restore fairness and balance for taxpayers without slowing down procurement. If the Mayor and his team are truly committed to having a City government that “Gets stuff done” and saves the government money, then scrapping, J.B. 4.0 is a good place to start.”
Here is how we got here. Mayor de Blasio moved aggressively to implement a new program called Joint Bidding 4.0 (J.B. 4.0) which went into effect at the beginning of the Adams Administration. The J.B. 4.0 system contains a fatal flaw that will cost taxpayers an estimated $260 million over the next four years and significantly favors multi-national utility and telecommunications companies.
The issue centers on the fundamental way contractors have to bid on the slew of city contracts let each year across all five boroughs.
The City adheres to a low-bid policy, however, while the contractor has wide discretion on how it can bid on the primary, City construction work, the complementing utility work that is required (moving power, phone and other lines and wires) is subject to dramatically lower fixed pricing.
Under J.B. 4.0, when bidding for a project, a contractor can only allocate their costs to the flexible portion of the bid, which is paid by the City (i.e. taxpayers) but is capped on what they can bill the private utilities and telecommunications companies. Since the fixed, private utility pricing is so low, the contractor must allocate all additional costs for the private utility work into the City, taxpayer funded portion of the work.
An analysis by the NYCRA compared the prices contained in the NYC Utility Price List to prices bid and accepted for substantially identical utility interference work before the J.B. 4.0 provisions took effect. NYCRA found that the prices set in the NYC Utility Price List are approximately 47% below the prices that resulted from a competitively bid marketplace.
As the City Council and Mayor continue the negotiate the upcoming budget, some of the cuts being considered could be avoided by implementing a rational and fair procurement program that doesn’t favor major utility companies.
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