Introduction

At the close of the 2005 Legislative Session, sweeping legislation was enacted that would significantly impact all entities that seek to do business with governmental agencies in New York State. Chapter 1 of 2005 amended the Lobbying Act and the State Finance Law (SFL), changing how companies and individuals are able to influence governmental procurements by the State and certain local governments. Since then, New York State has imposed a strict procurement lobbying law on the contracting community and governmental agencies.

Due to the 2005 amendments to the Legislative Law and the State Finance Law, essentially any attempt to influence any determination by a public official (defined to mean virtually any officer or employee of State or a covered municipal entity), or by any person or entity working in cooperation with a public official regarding a “governmental procurement,” constitutes lobbying activity that triggers lobbyist registration and disclosure requirements. Procurements by an officer or employee of the Unified Court System, or by those working in cooperation with such officers or employees, are also covered, as are procurements by the State Legislature. The 2005 law defined governmental procurement to include the solicitation, evaluation, award, approval, denial, amendment, or assignment of a “procurement contract,” which the law further defines as any agreement with a value greater than $15,000 which contemplates a “commodity, service, technology, public work, construction, revenue contract, the purchase, sale or lease of real property or an acquisition or granting of other interest in real property, that is the subject of a governmental procurement.”

Most notably, the 2005 legislation established a “restricted period” that limits contacts with all State governmental entities, industrial development agencies located in a municipality with a population of more than 50,000 and local public benefit corporations once a procurement is commenced. Moreover, since 2006, when permissive contacts are made, the procuring entity is required to record the source and substance of the contact. This law provides ground rules with respect to contacts with State entities — including the procuring entity — during the procurement process. Most importantly, the law limits who the contracting community is permitted to communicate with once the restricted period begins.

The sections of the SFL that set forth restrictions on contacts and provide for the recording of such contacts were set to be repealed on March 10, 2010. On the eve of this expiration, however, the Legislature passed and Governor Paterson signed legislation that extends these provisions until July 31, 2014. Additionally, this legislation made a variety of amendments to the Lobbying Act and the SFL. The relevant changes are described below.

Discussion

As noted above, Chapter 4 of 2010 was intended to extend the existing procurement restricted period laws. The sponsor’s memorandum, however, notes that the “bill [also] makes improvements to and clarifies the extent of the procurement lobbying law.” Specifically, following a lengthy legislative intent section of the bill wherein the Legislature notes the success — especially the increased confidence in the procurement process — of the procurement lobbying law that was first enacted in 2005, the legislation makes certain amendments to terms defined both in the Lobbying Act and the SFL, and clarifies certain issues related to the restricted period:

  1. The meaning of “governmental procurement” is clarified. “Governmental procurement” had been defined in both the SFL and the Lobbying Act as

the preparation or terms of the specifications, bid documents, request for proposals, or evaluation criteria for a procurement contract, (ii) solicitation for a procurement contract, (iii) evaluation of a procurement contract, (iv) award, approval, denial or disapproval of a procurement contract, or (v) approval or denial of an assignment, amendment (other than amendments that are authorized and payable under the terms of the procurement contract as it was finally awarded or approved by the comptroller, as applicable), renewal or extension of a procurement contract, or any other material change in the procurement contract resulting in a financial benefit to the offerer.

Chapter 4 amends sections 1-c of the Legislative Law and 139-k of the SFL to state that “the public announcement, public notice, or public communication to any potential vendor of a determination of need for a procurement,” shall be included within the definition of a “governmental procurement.” Therefore, an attempt to influence when an agency makes an announcement of a determination of need is deemed procurement lobbying activity under the statute. This change is of little moment, however, because the former Temporary State Commission on Lobbying, and now the Commission on Public Integrity, previously adopted a guideline holding that procurement lobbying commences upon a determination of need by a covered governmental entity.

  1. Clarifies the meaning of “offerer.” The definition now notes that a governmental agency that contacts a procuring entity shall not be considered an offerer, when such communication occurs in the exercise of the oversight responsibilities of the governmental agency. This impacts the Comptroller’s office and possibly the Attorney General’s office, but has no affect on private entities.
  1. Adjusts the definition of “procurement contract.” The 2010 chapter clarifies the definition of procurement contract to emphasize that contract amendments, extensions, renewals, or change orders to existing contracts are covered transactions. The new law provides, however, that amendments, extensions, renewals, and change orders authorized under the existing contract are excluded. Once again, this change should have little impact because existing provisions of the Lobbying Act relating to procurement contracts have always included similar language, and the Advisory Commission on Procurement Lobbying interpreted the State Finance Law in a similar fashion. In addition, the new law, for the first time, provides that “contracts governing organ transplants and contracts allowing for” the State to participate in trade shows are not to be considered procurement contracts.
  1. Technical amendment to the State Finance Law definition of “contacts.” The definition is amended to clarify that only communications that “a reasonable person would infer . . . was intended to influence the governmental entity’s conduct or decision regarding the governmental procurement,” shall be considered a contact. This clarifies that innocent and benign conversations were not intended to be covered by the restricted period. The obligation to report violations of the restricted period continues, however, and thus, even ambiguous communications regarding an existing procurement will likely be problematic. Accordingly, offerers should continue to exercise great caution in contacting entities regarding pending procurements and, in virtually all cases, should limit all contacts to the designated contact.
  1. Designated Contact. Finally, the bill includes amendments to the SFL regarding the restricted period and the designated contact.
  • The law clarifies that the designated contact must be identified “at the same time that the restricted period is imposed,” and requires that such individual be “knowledgeable of the procurement.”
  • The legislation also adds or amends certain exceptions to when the offerer is required to only communicate with the designated contact. Although the law always provided that offerers may participate in a bidders conference contemplated in a request for proposals, the law now also provides that offerers may participate in a “demonstration,” and “other means of exchange of information in a setting open to all potential bidders,” without being required to direct all communications to the designated contact. This addition to the statute will likely have little if any practical effect.
  • The exception to the restricted period which authorizes certain complaints is amended as well. Protests, appeals, and complaints to the Comptroller’s office, and any subsequent communications regarding such protests, appeals, or complaints, were previously required to be made in writing. Under the amended law, such objections are not specifically required to be made in writing, however, the Comptroller’s office is required to make a record of such communications and include them in the procurement record. Exceptions to the restricted period were also added for very limited communications by certain not-for-profit and charitable entities, as well as communications between offerers and governmental entities with regards to determinations of responsibility by the governmental entity.

Conclusion

Although Chapter 4 of 2010 may not appear to make significant changes to the procurement lobbying laws, it is another sign that the Legislature and Executive continue to believe that the amendments from 2005 are having a positive effect on the procurement process. Despite that this legislation includes some new or expanded exceptions to the restricted period, it is imperative that all companies that engage in business with the State or local municipalities, strictly adhere to this and all other aspects of the procurement lobbying laws. Failure to do so could result in draconian penalties. If you have any questions about this new law, or any other procurement lobbying law compliance issues, please let us know.