New York’s competitive bidding laws are designed to ensure transparency, fairness, and cost efficiency in public contracting. However, municipalities and school districts often seek ways to streamline the procurement processes while also complying with statutory requirements. One such method is “piggybacking” pursuant to General Municipal Law (GML) § 103(16), which permits municipalities to leverage existing competitively bid contracts for certain goods and services.
Recently, a New York Supreme Court in Matter of Daniel J. Lynch, Inc. v. Board of Educ. of the Maine-Endwell Cent. Sch. Dist. provided important guidance on the limitations of piggybacking in the context of public works projects. No. 002624/2024, 2025 WL 496722 (Sup. Ct. Onondaga Ctny. 2025). Specifically, the Court ruled that a school district’s use of The Interlocal Purchasing System (TIPS) to procure construction and renovation services regarding certain HVAC work violated the competitive bidding requirements of GML §§ 101 and 103. This decision highlights the need for public entities to exercise caution when considering piggybacking for construction-related contracts.
Understanding the Scope of GML § 103(16)
In New York, GML § 103(16) provides a narrow exception to the general competitive bidding requirements, allowing municipalities and school districts to “piggyback” on contracts previously let by federal, state, or local governments. “Piggybacking” refers to a practice whereby one municipality or school district uses an existing contract awarded by another governmental entity. Typically, public entities purchase certain goods and services under this exception, including “apparatus, materials, equipment, or supplies,” as well as related services for the “installation, maintenance, and repair” of these items, provided that the original contract was awarded to the “lowest responsible bidder” or based on the “best value.”
While this exception offers efficiency and potential cost savings, its application is strictly limited to specific types of purchases. The Court in Lynch held that GML § 103(16) excludes public works contracts – those related to the construction, repair, or improvement of infrastructure—from the provision. Public works contracts, therefore, must comply with the more stringent requirements set forth in GML §§ 101 and 103, which require that such contracts be awarded through competitive bidding, including public advertising and sealed bids.
Legal and Financial Risks
Contractors who enter into public works contracts in violation of competitive bidding laws face significant financial risks, including the possibility of disgorgement. While municipalities may face legal challenges and project disruptions, contractors stand to suffer the most harm. Disgorgement – requiring a party to forfeit all compensation received under an improperly awarded contract – can be devastating, particularly when substantial work has already been performed.
The Court’s decision in Lynch highlights the precarious position for contractors when a public entity improperly awards a contract. Although the court declined to impose disgorgement in Lynch, it did so largely because the project was nearly halfway completed, and unwinding the contract would have harmed the public interest. However, contractors should not expect similar leniency in future cases. The discretion courts have in these matters, especially the imposition of penalties, is unpredictable.
In Gerzof v. Sweeney, the Court of Appeals held that a public contract awarded in violation of competitive bidding laws was illegal and void, even absent a showing that the municipality suffered actual harm. 22 N.Y.2d 297 (1968). The Court clarified that once a contract is shown to have been improperly awarded, public funds are presumed to have been wasted, and the contract may be set aside. Notably, the Court emphasized that awarding a contract absent competition – whether through direct violation of bidding laws or unlawful manipulation – renders the agreement unenforceable. Had the Court in Lynch applied the reasoning in Gerzof, the contractor could have been ordered to return all payments received, regardless of the work completed.
Key Takeaways for Contractors
Ultimately, the Lynch decision serves as a cautionary tale for contractors engaged in public works projects. While municipalities must adhere to competitive bidding laws, it is contractors who bear the greatest financial risk when those laws are violated. The potential for contract invalidation and disgorgement makes it imperative for contractors to scrutinize the procurement process before accepting work. Given the unpredictability of the courts discretion in these cases, contractors must not assume that courts will waive financial penalties. To safeguard their interests, contractors should conduct thorough due diligence, seek legal guidance when necessary, and ensure strict compliance with competitive bidding laws before proceeding with work on public projects.
