The purpose of this bulletin is to remind New York State contracting entities (state agencies) of their legal obligations with respect to determining the responsibility of a business entity (vendor, contractor or offerer) to which a contract may be awarded.

This bulletin also serves to outline the Comptroller's procurement record requirements regarding vendor responsibility. These procurement record requirements ensure that:

• Public dollars are being spent appropriately with responsible contractors; and
• The procurement record on file with the Comptroller's Office is complete.

State procurement laws require that state agencies award contracts only to responsible vendors. Additionally, the Comptroller must be satisfied that the submitting business entity is responsible before approving a contract award under Section 112 of the State Finance Law.

Section 163 of the State Finance Law (SFL) requires that contracts for services and commodities be awarded on the basis of lowest price or best value "to a responsive and responsible offerer." Section 163 (9) f of the SFL requires that prior to making an award of a contract, each contracting agency shall make a determination of responsibility of the proposed contractor.

Section 8 of the Public Buildings Law provides that all contracts for amounts in excess of five thousand dollars for the work of construction, reconstruction, alteration, repair or improvement of any state building, whether constructed or to be constructed must be offered for public bidding and may be awarded to "the lowest responsible and reliable bidder,"as will best promote the public interest, by the said department or other agency with the approval of the Comptroller for the whole or any part of the work to be performed, and, in the discretion of the said department or other agency, such contracts may be sublet; provided, however, that no such contract shall be awarded to a bidder other than the lowest responsible and reliable bidder without the written approval of the Comptroller.

Section 163(c) of the SFL provides:

"'Responsible' or 'responsibility' shall have the same meaning as such terms have been interpreted prior to the effective date of this article."

The courts, in examining vendor "responsibility," have indicated that "responsibility" is "an elastic word," encompassing factors including financial ability to complete the contract, accountability, reliability, skill, sufficiency of capital resources, judgment, integrity, and "moral worth."

Whether a business entity is "responsible" is a question of fact to be determined on a case-by-case basis. Based upon existing legal precedents, responsibility determinations can and should involve a review of the following four major categories:

1. Does the business entity possess the integrity to perform the contract? Factors to be considered include criminal indictments, criminal convictions, civil fines and injunctions imposed by governmental agencies, anti-trust investigations, ethical violations, tax delinquencies, debarment or suspension by a government entity, prior determinations of integrity-related non-responsibility, etc.
2. Has the business entity performed at acceptable levels on other government contracts? Factors to be considered include reports of less than satisfactory performance, early contract termination for cause, contract abandonment, court determinations of breach of contract, etc.
3. Is the business entity legally capable of performing the contract? Factors to be considered include authority to do business in New York State, licensing (e.g., with the Education Department or Department of State), debarment by the State Labor Department due to a prevailing wage violation, etc.
4. Is the business entity financially and organizationally capable of performing the contract? Factors to be considered include assets, liabilities, recent bankruptcies, equipment, facilities, personnel resources and expertise, availability in consideration of other business commitments, existence of appropriate accounting and auditing procedures for control of property and funds, etc.

Review of Vendor Responsibility

Agencies are required to undertake an affirmative review of the responsibility of any business entity to which they propose to make a contract award. Such review shall be designed to provide reasonable assurances that the proposed contractor is responsible. In undertaking such review, agencies must comply with the following standards:

• In all cases, agencies must consider any information that has come to their attention from the proposed contractor or any other source that would raise issues concerning the proposed contractor's responsibility.
• In the case of any contract valued at $100,000 or more, agencies must affirmatively require disclosure by the proposed contractor of all information that the agency reasonably deems relevant to a determination of responsibility. At a minimum, such disclosure must satisfy the tests detailed above in "Factors Affecting a Vendor's Responsibility."
• An agency should notify a business entity, in writing, of its preliminary determination that the business entity is non-responsible, detailing the exact reasons for such preliminary determination. The business entity should be given a reasonable time from the receipt of the agency notice to file a written appeal. If a dispute as to the facts arises from this process, the agency may, at its option, hold a hearing to fully air this dispute. If the business entity files an appeal, the agency should promptly review it and make a final determination regarding the responsibility of the business entity.

Submitting Business Entity Affiliates, Owners and Officers

The same tests applied in determining the responsibility of a submitting business entity should also be applied to that entity's affiliated businesses, as well as to any entity to which the proposed contractor is a subsidiary.

The same tests applied in determining the integrity of a business entity should also be applied to the owners and/or officers of the entity.

Contracting Agency Vendor Responsibility Certification and Documentation

For contract transactions requiring vendor responsibility documentation, the agency must:

• certify in the procurement record that it has undertaken an affirmative review and has reasonable assurance that the submitting business entity is responsible. Such certification must be made by an authorized signatory (see Comptroller's Bulletin No. G-126 on authorized signatures) The procurement record should include a statement that:

  "[the agency] has undertaken an affirmative review of the proposed contractor's responsibility in accordance with the standards outlined in Comptroller’s Bulletin No. G-221, and based upon such review, has reasonable assurance that the proposed contractor is [responsible or non-responsible, as applicable].";

• document in the procurement record the basis for its determination, including any information compiled or used in arriving at the conclusion. If the agency has required the proposed contractor to complete a Vendor Responsibility Questionnaire, the agency must include in the procurement record the paper questionnaire, if one was used, or an indication that the vendor’s questionnaire has been electronically filed, using the VendRep System.

Procurement record documentation is most efficiently achieved through the Vendor Responsibility Profile, which, with applicable attachments, is designed to provide OSC with the required Agency Responsibility Certification and Contracting Agency Documentation detailed above.

Additionally, if the original low bidder or best value offerer was determined by the agency to be non-responsible, resulting in the agency forwarding a contract with a contractor, which was not the original low bidder/best value offerer, the agency must document the basis for the agency's determination that the original contractor was non-responsible and the process that was followed in making such determination.

As part of its review of the contract pursuant to Section 112 of the State Finance Law, the Comptroller's Office will review the procurement record prepared by the agency to verify that the agency has affirmatively certified its findings of responsibility. In addition, if OSC is not satisfied that there is adequate documentation of the proposed contractor's responsibility, OSC may either (i) return the contract unapproved, to the agency for further consideration of the proposed contractor's responsibility; or (ii) undertake its own review of the proposed contractor's responsibility.

"Frequently Asked Questions" for vendors are available at: http://www.osc.state.ny.us/vendrep/faqs_vendor.htm

"Frequently Asked Questions" for agencies are available at: http://www.osc.state.ny.us/vendrep/faqs_agency.htm

For additional assistance:

Your Agency Counsel
Your Agency Finance Office
OSC Help Desk – (518) 408-4OSC or 1-866-370-4OSC (4672)
OSC Legal – John Dalton or Richard Redlo (518) 474-6011

• Office of the State Comptroller's Vendor Responsibility website:

http://www.osc.state.ny.us/vendrep/

• Best Practices Bulletin on Vendor Responsibility

http://www.ogs.state.ny.us/procurecounc/pdfdoc/BestPractice.pdf