School Construction Authority Bill Signed Into Law by Governor Cuomo!

By Henry L. Goldberg

Governor Cuomo has signed into law the School Construction Authority Reform Bill, initially conceived and long championed by our Managing Partner, Henry L. Goldberg.

This new law will dramatically improve the change order process for subcontractors working with the New York City School Construction Authority (SCA). The law takes effect immediately, with regard to all SCA contracts executed on or after December 17, 2014.

The new law now effectively "preserves" a subcontractor's right to file a Notice of Claim against the SCA on an unresolved change order for up to three months after the amount claimed was denied by the SCA. (The old, unclear and unfair claim trigger for the running of the crucial three month period was "accrual" of the claim.)

It has been stated that there are thousands of unresolved change orders pending at the SCA. Even if the actual number is only a fraction of this regrettable amount, it still would mean that scores of contractors are being seriously harmed by the SCA's unacceptably slow resolution of extra work and other disputes involving millions of dollars. What has made this even worse, is that contractors and subcontractors on SCA projects have been disadvantaged in protecting their rights against the SCA because of this unfairness in the Public Authorities Law §1744, as originally written.

Prior to this amendment, under Public Authorities Law §1744, a contractor was precluded from bringing any lawsuit against the SCA unless: (1) it had submitted, a detailed, written, verified notice of claim upon which such action is based to the SCA within three months after the accrual of such claim; and (2) a lawsuit is commenced within one year after the happening of the event upon which the claim is based.

However often a contractor did not know that it even had a dispute until long after the time to submit a Verified Notice of Claim under §1744 had passed. Historically, an "accrual" of claim against the SCA arises when a contractor's "damages are ascertainable." The SCA could argue, therefore, that a contractor's claim for extra work accrues when it first submits its change order proposal. At that point, damages appear to be known, since the proposal itself values the work. At the same time, however, a contractor would not know of a dispute until the SCA actually denies its change order proposal, or offers an amount that cannot responsibly be accepted. Given the backlog of unresolved change orders, this process typically takes much longer than the statutorily required three months in which a claimant must submit a Verified Notice of Claim under §1744. This has been patently unfair, until now.

The industry achieved a major victory by having the Public Authorities Law §1744 amended to replace the words "accrual of a claim" with "denial of a claim." The time to file claims against the SCA should, and now will, run from a denial of a claim arising under any SCA contract. This is a "bright yellow line" that claimants can readily understand.

We would like to thank Governor Cuomo for acting fairly in signing this important legislation into law. This will directly benefit contractors and subcontractors doing business with the SCA. We also thank our friends and allies throughout the industry, and particularly the construction trade associations, who worked so diligently to achieve this legislative victory.

If you have any questions regarding the application of this important change in the the Public Authorities Law as it relates to the SCA, please feel free to give us a call.

Henry L. Goldberg is the Managing Partner at Goldberg & Connolly. He may be reached at (516) 764-2800 orhlgoldberg@goldbergconnolly.com. Please visit www.goldbergconnolly.com for more information.

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