New York Government Contractors Face Key Legal and Ethics Rules

Transparency, impartiality, and avoiding conflicts of interest are hallmarks of integrity in New York state government. Multiple legal and ethical restrictions may apply when conducting business with the state, and operating within these provisions is critical for contractors to be legally compliant and successful in pursuing contract awards.

Contractors should be aware of six areas that frequently arise when doing business with a NY state entity.

Requests for Proposals

State agencies design their solicitations to ensure public money is spent responsibly and without undue influence on government decision-makers. Procurements routinely involve a competitive process and restrict the evaluation of bids to a select group of government employees.

Contractors should follow the solicitation rules governing the bidding process, particularly a “restricted period” that may limit communications to only specified state agency employees until the contract is awarded.

This restriction addresses the risk of undue influence over the selection process, as well as any inappropriate dissemination of information. Violations of this rule may lead the state to reject a contract award and possibly bar the bidder from future government contracts.

Project Sunlight

Since 2011, certain communications with government employees may require disclosure in an online Project Sunlight database. State employees who can exercise discretion in procurement, rate making, regulatory matters, agency-based judicial or quasi-judicial proceedings, and adoption or repeal of a rule or regulation must report a meeting intended to influence them in these five areas within five business days of the interaction.

Project Sunlight has its own set of rules about what interactions require reporting. In-person and virtual meetings are considered reportable appearances, but phone calls, emails, and other written correspondence are not. However, an unsolicited appearance to influence a state agency to purchase products could trigger the reporting.

Determining whether to report a particular interaction requires a case-by-case evaluation. The disclosure burden sits with the government official.

FOIL Disclosures

New York’s Freedom of Information Law provides public access to government records. FOIL requests routinely obtain access to state contracts, thereby disclosing their business terms. FOIL requests also can seek correspondence concerning a proposed contract, regardless of whether there is a final agreement.

The state can deny FOIL requests for a contract under negotiation on the basis that disclosure “would impair present or imminent contract awards or collective bargaining negotiations.”

This exemption shouldn’t be assumed—a state agency bears the burden of proof, the exemption is construed narrowly, and a “particularized and specific justification” is required. The exemption may prevent disclosure of terms in a competitive bidding situation but not all contracting situations.

The Two-Year Bar

Hiring state employees involves far-reaching rules. State agencies may ask contractors and their sub-contractors to certify their compliance with these restrictions. Contractors also may have to identify any of their employees who are former state employees.

Former state employees can’t “appear or practice” before their former agency or render services for compensation in relation to any matter before their former agency for a period of two years. The appear-or-practice restriction would prohibit a former state employee’s name from appearing in an email, regardless of whether the former employee is paid.

If the former employee is unpaid and not visible to their former agency, they can provide “backroom services” on a matter before their former agency, but this cutout prohibits guidance on any material submitted to the agency.

A broad lifetime bar prevents former state employees from appearing, practicing, or providing services (backroom or not) on a matter for which they were directly involved at their former agency. Another broad provision for former employees in the New York State Executive Chamber restricts them from appearing or practicing before all state agencies for two years.

Prohibition Against Gifts

As we approach the holiday season, contractors should realize that state employees can’t receive gifts. A gift generally is anything worth more than a nominal value ($15) across a number of areas—including travel, meals, refreshments, and entertainment—if it comes from an “interested source” (such as an entity doing business with the recipient’s state agency).

Exclusions to the definition of “gift” may apply, such as complimentary attendance (including food and drink) at a widely attended public event. Each situation requires analysis, and even permissible attendance may require the state employee to provide advance written notice to their state agency.

Campaign Contributions

Political campaign contributions to elected officials don’t constitute prohibited gifts. However, elected officials and state employees are prohibited from asking a contractor to disclose what contributions have been made.

The identities of campaign contributors are disclosed publicly by the New York State Board of Elections. Even if a campaign contribution is compliant, campaign giving in the context of a state contract could create the appearance of a potential conflict of interest and attract substantial scrutiny.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Adam H. Schuman is partner at Petrillo Klein + Boxer. He was previously special counsel for public integrity in the New York State Governor’s Office and assistant US attorney in the Eastern District of New York.

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