§ 38. Contracts for construction or improvement of highways. State highways shall be constructed or improved by contract. Upon the completion and final adoption or approval, as provided by law, of the plans and specifications for the construction or improvement of a state highway, contracts therefor shall be executed as provided herein.

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1. Advertising for proposals. The commissioner of transportation shall advertise for proposals for the construction or improvement of such highways or sections thereof according to the plans and specifications prepared therefor. The advertisement shall be limited to a brief description of the work proposed to be done, with an announcement stating where the maps, plans and specifications may be seen, the terms and conditions under which proposals will be received, the time and place where the same will be opened, the amount of the draft or certified check to accompany the proposal, and such other matters as the commissioner of transportation may deem advisable to include therein. Such advertisement shall be published at least once in each week for two successive weeks in a newspaper published in the county in which such highway or section thereof is to be constructed or improved, and in such other newspapers as the commissioner of transportation may designate. If no newspaper is published in the county, the publication of the advertisement shall be in such newspaper or newspapers in an adjoining county as may be selected by the commissioner of transportation. Failure of such newspaper, published in such county or adjoining county, to publish such advertisement as provided in this subdivision or as directed by the commissioner of transportation shall not invalidate the publication of advertisement for proposals provided such advertisement is published in another newspaper or trade publication, which will be most likely to give adequate notice to contractors of the work contemplated and of the invitation to submit proposals therefor, at least once in each week for any two successive weeks preceding the date on which proposals described in such advertisement are to be received and opened.

2. Proposals. Each proposal shall specify the correct gross sum for which the work will be performed and shall also include the amount to be charged for each item specified on the proposal estimate sheet. The commissioner of transportation may prescribe and furnish forms for the submission of such proposals and may prescribe the manner of submitting the same which shall not be inconsistent herewith. Accompanying each proposal there shall be either a certified check or bank cashier's check for the amount of the bid deposit, to be fixed by the commissioner of transportation and specified in the advertisement for proposals or such other security from the bidder as may be acceptable to the commissioner of transportation. The checks of the two low bidders shall be deposited by the commissioner of transportation in a special account. Provided, however, that if prior to or upon receipt of said checks by the commissioner of transportation a bidder who is one of the two low bidders shall have duly filed a bond as hereinafter provided the commissioner of transportation shall forthwith return to said bidder his aforesaid check without depositing the same. If alternate proposals are taken, the checks of the two low bidders of all alternate proposals shall be deposited. All checks other than those of the two low bidders shall be returned promptly by the commissioner of transportation. Notwithstanding the provisions of any general or special law, the money represented by the checks of the two low bidders shall be paid from the special account when the contractor has duly executed and delivered to the commissioner of transportation the contract and the bond or bonds, if any, required by law for the performance of the work of a public improvement for the state of New York, or upon the rejection of all bids. The low bidder, in the discretion of the commissioner of transportation, and the second low bidder, as a matter of right, may at any time after the opening of the respective proposals, file with the commissioner of transportation a bond, the principal amount of which shall at least equal the amount of the respective bidder's check, theretofore deposited with his proposal, in the form prescribed by the commissioner of transportation, with sufficient sureties, to be approved by the commissioner of transportation, conditioned that the said bidder will execute a contract and furnish such performance or other bonds as may be required by law in accordance with the terms of the bidder's said proposal. If a bidder complies with the aforesaid provision, the commissioner of transportation shall forthwith return the money represented by the check of such bidder. In case the bidder to whom the contract shall be awarded shall fail to execute such contract and bond if required, the moneys represented by such check shall be regarded as liquidated damages and shall be forfeited to the state and shall be deposited by the commissioner of transportation with the commissioner of taxation and finance to the credit of the general fund. Provided, however, that although a performance bond or a payment bond or both may be accepted from a bidder by the commissioner of transportation, a requirement to furnish such bond or bonds may be dispensed with where the aggregate gross sums of the contracts to be awarded for the project is under fifty thousand dollars and provided further, that in a case where a single contract is issued for a project which is not subject to the multiple contract award requirements of § 135 of the state finance law, such requirements may be dispensed with where the commissioner finds it to be in the public interest and where the aggregate amount of the contract awarded or to be awarded is less than two hundred fifty thousand dollars. The gross sums indicated on the proposals when opened shall be publicly read. The commissioner shall keep the bids for the several items of the proposals confidential until an award of the contract is made, after which the proposals shall be subject at all reasonable times to public inspection.

2-a. Contracts; rubber-modified asphalt materials. In regard to contracts for construction or improvement of highways incorporating the use of asphalt construction materials after May first, nineteen hundred eighty-nine, the commissioner may require that the paving materials incorporate a percentage of scrap rubber derived from motor vehicle tires discarded in the state. Such percentage of rubber additives may be established by the commissioner subsequent to the completion of a rubber-modified asphalt pilot project to be conducted pursuant to section twenty-three of this chapter.

3. Award of contracts. The contract for the construction or improvement of such highway or section thereof shall be awarded to the lowest responsible bidder, as will best promote the public interest. No contract shall be awarded to a bidder other than the lowest responsible bidder without the written approval of the comptroller. The lowest bid shall be deemed to be that which specifically states the lowest gross sum for which the entire work will be performed, including all the items specified in the estimate thereof. The lowest bid shall be determined by the commissioner of transportation on the basis of the gross sum for which the entire work will be performed, arrived at by a correct computation of all the items specified in the estimate therefor at the unit prices contained in the bid.

4. Rejection of proposals. The commissioner of transportation may reject any or all proposals and may advertise for new proposals as provided in this section, if, in his opinion, the best interests of the state will thereby be promoted.

5. Form of contract. The commissioner of transportation shall prescribe the form of contract and may include therein such matters as he may deem advantageous to the state.

6. Bond of contractor. Each contractor, before entering into a contract for such construction or improvement, shall execute a bond in the form prescribed by the commissioner of transportation, with sufficient sureties, to be approved by the commissioner of transportation, conditioned that he will perform the work in accordance with the terms of the contract and the plans and specifications, and that he will commence and complete the work within the time prescribed in the contract. The bond shall also provide against any direct or indirect damages that shall be suffered or claimed on account of such construction or improvement during the time thereof, and until the highway is accepted.

7. Payments on contract, state taxes. The contract shall provide for partial payments as the work progresses as hereinafter provided:

(c) Whenever a contract shall in the judgment of the commissioner of transportation be substantially completed, the commissioner of transportation may, provided the regional director certifies that the essential items in the contract have been completed in accordance with the terms of the contract and the provisions of this chapter, direct the regional director to include in the final account such uncompleted items and pay therefor at the item prices in the contract upon the contractor depositing with the commissioner of transportation a certified check drawn upon a legally incorporated bank or trust company equal to at least double the value of such uncompleted work or, with the approval of the state comptroller, securities as are listed in subdivision three of § 139 of the state finance law, equal to at least double the value of such uncompleted work. The deposit may be used by the commissioner of transportation to complete the uncompleted portion of the contract and shall be returned to the contractor if he completes the uncompleted portion within a specified number of working days after he has been notified to proceed with the work.

(d) No certificates approving or authorizing a partial or final payment shall be made by the commissioner of transportation until he is satisfied that all laborers employed on the work have been paid for their services for the last payroll period preceding the said partial or final payment. The commissioner of transportation may, if he deems necessary, require an affidavit to such effect from the contractor or he may depend on any other source which he deems proper for such information.

(e) No such certificate approving or authorizing the first partial payment or any final payment to a foreign contractor shall be made unless such contractor shall furnish satisfactory proof that all taxes due the state tax commission by such contractor, under the provisions of or pursuant to a law enacted pursuant to the authority of article nine, nine-a, twelve-a, sixteen, sixteen-a, twenty-one, twenty-two, twenty-three, twenty-eight, twenty-nine or thirty of the tax law or Article 2-E of the general city law have been paid. The certificate of the state tax commission to the effect that all such taxes have been paid shall be, for purpose of this paragraph, conclusive proof of the payment of such taxes. The term "foreign contractor" as used in this subdivision means, in the case of an individual, a person who is not a resident of this state, in the case of a partnership, one having one or more partners not a resident of this state, and in the case of a corporation, one not organized under the laws of this state.

(f) Payment of the moneys due under a contract shall be made in accordance with the provisions of Article 11-A of the state finance law, provided failure to make such payment, as heretofore prescribed, shall not be due to any fault, neglect, or omission on the part of the contractor or by reason of the filing of any lien, attachment, or other legal process against the money due said contractor.

(g) For the purpose of making a final payment on a highway construction contract, the date to be used for determining the receipt of an invoice in subdivision two of § 179-f of the state finance law shall be the date on which the contract work has been accepted as completed by the commissioner of transportation.

8. Contingencies and extra work. Whenever the commissioner of transportation determines that from any unforeseen cause the terms of any contract should be altered to provide for contingencies or extra work, he may, if funds are available for payment of the cost thereof, issue an order on contract therefor to the contractor, a copy of which shall be filed with the director of the budget and the state comptroller. The estimated expenditure pursuant to the order on contract shall not increase the total amount of the primary contract until the estimated expenditure shall have been approved by the commissioner of transportation and a duplicate of such approval shall have been filed with the comptroller. No such extra work shall be commenced or undertaken until the commissioner of transportation has issued an order on contract as herein provided.

When such order on contract provides for similar items of work or materials which increase or decrease the itemized quantity provided for in the primary contract, the price to be paid therefor shall not exceed the unit bid price in the primary contract for such items. Agreed prices for new items of work or materials may be incorporated in the order on contract as the commissioner of transportation may deem them to be just and fair and beneficial to the state.

Whenever the commissioner of transportation also determines that in the cases herein provided it is impracticable for him to ascertain in advance the just and fair price to be paid by the state for new items of work or materials, the order on contract therefor may provide for performance of the work and the furnishing of the materials and equipment, in which event the contractor shall keep and shall make available at all times to the commissioner of transportation such accounting records, data and procedure as may be required by the commissioner of transportation. An estimate of the value of such work and the furnishing of materials and equipment shall be submitted by the commissioner of transportation to the state comptroller who is hereby empowered to approve such estimate. Partial and final payments shall be made upon proper records and data itemized as hereinbefore indicated.

Before any final accounting shall become effective, a supplemental contract and final agreement shall first be approved by the comptroller, and filed in his office. The director of the budget may at his discretion require the commissioner of transportation to submit periodic summaries of and reports on the scope and status of highway projects in such form and at such intervals as he may require, including any and all contract documents.

9. Adjustment of disputes. Notwithstanding the provisions of any general or special law, and in case of a dispute between a contractor and the commissioner of transportation concerning questions of fact which may arise under a contract, the contractor may, at any time before the final estimate is rendered, petition the commissioner of transportation for a hearing in relation thereto, provided (1) the amount involved therein as shown by such petition does not exceed five thousand dollars or five per centum of the final estimate of the completed contract, whichever is greater, (2) the contractor has complied with all provisions of the contract that relate to the filing of any protest and also of any statement concerning the subject-matter thereof, and (3) the contractor shall expressly agree in such petition that any determination as hereinafter provided, shall be final and conclusive upon all parties thereto. If the commissioner of transportation grants such petition, he shall, within a reasonable time, mail a notice to the contractor which shall specify the place of such hearing and the date thereof which shall be within thirty days after the mailing of such notice. Within ten days after such mailing, the commissioner of transportation shall also mail a copy of the petition and of such notice of hearing to the attorney general, who together with the commissioner of transportation, shall constitute a board to (a) hear such dispute, either personally or by any duly authorized officer or employee of their respective departments, and (b) determine the issues thereof.

Any amount fixed in the determination to be paid to the contractor shall be deemed to be a special item to be incorporated in a final supplemental contract and shall be payable from monies available for construction and reconstruction of state highways, on the audit and warrant of the comptroller on vouchers approved by the commissioner of transportation.