LLC WELSBACH ELECTRIC CORP ELECTRIC INSTALLATION CO v. THE CITY OF NEW YORK DEPARTMENT OF TRANSPORTATION YDANIS RODRIGUEZ (2026)

In this CPLR article 78 proceeding, petitioners, parties to a series of contracts with New York City, challenge as arbitrary and capricious the City's exercise of renewal options in those contracts. In particular, petitioners argue that the City's procurement rules required the City, as part of the contract-renewal process, to determine that the contract prices were "still fair and reasonable"—and that the undisputed absence here of a determination to that effect renders the contract renewals arbitrary and capricious.

On motion sequence 001, this court held that the City's governing Procurement Policy Board (PPB) Rules did not require respondents to make a fair-and-reasonable-price determination before exercising the renewal options on the underlying contracts. The court therefore denied petitioners' motion to annul the renewal of the contracts, granted respondents' cross-motion to dismiss, and dismissed the proceeding. (See Hellman Electric LLC v City of New York, 2026 NY Slip Op 30880[U] [Sup Ct, NY County 2026].) Petitioners now move for reargument. Leave to reargue is granted; on reargument, this court adheres to its original determination.

DISCUSSION

1. PPB Rule (9 RCNY) § 4-04 (c) (17) requires a City contracting officer, when recommending renewal of a contract, to make "all applicable determinations called for by these Rules, including a determination, if applicable, that the prices set forth in the contract are still fair and reasonable." On motion sequence 001, this court held that in light of the "if applicable" limitation on the scope of this requirement, paragraph (c) (17) cannot be read to mandate that the City "make a fair-and-reasonable determination whenever a contract is up for renewal," as petitioners would have it. (Hellman Electric, 2026 NY Slip Op 30880[U], at *2.)

In evaluating when the fair-and-reasonable-determination requirement is applicable on renewal, this court noted that the PPB Rules governing several specific categories of contracts expressly direct the City to make a fair-and-reasonable decision before entering into those kinds of contracts. (See id.) Thus, this court held, if a "given PPB Rule required the City to decide, before entering into a contract, that the contract's prices were 'fair and reasonable,' then Rule § 4-04 (c) (17) also requires the City to decide, before renewing the contract, that its prices are 'still fair and reasonable.' " (Id.) And because petitioners have not argued that the contracts here come within one of the categories for which the governing PPB Rule mandated a fair-and-reasonable determination before the contract award, the City did not have to make a still-fair-and-reasonable decision before renewing those contracts. (Id.)

In seeking reargument, petitioners emphasize Rule § 2-06. That rule provides that "[p]rior to vendor selection," the chief contracting officer "shall determine that the contract price is fair and reasonable by using price analysis and, where appropriate, cost analysis, as these terms are defined in these Rules, to make this determination." Petitioners argue that because this rule "mandated a 'fair and reasonable' determination by NYCDOT when the APS Contractors were initially selected and the APS Contract originally awarded," the result under this court's analysis should have been that "the Respondents were obliged to make a 'still fair-and-reasonable price determination' before renewing the APS Contract." (NYSCEF No. 61 at 4.) As a result, petitioners contend, this court's contrary conclusion misapprehended the law.

This court agrees that its prior decision did not sufficiently take into account the implications of Rule § 2-06, particularly read in light of the statement in the rule's legislative history that the rule "makes clear that agencies, prior to award, must make a determination that the proposed price is fair and reasonable." (Rule § 2-06 note 2.) The court therefore grants leave to reargue to address the rule's implications for the proper analysis of Rule § 4-04 (c) (17).

2. That said, on reargument, this court is not persuaded that petitioner's contentions warrant a different result. That is, on this motion, petitioners are "maintain[ing] their position that a 'still fair-and-reasonable' price determination is required whenever the City wishes to hold a contractor to the original contract prices throughout the renewal term." (NYSCEF No. 61 at 6.) This position still fails to give effect to the "if applicable" limitation on the scope of paragraph (c) (17).

Petitioners say that should the City "voluntarily recognize[ ] that a price adjustment is appropriate for a renewal period," then the still-fair-and-reasonable requirement in (c) (17) "is not 'applicable.' " (Id.) In all other cases, on petitioner's reading, that requirement would apply and must be addressed in the contract-renewal recommendation. This reading is unpersuasive.

As an initial matter, Rule 4-04 (a) defines a contract renewal as "re-registration of previous contracts with the same vendor, with substantially unchanged terms and conditions, but possibly revised quantities, lists, or schedules or items to be supplied." It is thus unclear—and petitioner does not explain—how a re-registered contract with the same vendor but with a materially different price term could qualify as a "renewal" within the meaning of this Rule.

Additionally, paragraph (c) (17), when it applies, calls for a City contracting officer to decide whether the contract price is still fair and reasonable. A conclusion by the City "that a price adjustment is appropriate for a renewal period" (NYSCEF No. 61 at 6) would not obviate the applicability of that requirement. To the contrary, the City's recognizing that the contract price should be adjusted for the renewal period would itself be a determination that the contract price is not still fair and reasonable. Thus, under petitioners' position, there would be no scenarios in which the still-fair-and-reasonable analysis would be unnecessary. Accepting that position, would effectively read "if applicable" out of paragraph (c) (17).

3. The question, therefore, as it was on motion sequence 001, is how to give meaning to "if applicable"—to ascertain when a contracting officer must assess whether contract prices remain fair and reasonable for purposes of a contract-renewal period, and when that assessment is unnecessary.

Petitioners correctly argue on this motion that PPB Rule § 2-06 imposes a categorical requirement that a fair-and-reasonable determination be made "[p]rior to vendor selection" for the original contract award. But for the reasons discussed above, it is untenable to treat this rule as also entailing categorically a still-fair-and-reasonable determination for all contract renewals under Rule § 4-04. Applicability of the still-fair-and-reasonable requirement in Rule § 4-04 (c) (17) requires more—additional reasons why a contracting officer should have to evaluate whether a contract price remains fair and reasonable.

Those reasons lie in the same aspect of the PPB Rules that this court found significant on motion sequence 001: That for several categories (or subcategories) of contracts, the particular governing contract rule expressly requires fair-and-reasonable determinations when the contract is first awarded. (See Hellman Electric, 2026 NY Slip Op 30880[U], at *2.) As respondents point out, a common element of these contract categories is that they involve contexts in which the typical "competition between vendors in setting the contract price" does not occur, or at a minimum is limited. (NYSCEF No. 71 at 12.) Given the decreased price competition before the award of contracts in these categories, greater scrutiny is required before these contracts are renewed, to ensure that the prices of these contracts are "still fair and reasonable." (Rule § 4-04 [c] [17].)

In other words, when particular PPB Rules specify that the City must make a fair-and-reasonable-price determination at the outset of the contracting process—over and above satisfying the default fair-and-reasonable-price requirement in Rule § 2-06—those rules also require contracting officers to make a still-fair-and-reasonable-price determination before renewing that contract under Rule § 4-04. In the current case, though, it is undisputed that the rules did not require a contract-category-specific determination that petitioners' contract prices were fair and reasonable. As a result, the City was not required, before exercising the contract-renewal option, to determine that those prices remained fair and reasonable. Petitioners' contrary contention is unavailing. The City's exercise of the renewal option at issue here was not arbitrary and capricious.

Accordingly, it is

ORDERED that the branch of petitioners' motion seeking leave to reargue this court's January 14, 2026, order on motion sequence 001 is granted; and it is further

ORDERED that on reargument, this court adheres to its determination on motion sequence 001.

DATE 5/29/2026

Gerald Lebovits, J.