Contractor license law proposed

Real Estate Weekly, July 1, 1998 by Lois Weiss

Thatcher Associates already is called in to help corporations choose both construction managers and subcontractors, and remains on-site to monitor construction.

According to Mayoral figures supplied in the memorandum that accompanied the proposal, corruption has driven up the cost of construction in New York City by as much as 35 percent more than the national average.

The Manhattan District Attorney's "on-going investigation of a bid rigging cartel" of many of the largest interior contractors has already revealed as much as 20 percent was added to the cost of all major city interior renovation projects.

"Today, in the absence of any City licensing authority or other competence standards for construction contractors, a contractor may continue to obtain building permits even in the face of a history of incompetence, egregious safety violations or dishonest business practices," writes Jake Menges, director of City Legislative Affairs, in the supporting memorandum.

The goal of the proposal would be to reduce construction costs that are blamed in part for rising housing and office rental prices, and to open more construction jobs to more companies.

"We have marvelous players or we wouldn't have the buildings that we do," said Thatcher. Costs have risen not because the people are corrupt, he claims, but because the process provides many opportunities, and the payoffs are so huge.

While law enforcement catches those that have taken advantage of the opportunities or succumbed to the incentives, the incentives continue.

Licensing creates disincentives, while monitors reduce the opportunities. Although they add to costs, the theory behind a good IPSIG is that they will work with senior management to put in place systems and controls to ensure the company and its clients are not being victimized by fraud, corruption or other unethical conduct. "And that will reduce costs," said Thatcher.