
    In the Matter of SCS Business & Technical Institute, Inc., Respondent-Appellant, v Lilliam Barrios-Paoli, as Commissioner of the New York City Department of Employment, et al., Appellants-Respondents.
   Judgment, Supreme Court, New York County (Edward Lehner, J.), entered on or about June 14, 1989, which remanded petitioner’s application for Job Training Partnership Act (JTPA) funding to respondent New York City Department of Employment for reconsideration on the basis of applicable law, is unanimously affirmed, without costs. This appeal and cross appeal from a CPLR article 78 judgment is by permission of this court (CPLR 5701 M [1]).

This application’s rejection was arbitrary, capricious and contrary to law. The exclusion of all proprietary profit-making institutions from JTPA participation, such as petitioner, as opposed to community-based nonprofit organizations, had no basis in the Federal enabling act (29 USC § 1517 [a]). Effectiveness of the organization in delivering services based on demonstrated performance is the applicable standard to be applied in selecting participants. The characterization of an organization as profit making is not relevant. None of the demonstrated abuses in training schools, primarily of the proprietary nature, have been shown to detract from petitioner’s past performance, which is all that should be considered on the reapplication.

Respondent did not raise the defenses that petitioner failed to exhaust its administrative remedies and that the JTPA does not authorize a private right of action. Therefore, we deem these defenses waived (Matter of Warwick v Henderson, 117 AD2d 1001).

Petitioner, on its cross appeal, seeks to have this court simply award the requested funds. However, a court should not assume the respondent’s power except in cases of special need, not here demonstrated (Matter of Perkins v Board of Trustees, 86 AD2d 808).

Accordingly, we direct the respondent to negotiate with petitioner in good faith and we remand for that purpose. Concur—Murphy, P. J., Asch, Kassal and Rosenberger, JJ.  