Request By:
Mr. George L. Atkins
Secretary
Department of Finance
Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Questions have been raised concerning the bidding process as relates to the purchase of refuse collection equipment for the benefit of Mason County, which purchases are to be funded from the Area Development Fund in the state treasury. KRS 42.350. The items advertised for bids were 47 garbage containers, 1 truck, and 1 front loader garbage compactor. Pursuant to KRS 42.355(3), the Department of Finance can award and administer the contracts relating to such Area Development Fund projects, or it can delegate the awarding and administering of all such contracts to the beneficiary agency. In this case the Department of Finance delegated its award and administration authority, on November 16, 1979, to the beneficiary agency, Mason County, subject to the approval of the Finance Department under 200 KAR 9:010, Section 5 and Section 6. Consequently, the Mason Fiscal Court had specifications developed by the Buffalo Trace Area Development District for which sealed bids were requested and opened on December 27, 1979. Separate quotations were requested on each of the three items: A. Containers (47), B. Front-end loading compaction body and C. Truck-chassis.
By item, bidders and amounts were as follows: "Bid Item A - Containers(1) Municipal Equipment Company$20,361.00(2) United Container Company$22,348.00(3) Holt Specialty Equipment, Inc.$22,479.00(4) Ohio Truck Equipment, Inc.$23,593.00(5) Manning Equipment, Inc.$24,371.00(6) Bode-Finn Company$24,392.00(7) Collins Truck Equipment Co.$35,963.00Bid Item B - Front-end Loading Compaction Body(1) Manning Equipment, Inc. (Heil)$22,475.00(2) Collins Truck Equipment Company$24,359.00(Perfection)(3) Ohio Truck Equipment, Inc. (Heil)$24,561.00(4) Tri-State Ford Truck Sales, Inc.$24,616.00(E-Z Pak)(5) Tri-State Ford Truck Sales, Inc.$24,702.59(Heil)(6) Bode-Finn Company (Dempster)$29,075.25Bid Item C - Truck-Chassis:(1) Tri-State Ford Truck Sales, Inc.$34,776.51(Ford Optional transmission - $1,698.64Other equipment offered $465.21 (total)(2) International Harvester (I-H)$38,500.00Optional transmission - $3,675.00Other equipment offered - $887.00 (total)(3) Bode-Finn Company$44,114.00Optional transmission - no quoteOther equipment - none
The above bid responses were evaluated by the Mason County Fiscal Court and awards of contracts were recommended to the following bidders:
Bid Item A. - Holt Specialty Equipment, Inc. (Third low bid)
Bid Item B. - Bode-Finn Company (Sixth low bid)
Bid Item C. - Bode-Finn Company (Third low bid) "
Under the present circumstances the Department of Finance has not yet issued any approval for awards.
Our office has reviewed this purchase situation from the standpoint of unfair competition and anti-trust law violation and possibility of collusion [see KRS Chapter 365, KRS 367.175 and KRS 45A.160] and has discovered no violations in that regard.
The question now before us is whether the Finance Department should issue an approval for awards, as recommended by the Mason Fiscal Court. For the following reasons, it is our opinion that such an approval cannot be issued.
The fatal defect in the procedure followed by the Mason Fiscal Court in letting these bids arises from the sincere but mistaken belief on the part of the Court that the State Model Procurement Code did not have to be followed because the bids were opened on December 27, 1979. It is true that the bidding procedure was completed before the effective date of those provisions of the Model Procurement Code which apply to counties, those provisions becoming effective on January 1, 1980. However, because the Department of Finance had the original power of award and administration pursuant to KRS 42.355, we are dealing with a "state contract" in its technical aspects. This involves state money. Therefore, the provisions of the Model Procurement Code applicable to state contracts applied to this bidding procedure. One of these statutes, KRS 45A.075 provides, inter alia, that except as otherwise authorized by law, all state contracts shall be awarded by competitive sealed bidding, pursuant to KRS 45A.080. The latter section (KRS 45A.080) became effective on February 10, 1979. Thus, the Mason Fiscal Court was required to meet the terms of that statute.
KRS 45A.080(2) reads:
"(2) The invitation for bids shall state whether award shall be made on the basis of the lowest bid price or the lowest evaluated bid price. If the latter basis is used, the objective measurable criteria to be utilized shall be set forth in the invitation for bids. " (Emphasis added).
Since the term "evaluated bid price" is critical to the "lowest evaluated bid price" category, the definition of "evaluated bid price" is stated in KRS 45A.070(3):
"(3) 'Evaluated bid price' shall mean the dollar amount of a bid after bid price adjustments are made pursuant to objective measurable criteria, set forth in the invitation for bids, which affect the economy and effectiveness in the operation or use of the product, such as reliability, maintainability, useful life, and residual value. " (Emphasis added).
It can be seen that the governmental unit [here the Department of Finance has delegated its authority to the Mason Fiscal Court] has, in connection with competitive sealed bidding, one of two choices: (1) the invitation for bids shall be let on the basis of the lowest bid price or (2) the invitation for bids shall be let on the basis of the lowest evaluated bid price. Only one basis can be used, not two. It is obvious as to why both methods [lowest bid price and lowest evaluated bid price] are not to be employed by the government. The reason is that the prospective bidders must be allowed to bid on the same thing and using the identical method. In 72 C.J.S., Supp., Public Contracts, Sec. 10, this is written:
"In order to give all bidders an opportunity to bid on the same thing, it is essential that the proper public authorities shall, prior to the solicitation and reception of bids, adopt plans and specifications definitely fixing the extent and character of the work to be done or materials to be furnished, so as to set up a proper competitive standard and afford a basis for competitive bidding. Such plans and specifications must be prepared by the public entity itself, rather than by private bidders. All prospective bidders must be furnished the same specifications from which to prepare their bids, and the specifications must be freely accessible to all competitors."
It is universally held that unless all bidders have been invited to bid upon the same specifications, a contract has not been let to the lowest and best bidder. Little v. Town of Southgate, 223 Ky. 735, 4 S.W.2d 711 (1928) 713.
This was included, by Mason Fiscal Court, in the Specifications and Contract Documents relative to the award basis:
"AWARD OF CONTRACT
"The Contract shall be awarded to the lowest responsible bidder as soon as practicable after opening of bids. In awarding any contract, the court may authorize such award to a responsible bidder, other than the lowest, in the interest of standardization and ultimate economy. However, when the recommendation of award moves away from the lowest bidder, good, and proper facts must be present to support the action."
In addition to providing that only one of two methods of award [lowest bid price or lowest evaluated bid price] shall be used by the government, KRS 45A.080(2) explicitly provides that if the "lowest evaluated bid price" basis is used, "the objective measurable criteria to be utilized shall be set forth in the invitation for bids. " (Emphasis added).
At this point, we note that in the specifications and contract documents of Mason Fiscal Court they adopted the "lowest bid price" basis in one sentence; but in the next they attempted to use the "lowest evaluated bid price" basis, though by inadequate description. Even if the two methods could be used simultaneously, which we say cannot be done under the literal language of the statute, the objective measurable criteria to be utilized in connection with the "lowest evaluated bid price" basis simply was not spelled out to the bidders in the invitation for bids. KRS 45A.070(3), in defining "evaluated bid price" , spells out with particularity just what is meant by objective measurable criteria. The method of "evaluated bid price" , if it is to carry out legislative intent, must involve objective measurable criteria, relating to the economy and effectiveness in the operation or use of the product. Definite guidelines are set forth in the statute such as reliability, maintainability, useful life and residual value. If those reasons set forth in the correspondence from the Mason County Attorney dated January 21, 1980, had been set forth in the invitation for bids, this requirement might have been met. However, because of the absence of objective measurable criteria in the invitation for bids, the specifications were lacking in the preciseness and definiteness required by the statute.
In Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962) 194, 195, the court stressed that "A statutory requirement of competitive bidding in the letting of public contracts is mandatory, and nonobservance renders the contract void."
Under the above analysis and facts submitted, it is our opinion that the proposed award by Mason Fiscal Court would be void and unenforceable, since the fiscal court has not strictly followed the requirements of KRS 45A.080(2) in establishing an award basis.
In this situation, the Mason Fiscal Court should reject all bids and start over by advertising for bids precisely as the law requires.