Request By:
Mr. Charles D. Wickliffe
Attorney
Department of Finance
Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You refer, in your letter, to OAG 78-464, in which it was concluded that under KRS 190.010(1) and 190.030 a motor vehicle dealer must be licensed as such in Kentucky prior to becoming eligible to sell motor vehicles to the Commonwealth pursuant to an invitation to bid.
You point out that prior to the issuance of the above opinion, the Department of Finance had never considered the Kentucky licensing of motor vehicle dealers to be a prerequisite to eligibility for responding to an invitation to bid on new motor vehicles.
The obvious effect of OAG 78-464, where it is followed, is to exclude new motor vehicle dealers in other states, especially the border or regional states, from bidding on new vehicles to be purchased by the state.
In addition, you write that the application of OAG 78-464 to the purchase of all vehicles the state may need, and sinds of vehiclen particularly to the purchase of specialized binds of vehicles such as ambulances, will likely have an adverse impact on the Department's ability to obtain any broad competition, due to the limited number of possible suppliers of such vehicles resident within the Commonwealth.
KRS Chapter 190 relates to motor vehicle sales and licensed dealers. It purports to deal only with the day-to-day sale of motor vehicles in Kentucky by dealers operating places of business in Kentucky. It contains no restrictional reference to state procurement of motor vehicles. It establishes no restrictional linkages with the state procurement law. Under these facts it becomes clear that the state procurement law and the motor vehicle sales chapter are mutually exclusive. It is at once apparent that a car dealer in Cincinnati responding to a state of Kentucky invitation to bid on cars is not a motor vehicle dealer engaged in the business of buying or selling cars in Kentucky. See KRS 190.010 and 190.030. KRS 190.010(2)(b) expressly excludes from the definition of "motor vehicle dealer" "public officers while performing their official duties." (Emphasis added). Thus the director of part chases is not a "motor vehicle dealer" , although ne purchases cars for the state.
KRS Chapter 190 and KRS Chapter 45A are not in part materia (involving same subject). Cf.
Indiana Truck Corporation of Kentucky v. Hurry Up Broadway Co., 222 Ky. 521, 1 S.W.2d 990 (1928). Thus they do not have to be read of construed together.
As you point out, no such limitation (being a licensed dealer in Kentucky) on the sources of supplies of such equipment is expressed in KRS 45.360 or in the Kentucky Model Procurement Code, KRS Chapter 45A, now governing the purchase of automobiles, other motor vehicles, and other goods and services by the Commonwealth. Both chapters adopt the basic principle of competitive bidding. In 72 C.J.S. Supp., Public Contracts, § 8, p.p. 182-184, this is written concerning competitive bidding:
"The purpose of this requirement is to protect the taxpaying public against the wasting of public funds and to prevent abuses such as fraud, favoritism, improvidence and extravagance. Competitive bidding statutes are primarily intended for the benefit of the public rather than for the benefit or enrichment of bidders, and consideration of advantages or disadvantages to bidders must be secondary to the general welfare of the public."
However, it has been written that a secondary purpose of competitive bidding is to provide bidders with a fair forum for the award of public contracts, "and that it is by protecting the secondary purpose that the primary benefits of a competitive bidding system can be insured to the general public." Ibid., p. 184.
It can be seen that a narrow or provincial approach to the bidding principle by way of a restricted geographical situs of bidders can be inimical to the public interest and interfere with the objective of economical purchasing. Indeed, KRS 45.360(12) provides that:
"The executive department for finance and administration shall attempt in every practicable way to insure the state's supplying its real needs at the lowest possible cost." (Emphasis added).
The same mandate for purchasing is expressed in KRS 45A.010(2)(e) and (f), which reads:
"The underlying purposes and policies of this code shall be:
(e) To insure the fair and equitable treatment of all persons who deal with the procurement system of the Commonwealth;
(f) To provide increased economy in state procurement activities by fostering effective competition;" (Emphasis added).
Even if the statutes mentioned above are ambiguous, and we do not think they are, we believe the courts would follow the construction placed on the statutes by way of contemporaneous construction. That rule is that such construction may be resorted to where enactments are ambiguous and uncertain, and there has been continued construction by authorities entitled to give construction (here the
Finance Department). Burbank v. Sinclair Prairie Oil Co., 304 Ky. 833, 202 S.W.2d 420 (1947) 423.
In OAG 78-164 it is stated, in support of the analysis given, that the construction of KRS Chapter 190 (requiring licensed dealers in Kentucky) promotes the policy of the state to protect the public interest in the purchase and trade of motor vehicles, so as to insure protection against irresponsible vendors or dishonest or fraudulent sales practices. The answer to that reasoning is that under the state's organizational structure of state purchasing, the state has experienced and competent motor vehicle buyers who are skilled in applying the statutory and administrative regulatory criteria for eligible biading, regardless of whether the bidders are in or out of Kentucky. Thus such skilled purchasing staff operating under adequate statutory and administrative regulatory guidelines are able to protect the public interest. See KRS 45.360, 45A.010, 45A.035, 45A.080, and 200 KAR 5.010 et seq.
Both the state of Kentucky and the federal government, through their anti-trust laws (see 15 U.S.C. § 1 et seq.), foster the principle of free and open trade, which principle is adopted in the Kentucky Model Procurement Code. See KRS 45A.010(2)(1). In addition, KRS 367.175 reads
"(1) Every contract, combination in the form of trust and otherwise, or conspiracy, in restraint of trade or commerce in this commonwealth shall be unlawful.
"(2) It shall be unlawful for any person or persons to monopolize, or attempt to monopolize or combine or conspire with any other person or persons to monopolize any part of the trade or commerce in this commonwealth."
Thus, since there is no state action legislation exempting this area of commerce (state purchasing of motor vehicles) from the free and open trade principle, such principle must be observed by the Department of Finance as the purchasing unit of state government. Cf.
California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., U.S., 63 L. Ed. 2d 233, 100 S. Ct. (1980).
Competitive bidding, except where the statutes permit some deviation, is mandatory.
Board of Ed. of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1961). And competitive bidding must be sought so as to foster effective competition. In fostering effective competition, a free and open trade approach is inevitable and required in the public interest. Even prior to the enactment of KRS 367.175, and under the common law rule, the restraint of trade, to be illegal, must be inimical to the public interest.
Kenton & Campbell Benev. Burial Ass'n. v. Goodpaster, 304 Ky. 233, 200 S.W.2d 120 (1947) 126.
Antitrust laws as the foundation of free enterprise was epitomized by the
Supreme Court of the United States in United States v. Topco Associates, 405 U.S. 506, 31 L. Ed. 2d 515, 92 S. Ct. 1126 (1972) 527:
"Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms. And the freedom guaranteed each and every business, no matter how small, is the freedom to compete-to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can muster."
In another case, the
Supreme Court, in Nat. Soc. of Professional Engineers v. U.S., 435 U.S. 679, 55 L. Ed. 2d 637, 98 S. Ct. 1355 (1978), wrote this about the primal importance of the Sherman Act:
"The Sherman Act reflects a legislative judgment that ultimately competition will not only produce lower prices, but also better goods and services. 'The heart of our national economic policy long has been faith in the value of competition.'
Standard Oil Co. v. FTC, 340 US 231, 248, 95 L Ed 239, 71 S Ct 240. The assumption that competition is the best method of allocating resources in a free market recognizes that all elements of a bargain-quality, service, safety, and durability-and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers."
Under the foregoing analysis and authorities, it is our opinion that motor vehicle dealers in other states are eligible to respond to invitation to bid on new motor vehicles and to subsequently sell their vehicles to the state upon a proper award, even though they are not licensed as dealers under KRS Chapter 190. Of course such eligibility will be conditioned upon applicable statutory and administrative regulatory procurement requirements.
OAG 78-464 is accordingly withdrawn.