Request By:
Honorable Michael E. Conliffe
Carroll, Chauvin, Miller & Conliffe
2720 Citizens Plaza
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; Robert L. Chenoweth, Deputy Attorney General
As the attorney for a business which sells graduation rings, graduation invitations and caps and gowns, among other things, you have asked the Office of the Attorney General to consider the effects, if any, of the Model Procurement Code provisions to the sale of these kinds of items to public school students. Although you or your client are not public officials within the scope of the regulations governing the rendering of advisory opinions (40 KAR 1:010 and 1:020), we believe your question is of such widespread concern that we should and will render an advisory opinion.
You noted that the Model Procurement Code, which became effective January 1, 1980, has caused some confusion among school superintendents and administrators concerning the applicability of this act to the purchase of graduation rings, graduation invitations and caps and gowns by the students. The question you presented in the following form:
Is it required of school personnel to require bids for graduation rings, graduation invitations and caps and gowns from companies selling same considering that no public funds are used or that no funds are carried on school accounting records.
You stated your client's position was that in the sale of the graduation rings, etc., the transactions are between your client and the individual students or some other entity other than the school itself. You continued that you and your client are of the belief the Model Procurement Code does not apply in these sales because school funds are not used. It is the opinion of this office that the Model Procurement Code does not govern any transaction unless there will be an expenditure of a local public agency's funds (school district) for either services, supplies or construction. Where no school funds, either general account or activity account, are expended in the purchasing of graduation rings, graduation invitations or caps and gowns, we do not believe the provisions of the Model Procurement Code have any application.
This office has stated before that if no school monies are expended, either general account or activity account, and thus no audit trail regarding the purchase of graduation rings, graduation invitations and caps and gowns, there fails to exist any "purchasing" by the school system. We believe this position is still sound under the Model Procurement Code. KRS 45A.345 defines "procurement" to mean "the purchasing, buying, renting, leasing, or otherwise obtaining supplies, services, for construction." Under the factual situation you provided, the school system merely acts as a facilitator of sorts in permitting your client to solicit the business of the students. Any sale that is made is directly between the students and your client. No school monies are used and the school system is not used as a conduit through which the money goes from the student to the business. We simply see no way any of the provisions of the Model Procurement Code come into play.
Although the Model Procurement Code does not apply under the circumstances outlined above, we still encourage the schools through its professional personnel to work with the students to help them establish a sound business relationship with the particular company which offers the style and quality, etc., of product desired at the best possible price. We suggest the school systems use this opportunity to coordinate these business dealings as a part of the schools' programs for compliance with the administration of the consumer education law, KRS 158.450 et seq.
The above responds to your question; however, we feel there should be proper consideration of the possible situation where school funds in excess of $2500 are employed in the process of purchasing some of the kinds of items referred to above. The most likely situations would be in the renting of caps and gowns for graduating seniors or the purchasing of graduation invitations. Some school systems have had a long-established practice of renting the caps and gowns from a company in the business and then charging the students each an appropriate sum to pay the total rental cost and plus, sometimes, a small "handling" charge for the school system's administrative costs. Also, a school system may purchase in quantity the particular graduation invitation desired and then the students pay the school for the number each student desires. The net effect is that the school systems do write out a school check for the rental or payment. Thus, we have a "procurement" envisioned by the Model Procurement Code.
If a school system procures an item such as caps and gowns or graduation invitations, and then "resells" or "subrents" the items to the students, the obvious question is what method of procurement under the Model Procurement Code is to be used. We note that although the Model Procurement Code in KRS 45A.360(1)(d) suggests that the "conditions and procedures for the purchase of . . . items for resale" is a subject the local public agency (school district) may desire to adopt regulations on, there are no other provisions in the Model Procurement Code which addresses the "items for resale" situation.
We are of the opinion that by adoption of an appropriate regulation by the board of education, items for resale, including caps and gowns and graduation invitations, may be properly procured by a school district through noncompetitive negotiation. Support for our conclusion in this regard is gotten from the manner in which the state has handled the purchasing of items for resale. The procurement Code provisions applicable to the state are similar to those for local public agencies. See 45A.095. Note that pursuant to KRS 45A.350 local public agencies may adopt any of the other provisions of the Code, and make modifications of such provisions so long as the modifications are not inconsistent with the Kentucky Procurement Code. The Executive Department for Finance and Administration, pursuant to the law applicable to the state, has promulgated 200 KAR 5:309, copy attached. This administrative regulation relates to noncompetitive negotiations. Section 1, subparagraph (6) reads as follows:
Procurement contracts may be awarded through noncompetitive negotiations only as provided in this regulation. Contracts which may be awarded on the basis of noncompetitive negotiations include, and shall be limited to the following:
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(6) Commercial items purchased for resale to the general public through a resale outlet maintained by a state agency. Such items shall be purchased only from a wholesaler, manufacturer or producer of the item or items.
It is the opinion of this office that if a local board of education adopts the provisions of the Procurement Code applicable to the state and also adopts a regulation similar to that which has been promulgated by the Executive Department for Finance and Administration, that items for resale such as caps and gowns and graduation invitations may be handled through noncompetitive negotiation. KRS 45A.380.
This opinion is not to be construed as applicable to procurement involving student school photographs. A request for consideration of that subject has been received by this office and will be taken up in a separate advisory opinion.