Request By:
Mr. Vic Hellard, Jr.
Director
Legislative Research Commission
Capitol Building
Frankfort, Kentucky
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Your question arises out of H.B. 102, which was signed by the Governor on March 12, 1980. It contains an emergency clause declaring the Act effective upon its passage and the signature of approval of the Governor. The Act relates to personal service contracts.
Your specific question reads:
"May work under a personal service contract commence immediately after the filing of copies of the contract with the Legislative Research Commission, or must the contract have been approved by the personal service contract review subcommittee before commencement of the work?"
Section 1 of the Act amends KRS 45.710(1) by providing that "no personal service contract made by any contracting body after the effective date of this act shall become effective until after three (3) copies of the personal service contract are filed with the legislative research commission." (Emphasis added).
Section 1 of the Act adds a new subparagraph (4) to KRS 45.710, by providing that "payment on contracts submitted to the [personal service contract review] subcommittee shall not be made before completion of the review procedure provided for in Section 2 of this Act" unless the Secretary of the Department of Finance determines that the time involved in making the review would cause a detrimental effect upon the state's ability to act or to procure services. (Emphasis added).
Section 2 of the Act amends KRS 45.715, which deals with the function of the personal service contract review subcommittee. KRS 45.715(4)(c) is amended to provide that instead of noting the objection of the subcommittee after reviewing such contracts, it will note its "disapproval or objection." (Emphasis added). Section 2 adds new language in subparagraphs (5), (6) and (7) of KRS 45.715, which provide that all personal service contracts objected to or disapproved by the subcommittee shall be forwarded to the Department of Finance. The Secretary of that department then determines whether a personal service contract: (a) shall be revised to comply with the objections of the subcommittee; or (b) cancelled if disapproved by the subcommittee; or (c) remain effective as originally approved by the Department of Finance. The Department of Finance must notify the subcommittee of action taken on the contracts referred to the department within 30 days from the date of subcommittee review. The subcommittee reports monthly to L.R.C. all action taken on such contracts by the Finance Department and subcommittee. At this point, it should be noted that the recommendations (disapproval or objections) of the subcommittee are not technically binding upon the Secretary of Finance, although he has the burden of carefully considering such disapproval or objections, especially in connection with possible future legislative action.
KRS 45.715(4), as amended, requires the subcommittee to review such personal service contracts and examine the need for the contract service, whether the services could or should be performed by state personnel, and the cost and duration of the contract.
Let us return to your question as to whether work under a personal service contract may commence immediately after the filing of copies of the contract with L.R.C.
Under KRS 45.710(1), as amended by H.B. 102, the contract becomes "effective" upon the original written approval of the Secretary of Finance [see Sec. 230, Ky., Const., KRS 41.110, 41.120, and 45.360(3)] and the filing of three (3) copies of same with the L.R.C. However, payment under the contract cannot be made until after it goes through the review procedure of the contract review subcommittee and the Secretary of Finance, unless the Secretary of Finance determines that the time involved in the review procedure would cause a detrimental effect upon the state's ability to act or to procure services, and he notifies the subcommittee accordingly. KRS 45.710(4), as amended by H.B. 102.
Therefore, it is apparent that since the contract is effective upon the first or original approval of the contract by the Secretary of Finance pursuant to KRS 45.360(3), and the filing of three copies with the LRC, pursuant to KRS 45.710, as amended, the person who is to furnish the services under the contract may start work immediately. According to KRS 45.710(4), only payment under the contract is to be withheld until the completion of the review procedure referred to above, unless the Secretary of the Department of Finance determines that the time involved in making the review would cause a detrimental effect upon the state's ability to act or to procure services. In addition, should the situation arise where work is performed pursuant to a personal service contract after it becomes effective and subsequently said contract is canceled by the Secretary of Finance pursuant to recommendations by the subcommittee, the courts might find that the state should pay its obligation for work performed before cancellation. See KRS 45A.240, et seq., and Fidelity & Cas. Co. v. Commonwealth ex rel Christen, Ky., 445 S.W.2d 113 (1969), the court observing that the state must live up to its authorized contractual obligations.
In view of this dilemma, the Secretary of the Department of Finance might wish to insert in every such contract that work is not to begin until the review process is completed, except where the delay caused by the review procedure, in connection with a particular contract, would be detrimental to the state. Concerning those contracts which the Secretary of Finance would consider that work should begin immediately, a clause could be inserted in the contract that arrangements for payment for work performed will be made after the review process is completed.
In summary, the work under a personal service contract can begin immediately upon the initial approval by the Secretary of Finance and the filing of three copies of the contract with the Legislative Research Commission.