Request By:
Mr. Douglas L. Greenburg
Mercer County Attorney
Courthouse, Main Street
Harrodsburg, Kentucky 40330
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On behalf of Mercer Fiscal Court, you request our opinion as to whether the fiscal court has to receive bids for the purchase of its gasoline, petroleum, and other supplies used by the county road department.
Assuming that your fiscal court has not adopted KRS 45A.345 through 45A.460 of the Kentucky Model Procurement Code, as per KRS 45A.343, then KRS 424.260 applies. Under that statute if the county expenditure exceeds $5,000, then the purchase must be let out under newspaper advertisement for bids. It is well to keep in mind that a statutory requirement of competitive bidding in the letting of public contracts is mandatory, and nonobservance renders the contract void. Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962).
In the event your county is under KRS 45A.345 to 45A.460, see KRS 45.365 relating to the major policy of competitive sealed bidding, except as otherwise provided by KRS 45A.370 to 45A.385. Note that under KRS 45A.385 the fiscal court may use small purchase procedures for any contract that does not exceed $5,000 in the aggregate, provided such purchase procedures are in writing and available to the public. This is the same rule expressed in KRS 424.260.
The next question is what consumption period must be considered in measuring the need for advertised bids. In other words, how many months' supply must be considered in applying the bidding law.
At this point it is helpful to consider the three important benefits of the bidding process: (a) an offering to the public, (b) an opportunity for competition and (c) a basis for an exact comparison of bids. See Handy v. Warren County Fiscal Court, Ky. App., 570 S.W.2d 663 (1978) 665, citing OAG 74-420.
Actually neither KRS 424.260 nor KRS Chapter 45A spells out any precise number of months' supply of any needed commodity which must be considered for bidding purposes. This is a matter, because of its nature, that must be left to the sound administrative discretion of the fiscal court. As Judge Palmore wrote in Board of Education of Floyd County v. Hall, above, "public contracts must be reasonably adapted to the customs and channels of trade . . ." Thus he said that toilet bowls and pick handles would not be required to be lumped with paint and brushes under the same procurement contract. You point out that gasoline prices are dropping somewhat, and that a long term bid could result in more expense to the county. As we have said, the matter of letting out for bids the gasoline and oil needed for the road department is left to the good business judgment of the fiscal court in terms of the period of consumption, price fluctuations, availability of the commodity for a definite period, etc. However, a fiscal court should not deliberately buy the needed commodities in "dribbles and dabs" merely to circumvent advertised bidding. See Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962). To the contrary, some rationally decided upon period of consumption should be arrived at, independently of the $5,000 cutoff. Then, after the consumption period is determined, the statute, KRS 424.260, or KRS Chapter 45A, as the case may be, must be followed in the procurement process. A statutory requirement of advertisement for bids is "jurisdictional", and a fiscal court is without power to enter into a contract without such advertisement, where the purchase requires bidding. City of Owensboro v. Evansville & Ohio Val. Tr. Co., Ky., 448 S.W.2d 375 (1969). Further a party deals with a public agency at its peril if it contracts with one and fails to inquire into the power of the agency to execute it. Hacker Bros. Const. v. Board of Ed. of Whitley, Ky. App., 590 S.W.2d 897 (1979) 899.