Request By:
Mr. Travis Combs, Jr.
Attorney at Law
101 W. Main Street
LaGrange, Kentucky 40031
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The purpose of your letter is to obtain clarification concerning the extent to which political subdivisions may negotiate contracts for the purchase of materials and supplies through vendors who maintain a General Service Administration Price agreement with the United States of America.
You wrote that notwithstanding the guidelines contained in 200 KAR 5:050 (central purchasing for political subdivisions) and the opinions of this office (you mention OAG 80-396 and 83-244), there still remains considerable confusion among various political subdivisions concerning the efficacy of their negotiating with vendors, independent of the State Executive Office of Finance and Administration, who maintain a G.S.A. price agreement with the United States of America or any agency thereof. It has been brought to your attention that some political subdivisions are of the opinion that, since there is no legal or statutory authority precluding them from purchasing directly from a vendor who maintains a G.S.A. price agreement, they may do so with impunity.
Your question: May a political subdivision effect purchases of materials and supplies through a contract negotiated by them with a vendor who maintains a G.S.A. price agreement, as opposed to one negotiated by the Kentucky State Executive Office of Finance and Administration?
In connection with state agency price contracts entered into by the State Department of Finance for the purchase of materials or supplies, any political subdivision (including cities of all classes, counties, school districts or special districts) may, "as approved by the secretary of the department of finance, purchase materials and supplies pursuant to a contract for such supplies and materials entered into by the department of finance for the Commonwealth. . . ." (Emphasis added). This arrangement, as authorized by KRS 45.365(1), includes "those contracts negotiated by the department of finance with vendors who maintain a general service administration price agreement as provided in subsection (2) of KRS 45.360." (Emphasis added). The latter refers to vendors who maintain a general service administration price agreement with the United States of America or any agency thereof. Under KRS 45.360(2), the Department of Finance, in negotiating contracts with such vendors, is held to the rule that no such contract shall authorize a price higher than is contained in the contract between G.S.A. and the vendor affected.
Under the express and literal wording of KRS 45.365(1) and 45.360(2), it is our opinion that four major points must be observed. First, the materials or supplies sought and needed by a political subdivision must be the specific materials or supplies covered in a current price contract entered into by the Department of Finance for the Commonwealth. The second point is that the purchase of such materials or supplies by a political subdivision under the state's price contract must be approved by the Secretary of the Department of Finance. After all, the state's contract is primarily the state's contract; and the approval would mean, inter alia, that supply level available as to a particular commodity was sufficient for state supply as well as supply for one or more political subdivisions. The third essential condition is that the political subdivision must procure such materials or supplies under the state's contract. Thus a political subdivision has no statutory authority to purchase such commodities except through and under the state's price contract. They (political subdivisions) cannot negotiate a contract with the state's vendors. The fourth condition is that where other provisions of the Kentucky statutes require that political subdivisions purchase by competitive bidding, such political subdivisions must comply with the applicable statute before participating in the contract, unless the state contract has been let by competitive bidding, or the contract was negotiated as provided in KRS 45.360(2), as mentioned above (department of finance negotiates with vendors who maintain a G.S.A. price agreement with the United States or agency thereof). See OAG 80-396, published, Banks-Baldwin, OAG 83-244, and 200 KAR 5:050.
Section 3 of 200 KAR 5:050 requires that each political subdivision desiring to participate in and use the Commonwealth's price contracts for the purchase of materials or supplies must file a written notice of such desire with the manager, Division of Purchases.
In order that KRS 45.365 and 45.360(2) be adequately implemented, it would be necessary that the manager, Division of Purchases, Department of Finance, furnish the applicant political subdivision with a copy of the applicable state price contract or contracts. Once all of the above conditions are met, the political subdivision can call on the applicable vendor to furnish and deliver such goods to the political subdivision under the state's contract or contracts. Thus each political subdivision would generally issue its own purchase orders, accept its own deliveries, and make its own payments for goods received and accepted under the state's contract.
The conditions outlined above apply to the state's contracts with vendors maintaining a G.S.A. agreement with the United States of America. See OAG 83-244.
Our construction of KRS 45.360(2) and 45.365(1) are based upon the literal provisions of those statutes.