Opinion
Opinion By: Chris Gorman, Attorney General; Ann M. Sheadel, Assistant Deputy Attorney General
Subject: City of Louisville Ordinances Regarding Contracts Allowed Through Noncompetitive Negotiation
Syllabus: The requirements set forth in Section 37.27(C) of the Louisville Code of Ordinances are mandatory in nature; if the requirements are not followed in entering into a professional services contract through noncompetitive negotiation, then the contract would be void.
OPINION OF THE ATTORNEY GENERAL
This Opinion responds to several follow-up questions that have been raised since the issuance of OAG 94-53. These questions, which concern portions of the Louisville Code of Ordinances (LCO) that deal with contracts allowed through noncompetitive negotiation, are summarized as follows:
1. Does the City of Louisville have the authority to enter into professional services contracts without taking bids?
2. If so, what are the requirements for entering into these professional services contracts?
3. If these requirements are not met, are the contracts void or voidable?
We have been provided with a copy of Chapter 37 of the LCO, which is titled "Procurement and Distribution Code," and have been asked to examine, in particular, Sections 37.10, 37.12, and 37.27(C) of that chapter.
Section 37.27(C) provides for the noncompetitive negotiation of certain contracts, and states in pertinent part:
The city may contract or purchase through noncompetitive negotiation only when written documentation is submitted to the Chief Procurement Officer or designee noting that competition is not feasible and it is further determined in writing by the Chief Procurement Officer or designee that:
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(C) The contract is for the services typically provided by a licensed professional, such as an attorney, architect, engineer, physician, certified public accountant, registered nurse, or educational specialist: a technician such as a plumber, electrician, carpenter, or mechanic; an artist such as a sculptor, aesthetic painter, or musician; or a non-licensed professional such as a consultant, developer, employment agency, construction manager, investment advisor, securities advisor, or marketing expert, and the like. . . .
Section 37.10 provides, among other things, that the Director of the Department of Finance and Budget shall be the Chief Procurement Officer. Section 37.12 provides in pertinent part:
Every determination required by this code shall be in writing and based upon written findings of the Chief Procurement Officer or the designee making the determination.
In answer to the first question, these sections of the LCO make it clear that the City of Louisville has the authority to enter into certain professional services contracts through noncompetitive negotiation, i.e., without taking bids.
In answer to the second question, the requirements for entering into these professional services contracts without taking bids are that:
1. Written documentation is submitted to the Chief Procurement Officer (or that Officer's designee) noting that competition is not feasible; and
2. The Chief Procurement Officer (or that Officer's designee) determines in writing that the personal services contract is for services typically provided by a licensed professional.
In answer to the third question, it is our Opinion that failure to follow the requirements set forth in Section 37.27(C) of the LCO for entering into a professional services contract through noncompetitive negotiation would appear to render such a professional services contract void.
As stated in 10 McQuillin Mun. Corp. (3rd Ed.), Section 29.02:
The doctrine which seems to harmonize with our governmental and legal system, which appears to be supported by reason, and which, therefore, should prevail may be thus stated briefly: If the charter or the statute applicable requires certain steps to be taken before making a contract, and it is mandatory in terms, a contract not made in conformity with the charter or statute is invalid, and ordinarily cannot be ratified, and usually there is no implied liability for the reasonable value of the property or services of which the municipality has had the benefit. These provisions exist to protect the citizens and taxpayers of the municipality from unjust, ill-considered, or extortionate contracts, or those showing favoritism, and if the municipality is suffered to disregard them and the other contracting party is, nevertheless, permitted to recover for the property delivered or the services rendered, either on the ground of ratification, estoppel or implied contract, then it follows that the statute or charter provision can always be evaded and set at naught.
Agreements that violate the requirements of municipal ordinances are illegal to the same extent as agreements that violate the enactments of the legislature.
King v. Moorehead, Mo., 495 S.W.2d 65 (1973); 17 C.J.S. Contracts Section 208.
The question for us to consider in this situation is whether the requirements in Section 37.27(C) of the LCO are mandatory in nature, and therefore within the general rule that, if such mandatory requirements are not followed in making a contract, then the contract is invalid. It appears to us that the requirements in Section 37.12 of the LCO are mandatory requirements. We reach this conclusion based on the general rule that, where there are requirements involving bidding and procurement, such requirements are mandatory and failure to follow them renders the contract void. See
Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962); 10 McQuillin Mun. Corp. (3rd Ed.), Section 29.30. In addition, when the power is granted by statute or ordinance to dispense with the competitive bidding process, as it is here, the requirements for granting a contract without compliance with normal bidding procedures must be strictly followed, 10 McQuillin Mun. Corp. (3rd Ed.), Section 29.36.
We recognize that it may be possible for some requirements connected with the bidding and procurement process to be considered "directory" requirements as opposed to "mandatory" requirements. "Directory" requirements are those that relate to some immaterial matter, or those that do not reach the substance of the thing to be done, and that will not prejudice the rights of those interested if they are omitted.
Fannin v. Davis, Ky., 385 S.W.2d 321, 328 (1964). If the requirements in question are "directory" in nature, then failure to comply with the requirements will not invalidate the contract. It appears to us, however, that the requirements in Section 37.27(C) of the LCO are not this type of "directory" requirement. Rather, the requirements in this ordinance appear to reach the very substance of allowing noncompetitive negotiation for professional services contracts under contracts under certain specified circumstances.
For these reasons, it is our Opinion that failure to meet the requirements set forth in Section 37.27(C) of the LCO regarding entering into a professional services contract through noncompetitive negotiation would appear to render such a professional services contract void. We emphasize, however, that we have no information to support a conclusion that the City of Louisville has in any way failed to meet the requirements set forth in Section 37.27(C) of the LCO regarding entering into a professional services contract through noncompetitive negotiation.