March 29, 1994
Joseph H. Mattingly III
Marion County Attorney
15 Court Square Box 681
Lebanon, Kentucky 40033
Re: Procurement of Paving Materials
Dear Mr. Mattingly:
You have asked two questions regarding your county's procurement of road paving materials and services. The facts, as we understand them, are these:
Marion County purchases over $100,000 worth of road asphalt a year. Some time in 1993 the county judge/executive placed an advertisement that sealed bids would be accepted on a variety of named materials such as diesel fuel, gasoline, antifreeze, motor oil, and concrete. The bid included among the items "bituminous class 1 base, bituminous class 1 surface." No quantity was given for any of the items, nor was any indication given of the period of time the bids were to cover.
The only bid received regarding the road surface was from Nally & Haydon Surfacing, Inc., whose bid was $24.50 per ton. The fiscal court never voted to ratify a contract with Nally & Haydon, and apparently did not adopt a county road plan. Instead, the county judge/executive would simply contact the paving company with directions to pave designated portions of county roads. In some instances the county judge/executive may have directed the county road foreman to obtain the asphalt and have it installed by county employees. If the asphalt was installed by Nally & Haydon, the company did not charge the county for this service. Three paving projects were completed in the fall of 1993. The county received invoices for these projects in amounts of approximately $40,000, $16,000, and $24,000. These expenses were incurred after the county's road budget for the fiscal year had been entirely depleted. Although it is not clear whether the county paid the contractor for the materials in question, the county evidently spent more than 65% of its fiscal 1993-94 budget in the first half of the fiscal year, leaving less than 35% available for the incoming administration that took office in January 1994.
You have asked whether the three paving projects should have been separately bid, and whether the transactions with the contractor were illegal and thus unenforceable against the county.
In this opinion we will point out the more obvious statutory violations. The list that follows is not necessarily complete.
County judge/executive lacks procurement authority
The county judge/executive has no authority to appropriate county funds. OAG 78-332. That is the function of the fiscal court. KRS 67.080.
County judge/executive lacks authority over road projects
Responsibility for determining what sections of county roads shall be paved rests with the fiscal court; the county judge/executive has no authority to order work on a particular project without fiscal court approval. OAG 80-368. The county judge/executive's role is to supervise the administration of the county road program. OAG 80-412.
Bids must relate to particular projects or time periods
KRS 424.260 states:
Except where a statute specifically fixes a larger sum as the minimum for a requirement of advertisements for bids, no city, county, or district, or board or commission of a city or county, may make a contract, lease, or other agreement for materials, supplies except perishable meat, fish, and vegetables, equipment, or for contractual services other than professional, involving an expenditure of more than ten thousand dollars ($10,000) without first making newspaper advertisements for bids. Provided, however, that this requirement shall not apply in an emergency if the chief executive officer of such city, county, or district has duly certified that an emergency exists, and has filed a copy of such certificate with the chief financial officer of such city, county, or district.
The purpose of the bidding process is to provide 1) an offering to the public; 2) an opportunity for competition; and 3) a basis for exact comparison of bids. Handy v. Warren County Fiscal Court, Ky.App., 570 S.W.2d 663, 665 (1978), citing OAG 74-20. In addition we have recognized that the bidding process protects the taxpaying public against the waste of public funds and prevents abuses such as fraud, favoritism, and extravagance. OAG 78-166. Our opinions have recognized that fiscal courts have some latitude in the manner in which materials are procured, as long as the method employed complies with the purposes just stated and does not amount to a subversion of the bidding requirement. In the matter of procuring road materials, we have said that a county may bid for supplies to be furnished over a stated period of time, or may accept bids for specific projects. OAG 82-125; OAG 83-316.
The bid process that you have described to us amounts to little more than a sham. At best it might be called a slipshod attempt to comply with the letter of KRS 424.260. The bid invitation contains no indication of either the quantity of materials to be purchased nor the projects for which the materials will be used. A party wishing to bid has no idea whether he may be obligated to supply one ton or ten thousand tons. The taxpaying public has no indication of either the amount of public money proposed for expenditure or the county roads to be resurfaced. The bid invitation does not grant reasonable notice of the county's intentions and does not comply with the statute.
An additional curious feature of the bid advertisement you have sent us is the fact that it is dated June 1, 1993, and it states that the deadline for bids is 9:00 A.M. on June 1, 1993. The bid in question was submitted on May 28, 1993. Because you have not asked us to comment on this peculiarity, we will assume that the date shown on the advertisement is incorrect and that the bid invitation was advertised a reasonable time before the deadline.
Contractor's claim unenforceable
Nonobservance of a bidding requirement renders a contract void, and public funds paid out pursuant to such a transaction are recoverable. Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962). Because the procurements in question did not comply with the bidding statute, the contractor's claims are unenforceable. If the claims have been paid, they are recoverable.
County not to spend over 65% of budget in six months
KRS 68.310 states:
Except in case of an emergency concerning which the county judge/executive, the fiscal court and the state local finance officer unanimously agree in writing, no county may, during the first half of any fourth fiscal year, beginning with the fiscal year 1941-1942, encumber or expend more than sixty-five percent (65%) of all its current funds, taken as a unit, budgeted for that fiscal year, not counting as current funds any budgetary allotments for or payments of principal and interest of bonded indebtedness.
The purpose of this statute is to ensure that an incoming administration will have enough money on hand to pay for essential government operations. OAG 73-802.
You ask us to consider whether claims such as the ones we have discussed here would be unenforceable if payment of the claims would result in a violation of this statute. Although we suggested in OAG 82-309 that such claims would be void, we can neither affirm nor deny the correctness of that assumption. Our hesitation is compelled by three observations. First, in any specific factual setting it may be difficult to segregate the particular claims that brought the county's expenditures over the 65% limitation. For example, if two expenditures were made on the same day, and both together put the county over its limit but neither claim alone would do so, fairness to the claimants would require that both claims be paid. Second, while we understand the law's expectation that contractors know whether the officials they are dealing with have authority to bind the government, we are reluctant to state that a contractor has a similar duty to monitor a county's expenditures in the first six months of the fourth year of the county's budget cycle in order to determine whether the expenditures exceed the 65% limit. Third, were a blanket rule laid down whereby all expenditures over 65% could be voided, counties would have little incentive to control spending during the last six months of the administration.
For these reasons we are unwilling to say that violation of KRS 68.310 renders claims against the county unenforceable. We leave open the possibility that particular circumstances may arise in which the application of such a rule would be warranted.
The conclusions reached in this opinion are based on the facts set out in your letter. They should not be taken as findings of fact that would prejudice any legal action taken by or against the contractor in question.
Ross T. Carter
Assistant Attorney General