Pursuant to 74 O.S. §2221.B, the Oklahoma Tourism and Recreation Department (“Tourism”) is authorized to enter into partnerships for promotional programs and projects with private entities for the purposes of carrying out its duties and responsibilities and promoting tourism and tourism economic development. Tourism may enter into contacts for these promotional programs and projects. Such contracts shall not be subject to the Oklahoma Central Purchasing Act. Agreements between Tourism and a private entity for the administration of the annual Governor’s Conference on Tourism fall under the types of agreements contemplated by 74 O.S. §2221.B and are not subject to the requirements of the Central Purchasing Act.
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Procurement-Related Attorney General Opinions
A limitation of liability clause where the state agrees not to seek damages against a private supplier or agrees to limit the damages it may seek (1) does not violate Oklahoma Constitution prohibitions related to debt of the state because there is no affirmative promise on the part of the state to pay another party to the contract and (2) is not inherently violative of public policy.
The limitation of liability clause considered in this Opinion does not constitute an obligation that binds future legislatures beyond the fiscal year; however, the terms of each clause must be analyzed to determine if the clause contains language that exempts the supplier from its own fraud, willful injury or violation of law. If so, the clause is null and void because such a limitation of liability is prohibited by 15 O.S. §212 and against the public policy of the state. Additionally, a clause may be labelled as a limitation of liability but its terms may require the state to indemnify a supplier for the supplier’s own damage; indemnification clauses requiring the state to pay a third party constitute a debt and are prohibited by the Oklahoma Constitution, Article X, §23. See 74 O.S. 85.5.
NOTE: This Opinion overrules Opinion Nos. 06-11, 01-02, and 78-256 to the extent those Opinions determined a limitation of liability clause in a contract constitutes a debt, liability or obligation of the state in violation of the Oklahoma Constitution or is inherently violative of public policy. Opinion 01-02 which addressed only limitation of liability clauses has been withdrawn.
Facility management and operation services contemplated by 10A O.S. §2-2-806, in connection with the Oklahoma Office of Juvenile Affairs, are not listed among the exclusions from the Central Purchasing Act. Citing Okla. Alcoholic Beverage Control Bd. v. Moss, 509 P.2d 666 (Okla. 1973), the Opinion stated state agencies have only those powers that are granted to them by statute, and an agency may not, by rule, expand its powers beyond those granted by statute. Thus, by promulgating a rule, the Office of Juvenile Affairs may not grant unto itself the power to be exempted from the Central Purchasing Act. See 74 O.S. §85.12.
Among the statutory exceptions to the general requirement that state agencies use competitive solicitations when making acquisitions are the statutes and administrative rules relating to the State Use Committee which exists within the OMES Purchasing Division. State Use Committee contracts are mandatory contracts and whenever a state agency intends to procure a product or service included in the State Use Committee’s procurement schedule, the agency shall secure the product or service from a State Use contractor regardless of the acquisition purchase price. The only exception to the mandate is if the product or service is not available within the period required by the entity. Pursuant to 74 O.S. §3007.B. a state agency is prohibited from evading the purchase of individual products or services listed on the State Use Committee's procurement schedule, by issuing a solicitation for products or services that is a slight variation from the standards adopted by OMES.
The proper test to apply in determining whether a solicitation by a state agency violates State Use statutes is found within the language of 74 O.S. §3007 and turns on whether a particular solicitation is for "any product or service included in the procurement schedule." This test must be applied to each solicitation on a case-by-case basis. For example, a solicitation for prepared soup is not a violation of the intent of the State Use statutes even though it includes individual items on the schedule such as pasta, peas and beans, because the product of prepared soup is not an item on the procurement schedule. Likewise, a solicitation for a comprehensive package of computer parts and services would not violate the intent of the State Use statutes even though the State Use procurement schedule includes an individual item such as toner, because the product/service of comprehensive computer services is not on the procurement schedule.
Pursuant to 74 O.S. §3007, the fair market price of products and services on the procurement schedule established by the State Use Committee must be determined before procurements can be made.
Regarding products and services on the procurement schedule for which the price does not vary by agency, location or specifications, the fair market price is determined before procurement by vote of the State Use Committee upon the recommendation of the contracting officer after the market analysis required pursuant to OAC 260:120-1-4.
Regarding products and services on the procurement schedule for which the price does vary and a fair market price has not been established, the contracting officer is authorized, with the approval of the State Purchasing Director, to award a contract to a State Use supplier and establish a fair market price in accordance with the State Use Fair Market Price Policy. The Policy is an internal policy which more specifically describes the methodology to be used by the contracting officer in conducting the market analysis required by OAC 260:120-1-4. The fair market price is subject to ratification by the State Use Committee.
Similarly, regarding emergency purchases, with approval of the State Purchasing Director, the contracting officer may award a contract for a maximum of three months to a State Use supplier after determining a fair market price in accordance with applicable administrative rules and the State Use Fair Market Price Policy, which is subject to ratification by the State Use Committee.
Citing the application that specific language will control over general language in statutes when there is a conflict between the two, the Opinion determined the State Use Committee has sole authority to prescribe rules which carry out the purposes of the State Use statutes and the OMES Director has the more general authority to promulgate rules governing the Purchasing Division and state agency acquisitions under the Central Purchasing Act.
Pursuant to 74 O.S. §3008, procurements made pursuant to the State Use statutes are not subject to the competitive bid requirements of the Central Purchasing Act. No other provisions of the State Use statutes or rules require a competitive bidding process and, citing the conclusion in Attorney General Opinion 06-23, the State Use Committee does not have the authority to issue requests for proposals and contracts with State Use suppliers are not awarded through a RFP process. Therefore, the State Use procurement process is an open market bid process and is not subject to a competitive bid process prior to procurement or the determination of a fair market price by the State Use Committee. See 74 O.S. §§3007, 3008 and 3009 and OAC 260:120-1-4.
The sales tax exemption in 68 O.S. §1356.10 on the sale of tangible personal property or services to any person who enters into a public contract with the Oklahoma Department of Veterans Affairs, or to any subcontractor to such a public contract, does not apply when the sale is to a person who has entered into a contract with OMES executed on behalf of the Oklahoma Department of Veterans Affairs. See 74 O.S. §85.5
Note: Opinion No. 07-31 withdrew the conclusion in Opinion Nos. 84-66, 84-76, 85-157, 87-7, 88-61 and 89-36 that OMES or the State Purchasing Director is a purchasing agent for a state agency.
The State Purchasing Director may only cancel contracts with State Use Committee suppliers for reasons specified by OAC 260:115-9-9 or as authorized by terms of the contract. The statutory authority and responsibility of the State Purchasing Director for all acquisitions used or consumed by state agencies would necessarily include the power to specify procedures agencies must follow in ordering acquisitions. The Opinion concluded the State Purchasing Director may implement an internet-based system of purchasing goods as long as orders for products on the State Use procurement schedule are routed to State Use suppliers. However, neither the statutes nor the rules governing the State Use program expressly, or by implication, authorize or impose a requirement that State Use suppliers may be required to subcontract with the entity providing the internet-based ordering system in order to sell to state agencies.
Unless otherwise provided by law, the State Purchasing Director has sole authority over state purchasing contracts, including the issuance of Requests for Proposals for acquisitions by state agencies. The State Use Committee does not have authority to enter into contracts or to issue or authorize Requests for Proposals. The Committee qualifies the suppliers, prepares the procurement schedule and establishes the fair market price of goods and services on the schedule but does not enter into contracts with suppliers. Contracts with suppliers on the Committee procurement schedule are between the supplier and the Purchasing Division of OMES. Contracts with State Use suppliers are not awarded through a RFP process, but rather, are awarded by the Purchasing Division after approval of the supplier by the State Use Committee and the inclusion of the supplier’s products and services on the procurement schedule. Because state agencies may purchase items on the procurement schedule from other suppliers where the items are not available from State Use suppliers within the time frame required by the agency and when the agency has a waiver from the contracting officer assigned to the State Use Committee, the State Purchasing Director may issue a RFP for items listed on the procurement schedule.
It would not be a fair competition if a bidder had advance notice of the terms of an RFP, such as would be the case if the bidder assisted in preparing the RFP. Citing Medco Behavioral Care Corp. v. State of Iowa Dep't of Human Serv., 553 N.W.2d 556 (Iowa 1996), the Opinion states "In such cases the concern is that the firm could either skew competition in favor of itself when developing the terms of the procurement, or, through its inside knowledge of the agency's requirements, gain an unfair advantage in the competitive bidding process.". Therefore, an entity may not be awarded a contract for the sale of software to a state agency if the entity has, through a professional services contract, provided assistance to the agency in developing a RFP for the purchase of such software.
Depending upon the particular facts and circumstances of the business relationship, it may be a conflict of interest for an entity to sell services to a state agency if a partner of the entity has, through a professional services contract, provided assistance to the agency in developing a RFP for the purchase of such services. If a partner of an entity that assisted in the preparation of a RFP is in a position to obtain advance information about the terms of the RFP from such entity, then the prohibition against bidding on the RFP would extend to the partner of the entity as well; however, the determination of an actual conflict of interest is a question of fact outside the scope of this Opinion. See 74 O.S. §§85.5; 3004, 3005 and 3007; OAC §§260:115-7-3, 115-7-23 and 115-9-9.
The Attorney General is the only person who can agree to grant a supplier sole control over the state's defense of any claim arising from a contract with the supplier. No purchasing officer has the authority to agree to such a clause and OMES is not the proper state agency to make such a decision and cannot do so under the guise of negotiating and performing a contract with a private entity. Therefore, a contract clause granting, in advance, a supplier control over the state's defense in a lawsuit or waiving the state’s defenses is prohibited.
Although contract language which states a supplier's liability is limited to the extent allowed by law is not prohibited, such language is superfluous, has no legal effect and the clause is void if the state cannot under the Constitution agree to a particular limitation of liability clause. See 74 O.S. §85.5.
NOTE: portions of this Opinion concluding that a limitation of liability clause in a contract constitutes a debt, liability or obligation of the state in violation of the Oklahoma Constitution or is inherently violative of public policy are not included in this Guide because those portions are overruled by Opinion No. 12-18.
The Central Purchasing Act does not prohibit negotiated contracts when using "RFP" bid procedures. Likewise, specific legislative enactments favor negotiated contracts using RFP procedures. The Opinion cites other instances in which an agency utilizes the bidding procedures and contracting process of the OMES Purchasing Division but retains its statutory duty to negotiate the contract. Thus, the Office of Juvenile Affairs may use the competitive bidding procedures of the OMES Purchasing Division or internal agency procedures when negotiating contracts with designated Youth Services Agencies so long as final contracts are negotiated by the Department of Juvenile Justice. See 74 O.S. §85.7.
The Legislature has authorized state agencies to enter into a multi-year lease-purchase contract so long as the contract contains a valid non-appropriation clause. However, the Legislature has not authorized school districts to enter into multi-year contracts containing non-appropriation clauses. A school district contract extending beyond the fiscal year cannot be automatically renewed pursuant to the operation of a non-appropriation clause. A school district contract must contain a provision for mutual ratification of renewal, allowing the school and supplier to consider if they want to continue the contract for another year or terminate the contract at the end of a fiscal year. See 74 O.S. §85.4.