Does an Arkansas county have to use competitive bidding when it leases (rather than buys) equipment under the county purchasing statutes?

Plain-English summary

State Representative Micah Neal asked the Arkansas AG whether an Arkansas county has to use competitive bidding when it leases equipment under Ark. Code Ann. § 14-22-101 (or any other statute). AG Leslie Rutledge said no, focusing the answer on "true leases": simple rental agreements where the county does not acquire any ownership interest or potential ownership in the equipment.

The reasoning is straightforward. The county purchasing statutes require formal bidding for any "purchase" exceeding $20,000 (with several exemptions). "Purchase" is defined in § 14-22-101(4) as:

not only the outright purchase of a commodity, but also the acquisition of commodities under rental-purchase agreements or lease-purchase agreements or any other types of agreements whereby the county has an option to buy the commodity and to apply the rental payments on the purchase price thereof . . . .

The definition specifically lists rental-purchase and lease-purchase agreements (where the county has an option to buy and apply rental payments toward the price). True leases (no ownership option) are not on the list. Under the maxim expressio unius est exclusio alterius (the express designation of one thing implies the exclusion of another) and the plain-meaning rule, the AG concluded the definition does not reach true leases.

The opinion also notes:

• State procurement law (Ark. R. 006.27.2R2:19-11-229) requires bidding for certain commodity leases, but county governments are not bound by Arkansas Procurement Law (§ 19-11-207).
• The county purchasing statutes do not prohibit a county from voluntarily soliciting bids for leases, as long as other purchasing procedures (including statutory exemptions) are otherwise respected.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Both the county purchasing dollar thresholds and the definitions in § 14-22-101 may have been amended since 2016. A county considering a lease today should verify the current text and the dollar threshold.

Background and statutory framework

The bid requirement

Ark. Code Ann. § 14-22-102(a) makes it unlawful for a county official to make a purchase exceeding $20,000 (as of the opinion) unless the formal bidding process is followed. "Formal bidding" is defined in § 14-22-101(2) as the procedure for solicitation and receipt of sealed bids. Several categories of purchases are exempt under § 14-22-102(b) and § 14-22-104 through § 14-22-106.

Why "purchase" is the linchpin

§ 14-22-101(4) defines "purchase" expansively to include outright purchases AND certain hybrid agreements:

• Rental-purchase agreements
• Lease-purchase agreements
• Any other agreement where the county has an option to buy and apply rental payments to the purchase price

The common thread is that the county acquires (or may acquire) ownership. A true lease, by contrast, leaves ownership with the lessor for the life of the agreement and at the end. Because the definition specifically singles out arrangements with an ownership feature, the AG infers (by expressio unius) that arrangements without an ownership feature fall outside.

Statutory construction principles applied

• Plain meaning (MacSteel Div. of Quanex v. Arkansas Okla. Gas Corp., 363 Ark. 22 (2005)): when statutory language is plain and unambiguous, give it its ordinary meaning.
• Expressio unius (Gazaway v. Greene Cty. Equalization Bd., 314 Ark. 569 (1993)): the express designation of one category implies exclusion of another.

Both maxims point the same direction: the legislature listed the hybrid acquisition arrangements it wanted covered, and chose not to list true leases.

State procurement law vs. county purchasing law

Ark. R. 006.27.2R2:19-11-229 (a state procurement rule) requires bidding for certain commodity leases. But § 19-11-207 makes the Arkansas Procurement Law inapplicable to county governments. So the state rule does not bind counties. Counties follow Title 14, Chapter 22, where the "purchase" definition controls.

Counties may still choose to bid leases

The AG noted that nothing in the county purchasing statutes prohibits a county from voluntarily soliciting bids for a true lease. A county may decide that competitive bidding produces a better price or better terms, and adopt that approach as a matter of policy. The opinion's holding is only that bidding is not statutorily required for true leases.

Common questions

Q: Our county wants to lease a backhoe for a single project, no buyout option. Do we have to bid it out?
A: Under this opinion, no, the formal bidding requirement does not apply to a true lease (no ownership interest). But the quorum court or county officials may still choose to use a competitive process as a policy matter.

Q: What if the lease has an option to purchase at the end?
A: That likely falls within the § 14-22-101(4) definition of "purchase" as a "lease-purchase agreement" or "any other type[] of agreement whereby the county has an option to buy . . . and to apply the rental payments on the purchase price." If so, the bidding requirement applies (subject to the statutory exemptions).

Q: Does this rule apply to state agencies or just counties?
A: Just counties. State agencies are governed by the Arkansas Procurement Law (§ 19-11-101 et seq.), which has different rules and includes a bidding requirement for certain commodity leases.

Q: What about municipalities?
A: This opinion does not address municipalities. Cities have their own purchasing statutes, and the analysis would have to be done separately.

Q: Can a vendor sue if the county fails to bid?
A: This opinion does not address a private cause of action. If a county is required to bid by statute and fails to do so, the contract may be voidable, and there may be remedies through the county attorney or in court. But true leases (as defined here) are not subject to that risk under the AG's reasoning.

Citations and references

Statutes and rules:

• Ark. Code Ann. § 14-22-101 (Repl. 2013, Supp. 2015), definitions including "purchase" and "formal bidding"
• Ark. Code Ann. § 14-22-102(a), unlawful purchases without bidding
• Ark. Code Ann. § 14-22-102(b), 14-22-104, 14-22-105, 14-22-106, exemptions from bidding
• Ark. Code Ann. § 19-11-207 (Repl. 2007), state procurement law does not bind counties
• Ark. R. 006.27.2R2:19-11-229, state-procurement bidding for commodity leases

Cases:

• MacSteel Div. of Quanex v. Arkansas Okla. Gas Corp., 363 Ark. 22, 210 S.W.3d 878 (2005), plain-meaning statutory construction
• Gazaway v. Greene Cty. Equalization Bd., 314 Ark. 569, 864 S.W.2d 233 (1993), expressio unius est exclusio alterius

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2016-071
August 25, 2016
The Honorable Micah S. Neal
State Representative
800 Fairway Circle
Springdale, AR 72764-1032
Dear Representative Neal:
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE

This is in response to your request for an official opinion on the following
question:

Does a county have to bid to lease equipment under Ark. Code Ann. § 14-22-101, or otherwise?

RESPONSE

I take your question to be asking about true leases of equipment, that is, simple
rental agreements whereby the county acquires no ownership interest or the
potential for ownership in the equipment. With this understanding, the answer to
your question is "no," in my opinion.

The statutes governing county purchasing procedures are, in my opinion, clear
and unambiguous. It is unlawful for any county official to make any purchases in
excess of $20,000 unless the method of purchasing described in the county
purchasing procedures is followed. Unless a particular purchase is exempt under
these statutes, the formal bidding process is to be followed. A "purchase" is
defined as "not only the outright purchase of a commodity, but also the acquisition
of commodities under rental-purchase agreements or lease-purchase agreements
or any other types of agreements whereby the county has an option to buy the
commodity and to apply the rental payments on the purchase price thereof . . . ."

The first rule in considering the meaning and effect of statutes is to construe them
just as they read, giving the words their ordinary meaning and usually accepted
meaning in common language. There is no need to resort to rules of statutory
construction when statutory language is plain and unambiguous. I am also guided
by a fundamental principle of statutory construction whereby the express
designation of one thing may properly be construed to mean the exclusion of
another.

As can be seen from the above definition of "purchase," true leases are not
included. Nor is even the concept of straight leasing (where no ownership
interest or the potential for ownership accrues from the transaction) used or
referred to in the chapter of the Code concerning county purchasing procedures.
Therefore, in my opinion, true leases by a county are not subject to the formal
county bidding process. (I will note that under state procurement law, certain commodity leases must be awarded on the basis of competitive sealed bids. See Ark. R. 006.27.2R2:19-11-229. But county governments are not bound by the Arkansas Procurement Law. See generally Ark. Code Ann. § 19-11-207 (Repl. 2007). Moreover, I do not read the county purchasing statutes as prohibiting a county from soliciting bids for leases, so long as remaining aspects of the county purchasing procedures are otherwise followed, for example, with respect to the statutory exemptions from competitive bidding.)

Attorney General