Could a Kentucky university skip competitive procurement for an audit by declaring allegations about its finances an emergency?

Plain-English summary

Western Kentucky University's regents had retained Arthur Andersen & Co. for an audit after allegations about university finances. The board chairman declared an emergency, and a legislator asked whether that let the university use a noncompetitive contract. The AG said the declaration's stated reason did not meet the emergency definition in KRS 45A.095. The statute addressed an immediate threat that normal procurement could not meet; the declaration identified serious allegations, but no imminent harm of that kind.

The opinion stopped there on the facts supplied. The AG said it could not decide whether the contract itself was illegal because the statute also allowed sole-source procurement or a finding that competition was infeasible. The office lacked the contract and the facts to assess those alternatives. It also declined to specify a remedy for an assumed illegal contract because the requested remedy was unclear.

Currency note

This opinion was issued in 1992. 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.

Historical summary

University regents and purchasing officials

The AG said calling an audit urgent did not itself establish the emergency condition in KRS 45A.095. On the stated facts, the declaration lacked the immediate threat to government, property, or people that the statute described. The opinion did not decide whether another exception supported the particular contract.

Legislators seeking an AG opinion during litigation

The office explained why it answered even though litigation involving the university audit was pending. It read KRS 15.025(2) as requiring a response to a legislator's public question of law, while its regulation against opinions on litigated matters governed only discretionary requests.

Common questions

Did the financial allegations establish an emergency procurement exception?

The AG said no on the facts presented. The declaration did not describe the immediate, serious threat required by KRS 45A.095.

Did the AG rule that Arthur Andersen's contract was illegal?

No. The AG lacked the contract and facts needed to assess sole-source procurement and infeasibility of competition, the statute's other exceptions.

Did the opinion tell the university how to remedy the contract?

No. The AG said the question did not identify which remedy was sought and declined to answer it.

Background and statutory framework

KRS 45A.095 allowed noncompetitive negotiation for sole-source purchases, infeasible competition, or qualifying emergencies. The AG compared the chairman's declaration with the statute's emergency definition and found the stated grounds insufficient. It distinguished that conclusion from a finding about the contract's overall validity. The opinion also cited KRS 15.025(2) to explain its duty to answer a legislative inquiry despite pending litigation.

Citations and references

• KRS 45A.095: noncompetitive procurement exceptions and emergency definition.
• KRS 15.025(2): duty to answer a legislator's public question of law.
• 40 KAR 1:010: AG opinion regulations discussed in the letter.
• KRS 12.210: cited in connection with earlier OAG 92-19 about hiring legal counsel.

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG92-040.htm

Original opinion text

OAG 92-40

March 12, 1992

Vic Hellard, Jr.

Director

Legislative Research Commission

State Capitol

Frankfort, Kentucky 40601

Dear Mr. Hellard:

On behalf of a legislator you have presented questions to the Attorney General pertaining to the hiring of Arthur Andersen & Company by the Western Kentucky University Board of Regents. Before we proceed to an analysis of your questions, a review of the context of your questions and our answers is in order.

The actions of the board of regents in attempting an audit directed at the university president have been amply reported in the media. An apparent disagreement among board members has erupted into litigation. A local grand jury, perhaps emboldened by an opinion from this office, has investigated the board's actions. The proceedings have attracted attention over much of the state.

In the midst of this controversy, at your request, we issued OAG 92-19, in which we advised that a university board of regents is subject to the provisions of KRS 12.210 and KRS chapter 45A in hiring legal counsel. Your current inquiry presents similar questions with regard to the hiring of an accounting firm.

In light of the statewide interest in this matter, we believe it necessary to review our authority for issuing these opinions. The Attorney General is commanded by KRS 15.025(2) to provide legal opinions “when public questions of law are submitted by either house of the legislature or by any member of the legislature.” In addition to this duty, the Attorney General is empowered by subsection 4 of the statute to provide opinions “when, in the discretion of the attorney general, the question presented is of such public interest that an attorney general's opinion on the subject is deemed desirable and when provided for by regulation pursuant to the provisions of this section.”

In obedience to this statute the Attorney General has promulgated 40 KAR 1:010 and 1:020 to establish when this office will render opinions not specifically ordered by the statute. Among the provisions of those regulations appears this language:

Official opinions . . . will not be rendered in response to moot, hypothetical, or abstract questions, nor will they be rendered in response to questions involving matters being litigated or questions submitted in contemplation of litigation.

The existence of litigation regarding the Western Kentucky University audits naturally raises a question of the appropriateness of our rendering an opinion in light of the language just quoted. We are proceeding to answer your questions on the basis that the quoted language in the regulation applies only to questions that the Attorney General may answer in his discretion. The regulation has no application to questions submitted by a member of the legislature under KRS 15.025(2).

While we recognize the influence that an opinion of this office sometimes wields in litigation, and while we take no side in the current controversy, we are compelled to respond to the questions presented. Moreover we perceive a legitimate need on the part of the legislature to remain fully advised of the legal implications of matters such as the one in question so that the legislature may act promptly to amend statutes that do not adequately state legislative intent. This need is particularly urgent when, as now, the legislature is in session and a deadline for introducing new legislation looms.

With our duty to respond to the inquiry thus established we turn to the questions you have presented. You state that the Western Kentucky University Board of Regents has retained Arthur Andersen & Co. to perform auditing services. You state that the board “has attempted to bypass the personal services contract law by declaring an emergency.” You have submitted an undated document entitled “DECLARATION OF EMERGENCY” signed by Joseph Iracane, chairman of the board of regents. The document reads:

In accordance with action by Board of Regents on February 20, 1992 and pursuant to authority established in KRS 164A, the undersigned, the contracting officer on behalf of the Board of Regents of Western Kentucky University, hereby declares an emergency exist [sic] which requires the employment of Arthur Andersen & Co., 2300 Meiding, Louisville, KY, a reputable, qualified and established certified public amounting firm.

This Declaration of Emergency is necessary because the Board of Regents has determined that an audit is necessary to clarify serious allegations regarding the financial affairs of Western Kentucky University.

Since such emergency exist [sic], the Board took action on February 20, 1992 to employ the accounting firm of Arthur Andersen & Co.

(s)

Joseph Iracane, Chairman

Board of Regents

Western Kentucky University

Your questions are:

(1) Does a state of emergency as contemplated in KRS 45A.095 exist at Western Kentucky University?

(2) If the answer to No. 1 is “No”, is the contract illegal?

(3) If the contract is illegal, what action should be taken to remedy the situation?

The general provisions of KRS chapter 45A pertaining to personal services contracts were discussed in our previous opinion and need not be repeated here. The statute that you have cited, KRS 45A.095, provides:

(1) A contract may be made by noncompetitive negotiation only for sole source purchases, or when competition is not feasible, as determined by the purchasing officer in writing prior to award, under regulations issued by the secretary of the Finance and Administration Cabinet or the governing boards of universities operating under KRS Chapter 164A, or when emergency conditions exist. . . .

. . .

(3) An emergency condition is a situation which creates a threat or impending threat to public health, welfare or safety such as may arise by reason of fires, floods, tornadoes, other natural or man-caused disasters, epidemics, riots, enemy attack, sabotage, explosion, power failure, energy shortages, transportation emergencies, equipment failures, state or federal legislative mandates or similar events. The existence of the emergency condition creates an immediate and serious need for services, construction, or items of tangible personal property that cannot be met through normal procurement methods and the lack of which would seriously threaten the functioning of government, the preservation or protection of property, or the health or safety of any person.

You have asked specifically whether a state of emergency as contemplated in the statute exists at Western Kentucky University. This question obviously calls for a factual conclusion that we cannot supply, since we do not sit as a trier of fact and cannot investigate the factual background of the situation. We can only apply the statute to the facts that you have supplied. In this regard we can state without hesitation that the grounds set forth in the “Declaration of Emergency” do not describe an “emergency condition” as defined in the statute. We need hardly repeat the terms of the statute to point out that the situations it describes are temporal emergencies; that is to say, the statute relaxes the competitive bidding requirement for procurements that are immediately necessary as a result of an unforeseeable contingency that seriously threatens government, property, or lives.

The statute obviously implies that the emergency exception embraces situations in which irreparable harm will befall government, property, or lives if the strict competitive bidding requirements are followed. If the statute does not make this point explicitly, it is only because it doesn't have to; the enumerated situations clearly convey the sort of temporal emergency that would make a lifting of the competitive bidding requirement appropriate.

The so-called emergency that the board chairman has declared is described as “serious allegations regarding the financial affairs of Western Kentucky University.” There is no indication of imminent harm to government, property, or lives. We do not believe that the emergency exception to the competitive bidding law may be invoked by a simple incantation. An emergency does not exist simply because a contracting officer says so in response to allegations of financial impropriety.

In response to your first question, we find that the facts as you have presented them to us do not indicate that an emergency condition exists at Western Kentucky University.

In response to your second question, our lack of a complete factual background renders a response impossible. You ask whether the contract is illegal. The emergency conditions exception is only one of three exceptions to the competitive bidding requirement, the other two being sole source purchases and situations when competition is not feasible. While we are confident that the contract would be illegal if the only proffered exception were the emergency condition exception, we cannot form an opinion regarding the other two exceptions. Again, these are factual issues and we do not have knowledge of the facts nor the duty to discover them. We do not, for example, have a copy of the contract in question. Therefore, we cannot state whether the contract may be valid under either of these two exceptions.

Your last question asks what action should be taken to remedy the situation if the contract is illegal. We are not certain what type of action you have in mind. Your question may be construed to refer to a legislative action, or it might ask us to provide legal advice to particular officials. Similarly, we are uncertain what type of remedy you envision. We do not know if your question is directed toward a proceeding to have the current contract declared void, to pay the contractor for his expenses already incurred, or to prevent similar situations from arising in the future. We therefore are unable to answer your third question at this time.

Sincerely,

CHRIS GORMAN

Attorney General

Ross T. Carter

Assistant Attorney General