Does the Oklahoma Commissioners of the Land Office have to follow the State Use Advisory Council's mandatory contracts (which steer state spending to nonprofits employing people with disabilities) and the Central Purchasing Act, when its constitutional duty is to maximize benefits to school trust beneficiaries?

Plain-English summary

The Office of Disability Concerns asked two questions about the Commissioners of the Land Office (CLO):

1. Does the CLO have to follow the State Use Advisory Council laws (which require state agencies to buy certain goods and services from nonprofits employing people with disabilities) and the Central Purchasing Act, given the CLO's constitutional duty to maximize benefits for school trust beneficiaries?
2. Is it unlawful for a state agency to buy a real estate unit that comes with bundled services (like janitorial) that are on the State Use procurement schedule?

The Attorney General said:

Question 1: The CLO is a state agency under the Central Purchasing Act. It is in the executive branch (four of five commissioners are statewide elected executive officers; the fifth is a Governor appointee). It must follow the CPA and the State Use laws, with one critical caveat: when the State Use mandatory price exceeds the lower market price, the CLO must use the existing "temporary exception" procedure under 74 O.S. § 3008(C) to buy at the lower market price. This harmonizes the statutory requirement with the constitutional duty to maximize trust benefits.

Question 2: Whether a real estate purchase that bundles services on the State Use schedule constitutes "evasion" depends on the agency's intent at purchase. The AG won't decide that as a fact question. The legal test is borrowed from 2010 OK AG 12: did the agency intend to procure a service on the schedule, or did the bundled service incidentally come along with the real estate? Real estate is not on the procurement schedule; janitorial services are. If a state agency negotiated to make sure the unit included janitorial services, that's evasion. If janitorial services were incidental to the property purchase, it's not. Application to the specific Strata building purchase requires factual investigation outside the AG's authority.

The constitutional analysis on Question 1 rests on Hendrick v. Walters (1993): the Oklahoma Constitution is the state's highest law, and statutes must yield where they conflict. The Oklahoma Constitution's "maximum benefits" duty in art. XI, § 6(B) is a fiduciary mandate the CLO must honor. The temporary exception in § 3008(C) is the statutory mechanism that lets the State Use framework coexist with the constitutional duty.

What this means for you

If you are a Commissioner of the Land Office or CLO staff

Continue to comply with the Central Purchasing Act and the State Use Advisory Council's mandatory contracts. You already have eight certified procurement officers and various existing CPA exemptions (realtor selection, financial management consultants).

When you find a State Use mandatory contract priced above the open market for the same goods or services, do not unilaterally buy outside the contract. Instead, follow OMES Central Purchasing's "fair market analysis process" and request a temporary exception under 74 O.S. § 3008(C). The State Use contracting officer must grant it once you verify the lower market price.

Document each fair-market-analysis exception. The opinion is your authority that the temporary exception is required (not discretionary) when the trust's interest in the lower price is constitutionally mandated.

If you are a state agency owning units in a multi-unit building

The opinion treats real estate purchases that come with bundled services on the State Use schedule as a potential evasion. To stay safe:

1. Document at the time of purchase that you are buying the real estate, and any included services are incidental.
2. If you affirmatively negotiate to include janitorial, security, or other on-schedule services, you are likely engaged in an evasion, even if you label the deal as a real estate purchase. Don't structure deals that way.
3. After purchase, manage your unit's services in compliance with the State Use framework. If the building's HOA or association provides bundled janitorial services, consider whether you can opt out and procure independently through State Use channels.

If you are at the State Use Advisory Council or its participating nonprofits

Your contracts are still mandatory for state agencies. But the temporary exception process is now flagged as a real check on those contracts. Be prepared to respond when an agency presents a fair-market-analysis showing your contract is priced above the market. Document the value your providers add (training, supportive employment, social value) so agencies have a complete picture before exercising the exception.

If you are at OMES Central Purchasing

You manage the temporary exception process. The opinion treats the exception as required (not discretionary) for the CLO when the constitutional trust duty is in play. Develop or refine your fair-market-analysis approval workflow accordingly. Apply the same logic for other agencies that have constitutional fiduciary duties.

If you are at the Office of Disability Concerns

The opinion supports the State Use framework as generally applicable to all state agencies, including constitutional offices like the CLO. But it confirms the temporary-exception escape valve. If you see CLO or other agencies using the exception aggressively or as a workaround rather than a genuine fair-market correction, you have grounds to raise compliance concerns with OMES.

If you are an Oklahoma legislator

The opinion identifies a constitutional ceiling on State Use mandatory contracts for the CLO specifically. If you want a clean tier system for constitutional offices, you might consider:

• A statutory exception for the CLO that mirrors the constitutional analysis.
• Legislation requiring fair-market-analysis review for all State Use mandatory contracts on a periodic basis.

Common questions

Q: What is the State Use Advisory Council?
A: Created in OMES under 74 O.S. § 3001. Its purpose is to create employment opportunities for people with disabilities by directing certain state contracts to nonprofits employing high percentages of disabled workers. State agencies must buy listed goods and services from these nonprofits at the "fair market price" Central Purchasing sets.

Q: What is the CLO?
A: The Commissioners of the Land Office, a constitutional office under Article VI, § 32. Its members are the Governor, Lieutenant Governor, State Auditor and Inspector, Superintendent of Public Instruction, and the President of the State Board of Agriculture. The CLO administers the School Lands Trust granted to Oklahoma at statehood.

Q: Why is the CLO different from a regular state agency?
A: Because Article XI, § 6(B) imposes a constitutional fiduciary duty: the CLO must invest "solely in the best interests of the beneficiaries and . . . for the exclusive purpose of providing maximum benefits to current and future beneficiaries." That duty trumps a statutory requirement to pay above-market State Use prices.

Q: Does the CLO get a blanket exemption from State Use?
A: No. Only when the State Use price exceeds the actual market price. In other cases, the CLO must use State Use mandatory contracts like every other state agency.

Q: What's the temporary exception under § 3008(C)?
A: A statutory carve-out: when the agency verifies a lower market price through OMES's fair-market-analysis process, the State Use contracting officer may grant a temporary exception to buy from the market supplier. The opinion reads "may" as effectively "must" for the CLO when the constitutional duty is implicated.

Q: What about the Strata building purchase?
A: Several state agencies (CLO, Tourism, Tax Commission, Department of Health) jointly own units in the Strata building. The Owners Association provides janitorial services as part of the deal. The opinion declines to opine on whether this purchase constitutes evasion. That depends on whether the agencies intended to buy janitorial services through the real estate transaction, which is a question of fact.

Q: How do you tell if an agency is "evading" State Use rules?
A: Look at intent at the time of purchase. If the agency negotiated for the bundled service, evasion is likely. If the bundled service was incidental, no evasion. The 2010 OK AG 12 opinion provides the framework.

Q: Can the AG decide factual disputes?
A: No. AG opinions resolve questions of law. Fact-finding belongs to courts and administrative agencies (74 O.S. § 18b(A)(5)).

Background and statutory framework

The CLO administers an irrevocable trust created by the federal Enabling Act when Oklahoma joined the Union. The "School Lands Trust" provides funding for Oklahoma's common schools and other beneficiaries. Article XI, § 1 of the Oklahoma Constitution accepts the trust; § 6(B) imposes the maximum-benefits fiduciary duty.

The CLO is composed of four constitutional executive officers (Governor, Lieutenant Governor, State Auditor and Inspector, Superintendent of Public Instruction) plus the President of the State Board of Agriculture. Each is an officer of the executive branch.

The State Use Advisory Council framework lives in 74 O.S. §§ 3001 et seq. State agencies must use mandatory contracts for goods and services on the procurement schedule. The schedule is set by OMES Central Purchasing. The temporary exception in § 3008(C) is the safety valve when the State Use price is above market.

The opinion's analysis turns on three principles:

1. Constitution > statute. Hendrick v. Walters (1993) holds the Oklahoma Constitution is the state's highest law. A statute that would force the CLO to violate its constitutional fiduciary duty is unconstitutional as applied. Reading the statute to harmonize with the Constitution (via § 3008(C)) avoids that conflict.

2. CLO is in the executive branch. Four of five commissioners are constitutional executive officers. The CLO meets the three-element public office test from Oklahoma City v. Century Indem. (1936). It is a state agency under the CPA and (by analogy) the State Use laws.

3. Evasion analysis depends on intent. 2010 OK AG 12 holds that whether a procurement evades State Use depends on whether the agency intended to procure a scheduled service. That test extends to real estate that bundles scheduled services. Application requires fact-finding the AG cannot do.

Citations and references

Constitution and statutes:
- Okla. Const. art. XI, § 6 (CLO fiduciary duty)
- 64 O.S. § 1001 (CLO composition)
- 74 O.S. §§ 3001 et seq. (State Use Advisory Council)
- 74 O.S. § 3008(C) (Temporary exception)

Cases:
- Hendrick v. Walters, 1993 OK 162, 865 P.2d 1232 (Constitution prevails over conflicting statutes)
- Oklahoma Educ. Ass'n v. Nigh, 1982 OK 22, 642 P.2d 230 (School Lands Trust as irrevocable compact)
- Oklahoma City v. Century Indemnity, 1936 OK 589, 62 P.2d 94 (three-element public office test)

Prior AG opinion:
- 2010 OK AG 12 (evasion analysis turns on intent at the time of solicitation)

Source

• Landing page: https://oklahoma.gov/oag/opinions/ag-opinions/2023/ag-opinion-2023-14.html
• Original PDF: https://oklahoma.gov/content/dam/ok/en/oag/opinions/ag-opinions/2023/ag_opinion_2023-14.pdf

Original opinion text

OFFICE OF THE ATTORNEY GENERAL
ATTORNEY GENERAL OPINION
2023-14

Brenda Hoefar, Interim Director
Office of Disability Concerns
P.O. Box 25352
Oklahoma City, OK 73125

December 1, 2023

Dear Director Hoefar:

This office has received your request for an official Attorney General Opinion in which you ask, in effect, the following questions:

1. Is the Commissioners of the Land Office subject to the laws of the State Use Advisory Council and the Central Purchasing Act despite a constitutional mandate to maximize benefits for the beneficiaries of the sacred trust held for the benefit of Oklahoma common schools?
2. Is it unlawful for a state agency to purchase a unit of real estate that is subject to a building association, established under the Unit Ownership Estate Act, which provides products or services listed on the State procurement schedule to each unit?

I. SUMMARY

The Commissioners of the Land Office ("CLO" or "Commissioners") is subject to the laws of the State Use Advisory Council and the Central Purchasing Act except where the laws conflict with the CLO's constitutional mandate to maximize benefits to current and future beneficiaries of the School Lands Trust. The CLO is an office within the executive branch of state government and is made up of officials within the executive branch. Four of the five commissioners are constitutionally vested with executive authority for the State.

However, an impermissible conflict between these statutes and the CLO's constitutional mandates exists when the CLO determines that there is a lower market price available than the statewide mandatory contracts for the same product or service. In such case, once the lower market price is verified by the CLO through compliance with the fair market analysis process approved by the Office of Management and Enterprise Services Central Purchasing Division, the State Use contracting officer must grant a temporary exemption to the CLO permitting it to obtain the lower market price.

The answer to the second question involves a factual dispute that is outside the scope of an Attorney General Opinion. Specifically, the second question turns on whether the purchase of real estate is an "evasion" of the laws of the State Use Advisory Council under title 74, section 3007 of the Oklahoma Statutes, and whether the intent of any state agency-owner within the Strata building was to purchase real estate in addition to janitorial services.

II. BACKGROUND

A. The Central Purchasing Act and statewide mandatory contracts

The State Use Advisory Council was created within the Office of Management and Enterprise Services ("OMES"). The general purpose of the program is to provide employment opportunities for disabled individuals by creating a process for awarding certain state contracts to qualified non-profit agencies that employ a high percentage of individuals with disabilities.

Whenever state agencies "intend[] to procure any product or service included in the procurement schedule," they must purchase the product or service under mandatory contracts, awarded by Central Purchasing, at "the fair market price" determined by Central Purchasing. State agencies also may not "evade the intent and meaning" of this requirement "by slight variations from standards."

Central Purchasing offers temporary exceptions to the "fair market price" requirement:

When the fair market price for a product or service approved by the Office of Management and Enterprise Services Central Purchasing Division exceeds a current market price for the same product or service and such lower market price has been verified by the agency through compliance with the fair market analysis process approved by the Office of Management and Enterprise Services Central Purchasing Division, the State Use contracting officer may grant a temporary exception to a requesting agency so that the agency may purchase the product or service from the supplier offering the lower market price.

B. The Oklahoma Constitution and Enabling Act

The Oklahoma Constitution established the CLO for the purpose of administering the School Lands Trust. The CLO is made up of "[t]he Governor, Lieutenant Governor, State Auditor and Inspector, Superintendent of Public Instruction, and the President of the State Board of Agriculture." OKLA. CONST. art. VI, § 32. As outlined in the Oklahoma Constitution, the grants of land and money under the Enabling Act are to be kept as a "sacred trust." OKLA. CONST. art. XI, § 1. Additionally, "[t]he Commissioners of the Land Office shall be responsible for the investment of the permanent common school and other educational funds . . . solely in the best interests of the beneficiaries and [] for the exclusive purpose of providing maximum benefits to current and future beneficiaries."

III. DISCUSSION

A. The CLO is subject to statewide mandatory contracts. But where the fair market price is not the lowest on the market, the CLO shall receive a temporary exception to purchase the product or service at the lower price.

Whether acquisitions by the CLO are subject to the Central Purchasing Act and the laws of the State Use Advisory Council turns on whether the CLO is a "state agency." The Legislature defined "State Agency" in the Central Purchasing Act as "any office, officer, bureau, board, counsel, court, commission, department, institution, unit, division, body or house of the executive or judicial branches of the state government, whether elected or appointed, excluding only political subdivisions of the state[.]"

In looking at its composition, it is clear that the CLO is within the executive branch of state government. The Oklahoma Constitution vests four of the five members of the CLO with the executive authority of the State and the fifth member is an appointment of the Governor. Thus, the CLO clearly constitutes an "office . . . of the executive . . . branch[] of the state government."

But when the "fair market price" mandated by State Use Advisory Council is not the lowest price, the mandate to comply with the laws of the State Use Advisory Council and the Central Purchasing Act conflicts with the CLO's constitutional mandate to utilize the School Lands Trust income "for the exclusive purpose of providing maximum benefits to current and future beneficiaries[.]" In such case, the exception provided within the statute for when a "lower market price has been verified by the agency through compliance with the fair market analysis process" must be utilized.

B. The Association is subject to the Central Purchasing Act and the laws of the State Use Advisory Council if the state agency owners of units within the Strata building intended to procure the included janitorial services at the time of purchase. However, this involves a question of fact beyond the scope of an official Attorney General Opinion.

This office previously analyzed § 3007(B) in 2010 OK AG 12. The opinion concluded that the test to determine if a state agency violates the laws of the State Use Advisory Council "turns on whether . . . the particular solicitation is for 'any product or service included in the procurement schedule.' This test must be applied to each solicitation on an individual case-by-case basis."

In the present matter, various state agencies purchased real estate, subject to a Declaration and Regulations, which include janitorial services. A cursory review of the procurement schedule evidences that janitorial services are listed, but real estate is not. If the agency purchases real estate, that includes incidental products or services listed on the procurement schedule, it does not violate the laws of the State Use Advisory Council unless the agency intended to evade purchasing restrictions applicable to those attendant products or services.

It is, therefore, the official Opinion of the Attorney General that:

1. The CLO is only subject to the laws of the Council and the Central Purchasing Act where the laws do not interfere with their constitutional mandate to maximize benefits to current and future beneficiaries. The CLO is therefore subject to statewide mandatory contracts because, where fair market price is not the lowest price, the CLO shall receive a temporary exception and be granted the ability to purchase the product or service at the lower price.

2. The proper test to apply in determining whether a solicitation by a state agency violates the laws of the State Use Advisory Council turns on whether a particular solicitation is for "any product or service included in the procurement schedule." This test extends to the purchase of real estate. However, applying this test to the Strata building is a question of fact beyond the scope of an official Attorney General Opinion.

GENTNER DRUMMOND
ATTORNEY GENERAL OF OKLAHOMA

STEPHANIE ACQUARIO
ASSISTANT ATTORNEY GENERAL