Could Surfside Beach negotiate a pier lease after its public requests for proposals produced no responsive bid?

Plain-English summary

In 2011, Surfside Beach asked about leasing commercial space at its publicly owned pier after its request for proposals produced no responsive bid. The South Carolina Attorney General said the town had to follow its normal procurement rules in seeking tenants and lease renewals, including a public request for proposals, unless an exception in its ordinance applied. Failed bidding did not itself release the town from that procedure.

The AG also said the town administrator could not negotiate directly or indirectly with prospective tenants simply because the council would later approve the lease by ordinance. The opinion discussed a possible exception for professional services, such as hiring a broker, but made its availability depend on the ordinance and the facts. It did not find that the exception actually applied.

Currency note

This opinion was issued in 2011. 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.

Common questions

Did the town's role as a commercial landlord exempt its pier leases from procurement rules? A: The AG said no. It concluded that Surfside Beach had to seek tenants and lease renewals under its procurement procedures.

Could failed bids let the town skip another public request for proposals? A: The AG said unsuccessful bids did not end the obligation to follow standard procedures unless an exception under the town ordinance applied.

Could the administrator negotiate with a prospective tenant if council approved the final lease? A: The opinion said no. It treated later council approval as insufficient to replace competitive treatment of prospective tenants.

Did the opinion authorize the town to hire a broker instead? A: It raised the ordinance's professional services exception as a possibility, but said its application depended on facts the AG did not determine.

Background and statutory framework

The town had acquired Surfside Pier with existing commercial tenants and had adopted procurement rules intended to comply with the state procurement code. The AG applied the town's bidding provisions and their stated exceptions. It stressed the procurement code's competitive and equal-treatment purposes while declining to decide whether a particular exception's factual conditions were met.

Citations and references

The opinion discussed S.C. Code § 11-35-50 and the town's ordinance sections 2-208, 2-209, and 2-210. It also referred to an earlier South Carolina AG opinion dated January 8, 1999 on competitive bidding.

Official title

January 14, 2011 (1)

Requester

Micki Fellner, Interim Town Administrator, Surfside Beach

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/january-14-2011-1/
• Original PDF: https://www.scag.gov/wp-content/uploads/2011/03/fellner-m-os-9176-1-14-11-procurement-issues-surfside-beac.pdf

Original opinion text

ALAN WILSON

A TIORNEY GENERAL

January 14, 2011

Micki Fellner
Interim Town Administrator, Surfside Beach
115 US Highway 17 North
Surfside Beach, SC 29575-6034
Dear Ms. Fellner:
We received your letter requesting an opinion of this Office regarding procurement issues. You explained in the request letter that Surfside Beach is organized under the council form ofgovernment as provided in S.C. Code § 5-11-10 et seq. and has "adopted procurement procedures that are intended to comply with the State Procurement Code, pursuant to S.C. Code§ 11-35-50." The request letter further explains that the town of Surfside beach acquired the Surfside Pier from a private owner in August 2008, making this parcel publicly-owned property. The pier had two commercial tenants at the time of acquisition. The lease of one tenant terminates on December 31 , 2010 without an option to renew or extend. The town has advertised the new lease twice through the Request for Proposal (RFP) procedures. However, the RFP process did not result in a responsive bid. Specifically you asked the following three questions: 1.

2.

3.

In circumstances where the Town is acting as a commercial landlord of property, must the Town first seek tenants and lease renewals through its procurement procedures, including a publicly advertised RFP? In circumstances where the Town is acting as a commercial landlord of property and all bids received from prospective tenants during the normal procurement process have been deemed nonresponsive, must the Town continue to seek tenants and lease renewals through standard procurement procedures, including a publicly advertised RFP? In circumstances where the Town is acting as a commercial landlord of property and all bids received from prospective tenants during the normal procurement process have been deemed nonresponsive, may the Town Administrator seek to negotiate with prospective tenants if the final draft lease is approved by Ordinance of Town Council?

REMBERT c. D ENNIS B ufLDING •

POST O FFICE Box 11549 • COLUMBIA, SC 29211-1549 • T ELEPHONE 803-734-3970 •

FACSIMILE 803-253-6283

Ms. Fellner
Page 2
January 14, 2011

Law I Analysis
The State Procurement Code is found in Chapter 35 of Title 11 of the South Carolina Code of Laws of 1976. S.C. Code§ 11-35-50 explains that political subdivisions must adopt procurement laws: All political subdivisions of the State shall adopt ordinances or procedures embodying sound principles of appropriately competitive procurement no later than July 1, 1983.

S.C. Code § 11-35-50.
The term "procurement" is defined as:
buying, purchasing, renting, leasing, or otherwise acqumng any supplies, services, information technology, or construction. It also includes all functions that pertain to the obtaining of any supply, service, or construction, including description of requirements, selection, and solicitation of sources, preparation and award of contracts, and all phases of contract administration. S.C. Code§ 11-35-310(24). The Town of Surfside Beach has set forth procurement policies in the Town Code of Ordinances, Chapter 2. In seeking a tenant for the Surfside Pier, the town must follow its normal procurement policies. Specifically, the Town of Surfside Beach Code of Ordinances § 2-208(a) requires any contract with a value of more than $5,000 to be subject to a formal bidding process, as set forth in
§ 2-209(a). However,§ 2-210 of the Town Code of Ordinances provides exceptions for following the bidding process. For example, ifthe Town Manager finds that there is an advantage to acquire goods or services on the basis of a previously awarded bid or contract, if only one known source of supply exists, or if the administrator is contracting for professional services as directed by the town council to conduct the town's business, the administrator may waive procurement requirements under the condition that prior to the next council meeting the administrator has informed council in writing of the terms of such waiver.§ 2-210(a), (b), and (f). This Office is not a fact finding entity; investigations and determinations of facts are beyond the scope of an opinion of this Office and are better resolved by a court." Op. S. C. Atty. Gen., September 14, 2006; April 6, 2006. However, from the request letter and conversations with municipal officials of Surfside Beach, it is the understanding of this Office that the Town of Surfside Beach acquired the Surfside Pier from a private owner. The pier had two commercial tenants at the time of acquisition. The lease of one tenant terminates on December 31, 2010 without an option to renew

Ms. Fellner
Page 3
January 14, 2011
1

or extend. After three attempts following the RFP procedures, there was no successful bid. As a general rule, the Town of Surfside Beach should follow its procurement procedures, including a publically advertised RFP. However, if a court finds that an exception found in§ 2-210 of the Town Code of Ordinances applies, the town would be exempt from following the normal bidding procedures. In an opinion of this Office dated January 8, 1999 we explained as follows: This Office has frequently commented upon the nature of the Consolidated Procurement Code as a statute which is remedial in purpose and thus requiring a broad and expansive construction. In Op. Atty. Gen., Op. No. 84-8 (Jan. 24, 1984), for example, we expressed this opinion as follows:
[t]he Consolidated Procurement Code is set forth in§ 11-35-10 et seq. The legislative purposes and objectives of the Code, which requires competitive bidding, are expressed in § 11-35-20. Among these are the consolidation and clarification of procurement law in the State; the promotion of increased public confidence in the procedures followed in public procurement; the insuring of fair and equitable treatment of all persons who deal with the State's procurement system; the provision of maximum purchasing power of State expenditures; the encouragement of broad-based competition for public procurement; and the insuring of a procurement system of quality and integrity. In construing the applicability of statutes full effect must be given the legislative purpose. Bankers Trust of South Carolina v. Bruce, 275 S.C. 35, 267 S.E.2d 424 (1980).

1

S.C. Code§ 11-35-1540 governs negotiations after unsuccessful competitive sealed bidding, but does not likely apply in this situation. The statute reads as follows: "When bids received pursuant to an invitation for bids under Section 11-35-1520 are considered unreasonable by the procuring agency, or are not independently reached in open competition, or the low bid exceeds available funds as certified by the appropriate fiscal officer, and it is determined in writing by the chief procurement officer, the head of a purchasing agency, or the designee of either officer above the level of procurement officer, that time or other circumstances will not permit the delay required to resolicit competitive sealed bids, a contract may be negotiated pursuant to this section, provided that: (1) each responsible bidder who submitted a bid under the original solicitation is notified ofthe determination and is given reasonable opportunity to negotiate; (2) the negotiated price is lower than the lowest rejected bid by any responsible and responsive bidder under the original solicitation; (3) the negotiated price is the lowest negotiated price offered by any responsible and responsive offeror." S.C. Code§ 11-35-1540.

Ms. Fellner
Page4
January 14, 2011

The above legislative purposes are in complete accord with the objectives of bidding requirements and public procurement codes, generally. Bidding requirements in public procurement are for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption in the awarding of ...
[government] contracts, and to secure the best work or supplies at the lowest price practicable, and are enacted for the benefit of property holders and taxpayers, and not for the benefit or emichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to public interest. Yohe v. City of Lower Burrell, 418 Pa. 23, 208 A.2d 847, 850 (1965), quoting 10 McQuillin, Municipal Corporations,§ 29.29. There is indeed a strong public policy which favors competitive bidding. See, Terminal Const. Co. v. Atlantic City Sewerage Auth., 67 N. J. 403, 341 A.2d 327 (1975). Accordingly, procurement statutes such as South Carolina's Consolidated Procurement Code are frequently held to be remedial in nature and are construed broadly to achieve their purpose. In discussing a competitive bidding statute, one court has held that the courts will not, by strict construction, narrow the scope of a statute and limit its application, in cases where such construction is against the legislative policy. Reiter v. Chapman, 31 P.2d 1005, 1007 (1934). In short, this Office is of the view that all doubt must be resolved in favor of the Procurement Code's applicability in a given situation. Op. S.C. Atty. Gen., January 8, 1999 (emphasis added).

Conclusion
This Office concurs with the conclusions reached by the town attorney for Surfside Beach, Michael T. Smith; he has provided very able counsel to the Town of Surfside Beach's Town Council and Mayor. We share in his conclusion that the Town of Surfside Beach must follow its normal procurement policies, found in Chapter 2 of the Town of Surfside Beach Code of Ordinances, in seeking a tenant for the Surfside Pier. Where the town is acting as a commercial landlord of property, the town must seek tenants and lease renewals through its procurement procedures, including a publically advertised RFP. See, Town of Surfside Beach Code of Ordinances§§ 2-201, 2-208 and 2-209.

Ms. Fellner
Page 5
January 14, 2011

Question 1
This Office has previously held that "all doubt must be resolved in favor of the Procurement Code's applicability." Op. S.C. Atty. Gen., January 8, 1999. Also, the Town of Surfside Beach Code of Ordinances § 2-208 explains that the formal bidding procedures must be followed. Therefore, it is the opinion of this Office that a court would likely find that the bidding procedures under§ 2-209( a) must be followed for nonbudgeted 2 expenditures $5,000 and over unless an exception applies. Question 2 Even though all bids received from prospective tenants during the normal procurement process have been deemed nonresponsive, the Town must continue to seek tenants and lease renewals through standard procurement procedures, including a publicly advertised RFP, unless an exception under
§ 2-210 applies.
Town Council should contact the Town Attorney to raise further questions about the applicability of an exception. This Office is not a fact finding entity, but based on conversations with Surfside Beach municipal officials, it is the understanding of this Office that the town may simply want to hire a professional, such as a broker, to handle the town's business, falling under the Professional Services exception,§ 2-21 O(f) of the Town Code ofOrdinances. 3 The court could logically conclude that a broker would be considered a professional. Therefore, if the court found this exception was applicable, the administrator may contract for professional services as directed by town council for professionals as appropriate to conduct the town's business. Question 3 It is the opinion of this Office that the Town Administrator may not seek to negotiate with prospective tenants even if the final draft lease is approved by Ordinance of Town Council. The legislative purposes of the South Carolina Procurement Code are in complete accord with the objectives of bidding requirements and public procurement codes. Bidding requirements in public

2

Based on conversations with municipal officials for Surfside Beach, it is the understanding of this Office that the Surfside Pier is part of the town's enterprise fund, and therefore is intended to pay for itself. 3

"Professional services. Administrator shall, subject to section 2-209 set forth hereinabove, contract for professional services as directed by town council for physicians, attorneys, engineers, certified public accountants, information technology consultants and other professionals as appropriate to conduct the town's business. The administrator may select eligible candidates and after interviews award the contract to the best responsive and responsible professional, or if the contract amount exceeds the administrator's authority set forth in section 2-209 hereinabove or at the administrator's discretion he shall present the professionals to town council for selection. Special considerations shall include desired expertise, experience, and quality of performance needed to perform the required services." Town of Surfside Beach Code of Ordinances§ 2-210(f).

Ms. Fellner
Page 6
January 14, 2011

procurement are "for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption in the awarding of ... [government] contracts, and to secure the best work or supplies at the lowest price practicable, and are enacted for the benefit of property holders and taxpayers, and not for the benefit or enrichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to public interest." Op. S.C. Atty. Gen., January 8, 1999. Of all the purposes of the South Carolina Procurement Code, insuring "fair and equitable treatment of all persons who deal with the State's procurement system" is of the utmost. See, S.C. Code§ 11-35-2420. Therefore, it would be improper for the Town Administrator to directly or indirectly negotiate with prospective tenants; all should be given a fair and equal chance. Sincerely,

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Leigha Blackwell
Assistant Attorney General
REVIEWED AND APPROVED BY:

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Robert D. Cook
Deputy Attorney General