Pendleton Bro's Vending v. Commonwealth Finance & Administration Cabinet

758 S.W.2d 24, 1988 Ky. LEXIS 46
CourtKentucky Supreme Court
DecidedJune 30, 1988
Docket87-SC-620-DG, 87-SC-772-DG and 87-SC-773-DG
StatusPublished
Cited by54 cases

This text of 758 S.W.2d 24 (Pendleton Bro's Vending v. Commonwealth Finance & Administration Cabinet) is published on Counsel Stack Legal Research, covering Kentucky Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pendleton Bro's Vending v. Commonwealth Finance & Administration Cabinet, 758 S.W.2d 24, 1988 Ky. LEXIS 46 (Ky. 1988).

Opinions

LEIBSON, Justice.

This is a case of first impression involving the impact on state purchasing procedures of the “Kentucky Model Procurement Code (“KMPC”),” KRS Chapter 45A, enacted in 1978 and effective since January 1, 1979 with minor revisions. The fundamental question is whether the KMPC has changed the rules of the game, providing access not previously available to challenge and investigate the propriety of government purchasing contracts. We hold that it has.

The general rule in Kentucky if the KMPC is not involved, as stated in HealthAmerica Corp. of Ky. v. Humana Health Plan, et al., Ky., 697 S.W.2d 946, 948 (1985), is that “absent a showing of fraud, collusion or dishonesty, a disappointed bidder [as such] has no standing to judicially challenge the award of a public contract to another bidder.” [25]*25The HealthAmerica case involved a challenge by a competitor to a contract for health care coverage for state employees awarded under KRS 18A.225. The KMPC was not involved.

The Complaint in the present case does not allege specific acts of fraud, collusion or dishonesty. The trial court’s summary judgment specifies this was a fatal defect, stating “the possibility of facts that might later be disclosed [by depositions or discovery] is not sufficient to sustain the plaintiffs’ burden of pleading specific facts that give rise to a cause of action.” We must decide whether the KMPC has effected a statutory change so that procurement is now a regulated administrative procedure subject to a court challenge if the decision was contrary to law, or arbitrary and capricious. This includes challenge on grounds that statutory procedures were disregarded for reasons of political patronage.

The Complaint was not filed solely by the disappointed bidder, Pendleton Brothers Vending, Inc. (“Pendleton Brothers”). Four additional plaintiffs (apparently principals in that company) allege standing as “taxpayers of the Commonwealth of Kentucky." The respondents acknowledge that taxpayers, as such, may have a judicially recognizable interest in the award of a public contract where a disappointed competitor does not, at least where there is proof “that there was an abuse of discretion on the agency’s part amounting to ... arbitrariness or capriciousness in awarding the contract.” Handy v. Warren Co. Fiscal Court, Ky.App., 570 S.W.2d 663, 664 (1978). In one of the principal cases relied on by the respondents for the general rule denying standing to a disappointed bidder, Bankamerica-Blair Corp. v. State Highway Comm., 265 Ky. 100, 95 S.W.2d 1068, 1071 (1936), our Court stated “[r]elief could be granted here only at the instance of the highway commission or of a taxpayer.” Emphasis added.

This case involves Pendleton Brothers’ challenge to the legal propriety of an award by the Commonwealth of Kentucky to Quatros, Inc., of a contract to place, service and stock automated vending machines in state-owned rest areas served by the interstate highway system in Kentucky. Pendleton Brothers claims it was legally entitled to the award and that the procedure used to make the award to Quat-ros, Inc., was a “sham.”

The trial court entered protective orders denying plaintiffs the right to depose witnesses and conduct discovery, and then decided the case on summary judgment. So this appeal must be decided on the basis of the Complaint and the Exhibits filed with the Complaint.

The Complaint alleges that initially the project was let for bid in an Invitation to Bid under the competitive sealed bidding process specified in the KMPC. The bid was to be awarded on a “highest commission percentage of gross sales basis, ... to a responsible bidder” as defined in the Invitation to Bid.

Only two firms bid on the project: Pen-dleton Brothers, whose bid specified a 15.7% commission percentage for the Commonwealth, and Quatros, Inc., who specified 12%. Nevertheless the responsible state agencies, the Transportation Cabinet and the Department for the Blind (who was to share benefit from the project under an applicable federal statute) recommended that the contract be awarded to Quatros, Inc.

Thereafter, newspaper articles appeared pointing to political connections and campaign contributions between three principals of Quatros, Inc., and the Collins for Governor Campaign, including connections with a political action committee headed by Floyd Poore who was Transportation Secretary at the time this invitation for bid was initiated. Following this adverse newspaper publicity, the Purchasing Officer of the Transportation Cabinet cancelled the Invitation to Bid and substituted the “competitive negotiation” procedure specified by KRS 45A.085-.090, which is to be utilized when “the purchasing officer determines in writing that the use of competitive sealed bidding is not practicable.”

This new bidding procedure utilized a “Request For Proposal [RFP] ” method provided in the KMPC, but included a novel refinement, a five person commission to [26]*26evaluate and rate bidding proposals. The Complaint alleges that this “five member evaluation team” was “arbitrarily assembled” and the evaluation procedure was “arbitrarily set.”

After this process, Quatros, Inc., once more was awarded the Contract even though again it bid a lower return to the state than Pendleton Brothers, ostensibly because Quatros was the only bidder attaining a 75 point average score under the point system utilized by the evaluation team. Pendleton Brothers filed a protest as permitted by KRS 45A.285. A hearing was held before a hearing officer designated by the Secretary for the Finance and Administration Cabinet. The protest was rejected. The Complaint alleges that at the hearing the Purchasing Officer for the Transportation Cabinet “admitted that the ‘point system’ was wholly subjective and that the 75 points was arbitrarily picked as a minimum score.”

The Complaint further alleges that: “The administration of the project was in such a way as to demonstrate a purposeful and deliberate attempt to avoid the mandate of KRS Chapter 45A [the KMPC] such as to make said administration invalid.”

An affidavit filed by one of the plaintiffs, Leland Pendleton, with plaintiffs’ Response to Quatros, Inc.’s, Motion for Summary Judgment stated:

“[0]ne Mac Thompson then Secretary [of the] Finance and Administration Cabinet ... indicated that he was very angry with the newspaper articles and said he personally was involved in turning us down and that Pendleton Brothers Vending, Inc., would never get the contract. Mac Thompson threatened ... lawsuits should we pursue our investigation into the contacts and collusion existent with regard to this project.”

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Cite This Page — Counsel Stack

Bluebook (online)
758 S.W.2d 24, 1988 Ky. LEXIS 46, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pendleton-bros-vending-v-commonwealth-finance-administration-cabinet-ky-1988.