Opinion 98 - 8

PUBLIC CONTRACTS -- Preferred Source (requirement to obtain services from) -- Contracts Not Requiring Bidding (preferred source requirements)

GENERAL MUNICIPAL LAW, §103; STATE FINANCE LAW, §162; CORRECTION LAW, §184: A political subdivision is required to procure microfilming services, when available in the form, function and utility required by the political subdivision, from a qualified and approved preferred source, in accordance with the notification procedures of section 162[4][b] of the State Finance Law.

You ask whether a town is required to obtain microfilming services from a "preferred source" or whether the town may solicit competitive bids for such services.

General Municipal Law, §103 provides that, except as otherwise expressly provided by the State Legislature or by local law adopted prior to September 1, 1953, all purchase contracts involving expenditures in excess of $10,000 and all contracts for public work involving expenditures in excess of $20,000 shall be awarded by the appropriate officer, board or agency of a political subdivision or district therein to the "lowest responsible bidder furnishing the required security" after public advertising requesting submission of sealed bids.

State Finance Law, §162 contains provisions relative to "preferred sources". Under that section, preferred source status is accorded to: (1) commodities produced by the Department of Correctional Services' Correctional Industries Program in state correctional institutions pursuant to Correction Law, §184; (2) commodities and services produced by qualified charitable non-profit-making agencies for the blind approved for such purposes by the Commissioner of Social Services; (3) commodities and services produced by special employment programs serving mentally ill persons operated by facilities within the Office of Mental Health and approved by the Commissioner of Mental Health; (4) commodities and services produced by qualified charitable non-profit-making agencies for other severely disabled persons approved by the Commissioner of Education or incorporated under the laws of this State and approved for such purposes by the Commissioner of Education; and (5) commodities and services produced by qualified veterans' workshops providing job and employment skills training to veterans where the workshop is operated by the U.S. Department of Veterans Affairs, is manufacturing products or performing services within the State, and is approved by the Commissioner of Education (State Finance Law, §162[2]).

When available in the "form, function and utility" required by a political subdivision, purchases of commodities and services must be made through these preferred sources, in accordance with the priorities set forth in section 162 (State Finance Law, §162[4][a],[b]; compare General Municipal Law, §104 and State Finance Law, §163[3][a][iv],[4][e], relative to purchases which may be made by political subdivisions through the New York State Office of General Service's centralized contracts). Section 162(1) expressly states that "[p]rocurement from these providers shall be exempted from ... competitive procurement statutes". In addition, it is expressly declared that the provisions in section 162 supersede inconsistent provisioins of any general, special or local law, or the provisions of any charter (State Finance Law, §162[9]).

Subdivision 4 of section 162 establishes the priority to be accorded the various preferred sources. Generally, with respect to commodities, when available in the form, function and utility required, commodities must be purchased first from the Department of Correctional Services' Correctional Industries Program. If not available from that source, the commodities must be purchased from approved charitable non-profit-making agencies for the blind. If not available from either of those two sources, the commodities must be purchased from qualified non-profit-making agencies for the severely disabled persons, a qualified special employment program for mentally ill persons, or a qualified veteran's workshop (State Finance Law, §§162[4][a][i]-[iii]).

With respect to services, when available in the form, function and utility required, equal priority must be accorded to services rendered and offered for sale by qualified non-profit making agencies for the blind and those for the other severely handicapped, by qualified special employment programs for mentally ill persons and qualified veterans' workshops (State Finance Law, §162[4][b]). Political subdivisions must make reasonable efforts to provide notification describing their requirements to these preferred sources (or to certain "facilitating entities") (State Finance Law, §§162[4][b][i]). If, within 10 days of the notification, one or more preferred sources (or facilitating entities) submits a notice of intent to provide the service in the form, function and utility required, the service must be procured from a preferred source. If more than one preferred source (or facilitating entity) submits a notification of intent and meets requirements, cost must be the determinative factor among the preferred sources (State Finance Law, §162[4][b][ii])⁽¹⁾. If no preferred source expresses an intent to provide the service, the political subdivision would then proceed pursuant to the competititve bidding requirements of General Municipal Law, §103.

Accordingly, a political subdivision is required to procure microfilming services, when available in the form, function and utility required by the political subdivision, from a qualified and approved preferred source, in accordance with the notification procedures of section 162[4][b] of the State Finance Law.

April 30, 1998
Barbara M. Wiplush, Esq., Assistant Town Attorney
Town of Brookhaven

1. We note that the New York State Commissioner of the Office of General Services is required to maintain a list of available preferred source commodities and services to be made available to, among others, political subdivisions (State Finance Law, §162[3]). We also note that provision is made for the establishment and adjustment of prices of commodities and services provided by the preferred sources (State Finance Law, §162[5],[6]). With respect to purchases of commodities manufactured in state correctional institutions, the Correction Law provides that a political subdivision may appeal the purchase price on the basis that it unreasonably exceeds fair market price (State Finance Law, §162[5][b]; Correction Law, §186; 1986 Opns St Comp No. 86-55, p 88).