June 15, 1976
Mr. Russell C. Molstad
City Attorney
1147 Sherman
Sturgis, South Dakota 57785
OFFICIAL OPINION NO. 76-61
SDCL 5-8-2 relating to competitive bidding
Dear Mr. Molstad:
You have requested an opinion from this office on the following question:
Do the provisions of SDCL 5-18-2 relating to competitive bidding apply to services for repair of city owned machinery and equipment used in the construction and maintenance of city streets and alleys, and city sewer systems, where such services require skilled mechanics?
SDCL 5-18-2 provides in part:
All contracts of any public corporation, whether for the construction of public improvements or contracts for the purchase of materials, supplies or equipment, when such contracts involve an expenditure equal to or in excess of fifteen hundred dollars, must be let to the lowest responsible bidder. . .
In the case of Foss v. Spitznagel, 77 S.D. 633, 97 N.W. 2d 856 (1959), the South Dakota Supreme Court stated:
Statutes requiring municipalities and public corporations to advertise for bids and let contracts for public improvements and for construction and repair of public buildings and other public works to lowest responsible bidder were not applicable to employment of architect by city to prepare plans for proposed new civic arena or auditorium.
The significance of the Spitznagel case is limited to situations involving professional service or services involving a peculiar and unique skill. If the skill of the mechanics you refer to is unique with respect to those repairs, the Sptiznagel case would be authority for the city not letting the bids for these services. 1965-66 AGR, page 121 stated a similar opinion with respect to the hiring of a planning consultant and found no necessity for the letting of bids in that situation.
Of future significance in regard to the question you raise is Chapter 61 of the Session Laws of ]976, which amends SDCL 5-18-18 to specifically exempt equipment repair contracts from the provisions of SDCL 5-18-1 through 5-18-7, inclusive. Therefore, after July 1, 1976, the law will specifically deal with the question you have posed. Until this law becomes effective, it is my opinion that the city is not required to advertise for competitive bids on services for the repair of equipment which require the unique services of specially skilled mechanics.
In addition, you have posed a question with respect to a particular piece of equipment owned by the city which needs to be repaired. You question whether you must let bids for the necessary supplies to repair the equipment when the cost of the supplies exceeds the statutory minimum of $1,500, and the necessary parts and services are all such that they can be supplied only by the company manufacturing the equipment.
This precise issue has never been litigated in South Dakota, but other jurisdictions are split upon the issue of whether competitive bids are necessary when the supplier has a monopoly on the materials needed. Some find that competitive bids must be let despite their impracticality, while others interpret statutes such as SDCL 5-18-2 to foreclose such a result.
In my opinion, the competitive bid requirements imposed by SDCL 5-18 exist and must be complied with in spite of the fact that parts and factory rebuilt units for a particular piece of equipment are manufactured by one company. In view of the amendment to SDCL 5-8-2 increasing the statutory minimum to $2,500, the use of competitive bids in this area should be relatively infrequent. The fact, however, that replacement parts are made only by one particular company does not mean that the competitive bid laws of this State are not applicable.
Respectfully submitted,
WILLIAM J. JANKLOW
ATTORNEY GENERAL
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