October 21, 1982

Mr. Gordon K. Milbrandt 
Auditor General 
Department of Legislative Audit 
435 South Chapelle 
Pierre, South Dakota 57501

Official Opinion No. 82-52

RE:  Bidding Of Computer Software

Dear Mr. Milbrandt:

You have requested an official opinion from this office based upon the following factual situation:

FACTS: 

Various political subdivisions of the State of South Dakota purchase various types of computer programs and software.

Based upon the above factual situation, you have asked the following question:

QUESTION:

Does the acquisition of computer programs and software fall within the bid requirements found in South Dakota Law?

Acquisition of computer programs and software by the various units of state government is governed by SDCL 1-14-12.1.  That section states as follows: 

The bureau of administration shall develop, install and direct automatic data processing systems to serve state-wide needs; and approve, disapprove or modify requests of departments, agencies, commissions, institutions, or any other units of state government which involve automatic data processing equipment and software.  The bureau shall take into consideration the unique needs of the separate legislative and judicial branches of government, the constitutional offices and the public utilities commission when evaluating  requests for software acquisition.

SDCL 1-14-12.1 makes the approval of such acquisitions the responsibility of the South Dakota Bureau of Administration. Generally, this approval would have to meet the requirements of SDCL 5-23, which deals with the bidding of state purchases.

However, before concluding that the purchase of computer programs and software must comply with the statutory bid requirements, a review of the purposes of the bidding laws must be made.  The South Dakota Supreme Court in Fonder v. City of South Sioux Falls, 71 N.W.2d 618 (S.D. 1955), stated the purpose of such laws in the following manner: 

The object the legislature sought to accomplish through the requirements of competitive bidding in making contracts for public corporations is to guard against favoritism, improvidence, extravagance, fraud and corruption. 

Fonder, supra at 620.

These purposes would not be advanced by forcing the Bureau of Administration to follow the statutory bidding requirements for the acquisition of computer programs and software.  These materials are highly unique.  Unlike other types of supplies or equipment acquired by the state, which are typical tangible goods, computer programs and software are highly specialized.  Computer programs and software must not only meet the specific needs required by the task to be undertaken, but they must also be compatible with the computer  hardware that is already being used by the entity.  Because of the unique nature of programs and software, the bidding specifications, which are required by statute, would be so specific as to make bidding not only impractical but also unproductive.  If only one computer program or software package can meet the specifications of the bid, the bidding requirements serve no purpose.

The unique nature of computer programs and software applies to not only programs and software utilized by the state and its agencies, but also to other political subdivisions of the state. Purchases by these other political subdivisions are regulated by the bidding requirements found in SDCL 5-18. The use of the bid laws found in SDCL 5-18 are as inappropriate for these other political subdivisions as the provisions of SDCL 5-23 are to the Bureau of Administration.  Therefore, it is my opinion that the answer to your question is NO, the acquisition of computer programs and software does not fall within the bid requirements found in South Dakota law.

Respectfully submitted,

Mark V. Meierhenry
Attorney General