New Procurement Rules for Public Trusts

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A new law will go into effect Nov. 1 which will level the playing field for the acquisition of operational equipment, supplies and services by governmental entities.

Oklahoma has more than 100 public trusts, which are separate legal entities formed to benefit the State of Oklahoma or a city or county within Oklahoma. Public trusts are used around the state to operate hospitals, public utilities and other important government services.

Senate Bill 173, which was supported by the Oklahoma Municipal League, the City of Oklahoma City and the Oklahoma Hospital Association, will eliminate outdated competitive bidding requirements for public trusts, and permit them the flexibility cities and counties currently have in obtaining required goods and services needed for day-to-day operation.

Virtually all governmental entities, including public trusts, will continue to be subject to competitive bidding requirements for construction projects.

For years, before acquiring goods or services with a value in excess of $50,000, a public trust has been required to publish a bid notice for two consecutive weeks in a local newspaper and required to award a contract to the lowest and best bidder resulting from that solicitation. This likely made sense when enacted as a way to safeguard government funds. However, in recent years the requirements have hamstrung public trusts and prevented them from accessing favorable contract rates available through purchasing cooperatives. In addition, the specialized equipment needed for the operation of hospitals and other public trust businesses is primarily manufactured by national and international companies not reached by local newspaper publication.

The Central Purchasing Act, which controls purchases by the state and state agencies, was modernized several years ago to make its purchasing requirements more efficient and cost-effective. Senate Bill 173 will have the same effect for Oklahoma public trusts.

The elimination of outdated bidding requirements is a favorable development for public trusts. However, public trusts will continue to have the obligation to use their funds in a reasonable, prudent manner, and to assure that conflicts of interest and favoritism do not find their way into procurement decisions.

Over the next few months, public trusts will need to develop new purchasing policies and procedures that best meet their specific needs. Some may want to look to the policies of their beneficiary city or county. Others may want to consider policies within their specific industry (e.g., healthcare, waste-water treatment, etc.). Carefully crafted policies and procedures will be the key to efficient and cost-effective operational purchases by public trusts.

This article first appeared in The Journal Record on June 21, 2022, and is reproduced with permission from the publisher.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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