North Carolina Memorial Hospital; State Contractual Service Contracts

Subject:

Requested By: Dennis R. Berry General Director North Carolina Memorial Hospital

Question: Does G.S. 143-49(3), as amended by Chapter 733 of the 1977 Session Laws, apply to State contractual service contracts entered into between two State agencies?

Conclusion: No.

G.S. 143-49(3) authorizes the Secretary of Administration to purchase or contract for all contractual services and needs of State government, or any of its departments, institutions or agencies or to authorize any department, institution or agency to purchase or contract for such services. This provision was amended by Chapter 733 of the 1977 Session Laws to provide that when the award of any contract for contractual services exceeding the cost of $100,000 requires negotiation with prospective contractors, the Secretary of Administration shall request and the Attorney General’s Office shall furnish a representative of the Attorney General’s Office to assist in negotiations for the award of the contract. It is the duty of such representative to assist and advise in obtaining the most favorable contract for the State and to advise the Secretary or his representative of the liabilities of the State and validity of the contract to be award.

The North Carolina Memorial Hospital has requested the opinion of this Office as to whether this statute, as amended, applies to contracts for contractual services entered into between State Departments, institutions or agencies as distinguished from contracts between the State and non-governmental entities. We are of the opinion that the statute does not apply to such inter-agency contracts.

The term "contractual services" as used in G.S. 143-49(3) means "work performed by and independent contractor requiring specialized knowledge, experience, expertise or similar capabilities wherein the service rendered does not consist primarily of acquisition by this State of equipment or materials and the rental of equipment, materials and supplies".

There is nothing in G.S. 143-49(3), as amended, to suggest that the Legislature intended its provisions to apply to contracts between State agencies. The primary objective of the statute is to insure that the State will obtain the contract most favorable to it. There would be no obstacle to obtaining this objective in a situation where the State is dealing with itself.

The administrative procedure rules adopted by the Department of Administration with regard to contracts for contractual services also support the position that this statute does not apply to contracts between State agencies. Under these rules the definition of "contractual services" is identical to the one contained in G.S. 143-49(3) as amended. Services performed by State agencies or their employees, when performed as part of their normal governmental functions, are specifically exempted from the contracting procedures prescribed by these rules. 1 NCAC 5D.0302(8).

Thus, we are of the opinion that G.S. 143-49(3), as amended, does not apply to contracts between State agencies as opposed to contracts between the State and nongovernmental entities.

Rufus L. Edmisten Attorney General

Roy A. Giles, Jr. Assistant Attorney General