By the Kean Miller Construction Law Team

One of the Executive Orders enacted by Governor Kathleen Blanco in response to the disaster arising out of Hurricane Katrina and the flooding caused by the breaches of the levees around New Orleans is Executive Order KBB 2005-27. This Executive Order is captioned “Emergency Procedures for Conducting State Business”.

Section 1 of Executive Order KBB 2005-27 authorizes state government officials and agency heads to purchase goods and services, necessary “to satisfy this situation caused by this emergency” without strict compliance with Louisiana Revised Statute 39:1490, et seq, which provides for procurement of professional, personal, consulting, and social services procurement by the State, and Louisiana Revised Statute 39:1551, et seq, the Procurement Code. Thus, to be applicable, the purchase must be (1) by a Lousiana Cabinet member, statewide elected official, or a state agency head; (2) must be for the purchase of goods or services; and (3) the purchase must be necessary to satisfy an emergency condition caused by Hurricane Katrina. In such event, the state official is to use his or her best judgment in the purchase of the goods or services, and shall maintain, to greatest extent practicable, documentation regarding the purchase and the emergency related reasons for the purchase.

While the Executive Order does not offer any guidance as to what types of purchases will be deemed as necessitated by the emergency, the emergency provisions contained in the Public Bid Law and the jurisprudence and attorney general opinions interpreting that law should provide some guidance.

It is important to note many types of purchases are already exempted from the Procurement Code and the law on procurement of services by the State because they are governed by other procurement guidelines. In those cases, the relief from strict compliance in this Executive Order may not apply by extension to those other requirements.

So, the scope of the order is necessarily limited to state actors (but may not include dealings with the Department of Transportation and Development, which are governed by Tile 48 of the Revised Statutes), and does not purport to modify purchasing requirements applicable to other political subdivisions including parishes and municipalities. The order also only applies to purchases necessary to satisfy an emergency condition caused by the storm. In other words, this Executive Order does not provide for a temporary tolling of the requirements of the Procurement Code or the law applicable to the State’s procurement of services for non-emergency acquisitions.

Remembering that the Procurement Code and the applicable law on procurement of services by the State are prohibitory laws designed to protect the public fisc and given the magnitude of the disaster and the monies to be spent meeting the emergency and rebuilding, it would not be a surprise to see some abuse of the public fisc. Also remembering that challenges to procurement of services or goods by the State are not limited to those with a direct fiscal interest, but rather, may be brought by any interested person, there may be a slew of litigation by taxpayers (or disappointed vendors) challenging the propriety of purchases under the auspices of this Executive Order.

Such a challenge, whether by a disappointed vendor, a citizens rights group, or otherwise, could be a costly proposition for the vendor who does business with the State under this Executive Order. Every case will have a cost of attorney’s fees and the cost to the business of weathering the drain on productivity caused by all litigation. Additionally, in the event that the challenge is successful, the contract may be deemed null void ab initio. If that happens, the vendor may have to return any money already paid under the contract and forfeit any money owed under the contract, without the ability to reclaim the goods or services sold. If the vendor was in “good faith” it may be entitled to retain or be paid on a quantum meruit basis, meaning it will recover its actual costs, which will not include profit, overhead, attorney’s fees, compensation for lost other business, etc . . . .

While the vendor has the most financial risk in the event of a suit challenging the contract, it is the public employee’s acts and discretion which will be at issue in the suit. In other words, the vendor must largely rely on the determination by the State that the emergency required the purchase at issue, must also trust that the State is doing its best to maintain sufficient records justifying the purchase on an emergency basis.

So, while doing business under the terms of this Executive Order may provide some opportunities for business and more importantly may provide an avenue for a vendor or provider of services to be of assistance in helping the State and its citizens rebuild, it also poses some significant risks. We encourage potential vendors to consider the contractual provisions proposed by the State and require an agreement from the State providing protection from these risks, where possible. Moreover, the vendor will want to take the extra step of ensuring that the State’s justifications for proceeding under the terms of this Executive Order are sound and well documented.

Read the order here: