Waste Management in Delray takes a HUGE HIT.
Legal Analysis of Requirement of Competitive Process Prior To Extension of Solid Waste Hauling Contract
The City’s Purchasing Ordinance governs the City’s acquisition of contractual services and requires the City to use a competitive process1 for the acquisition of contractual services “of $15,000 and up,” unless a sole source or emergency exception applies. The Franchise Agreement contractually binds the City to pay WM for Collection Service charges that are far in excess of $15,000. There was no competitive procurement process used in connection with the September 2012 approval of Amendment No. 5, which provided for an 8 year extension of the Franchise Agreement. There were no more remaining renewal options available under the competitively procured Franchise Agreement. The sole source and emergency exemptions did not apply.
The former City Manager stated at the time that he did not believe the Franchise Agreement extension needed to comply with the City’s competitive procurement requirement because the payment relationship of the parties presents a “pass through.” However, the City’s Purchasing Ordinance does not exempt “pass through” expenditures from the City’s competitive procurement requirements. The view that Amendment No. 5 is a “pass through” rather than an expenditure of City funds, and therefore does not require competition, conflicts with the language of the Franchise Agreement, the Purchasing Ordinance, and Florida law on the proper interpretation of city ordinances and competitive bidding laws. The Florida Supreme Court has held that competitive bidding laws should be construed in a manner that avoids their circumvention and in a manner most favorable to the public. Moreover, even if there was an exemption for “pass through” expenditures, in this case the City is required to pay WM regardless of whether the City collects from its residents, and thus it is not a “pass through.”
Accordingly, it is our opinion that the City’s Purchasing Ordinance required Amendment No. 5 to be competitively procured in a manner authorized by the Purchasing Ordinance. The Florida Supreme Court has long held that contracts entered into by local governments in violation of competitive bidding laws are void and no rights can be acquired under them by the contracting party. If the validity of Amendment No.5 comes before the court for a determination, there is a significant chance, based on existing case law, that the court will
declare Amendment No. 5 void.