CALNET and CMAS Contracts

To: Schools Legal Service Clients
From: Stephen L. Hartsell
Re: Acquiring Information Technology Goods And Services Through CALNET and CMAS

In letters dated November 21, 2000, and December 15, 2000, we advised that a school district or county superintendent may enter into a Department of General Services’ CALNET Integrated Services contract without going through further competitive bidding. They may also utilize the State Department of General Services’ (“DGS”) “California Multiple Award Schedule” (“CMAS”) to acquire information technology, goods and services without going through further competitive bidding.

In those letters, we also advised that a CALNET or CMAS contract could include “some incidental work or service,” so long as the cost of public works (and, in the case of CALNET contracts, any on-site assembly and installation of equipment and materials) does not exceed 10 percent of that contract’s price unless the contract has been competitively bid (or the contract is otherwise exempt from those bidding requirements).

Since sending those letters, we have had extensive conversations with a number of state officials, school attorneys, and clients regarding the letters and the subject of purchasing though CALNET and CMAS generally. As a result of those conversations and additional research, we have developed the following additional advice regarding the inclusion of “some incidental work or service” in CALNET or CMAS contracts. Our conversations with DGS officials indicate that whatever its own practice is in this regard, DGS does not intend to impose that practice on local agencies utilizing DGS contracts. Based on this, and Steelgard, Inc. v. Jannsen, (1985) 171 Cal.App.3d 79, which was discussed in our first two letters, we now provide the following advice.

Where the value of “incidental work or service” exceeds 10 percent, the district should consult with legal counsel to determine if, under the circumstances, such work or service may be included with either a CALNET or CMAS contract.

There are also other issues and concerns not raised in our earlier letters which our clients need to be aware of regarding CMAS contracts:

1. As reflected in Konica Business Machines U.S.A., Inc. v. Regents of University of California (1988) 206 Cal. App. 449 the courts closely scrutinize the letting of public contracts and those that contracts awarded without strict compliance with legal requirements will be set aside (i.e., voided.) As stated in Konica, “[t]his preventative approach is applied even where it is certain that there was in fact no corruption or adverse effect on the bidding process, and the deviations would save money.” Konica makes it clear that exceptions to bidding requirements–such as letting districts utilize CALNET and CMAS contracts will also be subject to close judicial scrutiny and can only be entered into in strict compliance with applicable law.

2. This means that in order to take advantage of CMAS, districts must actually enter into a “complete” CMAS contract. In addition, they can only buy the products and services identified on that particular CMAS contract unless the contract includes a “Not Specifically Priced” (“NSP”) provision. Even then, the value of such NSP items cannot exceed the limit set in the CMAS contract unless expressly approved by DGS. For example, see the DGS’ web pages at the following locations:

3. As indicated in 1 above, failure to comply with all of the requirements imposed on CMAS contracting could result in the contract being voided by a court if challenged. Such challenges could come from other CMAS suppliers or from local non CMAS suppliers who were not even given a chance to bid on the contract. In addition, challenges could come from taxpayers, especially if the cost of the CMAS contract is higher than might have been obtained if the district had awarded the contract through a competitive process. (We note in this regard that there is never any guarantee that the price through CMAS is the lowest price available.) Aside from judicial challenges, failure to fully comply with CMAS requirements could result in County Offices declining to issue a warrant to pay the CMAS supplier or audit exceptions.

From our conversations with various governmental officials in the last few months, we have the impression that at least some school districts may have been informed or otherwise believe that strict compliance with CMAS requirements is neither a legal mandated nor common practice, at least with respect to “E-Rate” projects or purchases. Federal regulations governing “E-Rate” do specify certain requirements for such projects or purchases, but the “federal” requirements are in addition to and not instead of state requirements. Moreover, even if there were a widespread non-compliance with the strict requirements of CALNET or CMAS acquisitions, this fact would be of no avail in any judicial challenge of any individual acquisition. As made clear by the California Supreme Court in 1894 (and reflected in the Konica case discussed above):

“It is said that what was done here has been frequently done by boards of supervisors in other counties. We are not disposed to question this assertion, nor the perfect good faith of the board in this instance. Many acts done by boards and officers in the supposed discharge of their duty and in the best of faith do not find sanction in the law, and for a time pass current because unchallenged; but that fact cannot weigh in favor of their validity when eventually called into question. The action of the board, being without authority, was void, and created no legal claim against the county. "It is settled in this state that no order made by a board of supervisors is valid or binding unless it is authorized by law. No claim against a county can be allowed, unless it be legally chargeable to the county; and if claims not legally chargeable to the county are allowed, neither the allowance nor the warrants drawn therefor create any legal liability (citation omitted).” Modoc County v. Spencer, et al, 103 Cal. 498, 37 P. 483 at 502.

Any district considering the use of CALNET or CMAS in lieu of the normal competitive process for acquiring information technology (or other items), should thoroughly review the information provided by DGS and determine whether the district’s need can actually be met that way. This review and determination should be done earlier rather than later to ensure that if the CALNET or CMAS processes cannot meet the district’s needs, the district will have sufficient time to meet the requirements of the normal competitive bidding process.

If you have any questions regarding this letter, or if we can be of any further assistance in this area, please feel free to contact Steve Hartsell at 661/636-4830.