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Hicks v. Central Point School District

Court of Appeals of Oregon

April 22, 2015

Stephanie HICKS, Plaintiff-Appellant,
v.
CENTRAL POINT SCHOOL DISTRICT, an Oregon school district; and First Student, Inc., a Delaware corporation, Defendants-Respondents

Argued and Submitted November 21, 2013.

Page 308

113521E9. Jackson County Circuit Court. Ronald D. Grensky, Judge.

Sarah K. Drescher argued the cause for appellant. With her on the briefs was Tedesco Law Group.

Barrett C. Mersereau and Paul H. Trinchero argued the cause for respondents. On the joint answering brief were Thomas W. McPherson and Mersereau Shannon, LLP, and John M. Junkin, Paul H. Trinchero and Garvey Schubert Barer. With them on the joint reply brief was Barrett C. Mersereau.

Before Duncan, Presiding Judge, and Lagesen, Judge, and Schuman, Senior Judge.[*]

OPINION

Page 309

[270 Or.App. 534] LAGESEN, J.

Concerned that government jobs were being out-sourced to private contractors under circumstances that either drove up costs for taxpayers or, alternatively, saved money for taxpayers solely by sacrificing family-wage jobs, the Oregon Legislature amended the Public Contracting Code (the code)[1] in 2009 to address that concern. 2009 Or. Laws, ch 880. As amended, the code requires (with some exceptions) that a public body considering entering into a service contract over $250,000 conduct a detailed cost-benefit analysis before making the decision to contract out government services. If that required cost-benefit analysis reveals that outsourcing the services at issue will be more expensive than providing them in-house with public employees, or shows that any cost savings will exist solely from the fact that a private contractor likely will pay its employees lower wages and benefits than those that would be paid to public employees, then the public body cannot outsource the services. See generally ORS 279B.030; ORS 279B.033.

This appeal requires us to assess how, if at all, the Central Point School District's (the district) cost analysis pertaining to the provision of student transportation services, and its related determination that that cost analysis authorized it to contract out with First Student for the provision of student transportation services, are subject to judicial review and, if they are reviewable, whether the district's cost analysis complied with statutory requirements. We conclude that the district's cost analysis, and its determination that that analysis permitted procurement, are subject to review in this action for declaratory relief, under the standard of review established by ORS 279B.145. We further conclude that the district's cost analysis did not comply with the requirements of the code, specifically, the requirements of ORS 279.033. Those conclusions require us to reverse and remand to the trial court for further proceedings consistent with this opinion.

[270 Or.App. 535] I. REGULATORY, FACTUAL, AND PROCEDURAL BACKGROUND

Before 2009, a public body considering contracting out for the provision of government services was permitted to initiate the procurement[2] process without conducting any

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sort of cost-benefit analysis; such an analysis was not required by statute. As a result of the 2009 amendments to the code, see generally 2009 Oregon Laws, chapter 880, a public body considering conducting a procurement for services estimated to cost more than $250,000 now must conduct a more rigorous analysis before initiating the procurement process. With exceptions not applicable here, an agency considering contracting out for services must demonstrate either that it is not feasible for the contracting agency[3] to provide those services with its own personnel and resources or, alternatively, that it will cost less to procure the services from a private contractor than it will for the government to provide those services with its own personnel. ORS 279B.030 states, in relevant part:

" (1) Except as provided in ORS 279B.036, before conducting a procurement for services with an estimated contract price that exceeds $250,000, a contracting agency shall:
" (a) Demonstrate, by means of a written cost analysis in accordance with ORS 279B.033, that the contracting agency would incur less cost in conducting the procurement than in performing the services with the contracting agency's own personnel and resources; or
" (b) Demonstrate, in accordance with ORS 279B.036, that performing the services with the contracting agency's own personnel and resources is not feasible."

ORS 279B.030(1).

[270 Or.App. 536] ORS 279B.033, in turn, details what information must be contained in the mandatory cost analysis, and explains how that cost analysis governs the contracting agency's authority to pursue procurement. See generally ORS 279B.033. After setting forth the required contents of the cost analysis, the statute explains that, subject to an exception for time-sensitive work, a contracting agency may proceed with the procurement process only if the cost analysis demonstrates that it would be more expensive for the government to perform the services in question with its own staff and resources. Id. Further, even if the cost analysis indicates that it would be more expensive for the contracting agency to perform the services in question with its own staff and resources, procurement is nonetheless prohibited if the estimate reflects that the only reason for any cost savings stems from the fact that a private contractor's costs for wages, salary, and benefits are estimated to be lower than the contracting agency's costs for wages, salary, and benefits in connection with the services at issue.[4] Id. Although the statute does not require a contracting agency to seek public input or conduct any sort of public process when preparing the cost analysis required by ORS 279B.033, and determining whether procurement is authorized in the light of the cost analyses, the statute specifies that the cost analysis and related determinations must be maintained as public records: " A cost analysis, record, documentation or determination made under this section is a public record." ORS 279B.033(3). Pursuant to ORS 279B.145, a contracting agency's cost analysis under ORS 279B.033, and its related determination as to whether the cost analysis

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allows for procurement, are " final and conclusive unless they are clearly [270 Or.App. 537] erroneous, arbitrary, capricious or contrary to law." ORS 279B.145.

The district is a public body governed by the code and, in particular, by the requirements of ORS 279B.030 and ORS 279B.033. Based on concerns that its bus fleet was aging and would soon need to be replaced, the district decided to explore the option of contracting its transportation services to a private company. The district asked Robinson, its director of business services, to complete a cost analysis, which she prepared and presented to the district's board of directors at its public meeting in March 2011. In preparing her cost estimate, Robinson did not obtain any information from which to estimate salary or wage and benefit costs for contractors involved in performing student transportation services; instead, Robinson chose to assume that a private contractor would have the same wage, salary, and benefit costs as the district.

At the March meeting of the district's board of directors, the board approved Robinson's cost analysis and directed the issuance of a request for proposals (RFP) for student transportation services. Then, in May 2011, after receiving defendant First Student's RFP, the district hired Fairchild, a transportation consultant, to provide a supplemental cost analysis in light of First Student's RFP. In his supplemental cost estimate, Fairchild, like Robinson, assumed that a contractor's wage or salary and benefit costs would be the same as the district's, and did not collect information from which to estimate those costs. A subcommittee of the board studied the First Student RFP and the Robinson and Fairchild cost analyses and recommended acceptance of First Student's RFP. After a hearing on June 14, 2011, the board declared its intention to contract with First Student. The district subsequently executed a service contract with First Student. Approximately one week later, the district laid off its student transportation employees, including plaintiff, who had been employed as a bus driver for the district.

Within a few weeks of receiving notice that she was being laid off, plaintiff initiated this action for declaratory and injunctive relief under ORS 28.010 to 28.160. [270 Or.App. 538] She alleged that the district had entered into the contract with First Student " unlawfully, in violation of ORS 279B.030(1)(a)[.]" Plaintiff's theory was that the contract between the district and First Student was unauthorized--and, thus, " void" --because, in plaintiff's view, the cost analyses conducted by the district did not comply with the requirements of ORS 279B.033. As a remedy for the alleged illegality in contracting procedure, plaintiff requested (1) a declaration that the district " violated ORS 279B.030(1)(a) by failing to conduct a cost analysis in accordance with ORS 279B.033 before conducting a procurement for transportation services" ; (2) a declaration that the contract between the district and First Student is " void" ; (3) an injunction barring defendants from implementing the contract; (4) an order compelling the district to reinstate her to her job, and to pay her any lost wages and benefits; and (5) any other " just and equitable" relief.

Plaintiff thereafter moved for partial summary judgment solely on the issue of whether the district's cost analysis satisfied the requirements of ORS 279B.033.[5] The district filed a cross-motion for summary judgment on the same point, arguing that the undisputed facts demonstrated that its cost analysis complied with ORS 279.033, completely defeating plaintiff's claim.[6] On its

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own, the court addressed the threshold jurisdictional issue of whether plaintiff should have brought the case as a writ of review under ORS 34.010, rather than as declaratory judgment action. The court concluded that plaintiff properly brought the action as a declaratory a judgment action. The court then concluded that the district's cost analysis complied with ORS 279B.033, and [270 Or.App. 539] that, consequently, the district permissibly proceeded with the procurement that led to the contract ...


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