De Kamp, 012783 CAAGO, AGO 82-1002

• Case Date: January 27, 1983
• Court: California

JOHN K. VAN DE KAMP Attorney General ANTHONY S. DA VIGO Deputy Attorney General AGO 82-1002 No. 82-1002 California Attorney General Opinion Office of the Attorney General State of California January 27, 1983          THE HONORABLE MICHAEL FRANCHETTI, DIRECTOR OF FINANCE, has requested an opinion on the following question:          Are inpatient hospital services contracts negotiated by the Office of the Special Hospital Negotiator subject to review and approval by the Department of Finance?          CONCLUSION          Inpatient hospital services contracts negotiated by the Office of the Special Hospital Negotiator are not subject to review and approval by the Department of Finance.          ANALYSIS          Prior to its amendment by the Statutes of 1982, chapter 1207, section 2, Government Code section 14780 provided in pertinent part:

"All contracts entered into by any state agency for (a) the hiring or purchase of equipment, supplies, materials, or of textbooks for use in the day and evening elementary schools of the state, (b) services, whether or not the same involve the furnishing or use of equipment, materials or supplies or are performed by an independent contractor, (c) the construction, alteration, improvement, repair or maintenance of property, real or personal, or (d) the performance of work or services by such state agency for or in cooperation with any person, or public body, are of no effect unless and until approved by the Department of General Services. Every such contract shall be transmitted with all papers, estimates, and recommendations concerning it to the department and, if approved by the department, shall be effective from the date of such approval. This section shall apply to any state agency which by general or specific statute is expressly or impliedly authorized to enter into transactions referred to herein." (Emphasis added.)

         Prior to its repeal by the Statutes of 1982, chapter 1207, section 1, Government Code section 14617 provided:

"The Department of Finance may establish such controls over approval of contracts by the Department of General Services as are necessary to assure that such approval is consistent with program and budget determinations of the Department of Finance."

         Among the contracts subject to such review and approval (i.e., prior to the Statutes of 1982 as hereinafter set forth) were the direct service contracts^[1] of the departments within the Health and Welfare Agency. In this regard, Health and Safety Code section 38012 (part of the Health and Welfare Agency - Direct Service Contracts Reform Act, enacted by ch. 990 of Stats. 1980) provided:

"The Department of General Services shall approve as to form and soundness of the contract pursuant to Section 14780 of the Government Code."

         Section 38013 of said code provided:

"The Department of Finance shall approve as to fiscal soundness, statutory or regulatory authority, and adequate management and fiscal controls."

         On June 30, 1982, chapter 328 of the Statutes of 1982 was enacted. In part, section 14082 was added to the Welfare and Institutions Code providing that the Governor shall designate a person in his office to act as a special negotiator to negotiate rates, terms, and conditions for contracts with hospitals for inpatient services to be rendered to Medi-Cal program beneficiaries.2 The Department of Health Services entering into such contracts with hospitals is bound by the rates, terms, and conditions negotiated by the special negotiator. Also provided in section 14087.25 of said code is an expedited contract process, on a nonbid basis, and exempt from the provisions of chapter 6 (commencing with § 14780), part 5.5, division 3, title 2 of the Government Code. The effect of this exemption was to obviate the requirement of contract approval pursuant to that chapter by the Department of General Services.          On September 21, 1982, chapter 1207 of the Statutes of 1982 was enacted and effected, inter alia, the following specific additions and amendments:          Government Code section 14780 was amended to begin with the words, "Except as provided by Article 5 (commencing with Section 14831) . . . ."          Article 5 (commencing with § 14831) was added to chapter 6, part 5.5, division 3, title 2 of the Government Code. Section 14831 provides:

"The provisions of this article shall apply to all contracts entered into by any state agency for services to be rendered to the state, whether or not the same involves the furnishing or use of equipment, materials or supplies or are performed by an independent contractor. Except as provided in Section 14834, all contracts subject to the provisions of this article are of no effect unless and until approved by the Department of General Services.

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