Untitled Texas Attorney General Opinion ( 1995 )

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DAN MORALES
ATTORNEY
GENERAL May 4,199s
Honorable Bill Sims Opinion No. DM-347
Chair
Committee on Natural Resources Be: Whether, under Education Code
Texas State Senate section 21.901, a school district must
P.O. Box 12068 competitively bid a contract for the
Austin, Texas 7871 l-2068 purchase of imnunnce (RQ-656)
Dear Senator Si:
You have asked whether a school district that chooses to request bids for the
purchase of property insurance must comply with the competitive bidding procedures
Texas law sets forth. You state that a school district has chosen to seek bids for the
purchase of property insurance, although the school district understands that section
21.901 of the Education Code does not require it to do so. You have further informed us
that, as part of the school district’s routine, members of the school board review each bid
and subjectively evaluate which bid would provide the most benefit to the school district.
The school district does not necessarily award the contract to the lowest bidder.
You cite section 21.901 of the Bducation Code, which you understand governs
when a school district must obtain a contract through competitive bidding. Section
21.901 states in pertinent part as follows:
(a) Except as provided in this section, ah contracts proposed to
be made by any Texas public school board for tbe purchase of any
personal property, except produce or vehicle fuel, shall be submitted
to competitive bidding for each 1Zmonth period when said property
is valued at S25,OOOor more, in the aggregate for each 12-month
period.
(b) Except as provided in Subsection (e) of this section, all
contracts proposed to be made by any Texas public school board for
the construction, maintenance, repair or renovation of any building
shall be submitted to competitive bidding when said contracts are
valued at more than Sl5,OOO.. .
(c) Nothing in this section shall apply to fees received for
professional services rendered, including but not limited to
architect[‘]s fees, attorney’s fees, and fees for fiscal agents.
Honorable Bill Sims - Page 2 @M-347)
(d) providing that school board noti* public of time when and
place where “such contracts” will be let and bids opened]
(e) lproviding for replacement or repair of school building or
school equipment in certain emergency situations]
(t) ~ovidmg for purchase of computers and computer-related
eq~p-4
(g) [providing for purchase of item available tkom only one
SOIUW]
Q [Providing for lease of one or more school buses]
Your question is premised upon an assumption that, under section 21.901 of the
Education Code, a school board need not competitively bid a contract for the purchase of
insurance. Indeed, this office concluded in Attorney General Opiion h4W-342 that
section 21.901 of the Education Code does not require a public school district to
competitiveiy bid a contract for the purchase of insurance.. Attorney General Opiion
MY-342 (1981) at 3. We now wish to m-examine that decision.
Attorney General Opinion MW-342 specifically considered subsections (a) and (c)
of Education Code section 21.901. In particular, Attorney General Opinion MW-342
focused on whether the purchase of insurance was the purchase of personal property, and
therefore governed by subsection (a), or the purchase of professional services, and
therefore governed by subsection (c).
If “insurance*’involved nothing more than the insurance policy
which is finally negotiated, we would conclude that the purchase of
insurance involved the purchase of property. [Citations omitted.] It
is clear, however, that insurers do much more than write policies. A
purchaser of property insurance, for example, will be vitally
interested in such things as the professionalism exhibited by the
insurer, the frequency and thoroughness with which he inspects the
insured property, and ,the promptness, eflkiency and honesty with
which he set-&es claims and provides assistance. An insurer’s ability
to provide certain services in a wmpetent manner, in other words, is
a dominant, if not the primary, consideration in any purchase of
insurance. .
[T]he purchase of insurance cannot be neatly characterized as
the purchase of either “personal property” or “professional service,”
within the meaning of section 21.901; to some extent, both
categories are involved. Section 21.901 does not, however, indicate
whether a purchase involving both property and services must be
made on the basis of competitive bids. But in our opinion, the
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Honorable Bi Sims - Page 3 @M-347)
weight of authority compels us to conclude that, at least where
insurance is involved, such a purchase need not be so made.
We therefore conclude that a wntract for the purchase of
insurance would most accurately be described as one for tbe
purchase of services, and themfore, that it need not be awarded
through the competitive bidding process. . . .
Attorney General Opinion MW-342 (1981) at 2-3.
In an opinion issued the day after this office issued Attorney General Opiion
MW-342, this office considered the parameters of the term “professional services” in the
context of V.T.C.S. article 2368a, now Locsl Government Code section 252.021.*
Article 2368a governed the competitive bidding and competitive proposal processes of
counties and cities of this state.
According to Attorney General Opinion MW-344, a professional service is one
requiring “‘predominantiy mental or intellectual, rather than physical or manual,“’ skills.
Attorney General Opiion MW-344 (1981) at 4 (quoting Mqkmd Gasua&y Co. v. Crq
BGrfer Co., 160 S.W.2d 102, 105 (Tex. Civ. App.-Eastland 1942, no writ)). Further-
more, a “professional” works in a profession that “‘requires years of education and service
for one to attain competence and [that] calls for a high order of intelligence, skill and
leaming.“’ Id. (quoting Tranrpwration Disp.@, Inc. v. City of New Orleans, 346 So. 2d
359,363 n.5 (La. Ct. App. 1977)).
Finally, the opinion discussed “[t]he most useful standard for judging the scope of
‘profession’” from W&ii v. Drriley, 230 S.E.Zd 466 (W. Va. 1976). Id. at 5. The
Woo&J1 wurt concluded that the services of an interior decorator were not professional
services. The WooddeN court did not, however, limit the term “professional services” to
the professions of theology, law, or medicine, nor to professions specifically recognized as
such by statute. Id. (citing Woo&Tell, 230 S.E.Zd at 469-70). Rather, while “‘most
occupations, trades, business or callings require a diversity of knowledge and skill,“’ not
all such occupations, trades, business or callings could be called “professions.” Id.
(quoting WooaiM, 230 S.E.Zd at 470). A professional is only one who “‘is a member of
[a] discipline with widely accepted standards of required study or specified attainments in
%omey Genaal opiion Mw-344 (1981) alnsidcmdwbahs the boardef tNstces of the
GalvcstonWharvcswasrequindtocomptitivclybidrcontractforthcpavicadacontaiarrtcrminal
operator.Article2368a.section2(a), V.T.C.S.,requiredIIcomnyto wmpctitivtlybid cettainwn~mcts;
however, subsedoo @) precludeda political&division from competitively biddingB m&act “for
persooalor pmkssiolvil service&”Acwdingiy, if the amtract for Ihe service8of a containertmminai
operatorwas a am-act for personalor professional
serviceswithinthe conlex~of article2368a,sution
2(a), lbc hod of husteeswas forbiddento compeiitivdybid it. AltomeyGeneralOpinionMW-344
emminedthemeaningsascribedto theterms“personal scrvicxs”andUpmfssionalscrviccs”to determh
wktber thecatmct at iswc fell withinthescopeof&her CategoIy.
p. 1847
Honorable Bill Sims - Page 4 @M-347)
special knowledge as distinguished from mere ~kill.‘“~ Id. (quoting Woou&ll, 230 S.E.2d
at 470).
Subsequently, this office issued Attorney General Opiion MW-494 (1982), which
concluded that a county must competitively bid a wntract for the purchase of insurance
under V.T.C.S. article 2368a, section 2. The opinion distinguished article 2368a, section
2 from section 21.901 of the Education Code and therefore was not bound by the
conclusion in Attorney General Opiion MW-342. Notably, according to nomey
Oeneral Opinion MW494, section 21.901 specifically set out two categories of wntracts
a public school board must competitively bid: subsection (a) pert&s to wntracts for the
purchase of personal property, and subsection (b) pertahu to wntracts for the
wnstruction, maintenance. repair, or renovation of a building or for the purchase of
materials to use in such a project. Attorney General Opinion MW-494 (1982) at 3. These
two categories do not “cover every type of contract a school district might enter. .”
Id. A school district need not competitively bid wntracts outside of the two categories
listed in Education Code section 21901(a) and (b).s Id.
By wntrast, V.T.C.S. article 2368a. section 2(a) prohibited a county or city from
making any contract requiring an expenditure in an amount exceeding S5,OOO.oOunless
the county or city had competitively bid the contract. See id. at 2. Section 2(b) created an
exception to the wmpetitive bidding requirement for, among other things, “contracts for
personal or professional services.” Id, This office thus declined to apply its conclusion in
Attorney General Opinion MW-342 to the situation before it in Attorney General Opinion
MW-494. See id. at 3.
%ased on the standad it set forth,AttorneyGanual OpinionW-344 concludedthat a
containertermimIoperatoris not a memberof a rccognizd profession. AttorneyGeneralOpinion
AN-344 (1981) at 5. Accordingly,the CiahestonWharvesboard of mtstczs was requiredto
of a containerterminalopnator.Id.
umpetitivdybida contractforthe scr%iccs
3Attomy GeneraIOpiion MW-494summaid the reasoningand conclusionof Attorney
GeneralOpiion MW-342as follows:
AttorneyGeneralOpinionh4W-342statedthat an insmmceamtmetdid
not fit sqoady into the categoryof ‘paaonal property”
or the exemptionfor
“pmfcssi0nalscrvices~undcrsccti0n21.901 oftheEducationCo&Theservices
pmvidcdunderitwnchignificantenoughmrrmovcthccontractfromthc
categoryof “personalpropetty,”
eventhoughtheydid notconstitute“professional
smkxs.” U&t section21.901 it is lJtmamytoshowtbataniasulaoce
amtmct is a wnhact for “professionalservices”to mnovc it from the
competitivebiddingrequirement.It is only nuxssmy to show that it QuLnot
fairhlkcharanerizcdasawntractforthcpurchascdpersonalpropcrty. The
disco&on in Attorney General Opinion MW-342of the service aspect of an
inwmoce umtmet mostlx mad with section21.901in mind.
AttorneyGeneralOpinionMW-494(1982)at 3.
Honorable Bill Sims - Page 5 @M-347)
Instead, the drag applied the standards Attorney General Opinion MW-344
assigned to the term “personal and professional services” to determine whether a contract
for the purchase of insurance was a personal or professional service under V.T.C.S. article
2368a, section 2. Attorney Generai Opinion MW-494 (1982) at 3-4. The opinion Ihst
found that such a wntract was not for personal services. Id. at 4. Second, the opinion
found that such a wntract was not for professional services because the provision of
insurance coverage does not entail a “body of special knowledge attributable to a
profession, the years of study necessq to attain wmpetence, and the wide recognition of
the profession and its standards of study.” Id.
We believe the analyses and conclusions reached in Attorney General Opinions
MW-344 and MW-494 are wrrect; on the other hand to the extent Attorney General
Opinion MW-342 is inwnsistent with these opinions by concluding that, under section
21.901 of the Education Code, a contract for the purchase of insurance “would most
accurately be descrii as one for the purchase of’ professional services, we believe the
opinion is incorrect. Accordingly, we hereby overrule Attorney Generai Opinion MW-342
to the extent it concludes that a contract for the purchase of insurance under Education
Code section 21.901 is a contract for professional services that section 21.901 excepts
from the competitive bidding process.
Furthermore, to the extent Attorney Generai Opinion MW-342 concludes that a
wntract for the purchase of insurance is not a contract for the purchase of personal
property subject to competitive bidding under Education Code section 21901(a), we
overrule it. Likewise, to the extent Attorney Generai Opinion Attorney Generai Opiion
MW-494 suggests a contract for the purchase of insurance is not personal property for
purposes of section 21.901 of the Education Code, we overrule it. “Personal property”
generally is “all property other than real estate,” BLACK’SLAWDKTIONARY10% (5th ed.
1979); it includes “goods, chattels, money, notes, bonds, stocks and chases in action
generally, including intangible property,” id. (citing Bismarck Tribune Co. v. OmahhI, 147
N.W.Zd 903, 906 @I.D. 1966)). An insurance policy wnstitutes a contract between the
insurer and insured, International Travelers’Ass ‘n v. Gunther, 269 S.W. 507, 508 (Tex.
Civ. App.--San Antonio 1925), rev’d on other puna& 280 S.W. 172 (Tex. Comm’n
App. 1926, judgm’t adopted). The Texas Supreme Court has concluded that the right to
receive insurance proceeds payable in the future is “property.” See Brown v. Lee, 371
S.W.2d 694, 696 (Tex. 1963). Siilarly, a wurt of civil appeals has concluded that a
spouse’s disability insurance policy is a property right belonging to the community estate.
Mathews v. Mathews, 414 S.W.Zd 703, 707 (Tex Civ. App.-Austin 1967, no writ).
In sum, we conclude a contract for the purchase of insurance is a contract that
section 21.901 of the Education Code requires a school board to competitively bid if the
value of the contract is 825,000 or more for a twelve-month period. We do not, by this
.’ conclusion, discount our suggestion in Attorney Generai Opinion MW-342 that a
wnscientious wnsumer purchases an insurance policy on the basis of an insurer’s
professionalism and the promptness, etliciency, and honesty with which the insurer
services claims, as well as on the basis of price. See Attorney General Opinion MW-342
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Honorable Bill Sims - Page 6 @M-347)
(1981) at 2. We believe that a school board properly may consider these factors in the
process of competitive bidding, however. Nothing in Education Code section 21.901 re-
quires a school board to accept the lowest bid submitted. Timothy T. Cooper &
Janet L. Horton, Competitive Bid Requirements forSchool District Contract%, 46 TEX.
B.J. 1154, 1154 (1983). Furthermore., we are unaware of any other statute that requires a
school hoard to select the lowest bid submitted in response to a request for bids on the
purh of insurance or any other personal property. See Local Gov’t Code 5 271.005;
see ulro id. 53 271.004. .021 - .030 (providing for wntracts for purchase of real property
and for public improvements).
Rather, the school board only must “act faithgtlly and in the exercise of [its
members’] best judgment so as to best serve the interest of [its] district.” See Teurs
Roofing Co. v. Whiteside, 385 S.W.Zd 699, 702 (Tex. Civ. App.-Amsriho 1964, writ
ref d n.r.e.); Skzpleton v. Trwsell, 196 S.W. 269, 270 (Tar. Civ. App.-Fort Worth 1917,
no writ); see also Cooper & Horton, supru, at 1154. Generally, in wmpetitive bidding
situations, a governmental body may reject the lowest bid “‘if in the exercise of an honest
discretion, another seems to be better for the object to be accomplished.” Cooper &
Horton, supro, at 1154 (quoting EUGENE MCQUILLIN, THE LAW OF M~NICPAL
CoRpoRAToNs 4 29.734 at 429-30 (1971)).
In relation to the procedures a school board must use when competitively bidding
a wntract under section ,21.901(a), we note that, with the exception of the notice
requirements provided in subsection (d), section 21.901 articulates no mandatory
procedures a school district must follow in the competitive bidding process, See &o id.
Section 271.005 of the Local Government Code authorizes the board of trustees of a
school district to contract for the use or purchase of personal property, but it does not set
forth any mandates with which a board must comply. other sections of the Local
Government Code articulate competitive bidding requirements to which a governmental
body must comply in certain situations, but the sections are inapplicable to a contract for
the purchase of insurance. See Local Gov’t Code $8 271.004, ,021 - .030 (per&ring to
contract for use or purchase of real property or improvement to real property and to
contract for wnstruction, repair, or renovation of structure, road, highway, or other
improvement or addition to real property requiring expenditure of more than SlO,OOO).
Instead, we believe the school board may devise its own bidding procedure, so long as the
procedure is wnsistent with good business management. See Educ. Code 5 23.26(b)
(providing board of trustees with exclusive power to manage and govern district’s
schools); Punen v. Con&o Connv, 196 S.W.Zd 833, 835 (Tex. Civ. App.-Austin 1946,
no writ); see also Texas Roofing Co., 385 S.W.Zd at 702; Stqleton, 1% S.W. at 270; cJ
Attorney General Opinion DM-14 (1991) at 3 (concluding that federal law requires local
school board to competitively bid contracts for purchase of food service management
services because “[i]n the absence of applicable state regulations, the selection of specifk
procedures is within the sound discretion of local school boards”).
of course, if a contract is valued at less than S25,OOOfor a twelve-month period,
Education Code section 21.901 does not require a school board to competitively bid it. In
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HonorableBill Sims - Page 7 @M-347)
such a situation, a school board may opt to competitively bid the contract if the board
determines that good business management requires it. See Paten, 196 S.W.2d at 835;
see also Texas Roofing Co., 385 S.W.2d at 701; S&pIelon, 196 S.W. at 270; Attorney
General Opinion DM-106 (1992) at 2 (stating that, even if municipality determines that
auctioneering services are professional se.rvices and that municipality therefore need not
competitively bid contract for purchase. of such services, municipality may choose to
competitively bid contract). If the board opts to competitively bid a contract, the board
must devise a wmmitive bidding procedure that is consistent with good business
management. Be Educ. Code 8 23.26@) (providing board of trust= with exclusive
power to manage and govern district’s schools); PuUen, 196 S.W.Zd at 835; see also
Texas Roofing Co., 385 S.W.Zd at 702; Shplebn, 196 S.W. at 270; cf. Attorney General
OpiionDM-14 (1991) at 3.
To specitically answer your question, then, a school board may not choose
whether to competitively bid a contract for the purchase of insurance if the value of the
contract is S25,OOOor more for a twelve-month period, rather, under section 21.901(a) of
tbe Education Code, a school board must wmpetitively bid such a wntract. You do not
indicate the value of the wntact about which you ask, we cannot, therefore, determine
whether the school board must have competitively bid the contract. If the contract was
vahted at S25,OOOor more for a twelve-month period, the school board must comply with
the notice requirements articulated in section 21.901(d) of the Education Code. AB to the
remaining competitive bidding procedures, the school board must select a procedure that
is consistent with good business management. If the contract is valued at less than
S25,OOOfor a twelve-month period, the school board may competitively bid the project if
tbe board determines that good business management requires it. In such a situation, the
board must devise a competitive bidding procedure that is wnsistent with good business
management.
SUMMARY
To the extent Attorney General opinion MW-342 (1981) wn-
eludes that a contract for the purchase of insurance under Education
Code section 21.901 is a wntract for professional services that
section 21.901(c) excepts from the competitive bidding process, it is
overruled. Furthermore, to the extent Attorney General Opinion
MW-342 concludes that a contract for the purchase of insurance is
not a contract for the purchase of personal property subject to
wmpaitive bidding under Education Code section 21.901(a), it is
overruled. Likewise, to the extent Attorney General Opinion
Attorney General Opinion MW-494 (1982) suggests that a contract
for the purchase of insurance is not personal property for purposes of
section 21.901(a) of the Education Code, we overrule it.
Under section 21.901(a) of the Education Code, a school board
must wmpetitively bid a contract for the purchase of insurance if the
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Honorable Bill Sims - Page 8 @M-347)
contract is valued at S25.000 or more for a twelve-month period. In
evaluating which bid to accept, the school board may consider
factors other than cost, such as the insurer’s professionalism and the
promptness, e&iency, and honesty with which the insurer services
Claims.
When a school board must competitively bid a contract under
section 21:901(a), it must comply with tbe notice requirements set
out in subsection (d). The school board must devise the remainder of
the competitive bidding procedure wnsistent with good business
management. In the event a school board need not competitively bid
a contract for the purchase of insumnw because the wntract is
valued at less than S25,000 for a twelve-month period, the school
board may choose to competitively bid the wntract if the board
determines that good business management requires it. The school
board must devise a competitive bidding procedure that is consistent
with good business management.
DAN MORALES
Attorney General of Texas
JORGE VEGA
First Assistant Attorney General
SARAH J. SHIRLEY
Chair, Opiion Committee
Prepared by Kymberly K. Oltrogge
Assistant Attorney General
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