Untitled Texas Attorney General Opinion ( 2002 )

OFFICE OF THE ATTORNEY GENER,~L . STATE OF TEXAS
JOHN CORNYN
June 28,2002
The Honorable Michael A. Stafford Opinion No. JC-052 1
Harris County Attorney
1019 Congress, 15th Floor Re: Whether a county may require prospective
Houston, Texas 77002-l 700 contractors to submit affidavits disclosing their
business relationships with officers and employees of
the county and county entities (RQ-049 1-JC)
Dear Mr. Stafford:
You ask whether a county may require prospective contractors to submit affidavits disclosing
their business relationships with officers and employees of the county and county entities. We
conclude that the County Purchasing Act and the Professional Services Procurement Act authorize
a county to impose this condition on prospective contractors.
You explain that the Harris County Commissioners Court is considering adopting an order
that would require a business entity or person who wishes to enter into a contract with the county
or a county entity to submit a “disclosure statement.“’ The disclosure statement would be in the
form of a notarized affidavit in which the prospective contractor would disclose all of the
contractor’s “business relationships” with officers and employees of the county or other county
entity “with [which] the vendor desires to contract.“2
The proposed order states that it is not the intent of the commissioners court to “preclude any
prospective vendor or contractor from employing . . . any public officer or employee” or for such
employment to “be considered in the award of any contract except to the extent allowed or required
by law.” Request Letter, supra note 1, Proposed Order at 2. The proposed order also provides that
“[nlothing in this order should be construed as disqualifying any entity from receiving a contract
because of the employment of an individual properly identified in a Disclosure Statement.” Id. It
also states, however, that the disclosure statements are necessary to ensure that contracts are
“awarded based upon proper criteria rather than based upon favoritism or inside information,” id.
at 1, which suggests that information disclosed in the statements would be considered in awarding
contracts. The proposed order would also provide that failure to submit a disclosure statement would
be grounds for terminating a contract: “[Algreements for which a proper and truthful Disclosure
‘Letter and attachments from Honorable Michael A. Stafford, Harris County Attorney, to Honorable John
Comyn, Texas Attorney General (Jan. 11,2002) (on file with Opinion Committee) [hereinafter “Request Letter”].
2See id. and Proposed Order and Affidavit attached thereto.
The Honorable Michael A. Stafford - Page 2 (JC-052 1)
Statement are required but not presented should be terminable without further cause.” Id. at 2. Thus,
it appears that information in disclosure statements would be considered in awarding contracts and
that, in effect, the submission of a disclosure statement would be required of all prospective
contractors.
You note that one of the cornmissioners in your county has pointed out that Local
Government Code section 335.107 expressly requires the board of a sports authority to design a
“conflict of interest questionnaire that requires disclosure of a vendor’s affiliations or business
relationships that might cause a conflict of interest” and requires vendors to file completed
questionnaires with the board, see TEX. Lot. GOV’T CODEANN. 8 335.107(b), (d) (Vernon Supp.
2002), but “no statute expressly authorizes the commissioners court to make such a requirement.”
Request Letter, supra note 1, at 2.
The proposed order indicates that it would apply to the Harris County Flood Control District,
the Harris County Hospital District, and “all Local Government Corporations and other entities
whose boards are appointed by this court,” as well as the county. Request Letter, supra note 1,
Proposed Order at 1. A number of statutes govern purchasing by counties and county entities, but
your request letter and brief refer only to the County Purchasing Act and the Professional Services
Procurement Act. Rather than survey all the statutes that might apply to purchasing by the county
or a county entity, we limit our analysis to the two statutes briefed in your letter. We address the
County Purchasing Act and the Professional Services Procurement Act separately and conclude that
both provisions impliedly authorize a commissioners court to require prospective contractors to
disclose their business relationships with county officers and employees. We limit our analysis to
whether these statutes generally authorize such a requirement; we do not make any conclusions with
respect to the specific proposed order and affidavit submitted with your request.
The County Purchasing Act, Local Government Code, chapter 262, subchapter C, generally
requires a county to purchase goods and services according to competitive bidding or competitive
proposals:
Before a county may purchase one or more items under a
contract that will require an expenditure exceeding $25,000, the
commissioners court of the county must comply with the competitive
bidding or competitive proposal procedures prescribed by this
subchapter. . . .
TEX. Lot. GOV’T CODE ANN. 8 262.023(a)3 (Vernon Supp. 2002); see also id. 8 262.023(l~)~ (“The
competitive bidding and competitive proposal requirements established by Subsection (a) apply to
contracts for which payment will be made from current funds or bond funds or through time
3Text us amended by Act of May 27,2001,77th Leg., R.S., ch. 1409,§ 4,200l Tex. Gen. Laws 3619,3620-21.
The Honorable Michael A. Stafford - Page 3 (JC-0521)
warrants. Contracts for which payments will be made through certificates of obligation are governed
by The Certificate of Obligation Act of 1971 (Subchapter C, Chapter 271).“).
With respect to competitive bidding, the County Purchasing Act requires a county to publish
notice of a proposed purchase including specifications about the item to be purchased and other
information about the purchase. See id. 0 262.025. The county must “provide all bidders with the
opportunity to bid on the same items on equal terms and have bids judged according to the same
standards as set forth in the specifications.” Id. 8 262.0225(a). All bids for an item must be opened
at the same time. See id. 8 262.026(a). After bids for an item have been opened, the officer in
charge of opening the bids must present them to the commissioners court. See id. tj 262.027(a).
Section 262.027 requires a commissioners court to award the contract to the lowest responsible
bidder, providing in pertinent part:
0a . . . . Except as provided by Subsection (e), the court shall:
(1) award the contract to the responsible bidder who submits
the lowest and best bid; or
(2) reject all bids and publish a new notice.
(b) If two responsible bidders submit the lowest and best bid, the
commissioners court shall decide between the two by drawing lots in
a manner prescribed by the county judge.
(c) A contract may not be awarded to a bidder who is not the
lowest dollar bidder meeting specifications unless, before the award,
each lower bidder is given notice of the proposed award and is given
an opportunity to appear before the commissioners court and present
evidence concerning the lower bidder’s responsibility.
Id. 8 262.027(a)-(c). Subsections (d) and (e) of section 262.027 provide special criteria for
determining the lowest and best bid for a contract for the purchase of certain equipment and
materials. In addition, section 262.0275 provides that in determining who is a responsible bidder,
the commissioners court may take into account the safety record of the bidder, if:
(1) the commissioners court has adopted a written definition and
criteria for accurately determining the safety record of a bidder;
(2) the governing body has given notice to prospective bidders in
the bid specifications that the safety record of a bidder may be
considered in determining the responsibility of the bidder; and
(3) the determinations are not arbitrary and capricious.
Id. 5 262.0275 (Vernon 1999).
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Section 262.0295 of the County Purchasing Act provides for a multistep competitive
proposal procedure that may be used in certain situations. See id. 8 262.0295(a). “Quotations must
be solicited through a request for proposals.” See id. 5 262.0295(b). “Public notice for the request
for proposals must be made in the same manner as provided in the competitive bidding procedure,
except that the notice may include a general description of the item to be purchased, instead of the
specifications describing the item or a statement of where the specifications may be obtained, and
may request the submission of unpriced proposals.” Id. “The award of the contract shall be made
to the responsible offeror whose bid is determined to be the lowest evaluated offer resulting from
negotiation.” Id. fj 262.0295(d); see also id. 0 262.0295(e) (“As provided in the request for
proposals and under rules adopted by the commissioners court, discussion may be conducted with
responsible offerors who submit priced bids determined to be reasonably susceptible of being
selected for award. Offerors must be accorded fair and equal treatment with respect to any
opportunity for discussion and revision of proposals, and revisions may be permitted after
submission and before award for the purpose of obtaining best and final offers.“).
Section 262.030 provides that certain items may be purchased using a competitive proposal
procedure. As with section 262.0295, quotations must be solicited through a request for proposals.
Public notice for the request for proposals must be made in the same manner as provided in the
competitive bidding procedure. The request for proposals must specify the relative importance of
price and other evaluation factors. “The award of the contract shall be made to the responsible
offeror whose proposal is determined to be the lowest evaluated offer resulting from negotiation,
taking into consideration the relative importance of price and other evaluation factors set forth in the
request for proposals.” Id. 9 262.030(b) (Vernon Supp. 2002); see also id. 9 262.030(e) (“As
provided in the request for proposals and under rules adopted by the commissioners court,
discussions may be conducted with responsible offerors who submit proposals determined to be
reasonably susceptible of being selected for award. Offerors must be accorded fair and equal
treatment with respect to any opportunity for discussion and revision ofproposals, and revisions may
be permitted after submission and before award for the purpose of obtaining best and final offers.“).
For purposes of our analysis of the County Purchasing Act, we will use the term “bidders” to refer
generally to those who submit competitive bids and those who submit competitive proposals.
The County Purchasing Act does not expressly authorize a county to require bidders to
disclose information about their business relationships with county officers and employees. In cases
where the County Purchasing Act does not expressly authorize the county to impose a condition on
prospective bidders, this office must determine whether the condition is consistent with the Act and,
moreover, whether authority to impose the condition may be necessarily implied from statutory
authority.
The purpose of the County Purchasing Act’s competitive procedures is to enable the county
to obtain the “lowest and best” bid or, in the case of competitive proposals, the “lowest evaluated
offer” from a “responsible offeror.” See TEX. Lot. GOV’T CODEANN. $5 262.027(a)(l) (Vernon
Supp. ZOOZ), .0295(d) (Vernon 1999), .030(b) (V emon Supp. 2002). As courts have noted, the
rationale underlying competitive bidding is that a governmental entity that obtains bids from
The Honorable Michael A. Stafford - Page 5 (JC-0521)
competitors who have equal access to information about the project will secure the best work at the
lowest practicable price:
[Competitive bidding] requires that all bidders be placed upon the
same plane of equality and that they each bid upon the same terms
and conditions involved in all the items and parts of the contract, and
that the proposal specify as to all bids the same, or substantially
similar specifications. Its purpose is to stimulate competition,
prevent favoritism and secure the best work and materials at the
lowest practicable price, for the best interests and benefit of the
taxpayers and property owners. There can be no competitive bidding
in a legal sense where the terms of the letting of the contract prevent
or restrict competition, favor a contractor or materialman, or increase
the cost of the work or of the materials or other items going into the
project.
Tex. Highway Comm ‘n v. Tex. Ass ‘n bfSteel Imps., Inc., 372 S.W.2d 525,527 (Tex.1963) (citing
Sterrett v. Bell, 240 S.W.2d 5 16, 520 (Tex. Civ. App.-195 1 no writ)). Construing competitive
bidding requirements in light of this purpose, courts have held that a governmental body may not
adopt policies or issue bid solicitations or specifications that restrict competition unless such
policies, solicitations, or specifications have a definite and objective relationship to matters of
quality and competence or are adopted pursuant to clear legislative authority. See Tex. Att’y Gen.
Op. Nos. DM-113 (1992) at 7; JM-712 (1987).
Requiring bidders to submit information about their business relationships with county
officers and employees imposes a burden on bidders, but it does not appear to restrict competition.
Indeed, the requirement would appear to foster competition by reducing the likelihood that contracts
will be awarded due to favoritism or access to inside information, thus leveling the playing field and
encouraging prospective bidders to submit bids. To the extent the requirement does restrict
competition, we conclude that it has an objective relationship to “matters of quality and competence”
because the information will assist the county in identifying instances in which a bidder’s business
relationships may have given the bidder an advantage in preparing the bid, which may in turn be
relevant to the bidder’s ability to perform.
It is not enough, however, that a county’s competitive purchasing policy is consistent with
the policies underlying competitive bidding. Given counties’ limited jurisdiction, a purchasing
policy must also be expressly or impliedly authorized by statute. See Tex. Att’y Gen. Op. No. JC-
3 19 (2000) at 3-4. Authority may be implied from a statute if it is reasonably necessary to carry out
a county’s express duties. See Anderson v. Wood, 152 S.W.2d 1084, 1085 (Tex. 1941) (“Where a
right is conferred or obligation imposed on [a commissioners court], it has implied authority to
exercise a broad discretion to accomplish the purposes intended.“).
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In Attorney General Opinion JM-1215, for example, this office considered whether Harris
County was authorized to prescribe a prevailing wage for nonpublic works contracts awarded under
the County Purchasing Act. As this office noted, “[clounties may do only those things that they are
authorized to do, either expressly or by necessary implication.” Tex. Att’y Gen. Op. No. JM-12 15
(1990) at 2 (citing Canales v. Laughlin, 2 14 S.W.2d 45 1,453 (Tex. 1948); Anderson v. Wood, 152
S.W.2d 1084 (Tex. 1941); Childress County v. State, 92 S.W.2d 1011,1016 (Tex. 1936)); see also
Tex. Atty. Gen. Op. No. JC-0171 (2000) at 1 (“It is well settled that the authority of the
commissioners court to contract [o]n behalf of the county is limited to that conferred either expressly
or by necessary implication by the constitution and laws of this state.“). This office concluded that
Harris County was not authorized to prescribe a prevailing wage: “While the legislature has required
that counties determine and pay local prevailing wage rates on public works contracts, it has made
no such requirement in regard to other contracts. . . . [Clhapter 262 does not require the payment
of prevailing wages generally. Nor do we find any other statute that expressly requires or necessarily
implies that the commissioners court establish prevailing wage rates for contracts other than public
works contracts.” Tex. Att’y Gen. Op. No. JM-12 15 (1990) at 2. And, in Attorney General Opinion
JC-03 19, we concluded that a county was not authorized to require prospective bidders to attend
mandatory prebid conferences. The County Purchasing Act did not expressly authorize the bidding
requirement and the requirement could not be necessarily implied because the county could convey
information about a project to potential bidders in writing. See Tex. Att’y Gen. Op. No. JC-03 19
(2000) at 3. Furthermore, the legislature had expressly authorized other limited-power entities to
require such conferences. See id. at 4.
Here, the County Purchasing Act does not expressly authorize a county to require bidders
to submit disclosure statements regarding their business relationships with county officers or
employees. However, as we explain below, we believe that such authority may be necessarily
implied from the County Purchasing Act, because a bidder’s business relationships with county
officers or employees may be related to the bidder’s ability to perform and requiring bidders to
disclose this information is a reasonable method to obtain it. Given that we conclude that this
authority may be necessarily implied from the County Purchasing Act, we do not believe it is
dispositive that the legislature has expressly required the board of a sports authority to obtain this
information. See TEX. LOC.GOV’T CODEANN. 5 335.107(b)-(c) (Vernon Supp. 2002) (requiring the
board of a sports authority to design a “conflict of interest questionnaire that requires disclosure of
a vendor’s affiliations or business relationships that might cause a conflict of interest” and requiring
vendors to file completed questionnaires with the board). The legislature’s decision to mandate the
board of a sports authority to obtain such information does not indicate that the authority to obtain
such information may never be implied.
Again, the Act requires a county to select the lowest and best bid or, in the case of
competitive proposals, the “lowest evaluated offer” from a “responsible offeror.” See id. $4 262.027
(Vernon Supp. 2002), .0295(d) (Vernon 1999)’ .030(b) (Vernon Supp. 2002). A contract may not
be awarded to a bidder who is not the lowest bidder, unless the lower bidders are given an
opportunity to present evidence regarding their “responsibility.” See id. 5 262.027(c) (Vernon Supp.
2002). Section 262.0275 of the County Purchasing Act authorizes a commissioners court to take
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into account the safety record of a bidder in determining who is a responsible bidder, see id. 8
262.0275 (Vernon 1999), but this provision does not limit a commissioners court from considering
other criteria. As this office has noted, the County Purchasing Act precludes a commissioners court
from limiting competition, but it need not accept a bid merely because it is the lowest. “The statute
only requires that the county accept the lowest and best bid proffered.” Tex. Att’y Gen. Op. No. JM-
881 (1988) at 3. Thus, if county commissioners “have an objective reason, supportable by facts
fairly known to them, that a particular bidder cannot perform responsibly because of some objective
impediment, they may consider rejecting that bid, and the rejection would not be an abuse of
discretion.” Id. at 4 (citing Corbin v. Collin County Comm ‘rs Court, 651 S.W.2d 55 (Tex.
App.-Dallas 1983, no writ)).
A bidder’s business relationships with county officers and employees may be relevant to the
bidder’s ability to perform, and, in certain circumstances, a commissioners court could reasonably
decide to reject a bid on the basis that the bidder’s business relationship with a county officer or
employee affects the bidder’s ability to perform responsibly. See id. Where the authority exists for
a commissioners court to reject a bid on the basis of certain information, we believe that a
commissioners court is necessarily authorized to obtain that information.
We are not aware of any other means for a county to effectively obtain information about
prospective contractors’ business relationships with county officers and employees other than by
requiring prospective contractors to provide it. Chapter 17 1 of the Local Government Code requires
a county official with an interest in a county contract to disclose the interest and to abstain from
voting on the matter, see TEX. LOC. GOV’T CODEANN. $5 171 .OOl(a) (Vernon 1999) (definition of
“local public official”), ,004 (affidavit and abstention from voting), but it applies only if the county
official has a “substantial interest” in the affected business entity, see id. 5 5 17 1.002 (definition of
“substantial interest”), .004, and it does not apply to county employees, see id. 8 171.001(a)
(definition of “local public official”). Furthermore, section 159.033 of the Local Government Code
permits a commissioners court in a county with a population of 125,000 or more to “adopt by order
a financial disclosure reporting system for county officers, precinct officers, county judicial officers,
candidates for those offices, and county employees.” Id. 5 159.033. It is not apparent to us,
however, that such a reporting system would necessarily enable a county to ascertain whether a
particular contract is awarded on a competitive basis or to assess a particular bidder’s ability to
perform.
Next, we consider whether requiring prospective contractors to submit a disclosure statement
is permitted in the procurement of professional services. We conclude that it is.
The Professional Services Procurement Act forbids a “governmental entity” to competitively
bid a contract for “professional services,” which is defined to include services such as accounting,
architecture and landscape architecture, land surveying, professional engineering, and real-estate
appraising. See TEX. GOV’T CODE ANN. $9 2254.002(2)(A) (V emon 2000) (defining “professional
services”), .003(a) (forbidding competitive bidding for professional services); see also Tex. Att’y
Gen. LO-96-l 17, at 1 (noting that contract for professional services may not be competitively bid).
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For purposes of the Professional Services Procurement Act, “governmental entity” includes a county.
See id. tj 2254.002(1)(B). G enerally, a governmental entity must award a contract for professional
services “on the basis of demonstrated competence and qualifications to perform the services . . . for
a fair and reasonable price.” Id. 5 2254.003(a). With respect to a contract for the professional
services of an architect, professional engineer, or land surveyor, a county must:
(1) first select the most highly qualified provider of those
services on the basis of demonstrated competence and qualifications;
and
(2) then attempt to negotiate with that provider a contract at
a fair and reasonable price.
Id. 8 2254.004(a). A professional-services contract entered in contravention of the Professional
Services Procurement Act is “void as against public policy.” Id. 0 2254.005.
We conclude that requiring a provider of professional services who wishes to contract with
the county to submit a disclosure statement is consistent with the Professional Services Procurement
Act and that county authority to impose such a requirement may be implied from the Act. First, the
purpose of the Act is to prohibit a governmental entity from obtaining professional services by
competitive bidding and to ensure that professionals are selected on the basis of their “demonstrated
competence and qualifications to perform the services.” Id. 55 2254.003, .004. Requiring
professionals who wish to enter into a contract with a county to disclose their business relationships
with county officers and employees is consistent with both of these statutory goals. Furthermore,
the Act’s requirement that professionals be selected on the basis of their “demonstrated competence
and qualifications to perform the services” for “a fair and reasonable price,” id., necessarily implies
the authority to assess a professional’s competence and qualifications and the fairness and
reasonableness of the offering price. A professional’s business relationships with county officers
and employees may be relevant to assessing the professional’s competence and qualifications to
perform services for the county and to the fairness and reasonableness of the offering price. Where
the authority exists for a commissioners court to select a professional on the basis of certain criteria,
we believe that a commissioners court is necessarily authorized to obtain information that is relevant
to that criteria.
You also ask whether the county may impose the disclosure-statement requirement “where
the contract to be awarded is not required to be bid or to be awarded under the Professional Services
Procurement Act.” Request Letter, supra note 1, at 1. We assume this question is intended to
address purchasing in situations in which the County Purchasing Act and Professional Services
Procurement Act do not apply. County authority must be expressly provided by statute or
necessarily implied from statutory powers. The authority to require prospective contractors to
disclose information about their business relationships must be expressly authorized or necessarily
implied from a statute. When other statutory provisions govern purchasing, the county’s authority
to require the disclosure statement will depend upon the applicable law. Our conclusion here is
limited to county purchasing under the County Purchasing Act and the Professional Services
Procurement Act, the two provisions raised and briefed in your letter.
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SUMMARY
Under the County Purchasing Act and the Professional
Services Procurement Act, a county is authorized to require
prospective contractors to submit disclosure statements regarding
their business relationships with county officers and employees.
Attorney General of Texas
HOWARD G. BALDWIN, JR.
First Assistant Attorney General
NANCY FULLER
Deputy Attorney General - General Counsel
SUSAN DENMON GUSKY
Chair, Opinion Committee
Mary R. Crouter
Assistant Attorney General, Opinion Committee