Untitled Texas Attorney General Opinion ( 1982 )

The Attorney General of Texas
February 8, 1982
MARK WHITE
Attorney General
Mr. Homer A. Foerster opinion No. w-440
Supreme Court Bullding
P. 0. BOX 12549
Executive Director
Austin. TX. 79711 State Purchasing and General Re: Authority of state
512/475-2501 Services Commission Purchasing and General
Telex 9101974.1367 L.B.J. State Office Building Services Commission to award
Telecopier 512/475.0266
Austin, Texas 78711 contracts on competitive pro-
posals rather than competitive
1907 Main St.. Suite 1400 bids
Dallas, TX. 75201
21417428944 Dear Mr. Foerster:
4924 Alberta Ave.. Suite 160
You advise that in October 1980. the State Purchasing and General
El Paso, TX. 79905 Services Commission received the Report of the Operational Audit
9151533.3484 Committee of the Governor's Budget and Planning Office recommending
that your commission "employ the competitive sealed proposal method as
an alternative to competitive sealed bidding, particularly when
1220 Dallas Ave., Suite 202
Houston. TX. 77002
factors'other than acquisition price are important." The commission
7131650-0%6 requests our nconcurrence" that this method is permitted under article
3 of article 601b, V.T.C.S.
806 Broadway. Suite 312
Article 6Olb. section 3.10 states:
Lubbock. TX. 79401
SOSi747.5238
In purchasing supplies, materials, services, and
equipment the commission may "se, but is not
4309 N. Tenth, Suite S limited to, the contract purchase procedure, the
McAllan, TX. 79501
5121092-4547
multiple award contract procedure, and the open
market purchase procedure. The commission shall
have the authority to combine orders in a system
200 Main Plaza, Suite 400 of schedule purchasing, and it shall at all times
San Antonio, TX. 78205 try to benefit from purchasing in bulk. All
512/225-4191
purchases of and contracts for supplies,
materials, services, and equipment shall, except
An Equal OpportunityI as provided herein, be based whenever possible on
Attirmative Action Employel competitive bids. (Emphasis added).
The "contract purchase procedure" and the "open market purchase
procedure" are both described in detail by subsequent sections. Id.
OP3.11, 3.12. Section 3.10 does not require the commission to G
either procedure to the exclusion of other procedures, but it does
require that all purchases and contracts shall (except as therein
provided) be based on competitive bids "whenever possible."
p. 1516
Mr. Homer A. Foerster - Page 2 (MW-440)
The exceptions provided therein are few. As amended in 1981,
section 3.08(a) of article 601b provides that competitive bidding is
not required for state agency purchases of $100 or less (or of $500 or
less if the commission should so prescribe by rule). See V.T.C.S.
art. 601b. 13, Acts 1981. 67th Leg., ch. 546, at 226c Although
certain required preferences affect the selection of the “lowest,and
best bid,” see article 601b. sections 3.20, 3.28, V.T.C.S., the only
other exemp& provided by article 601b from the competitive bidding
requirement is an exemption for blind-made products found in section
3.22. With those exceptions, the commission is to make purchases on
competitive bids “whenever possible.”
As noted in Texas Highway Commission v. Texas Association of
Steel Importers, Inc., 372 S.W.2d 525, 527 (Tex. 1963):
Competitive bidding... contemplates a bidding on
the same undertaking upon each of the same
material items covered by the contract; upon the
same thing. It 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.. .. There can be no competitive bidding $J
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. (Emphasis added).
See also Sterrett v. Bell, 240 S.W.2d 516, 520 (Tex. Civ. App. -
Dallas 1951, no writ); Attorney General Opinion B-24 (1973).
A “bid” is an offer to contract, and an invitation for bids is
merely a solicitation of such offers. See A 6 A Construction Company,
Inc. v. City of Corpus Christi, 527 =.2d 833 (Tex. Civ. App. -
Corpus Christ1 1975, no writ); Lane and Nearn v. Warren, 115 S.W. 903
(Tex. Civ. App. 1909, writ ref’d). In the law of contracts, a
“proposal” is also an offer. Daugherty v. Missouri-Kansas-Texas
Railroad Company of Texas, 221 S.W.Zd 928 (Tex. Civ. App. - Austin
1949. no writ). Thus, the term “competitive proposals” does not in
itself signify a procedure different &om that-of-“competitive bids.”
As you describe the proposed procedure, however, and as it is
delineated by the rules the commission contemplates, it does not
provide for competitive bidding in a legal sense.
p. 1517
Mr. Homer A. Foerster - Page 3 (MW-440)
You advise that “competitive sealed proposals” is a method of
procurement included in the “Model Procurement Code for State and
Local Governments” section 3.203 (1979), developed by the American Bar
Association for statutory adoption, and we note that the rules
proposed by the commission closely resemble the suggested statutory
provisions and accompanying commentary by the American Bar
Association. The suggested code has not been adopted by the Texas
Legislature, however. and we do not think the commission can implement
it by rule. In exercising its rule making power, the commission may
not act contrary to the expressed statutory purposes; the commission
must act consistently with and in furtherance of those purposes. See
Attorney General Opinion MW-332 (1981). The code provisions, x
interpreted by the commission’s proposed rules, are inconsistent with
the competitive bidding requirements of article 601b, V.T.C.S.
The inconsistency is succinctly pointed out by the portion of the
contemplated rules discussing the use of “competitive sealed
proposals.” It states:
The competitive sealed proposals method differs
from competitive sealed bidding in two important
ways:
(I) it permits discussions with competing vendors
and changes in their proposals including
price; and
(ii) it allows comparative judgmental evaluations
to be made when selecting among acceptable
proposals for award of the contract.
Again the proposed rules state:
An important difference between competitive sealed
proposals and competitive sealed bidding is the
finality of the initial offers. Under competitive
sealed proposals, alterations in the nature of a
proposal, and in prices, may be made after
proposals are opened. Such changes are not
allowed, however, under competitive sealed
bi.dding.
In Nile6 v. Harris County Fresh Water Supply District No. lA, 336
S.W.2d 637, 637 (Tex. Civ. App. - Waco 1960, writ ref’d), the
governmental body invited bids for a sewage treatment plant and other
facilities, the notice to bidders stating that plans, specifications
and bid documents would be furnished, but that “the bid and other data
submitted by bidders will form the basis for negotiations of a
contract for all or part” of the work described. After negotiations
p. 1518
Mr. Homer A. Foerster - Page 4 (MW-440)
with the low bidder resulted in a number of alterations of the
original bid documents, a contract between the governmental district
and the bidder was signed. The court held that the statute by which
the fresh water supply district was governed required competitive
bidding, that the prime purpose of such a statute is to stimulate
competition, that compliance with such statutes is mandatory, and that
the contract was illegal because the proposal for which competitive
bids were called was not substantially similar to the contract
executed, nor was there substantial compliance with the statute. See
Attorney General Opinion MW-296 (1981). See also Attorney Gene=
Opinions NW-299 (1981); MW-91 (1979). The procedure followed by the
fresh water supply district in the Nile6 case was somewhat similar to
the “competitive sealed proposals method” suggested by the
commission’s proposed rules and the American Bar Association’s Model
Code. Such a method is inconsistent with the competitive bidding
reauirement of article 601b. V.T.C.S.. which anolies “whenever
possible .‘I See Headlee v. Fryer, 208 S.W.il3 (Tex. Fryer, supra. -See
also Attorney General Opinions MW-139 (1980); H-972 (1977).
p. 1519
.
Hr. Homer A. Foerster - Page 5 (Mu-440)
*,
*
SUMMARY
The "competitive sealed proposals method" of
procurement as described Is inconsistent with the
competitive bidding requirements of article 601b,
V.T.C.S., and. whenever competitive bidding is
possible, the competitive proposal method may not
be used by the State Purchasing and General
Services Commission in lieu of a competitive
bidding procedure.
Very truly yours,
WHITE
Attorney General of Texas
JOHN W. FAINTER. JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Bruce Youngblood
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Robert Gauss
Rick Gllpin
Bruce Youngblood
p. 1520