. 

May 14, 1987 

Elonorable Mark W. Stiles 

chairman 

County Affairs Conduittee 

Texas House of Repres&tatives 

P. 0. Box 2910 

Austin, Texas 78769 

Dear Representative Stiles: 

Opinion No. n-696 

Re: Definition of "principal place 

of business" for purposes of article 

60113, V.T.C.S.. the out-of-state 

bidding act 

Tou ask about the proper construction of article 6Olg, V.T.C.S. 

Thereinafter the act], which governs bids submitted by nonresidents 

to political subdivisions in Texas for constructlou, supplies, and 

services. Specifically, you ask about' the proper construction of 

the phrase "principal place of business' that is set forth in the 

statutory definitions of "nonresident bidder" and "Texas resident 

bidder" found in section l(a) of the act. 

Section l(b) of the act provides the following: 

T'he state or a govermnsntal agency of the state 

may not award a contract for general construction, 

improvements, services, or public works projects 

or purchases of supplies, materials, or equipment 

to a nonresident bidder unless the nonresident's 

bid is lower than the lowest bid submitted by a 

responsible Texas resident bidder by the same 

amount that a Texas resident bidder would be 

required to underbid a nonresident bidder to 

obtain a comparable contract in the state in which 

the nonresident's principal place of business is 

located. (Emphasis added). 

Section l(a)(2). of article 6Olg. provides that "'[nlonresident 

bidder' means a bidder whose principal place of business is not in 

this state, but excludes a contractor whos.& ultimate parent company or 

majority owner has its principal place of business in this state." 

(Emphasis added.) Section l(a)(3) provides that "'Texas resident 

bfdder' means a bidder whose principal place of business is in this 

state, and includes a contractor whose ultimate parent company or 

majority owner has its principal place of business in this state.' 

(Emphasis added.) The act itself does not define the phrase 

p. 3224 
Honorable Mark W. Stiles - Page 2 (m-696) 

"principal place of business." You express concern that political 

s&divisions in this state are construing "principal place of 

business" in such a way as to permit companies having, for example, 

only one permanent office in the state with as few as one employee 

engaged in activities other than submitting bids to governmenral 

agencies to compete on an equal footing with Texas resident bidders. 

You assert that this does not comport with the legislature's intent 

when it enacted the statute. 

In construing a statute, we must look to the intent of the 

legislatiare and construe the statute so as to give effect to chat 

intent. Knight v. International Harvester Credit Corp., 627 S.W.2d 

382 (Tex. 1982). In determining legislative intent. we must consider 

the end to be attained. the mischief to be remedied, and the purposes 

to be accomplished. Flowers v. Den se -Ta eler h Co., 472 S.W.2d 112 

(Tex. 1971); Calvert v. Kadane, 427 S.W.2d 605 (Tex. 1968). When the 

words of a statute are subject to two reasonable Interpretations and 

are therefore ambiguous. one may consider the legislative history of 

the statute to determine which meaninn of the words the legislature 

intended. San Antonio General Drive&, Helpers Local No, 657 v. 

Thornton, 299 S.W.2d 911 (Tex. 1957); Miller v. Calverc, 418 S.W.2d 

869 (Tex. Civ. App. - Austin 1967, no writ). Specifically, in 

attempt&g to- dis&rn legislative intent from an examination of the 

legislative history of a statute, one looks to the purpose the 

original enactment served, the discussion of statutory meaning in 

committee reports, the effect of amendments. whetha? accepted or 

rejected, and the remarks in debatc preceding passage. Johnson v. 

Department of Treasury, I.B.S., 700 F.2d 971 (5th Cir. 1983); Rogers 

v. Frito-Lay, Inc., 611 F.2d 1074 (5th Cit. 1980). cert. denied, 449 

U.S. 889 (1980), 

On the basis of our examination of both the Bouse Committee on 

Business and Commerce and Iiouse of Representatives discussions of the 

bill, we conclude that the act is intended to impose on any out-ofstate company seeking co bid on construction. supplies, or services 

contracts with a political subdivision in Texas the same burdens that 

are imposed, if any. upon Texas resident bidders by the state in which 

the nonresident's principal place of business is located. In the 

public hearing before the House Committee on Buslnass and Commerce, 

the House author of the bill made the following remarks explaining the 

purpose of the proposed bill: 

In neighboring states. like Louisiana, Arkansas, 

and New Mexico, there is a rule that says any 

public work awarded In that state, if an out-ofstate contractor like a contractor from Texas bids 

a project in that state, than the Texas bidder, in 

order to receive the contract, has to be five 

percent lower than the lowest bidder in that 

p. 3225 
Honorable Mark W. Stiles - Page 3 (JM-696) 

state. This is Arkansas, for instance . . . . If 

a state like Arkansas, New Mexico, Louisiana, New 

York, wherever, requires that an out-of-state 

contractor be lower by a certain amount in order 

to receive that bid, we will require those state 

contractors to do the same thing in Texas. . . .' 

Teshony of Rep. Mark Stiles on Tex. B.B. No. 602 before House 

Cosmlttee on Business and Commerce, 69th Leg., public hearing (Feb. 

18, 1985) (transcript available from House Staff Services). In the 

House discussion prior to the bill's passage to engrossment, the liouse 

author of the bill explained that it was designed to create a 

"reciprocity requirement in the award of state contracts so chat 

bidders from other.states would face the same under-bid requirements 

in Texas contracts that Texas bidders would experience from bidding on 

comparable contracts in those states." 

In Attorney General Opinion JM-616 (1987). we declared: 

[T]he term 'principal place of business' as used 

in article 601g does not necessarily refer to the 

place of incorporation or organization of a 

fompany . or to the residence of Its majority 

owner. It means the place where the person' 

whether natural or artificial, maintains offices 

and transacts business. I.e., where the person's 

business affairs are conducted. See National 

Truckers Service, Inc. v. Aero SystG Inc., 480 

S.W.2d 455 (Tax. Civ. App. - Fort Worth 1972. writ 

ref'd n.r.e.). The 'principal place of business' 

can sometimes be different from the place of the 

person's general offices, see Dryden v. Ranger 

Refining 6 Pipe Line Co., 280 F. 257 (5th Cir. 

1922). but when a business ouerates in a number of 

states and no one state is clearly the state in 

which its activities are principally conducted, 

the state from which centralized general 

supervision is exercised may be considered the 

location of the 'principal place of business,' 

particularly if a substantial part of its 

operations are also conducted there. See Jackson 

v. Tennessee Valley Authority. 462 F.upp. 45 

(D.C. Term. 1978). Cf. In re' Commonwealth 011 

Refining Co., Inc., 596 F.2d 1239 (5th Clr. 1979). 

It Is clear that the bill is intended to treat as a "Texas resident 

bidder" a bidder that has more In Texas than merely an office In the 

state with an employee who submits bids to various political subdivisions. "Principal" has been defined to mean "chief, leading, 

p. 3226 
liouorable Mark W. Stiles - Page 4 (JM-696) 

ttost important or considerable, primary, original' highest in rank' 

authority, character, importance, or degree." Stilwell Co. v. 

Commissioner of Taxation, 100 N.W.2d 504, 507 (Minn. 1959); Kelp v. 

Burgess. 115 P. s 583, 584 (Kan. 1911). 

The issue of whether an office or establishment is a "principal 

place of business" requires, of course, a determination of fact, 

Kibler v. Transcontinental & Western Air, 63 F. Supp. 724. 726 (E.D. 

N.Y. 1945)' the resolution of which would be inappropriate in the 

opinion process. We do conclude, however, chat, for purposes of 

article 6Olg, V.T.C.S., a bidder's "principal place of business" 

refers to the place-where the bidder maintains offices and a substantial part of its operations are also conducted there. 

For purposes of article 601g, V.T.C.S., which 

governs bids submitted by nonresidents to political 

subdivisions in Texas for construction, supplies, 

and services, a bidder's "principal place of 

business" refers to the state in which the bidder 

maintains an office and a substantial part of its 

operations are also conducted there. 

Attorney General of Texas 

JACK HIGHTOWER 

First Assistant Attorney General 

MARY KELLER 

Executive Assistant Attorney General 

JDDGE ZOLLIE STZAKLKT 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Jim Moellinger 

Assistant Attorney General 

p. 3227