MARKWHITE AttorneyGeneral

Supreme Court Bullding P.0. BOX12549 Austin. TX. 79711 512/475-2501 Telex 9101974.1367 Telecopier 512/475.0266

1907MainSt..Suite 1400 Dallas, TX. 75201 21417428944 

# TheAttorney GeneralofTexas

February 8, 1982

Mr. HomerA. Foerster Executive Director State Purchasing andGeneral Services Commission L.B.J. State Office Building Austin, Texas 78711 opinion No. w-440
Re: Authority of state Purchasing and General Services Commission toaward contracts on competitive proposals rather than competitive bids
DearMr. Foerster:

4924Alberta Ave..Suite 160 Youadvise that in October 1980. the State Purchasing andGeneral
ElPaso,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
1220Dallas Ave.,Suite202 an alternative to competitive sealed bidding, particularly when
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 3of article 601b, V.T.C.S.

806Broadway. Suite312 Lubbock. TX. 79401 SOSi747.5238

4309N.Tenth, Suite S McAllan, TX. 79501 5121092-4547

200Main Plaza, Suite400 SanAntonio, TX. 78205 512/225-4191

AnEqualOpportunityI Attirmative Action Employel Article 6Olb. section 3.10 states:
In purchasing supplies, materials, services, and equipment the commission may "se, but is not limited to, the contract purchase procedure, the multiple award contract procedure, and the open market purchase procedure. The commission shall have the authority to combine orders in asystem of schedule purchasing, and it shall at all times try to benefit from purchasing in bulk. All purchases of and contracts for supplies, materials, services, and equipment shall, except as provided herein, be based whenever possible on 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) bebased oncompetitive bids "whenever possible."

p. 1516Mr. HomerA. 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 $100or less (or of $500or 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 byarticle 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 makepurchases on competitive bids “whenever possible.”
As noted in Texas Highway Commission v. Texas Association of Steel Importers, Inc., 372S.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 andmaterials 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 acontractor ormaterialman, 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, nowrit); Attorney General Opinion B-24 (1973).
A“bid” is an offer to contract, and an invitation for bids is merely asolicitation of such offers. SeeA6AConstruction Company, Inc. v. City of Corpus Christi, 527=.2d 833 (Tex. Civ. App. - Corpus Christ1 1975, nowrit); Lane andNearnv. Warren, 115S.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. nowrit). Thus, the term “competitive proposals” does not in itself signify aprocedure 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 alegal sense.

p. 1517Mr. HomerA. 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 bytheAmerican 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. andwedonot 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 andin 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.
Theinconsistency is succinctly pointed out bythe 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 awardof the contract. Again the proposed rules state:
Animportant 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.
InNile6 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 asewage treatment plant andother facilities, the notice to bidders stating that plans, specifications andbid documents would be furnished, but that “the bid andother 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.** HomerA. 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. Thecourt held that the statute bywhich **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, andthat 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). Theprocedure 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 SeeHeadlee v. Fryer, 208S.W.il3 (Tex. <ii. App. - Dallas 1919, writ d=‘d). Cf. V.T.C.S. art. 2368a; Overstreet v. Houston County, 365 S.W.2d 4OF(Tex. Civ. App. - Houston 1963, writ ref ’d n.r.e.) (statute authorized changes).
The use of the term “whenever possible” leaves little to the discretion of the commission. It means that purchases are tobe made on competitive bids unless in the particular circumstance it is not Possible to do so. See Rogers v. Department of Civil Service, 111 A.Zd 894 (N.J. 1955), Although there maybe instances in which the commission mayproperly determine that apurchase on competitive bids is not possible, the controlling principle is that purchases are tobe made on a competitive bids basis. Cf. V.T.C.S. art. 601b, 03.07 (emergency purchases). The commission’ proposed rules would permit the use of the “competitive sealed proposals method” whenever it considered the use of competitive bids either “not practicible” or

“not advantageous.” Those terms, as defined by the proposed rules, are not the substantial equivalents of “whenever possible” ss used by the legislature in article 601b. Cf. Attorney General Opinion NW-310 (1981) (commission maypromulgate % possible” rules).
Of course, the commission is not prohibited from soliciting information or proposals which it maywish later to incorporate in plans andspecifications submitted to prospective bidders regarding a contract thereafter to be submitted to competitive bids, cf. article 6252-11~. V.T.C.S. (private consultants), but it may notcall for proposals and then negotiate adifferent contract with the preferred contractor instead of submitting the contract finally proposed to unrestricted competitive bidding. Texas Highway Commission v. Texas Association of Steel Importers, s; Headlee v. Fryer, supra. See - also Attorney General Opinions MW-139(1980); H-972 (1977).

p. 1519. *, * Hr. HomerA. 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 maynot 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
JOHNW.FAINTER.JR. First Assistant Attorney General
RICHARDE. GRAYIII Executive Assistant Attorney General Prepared byBruce Youngblood Assistant Attorney General
APPROVED: OPINIONCOMMITTEE
SusanL. Garrison, Chairman Robert Gauss Rick Gllpin Bruce Youngblood

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