THE ATTORSEY GESERAL 

OP TEXAS 

Honorable Jim Mapel Opinion No. JM-1243 

Criminal District Attorney 

Brazoria County Courthouse Re: Whether performance and 

Room 408A payment bonds are required for 

Angleton, Texas 77515 certain county unit price contracts (RQ-1995) 

Dear Mr. Mapel: 

In your letter you describe the letting of a contract 

to provide hot mix-hot laid and hot mix-cold laid asphaltic 

concrete as well as asphalt stabilized base for the repair 

of county roads to be applied as required. Along with your 

letter, you have submitted the bid packet, including the 

"General Instructions and Special Provisions,8* which identifies the purpose of the request for bids as follows: 

These bids are being accepted so that 

Brazoria County may make purchases for the 

maintenance and construction of roads on a 

'more-or-less' quantity basis, and Brazoria 

County reserves the right to purchase only 

the quantity required to meet its needs on or 

before the date of expiration of the firm 

price bid. 

The "Proposal and Bid Sheet" explains that the "guantities of materials to be furnished at the unit prices bid 

may be increased or diminished as may be considered necessary in the opinion of the Engineer." The bid sheet contains spaces for actual bid prices for hot mix-hot laid and 

hot mix-cold laid asphaltic concrete as well as asphalt 

stabilized base for each precinct in the county. The bid 

sheet also contains a notation of "(5,000 Tons)" with 

respect to the unit price to be bid for each ton laid in 

place of hot mix-hot laid asphaltic concrete and a notation 

of "(300 Tons)" with respect to asphalt stabilized base. No 

estimated quantities are indicated with regard to either the 

unit price to be bid for loading hot mix-cold laid asphaltic 

concrete into county trucks or the unit price to be bid for 

hauling a ton of hot mix-cold laid asphaltic concrete. 

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Honorable Jim nape1 - Page 2 (JM-1243) 

We understand from your letter that the notations reflect the quantities estimated by the county to be required 

for the contract term and that the estimated quantities are 

based on historical usage. We are also advised that the 

successful bidder's unit price of S28 for each ton laid in 

place of hot mix-hot laid asphaltic concrete is consistent 

with bids submitted in prior years and county estimates of 

bids to be submitted in response to the request for bids. 

Given an estimated purchase of 5,000 tons, a unit price of 

$28 per ton results in an estimated contract price of at 

least $140,000. 

You explain that, subsequent to the letting of the bid, 

payment and performance bonds submitted by the successful 

bidder were found to be issued by a surety company that is 

not authorized to do business in the state. The page in the 

bid packet entitled "General Instructions and Special 

Provisions" requires each bidder to furnish performance and 

payment bonds provided by a bonding company "licensed to do 

business in the State of Texas." The question you raise is 

whether, given the uncertainty of the total contract price, 

the payment and performance bonds are required under article 

5160, V.T.C.S. Article 5160 imposes various performance and 

payment bond requirements for public works contracts in 

excess of $25,000.1 In particular, part A of article 5160 

requires that both performance and payment bonds-"be executed by a corporate surety or corporate sureties duly authorized and admitted to do business in this State and licensed 

by this State to issue surety bonds." 

The bid documents submitted to us indicate that the 

contract term of the proposed contract was to expire September 30, 1990. Although any particular issues concerning 

that contract and the related request for bids may no longer 

need resolution, you have advised us that the county is 

currently considering requests for bids and future contracts 

with the selected bidders for provision and application of 

similar asphaltic materials. Even though we are unable to 

find facts in the opinion process and can therefore not 

resolve definitively your concerns about a particular bid or 

1. While a contract for the purchase of materials for 

road repair would not be considered a public works contract, 

w Attorney General Opinion JM-1027 (1989) at 6, a contract 

for the purchase of the materials and their application is 

so considered. Austin Bridae Co. v. Teaaue, 152 S.W.2d 1091 

(Tex. 1941). 

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Honorable Jim nape1 Y Page 3 (JM-1243) 

contract, we provide the following discussion to ass::: 

you in applying article 5160 to future solicitations 

contracts.2 

Attorney General opinion J&l-1220 (1990) establishes 

the framework within which we answer your question. That 

opinion addressed the question of competitive bidding 

requirements for the construction of a county vehicle 

maintenance shed. We concluded therein that in adopting the 

County Purchasing Act3 (hereinafter the ,lact,l), the legislature exhibited a "manifest intent', that the act take precedence over subchapter B of chapter 271 of the Local Government Code. In reaching that conclusion, we noted the 

irreconcilable differences between the act and subchapter B 

and the more general nature of the act, the later of the two 

statutes. Gov't Code 5 311.026(b); Attorney General Opinion 

JM-1220, at 13-14. 

Although it may be considered dicta in Attorney General 

Opinion JM-1220, we adhere to our additional conclusion in 

that opinion that the act, a more general provision, also 

takes precedence to the extent of conflict over article 

5160, a statute enacted prior to the act. Thus, we affirm 

the statement that "our conclusion [with regard to subchapter B] also applies to conflicts between the County 

Purchasing Act and V.T.C.S. article 5160." Attorney General 

Opinion JM-1220, at 14. We thereafter continued that 

[slince the County Purchasing Act contains 

provisions relating to bid and performance 

2. Thus, we do not resolve the issue whether the 

quoted language concerning bond requirements in the "General 

Instructions and Special Provisions,, imposes as a bid 

specification the requirement that the bonding company be 

authorized and admitted to do business in Texas as well as 

licensed by Texas to issue surety bonds. We also do :;L 

address the issue whether other information furnished 

bidders but not submitted to us specified the estimated 

quantities with regard to all items to be bid on a unit 

price basis as required by section 262.028 of the Local 

Government Code or any other issues raised by the particular 

bid and proposed contract other than your question concerning the applicability of article 5160, V.T.C.S. 

3. The County Purchasing Act is currently codified as 

subchapter C of chapter 262 of the Local Government Code. 

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Honorable Jim Mapel - Page 4 (JM-1243) 

bonds, w Local Gov't Code 5 262.032(a), 

(b), we think these provisions should prevail 

over article 5160, which provides for performance bonds but not bid bonds. Since the 

County Purchasing Act makes no provision for 

payment bonds, a county must require contractors to provide such bonds pursuant to 

article 5160. 

Id. at 15. 

In accordance with the reasoning in Attorney General 

Opinion JM-1220 and the law supporting it, the act and not 

article 5160 controls to the extent of conflict the letting 

of the contract under consideration here. Thus, as was 

noted in Attorney General Opinion JM-1220, bid bonds, which 

are not under consideration here, and performance bonds, 

which are, are governed by the act. Section 262.032(b) of 

the Local Government Code, the provision of the act addressing performance bonds, reads as follows: 

(b) Within 10 days after the date of the 

signing of a contract or issuance of a 

purchase order following the acceptance of a 

bid or proposal, the bidder or proposal 

offeror shall furnish a performance bond to 

the county, if reouired bv the county for 

the full amount of the contract if' that 

contract exceeds $50,000. (Emphasis added.) 

Although prior to issuance of Attorney General Opinion 

JM-1220, county officers may have understood that article 

5160 required performance and payment bonds, the county is 

independently authorized to require performance bonds in 

certain contracts under the controlling provision of the 

act. & Section 262.032(b) expressly permits the county 

to require a performance bond. As discussed above, however, 

Attorney General Opinion JM-1220 provides that since the act 

is silent with regard to payment bonds, a payment bond, if 

required for a particular contract, must be obtained in 

accordance with article 5160. 

We now return to your question as modified to reflect 

the reasoning in Attorney General Opinion JM-1220 with 

regard to article 5160: whether the indefiniteness of the 

final total contract price removes this contract from the 

scope of the payment bond requirements of article 5160 and, 

we add, from the competitive bidding requirements of the 

act, including section 262.032(b), which authorizes counties 

to require performance bonds in certain competitively bid 

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Honorable Jim Mapel - Page 5~ (JM-1243) 

contracts. Just as article 5160 requires payment bonds in 

county public works contracts only if the price of the 

contract is in excess of $25,000, the act requires counties 

to competitively bid purchases only if the the contract for 

such purchases will require the expenditure of more than 

$10,000. Similarly, the act authorizes counties to require 

performance bonds only if the contract exceeds $50,000. 

Local Gov't Code S§ 262.023(a), 262.032(b). 

As indicated by your question, the final total contract 

price is unknown because it is based on the requirements of 

the county over the course of a year, and the county cannot 

know in advance what its requirements will be. This uncertainty plays a role in all competitive bidding -- the 

final total cost cannot be known until the bids are received. A governmental entity soliciting bids no more knows 

in advance the contract price of a proposed lump sum contract than it knows the unit price for a proposed unit price 

contract. Uncertainty about the final lump sum or unit 

price does not, however, remove the purchase from the 

requirements of the act: nor does the uncertainty about 

quantity in the case of a unit price contract remove a unit 

price contract from either the scope of the act or the 

payment bond requirements of article 5160. To hold otherwise would allow counties to avoid the requirements of the 

act or article 5160 simply by acquiring items on a unit 

price basis. 

With regard to the requirements of the act, the legislature added in 1987 a provision codified as section 262.028 

of the Local Government Code, which allows unit price 

contracts as follows: 

A purchase may be proposed on a lump-sum or 

unit price basis. If the county chooses to 

use unit pricing in its notice, the information furnished bidders must goecifv the 

anoroximate ouantities estimated on the best 

available information, but the compensation 

paid the bidder must be based on the actual 

quantities purchased. (Emphasis added.) 

A requirements contract that measures quantity by the purchaser's good faith requirements, such as the one in issue 

here, can be reasonably classified as a unit price contract 

if the terms of the bid and resulting contract require unit 

prices. a Bus. h Corn. Code 5 2.306 h comment 2 (reguirements contracts do not lack mutuality of obligation since 

such.contracts require purchasers to act in good faith so 

that their requirements approximate reasonably foreseeable 

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Honorable Jim Mapel - Page 6 (JM-1243) 

figures). Although section 262.020 does not expressly refer 

to requirements contracts, it does provide that purchases 

may be made using quantities estimated on the best available 

information. Assuming the estimates of 5,000 and 300 tons 

provided in the particular bid documents in the instant case 

are based on the best available information, the letting of 

the contract here is within the scope of authority conferred 

on the county by this section. See Canales v. Lauahlin, 214 

S.W.2d 451 (Tex. 1948): Patten v. Conch0 County, 196 S.W.2d 

833 (Tex. Civ. App. - Austin 1946, no writ). 

If we read the competitive bidding threshold found in 

section 262.023 together with the permissibility of unit 

pricing and the requirement for an estimated quantity of 

each item to be purchased found in section 262.028, we can 

logically conclude only that the legislature intended the 

product obtained by multiplying the estimated quantity 

required by section 262.028 times the estimated unit price 

to be the amount that triggers the requirement that any 

particular unit price contract be competitively bid. This 

calculation implicitly requires the county to estimate in 

advance the unit price to determine whether a unit price 

contract must be let by competitive bids. A conclusion that 

the county estimate unit prices as well as quantities in 

advance is consistent with the general use of estimated lump 

sum prices in advance to determine if particular lump sum 

contracts must be bid. If estimated quantities and estimated prices are not used to trigger the competitive bidding 

requirements, a county, wanting to purchase only the amount 

of an item that it will need over a period of time and 

without knowing in advance precisely the amount needed, 

would escape the competitive bidding requirements altogether. 

Similarly, if we read the threshold in section 

262.032(b) together with the permissibility of unit pricing 

and the requirement for estimated quantities found in 

section 262.028, we must conclude that the amount that 

triggers the authorization in section 262.032(b) for counties to require performance bonds is the product obtained by 

multiplying the estimated quantities to be purchased times 

the established unit prices. Again, to hold otherwise would 

not effectuate the legislature's intent in section 

262.032(b) to authorize counties to use their discretion to 

obtain needed performance security in contracts exceeding 

$50,000. 

Likewise, we read the express authority in section 

262.028 for a county to make purchases on a unit price basis 

in conjunction with the requirement in article 5160 for 

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Honorable Jim nape1 - Page 7 (JM-1243) . 

payment bonds for public works contracts in excess of 

$25,000. These provisions read together lead us to conclude 

that the legislature intended to require private persons 

entering into unit price contracts with counties for prosecution or completion of public works to satisfy the payment 

bond requirements of article 5160 if such contracts are 

estimated by the county, using the best available information, to be in excess of $25,000. 

In support of this conclusion, we note that the final 

total contract price for a unit price requirements contract 

is unknown before commencement of the work. Thus, the 

county cannot assure compliance with the requirement in 

article 5160 that required bonds be submitted "before 

commencing the work" unless estimated quantities are used to 

determine if article 5160 applies to a particular unit price 

contract. The total cost of the unit price contract, in 

fact, remains unknown until the work is completed. Furthermore, only by such a conclusion can the legislative policy 

behind article 5160 -- protection for suppliers of labor 

and materials against nonpayment by the contractor -- be 

effectuated with regard to county public works contracts 

exceeding $25,000. 

Thus, we conclude that the total estimated cost of a 

county unit price contract, based on the estimated quantity 

and the established unit price, is sufficiently certain to 

determine whether article 5160 applies. In reaching this 

conclusion, we of course have assumed, as the contractor 

must have done when he made the bid, that the county‘s 

estimate was a reasonable one based on "the best available 

information," as required by section 262.028 of the Local 

Government Code. 

SUMMARY 

The County Purchasing Act, subchapter C, 

chapter 262 of the Local Government Code, 

allows counties to purchase items by the unit 

price method and requires counties to furnish 

bidders with an estimate of the total guantity needed. Requirements contracts are 

permitted under that section. With regard to 

county unit price requirements contracts for 

the prosecution or completion of public 

works, the product of the estimated total 

quantity needed, determined on the best 

available information, and the established 

unit price provides an estimated total 

contract price, which if in excess of 

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Honorable Jim Mapel - Page 8 (JM-1243) 

$25,000, will trigger the payment bond 

requirements of article 5160, V.T.C.S. 

However, section 262.032(b) of the Local 

Government Code, which authorizes counties to 

require performance bonds for certain contracts, controls the acquisition of performance bonds. 

Very truly you d-h . 

-J I M MATTOX 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

MU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RENEA HICKS 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Celeste A. Baker 

Assistant Attorney General 

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