@ffice of tfie Bttornep ti3eneraI 

#Mate of ?ICexas 

DAN MORALES Al-KmNLY GENERAL 

September 17,199l 

Honorable John B. Holmes 

Harris County District Attorney 

201 Fannin, Suite 200 

Houston, Texas 77002 

Opinion No. DM-43 

Re: Whether the acquisition and constmction of a monorail transit system is 

subject to competitive bidding (RQ-64) 

Dear Mr. Holmes: 

You ask two questions regarding the proposed construction of a rail transit 

system by the Metropolitan Transit Authority of Harris County (METRO). You ask 

whether the construction of a rail, monorail, or fixed guideway transit system 

constitutes an improvement to real property and whether the purchase of a transit 

system is subject to the competitive bidding requirements of V.T.C.S. article 1118x. 

We conclude that the procurement of a new transit system is subject to the 

competitive bidding requirement of article 1118x, but that the board of METRO 

may grant a waiver of this requirement for portions of the project and may award 

contracts for those portions through competitive negotiation upon a finding of the 

conditions specified in section 14(a) of the statute. Whether the conditions of 

section 14(a) were met under the circumstances described in this opinion is a fact 

question that cannot be resolved by this office in the opinion process. 

I. Background 

A brief submitted on behalf of METRO acquaints us with some of the history 

of the METRO rail project. In 1988 the voters residing in the METRO service area 

approved by referendum a comprehensive regional mobility plan that included a 

proposal to construct a fixed guideway transit system Soon thereafter, the board of 

METRO embarked upon a strategy to develop a comprehensive plan to procure 

and construct the new transit system Following consultation with legal counsel, the 

METRO board concluded, contrary to its initial intentions. that the entire rail 

project could not be completed on a turnkey basis.’ The board determined that 

certain portions of the project could only be procured pursuant to competitive 

%x Attorney General Opinion JM-1189 (1990) 0.1 (dchition of “turnkey’ contracting in the 

-00 contcat). 

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Honorable John B. Holmes - Page 2 (DM-43) 

bidding while other portions could not. For example, the board understood that 

architectural and engineering services would have to be procured in accordance. with 

the Professional Services Procurement Act. V.T.CS. art. 664-4, see Attorney 

General Opinion JM-1189 (1990). The board also decided to divide the rail project 

into different components and pursuant to section 14(a) of article 111% to 

procure some components of tbe project through competitive bidding and others 

through competitive negotiation. 

The components of the rail project to be acquired by METRO through 

competitive bidding include terminal complexes, parking lots, maintenance and 

storage buildings, the central control facility, roadways, and guideway supports. The 

portions of the project to be obtained via competitive negotiation constitute the 

nucleus of the equipment involved in the project and are called “System Elements.” 

These items include vehicles, the traction power system, automatic train control and 

commmdcations system, the fare collection system, trackage, supporting girders, 

maintenance equipment and tools, and other equipment used in the operation of the 

system The METRO board determined that the contract for all of these elements 

would be awarded to a single supplier selected following an evaluation of proposals 

submitted in response to a detailed Request for Proposals (RFP). On March 28, 

1991, the METRO board selected one proposal for the “System Elements.” The 

general manager of METRO is currently engaged in negotiations with the Houston 

Monorail Team (I-WI’), offerors2 of the selected proposal. 

II. Metropolitan Transit Authority (MTA) statutory procurement requirements 

METRO’s purchasing practices are governed by section 14 of article 1118x. 

Subsection (a) of that section requires that contracts of a metropolitan transit 

authority (MTA) 

for more than SlO,OOO for the construction of improvements or 

the purchase of materi& machinery, equipment supplies [sic] 

and all other property, shall be let on competitive bids. 

V.T.C.S. art. 1118x, 0 14(a). The subsection also prescrii general procedures for 

the advertising of proposed purchases. The board of an MTA may adopt rules 

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Honorable John B. Holmes - Page 3 (DM-43) 

governing the taking of bids and the awarding of such contracts. It is also 

authorized to grant waivers of the bidding requirement under the circumstances 

itemized below: 

(1) ‘in the event of emergency, 

(2) ‘in the event the needed materials are available from only 

one source; 

(3) ‘in the event that, except for construction of improvements 

on real property, in a procurement requhing design by the 

supplier competitive bidding would not be appropriate and 

competitive negotiation, witb proposals solicited from an 

adequate number of quaJified sources, would permit reasonable 

competition consistent with the nature and requirements of tbe 

procurement;’ or 

(4) “in the event that, except for construction of improvements 

on real property, after solicitation it is ascertained that there will 

be only one bidder. 

See V.T.C.S. art. 1118x, 0 14(a). Subsection (a) of section 14 does not apply to 

contracts for personal or professional services, for the acquisition of existing transit 

systems, or for services covered by the Professional Services Procurement Act, 

V.T.CS. article 664-4. Id; see u.50 Attorney General Opinion JM-1189 (1990). 

The complete text of section 14(a) is set out below.3 

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The METRO board granted a waiver from competitive bidding for portions 

of the rail project under the third form of waiver authorized by section 14(a), which 

we will generally refer to as the “design waiver.” You question whether the board 

was authorized to grant the waiver under these circumstances. Before addressing 

the specific issues you raise, we will examine the competitive negotiation technique 

under section 14(a) and other statutes. 

III. Charactehtics of competitive negotiation 

The language of the design waiver of section 14(a) reveals that prior to 

granting the waiver the board must make four critical determinations - (1) that a 

particular procurement “requires design by tbe supplier,” (2) that it does not 

constitute an “improvement on real property,” (3) that “competitive bidding would 

not be appropriate” under the circumstances, and (4) that competitive negotiation 

would permit reasonable competition under the circumstances. As indicated at the 

outset of this opinion, these inquiries involve factual questions that CannOt be 

resolved in an opinion of the attorney general. It is possible, however, to address 

some of the issues regarding the proper interpretation of section 14(a). The balance 

of this opinion wilI address such issues. 

Another sig.niiIcant feature of tbe language of section 14(a) is that it 

authorizes procurement contracts to be awarded on the basis of competitive 

negotiation, an alternative to competitive sealed bidding, the traditional mode of 

government procurement. The approxlmate scope of the design waiver and its 

precise meaning are matters left unsettled by the terms of article 11%. The statute 

does not prescribe specific procedures or time frames for competitive negotiation, 

but specikahy grants the board rulemaking power over the process. It nonetheless 

offers some insight into the differences between the two procurement modes. 

For instance, competitive negotiation under section 14 does not require 

formal advertising of the MTA’s decision to make a particular procurement as it 

does for competitive bidding. Instead, the board may solicit proposals directly from 

sources it determines are qualified to meet the MTA’s needs. The MTA is required 

only to post an amrouncement that it is considering such a contract in its principal 

office for at least two weeks before the contract is awarded. V.T.C.S. art. 111&4 

814(b). 

Also, section 14 authorizes the board of the hITA to determine what level of 

competition is appropriate for a contract awarded by competitve negotiators and 

requires only “reasonable competition” among “an adequate number of qualified 

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Honorable John B. Holmes - Page 5 (DM-43) 

sources.” On the surfacx, this standard differs from the widely-recognized view that 

competitive bidding requires and generates maximum open competition among all 

interested parties. See Tarac Highway Conun’n v. Tarar A&n of Steel Zmporers, 372 

S.W2d 525 (Ten. 1963). Yet it is apparent from the experience in other jurMictior~~ 

that competitive negotiation can also be conducive to maximum competition. See 

gemdy Paul v. United Statfs, 371 U.S. 245,2X%53 (1963) (discussing competitive 

negotiation procedures for military procurements). 

The competitive negotiation procedure is said to allow comparative, 

judgmental evaluations to be made when selecting from a number of acceptable 

proposals. Attorney General opinion MW440 (1982) at 3. The principal difference 

between competitive negotiation and the traditional method of procurement 

(competitive bidding) is that the former permits alteration and refinement of a 

proposal following the opening and initial review of the proposal by the governing 

body and prior to award of the contract, whereas the traditional method requires a 

contract to be awarded solely on the basis of the information contained in the bid at 

the time of opening. See The Council of State Governments, State and Local 

Govemment Ptuddng 64-65 (3rd ed. 1988); Nash & Love, Znnovationr in Federal 

Conhrdion ccmfm&g, 45 Geo. Wash. L Rev. 309,324-33 (1977). Competitive 

bidding utilizes price as either the sole criterion or one of two chief criteria for 

contract awards. Competitive negotiation, on the other hand allows evaluation of a 

proposal in light of important criteria in addition to price, such as quality, 

experience, and staff@ Id 

The competitive negotiation technique also affords a governmental body 

somewhat greater flexibility than the traditional method because it is usually 

associated with the use of “performance” specifications. Performance specifications 

permit the governmental body to describe a need and invite prospective vendors to 

devise unique solutions to the problem See Ztuwvationr in Federal Constmcthn 

Contract@, supm, 1135 at 32526. Competitive bidding is typically associated with 

the use of “prescriptive” or “design” specifications, which describe the means of 

meeting the governmental body’s needs and customarily employ dimensional and 

other physical requirements of the item being procured. See id; State and Local 

Govemment Ptuddng, suptn, at 45. 

Under the negotiation technique, the governmental body is allowed to 

conduct dkcussions with offerors regarding the particulars of their proposals, to 

negotiate with offerors to obtain the most advantageous contract for the agency, and 

to award the contract to the offeror submitting the best overall proposal. Id As 

prescriid in statutes other than article Ill&r, competitive negotiation generally 

Ij. 214 
Honorable John B. Holmes - Page 6 (DM-43) 

requires the governmental body to specify the relative importance of the additional 

evaluative criteria and to give all offerors fair and equal treatment with respect to 

any opportunity for diswssion or revision of proposals. E.g., Educ. Code 

0 21.9012(g); Local Gov? Code $0 252.04~ 262.030. 

Iv. Divisibility of publk works or improvement projects into separate components 

You ask whether the purchase of a transit system is subject to the 

competitive bidding requirement of section 14(a), but your brief focuses on a 

different issue: i.e., whether the METRO board was authorized to divide the rail 

project into separate wmponents for the purpose of submitting wntracts for some 

of the components to competitive bidding. You argue that the board was required 

to award a single contract for the entire project pursuant to competitive bidding. 

We disagree. 

It has long been the rule in Texas that a governmental body has discretion to 

award separate contracts for different portions of a single public improvement 

project when, in its honest judgment, separate wntracts are in the public interest. 

Wbig Bnx v. Cfty qf DaUas, 91 S.W3d 336,338 (Tex. 1936); see aIro 64 AM. JUR 

26 Acbk Works and Contmcts 0 56 (1972). Thus, the METRO board required no 

special statutory authorization to divide the rail project into separate components. 

In this instance, section 14(a) expressly recognizes that competitive bidding 

may be inapplicable to some components of a public works or improvement project 

(e.g., some professional services). See V.T.C.S. arts. m 1118x, 0 14(b). Where 

competitive bidding is required, a governmental body may only act to promote the 

unmistakable legislative policy favoring unrestricted competition for public 

wntracts. Teuzr Highway Comm’n v. Texas Ash of Steel Zmmen. supm. Likewise, 

where some aspects of a contract are subject to a waiver of competitive bidding and 

others not, those aspects that are not subject to waiver are controlled by the 

competitive bidding statute. See Wiakce v. ~Gxnmirsioners’ Court of Madiron 

County, 281 S.W. 593,595 (Tex. Civ. App.-Waco 1926), r&d on other groundr, 15 

S.W.2d 535 (Tex. 1929). 

Once it resolved to divide the rail project into components, the METRO 

board’s duty then became to ascertain which components were subject to 

competitive bidding and to award wntracts for those components acwrdingly. In 

answer to your Srst question, we conclude that article 1118x did not require the 

METRO board to award a single contract for the entire rail system project. 

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Honorable John B. Holmes - Page 7 (DM-43) 

V. Whether eonstn~ction of a monorail system is an improvement to red property 

In light of the preceding disc&on, your next question is whether the 

contract for the “System Elements” is subject to the competitive bidding 

requirements of section 14(a)? The answer to this question hinges on the meaning 

of the word “improvement,” a term which appears susceptible to several different 

interpretations. 

METRO and HMT direct our attention to several cases which hold that 

railroad ties and trackage are personal property which do not become part of the 

underlying real estate and therefore do not constitute improvements to real 

property. Teaa & iKO.R Co. v. S&e&&f, 146 S.W.2d 724, 727 (Tex. 1941); 

Pmton v. Sabhe & E.T. Ry. Ca, 7 S.W. (L25 (Tex. 1888); Moore v. Roteb, 719 

S.W.2d 372,376 (Tex. App.-Houston [14th Dist.] 1986, writ ref d n.r.e.). The HMT 

brief also invokes the familiar rule of statutory wnstruction establishing the 

presumption that the legislature intends to give undefiued words in a statute the 

meaning given those words by the wurts. See McBride v. Cluyton, 166 S.W.2d 125, 

128 (RX. 1942); Tetm Employers’ Ins A&n v. Hamchild, 527 S.W.2d 270, 275 

(Tex. Civ. App.-Amarillo 1975, writ refd n.r.e.). The HMT brief asserts that the 

legislature’s failure to define the word “improvement” gives rise to the presumption 

that it intended the word to carry the same meaning given it by the courts in the 

railroad cases. Drawing an analogy to the railroad cases, the METRO brief 

concludes that a monorail system does not wnstitute an improvement to real 

wwv. 

These arguments are persuasive, but we do not find them fully dispositive of 

the issue. You point out, in keeping with the rule of construction described above, 

that “improvement” has been broadly defined by the wmts. See Nine Hundred 

Main, Zne v. City of Houston, 150 S.W.2d 468,472 (Tex. Civ. App.-Galveston 1941, 

writ dism’d judgm’t car.) (“improvement” comprehends all additions to the freehold, 

except trade fixtures which may be removed without injury). Also, other rules of 

statutory wnstruction make it possible to draw different conclusions regarding the 

meaning of the word “improvement.” 

For instance, in contrast to the rule descriid above, the courts will also 

presume that the legislature, in leaving certain words in a statute undefined, is 

%esc items indnde dkb%, the traction power system, automarie train control and 

c0mmW 6yStem. the fare cdlcetion system, trackage, qpcuthg girdeq maintenance 

quipmeat and too& aad other quipmeat used in the operation of the system. 

p. 216 
Honorable John B. Holmes - Page 8 (DM-43) 

aware of existing statutes employing similar terms. See Gmrso v. Cannon Ball Motor 

Freight Lutes, 81 S.W.2d 482,485 (Tex. 1935). Where the legislature has specially 

defined a word in a statute, it will be presumed that the word will be used in the 

same sense in a subsequent enactment, though this is not necessarily so when the 

two enactments deal with different subject matter. See Bmo&shk v. Houron Z&&p. 

SchoolDist, 508 S.W.2d 675 (Tea. Civ. App.-Houston [14th Dist.] 1974, no writ). 

“Improvement” is defined different@ in at least three codes. See Tax Code 

0 1.04(3) (Property Tax Code definition; “improvement” means, tier &z, “a 

building, structure, fixture, or fence erected on or affixed to land”); Property Code 

0 53.001(2) (defining term for purposes of mechanic’s, wntractor’s, and 

materialman’s liens to include abutting sidewalks and streets and utilities, wells. 

cisterns, tanks, reservoirs, pumps, siphons, windmills, and “other machinery or 

apparatus used for raising water for stock, domestic use, or irrigation”); Water Code 

Q53.001(3) (“improvement” means a facility for wnservin& transporting or 

dismhtingfresb water). 

Furthermore, the analogy to railroads, while ilbmdnating, does not answer 

the issue with certitude, for a monorail might also draw wmparkons to other forms 

of transport. See A. Lerchen & Sons Rope Co. v. Moser, 159 S.W. 1018 (Tex. Civ. 

App.-San Antonio 1913, no writ) (an aerial tramway was an improvement to real 

property for purposes of enforcing a materialman’s lien). These examples demonstrate the difficulty of conforming the word “improvement” in section 14(a) to cases 

and statutes reflecting altogether different wntextual considerations and policies. 

We think it is more productive to analyze the term in relation to the general body of 

law of which it is a part and by reference to its legislative history. On examination 

of these factors, we think it was not unreasonable for the METRO board to 

conclude that parts of the rail project could be accomplished by use of the 

competitive negotiation technique. Whether its decision with respect to particular 

components of the project was justified is, again, a question of fact that cannot be 

resolved here. 

Prior to 1985, section 14(a) required competitive bidding on all MTA 

purchases above S5000 and permitted a waiver of the sealed bidding requirement 

only in cases of emergency. In that year the legislature amended the provision to its 

current form. S.B. 440, Acts 198569th Leg., ch. 620, at 2306. As originally Sled, 

Senate Bill 440 would have permitted the board of an MTA to waive competitive 

bidding if it found that 

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Honorable John B. Holmes - Page 9 (DM-43) 

wnditions are not appropriate for formal advertisin& the 

needed materials are available from only one source, or after 

soiicitatio~ competition is inadequate. 

Bill File to S.B. 44469th Leg. (1985). 

The publicly stated purpose of the 1985 amendment was to wnfonn MTA 

procurement requirements to parallel federal guidelines, since most MTA capital 

projects are funded with a combination of state, local, and federal funds. Hearings 

on S.B. 440 Before the Senate Comm. on Intergovernmental Relations, 69th Leg. 

(March 5, 198S).J The most obvious effect of the 1985 amendment was to free 

MTAs from the rigid structural and discretionary wnstraints imposed by sealed 

competitive bidding. See Znnovaffonr in Fedeml Gwhucdon Contmcdng, supm, at 

324-33 (1977) (comparing competitive bidding to competitive negotiation, at the 

federal level). 

The most relevant item of legislative history is a statement by the sponsor of 

the bill indicating that the original language of the amendment to section 14(a) was 

changed in subcommittee to address, among other things, the concerns of a segment 

of the wnstruction industry - specifically, general wntractors. Hearings on S.B. 440 

Before the Senate Comm. on Intergovernmental Relations, 69th Leg. (March 5. 

1985) (testimony of Senator John Traeger). This most likely explains the addition to 

section 14(a) of tbe phrase “except for the wnstruction of improvements on real 

property.” We think the modification of the original language of Senate Bill 440 to 

its ultimate form indicates that the legislature was interested in preserving the status 

quo with respect to the award of mA wntracts for conventional construction 

projects. Viewed from this perspective, the legislature may have used the term 

“improvement” to denote, as you suggest, public improvements or public works. 

The phrases “public improvements” and “public works” are often used 

interchangeably. Compare Navam~ Auto-Park, Znc v. Ci@ of Son Antonio, 574 

S.W.2d 582,584 (Ten. Civ. App.-San Antonio 1978, writ refd n.r.e.) (characterizing 

municipal public parking facility as a “public work”); with Zachty v. City of Son 

Antonio, 296 S.WL?d 299,304 (Tex. Civ. App.-San Antonio 1956). t#‘d, 305 S.W.2d 

558 (Ten. 1957) (numicipal public parking facility is a “public improvement”). 

%rdbily, interprcdons of the paraUel federal guideha would be approphtc sources of 

meaoing d section 14(a). See St& v. wicss. 171 S.WZd 848 (T~L l!X3). q Eourd of W&r Eng’n v. 

AkKnf$u, 229 S.W. 301 (Tex 1921). I-hwer, WC bavc been unable to locate any federal standard 

emplojhg laquage comparable to the ‘design’ waiver. 

p. 218 
Honorable John B. Holmes - Page 10 (DM-43) 

courts have generally applied these phrases to permanent structures or facilities, 

additionsofafixednaturetostructures,andtoroads. SeeC&ofCopusChistiv. 

Haywad, 111 F.2d 637, 639 (5th Cir.), cert. denied, 311 U.S. 670 (1940) (dam and 

reservoir); i&auf& v. C* of CR-M P&&s, 86 S.W.2d 204, 206 (Ten 1935) (water 

reservoir and pipelines); Enzpw Gawalty Ca v. Stewatt, 17 S.W.2d 781 (Tex. 

Comm’n App. 1929, judgm’t aff’d) (wntracts for building or road wnstntction 

included, but not wntracts for map and plat book preparation or purchase of road 

grader); Overslreet v. Houston County, 365 S.W2d 409,412 (Ten. Civ. App.-Houston 

[lst Dist.] 1963, writ rePd n.r.e.) (central air wnditioning system and window tits). 

We think the context and legislative history of section 14(a) support a comparable 

application. 

With these points in mind, it may be possible to draw initial conclusions 

regarding the propriety of the METRO board’s actions. These matters, however, 

are entrusted in the first instance to the discretion of the METRO board. 

Moreover, since this inquiry requires the examination and resolution of issues 

regarding facts which are not before us and are beyond our authority to investigate 

in the opinion process, we are unable to further advise you in this regard. 

To summa&e, we conclude that the procurement of a monorail transit 

system by the Metropolitan Transit Authority of Harris County is subject to 

competitive bidding, but the board of METRO may grant a waiver of this 

requirement for portions of the project and award wntracts for those portions 

pursuant to competitive negotiation upon a finding of the conditions described in 

section 14(a) of article 1118x. The board is not required to award a single contract 

for the entire project, 

The procurement of a transit system employing monorail 

technology by the Metropolitan Transit Authority of Harris 

County is subject to the competitive bidding requirement of 

article 1118x, V.T.C.S. The board of the authority is not 

required to award a single contract for tbe acquisition and 

wnstruction of the transit system, but in its discretion may 

divide the project into wmponents and award separate contracts 

p. 219 
Honorable John B. Holmes - Page 11 (DM-43) 

for those wmponents. The board may grant a waiver of 

competitive bidding in favor of competitive negotiation 

procedures upon a finding of the conditions specified in section 

14(a) of article 1118x. 

DAN MORALES 

Attorney General of Texas 

WILL PRYOR 

First Assistant Attorney General 

MARYKELLER 

Executive Assistant Attorney General 

JUDGE ZOIUE STEAKLEY (Ret.) 

Special Assistant Attorney General 

RENEAHIcKs 

Special Assistant Attorney General 

MADELEINE B. JOHNSON 

Chair, Opinion Committee 

Prepared by Steve Aragon 

Assistant Attorney General 

p. 220