QiXfice of tlyz !&tornep @eneral 

DAN MORALES 

ATTORNEY GENERAL 

%btate of fEexae 

May 4,199s 

Honorable Bill Sims 

Chair 

Committee on Natural Resources 

Texas State Senate 

P.O. Box 12068 

Austin, Texas 7871 l-2068 

Dear Senator Si: 

Opinion No. DM-347 

Be: Whether, under Education Code 

section 21.901, a school district must 

competitively bid a contract for the 

purchase of imnunnce (RQ-656) 

You have asked whether a school district that chooses to request bids for the 

purchase of property insurance must comply with the competitive bidding procedures 

Texas law sets forth. You state that a school district has chosen to seek bids for the 

purchase of property insurance, although the school district understands that section 

21.901 of the Education Code does not require it to do so. You have further informed us 

that, as part of the school district’s routine, members of the school board review each bid 

and subjectively evaluate which bid would provide the most benefit to the school district. 

The school district does not necessarily award the contract to the lowest bidder. 

You cite section 21.901 of the Bducation Code, which you understand governs 

when a school district must obtain a contract through competitive bidding. Section 

21.901 states in pertinent part as follows: 

(a) Except as provided in this section, ah contracts proposed to 

be made by any Texas public school board for tbe purchase of any 

personal property, except produce or vehicle fuel, shall be submitted 

to competitive bidding for each 1Zmonth period when said property 

is valued at S25,OOO or more, in the aggregate for each 12-month 

period. 

(b) Except as provided in Subsection (e) of this section, all 

contracts proposed to be made by any Texas public school board for 

the construction, maintenance, repair or renovation of any building 

shall be submitted to competitive bidding when said contracts are 

valued at more than Sl5,OOO. . . 

(c) Nothing in this section shall apply to fees received for 

professional services rendered, including but not limited to 

architect[‘]s fees, attorney’s fees, and fees for fiscal agents. 
Honorable Bill Sims - Page 2 @M-347) 

(d) providing that school board noti* public of time when and 

place where “such contracts” will be let and bids opened] 

(e) lproviding for replacement or repair of school building or 

school equipment in certain emergency situations] 

(t) ~ovidmg for purchase of computers and computer-related 

eq~p-4 

(g) [providing for purchase of item available tkom only one 

SOIUW] 

Q [Providing for lease of one or more school buses] 

Your question is premised upon an assumption that, under section 21.901 of the 

Education Code, a school board need not competitively bid a contract for the purchase of 

insurance. Indeed, this office concluded in Attorney General Opiion h4W-342 that 

section 21.901 of the Education Code does not require a public school district to 

competitiveiy bid a contract for the purchase of insurance.. Attorney General Opiion 

MY-342 (1981) at 3. We now wish to m-examine that decision. 

Attorney General Opinion MW-342 specifically considered subsections (a) and (c) 

of Education Code section 21.901. In particular, Attorney General Opinion MW-342 

focused on whether the purchase of insurance was the purchase of personal property, and 

therefore governed by subsection (a), or the purchase of professional services, and 

therefore governed by subsection (c). 

If “insurance*’ involved nothing more than the insurance policy 

which is finally negotiated, we would conclude that the purchase of 

insurance involved the purchase of property. [Citations omitted.] It 

is clear, however, that insurers do much more than write policies. A 

purchaser of property insurance, for example, will be vitally 

interested in such things as the professionalism exhibited by the 

insurer, the frequency and thoroughness with which he inspects the 

insured property, and ,the promptness, eflkiency and honesty with 

which he set-&es claims and provides assistance. An insurer’s ability 

to provide certain services in a wmpetent manner, in other words, is 

a dominant, if not the primary, consideration in any purchase of 

insurance. . 

[T]he purchase of insurance cannot be neatly characterized as 

the purchase of either “personal property” or “professional service,” 

within the meaning of section 21.901; to some extent, both 

categories are involved. Section 21.901 does not, however, indicate 

whether a purchase involving both property and services must be 

made on the basis of competitive bids. But in our opinion, the 

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Honorable Bi Sims - Page 3 @M-347) 

weight of authority compels us to conclude that, at least where 

insurance is involved, such a purchase need not be so made. 

We therefore conclude that a wntract for the purchase of 

insurance would most accurately be described as one for tbe 

purchase of services, and themfore, that it need not be awarded 

through the competitive bidding process. . . . 

Attorney General Opinion MW-342 (1981) at 2-3. 

In an opinion issued the day after this office issued Attorney General Opiion 

MW-342, this office considered the parameters of the term “professional services” in the 

context of V.T.C.S. article 2368a, now Locsl Government Code section 252.021.* 

Article 2368a governed the competitive bidding and competitive proposal processes of 

counties and cities of this state. 

According to Attorney General Opinion MW-344, a professional service is one 

requiring “‘predominantiy mental or intellectual, rather than physical or manual,“’ skills. 

Attorney General Opiion MW-344 (1981) at 4 (quoting Mqkmd Gasua&y Co. v. Crq 

BGrfer Co., 160 S.W.2d 102, 105 (Tex. Civ. App.-Eastland 1942, no writ)). Furthermore, a “professional” works in a profession that “‘requires years of education and service 

for one to attain competence and [that] calls for a high order of intelligence, skill and 

leaming.“’ Id. (quoting Tranrpwration Disp.@, Inc. v. City of New Orleans, 346 So. 2d 

359,363 n.5 (La. Ct. App. 1977)). 

Finally, the opinion discussed “[t]he most useful standard for judging the scope of 

‘profession’” from W&ii v. Drriley, 230 S.E.Zd 466 (W. Va. 1976). Id. at 5. The 

Woo&J1 wurt concluded that the services of an interior decorator were not professional 

services. The WooddeN court did not, however, limit the term “professional services” to 

the professions of theology, law, or medicine, nor to professions specifically recognized as 

such by statute. Id. (citing Woo&Tell, 230 S.E.Zd at 469-70). Rather, while “‘most 

occupations, trades, business or callings require a diversity of knowledge and skill,“’ not 

all such occupations, trades, business or callings could be called “professions.” Id. 

(quoting WooaiM, 230 S.E.Zd at 470). A professional is only one who “‘is a member of 

[a] discipline with widely accepted standards of required study or specified attainments in 

%omey Genaal opiion Mw-344 (1981) alnsidcmd wbahs the board ef tNstces of the 

GalvcstonWharvcswasrequindtocomptitivclybidrcontractforthcpavicadacontaiarrtcrminal 

operator. Article 2368a. section 2(a), V.T.C.S., required II comny to wmpctitivtly bid cettain wn~mcts; 

however, subsedoo @) precluded a political &division from competitively bidding B m&act “for 

persooal or pmkssiolvil service&” Acwdingiy, if the amtract for Ihe service8 of a container tmminai 

operator was a am-act for personal or professional services within the conlex~ of article 2368a, sution 

2(a), lbc hod of hustees was forbidden to compeiitivdy bid it. Altomey General Opinion MW-344 

emmined the meanings ascribed to the terms “personal scrvicxs” and Upmfssional scrviccs” to determh 

wktber the catmct at iswc fell within the scope of&her CategoIy. 

p. 1847 
Honorable Bill Sims - Page 4 @M-347) 

special knowledge as distinguished from mere ~kill.‘“~ Id. (quoting Woou&ll, 230 S.E.2d 

at 470). 

Subsequently, this office issued Attorney General Opiion MW-494 (1982), which 

concluded that a county must competitively bid a wntract for the purchase of insurance 

under V.T.C.S. article 2368a, section 2. The opinion distinguished article 2368a, section 

2 from section 21.901 of the Education Code and therefore was not bound by the 

conclusion in Attorney General Opiion MW-342. Notably, according to nomey 

Oeneral Opinion MW494, section 21.901 specifically set out two categories of wntracts 

a public school board must competitively bid: subsection (a) pert&s to wntracts for the 

purchase of personal property, and subsection (b) pertahu to wntracts for the 

wnstruction, maintenance. repair, or renovation of a building or for the purchase of 

materials to use in such a project. Attorney General Opinion MW-494 (1982) at 3. These 

two categories do not “cover every type of contract a school district might enter. .” 

Id. A school district need not competitively bid wntracts outside of the two categories 

listed in Education Code section 21901(a) and (b).s Id. 

By wntrast, V.T.C.S. article 2368a. section 2(a) prohibited a county or city from 

making any contract requiring an expenditure in an amount exceeding S5,OOO.oO unless 

the county or city had competitively bid the contract. See id. at 2. Section 2(b) created an 

exception to the wmpetitive bidding requirement for, among other things, “contracts for 

personal or professional services.” Id, This office thus declined to apply its conclusion in 

Attorney General Opinion MW-342 to the situation before it in Attorney General Opinion 

MW-494. See id. at 3. 

%ased on the standad it set forth, Attorney Ganual Opinion W-344 concluded that a 

container termimI operator is not a member of a rccognizd profession. Attorney General Opinion 

AN-344 (1981) at 5. Accordingly, the Ciaheston Wharves board of mtstczs was required to 

umpetitivdy bid a contract for the scr%iccs ofa container terminal opnator. Id. 

3Attomy GeneraI Opiion MW-494 summaid the reasoning and conclusion of Attorney 

General Opiion MW-342 as follows: 

Attorney General Opinion h4W-342 stated that an insmmce amtmet did 

not fit sqoady into the category of ‘paaonal property” or the exemption for 

“pmfcssi0nalscrvices~undcrsccti0n21.901 oftheEducationCo& Theservices 

pmvidcdunderitwnchignificantenoughmrrmovcthccontractfromthc 

category of “personal propetty,” even though they did not constitute “professional 

smkxs.” U&t section 21.901 it is lJtmamytoshowtbataniasulaoce 

amtmct is a wnhact for “professional services” to mnovc it from the 

competitive bidding requirement. It is only nuxssmy to show that it QuLnot 

fairhlkcharanerizcdasawntractforthcpurchascdpersonalpropcrty. The 

disco&on in Attorney General Opinion MW-342 of the service aspect of an 

inwmoce umtmet most lx mad with section 21.901 in mind. 

Attorney General Opinion MW-494 (1982) at 3. 
Honorable Bill Sims - Page 5 @M-347) 

Instead, the drag applied the standards Attorney General Opinion MW-344 

assigned to the term “personal and professional services” to determine whether a contract 

for the purchase of insurance was a personal or professional service under V.T.C.S. article 

2368a, section 2. Attorney Generai Opinion MW-494 (1982) at 3-4. The opinion Ihst 

found that such a wntract was not for personal services. Id. at 4. Second, the opinion 

found that such a wntract was not for professional services because the provision of 

insurance coverage does not entail a “body of special knowledge attributable to a 

profession, the years of study necessq to attain wmpetence, and the wide recognition of 

the profession and its standards of study.” Id. 

We believe the analyses and conclusions reached in Attorney General Opinions 

MW-344 and MW-494 are wrrect; on the other hand to the extent Attorney General 

Opinion MW-342 is inwnsistent with these opinions by concluding that, under section 

21.901 of the Education Code, a contract for the purchase of insurance “would most 

accurately be descrii as one for the purchase of’ professional services, we believe the 

opinion is incorrect. Accordingly, we hereby overrule Attorney Generai Opinion MW-342 

to the extent it concludes that a contract for the purchase of insurance under Education 

Code section 21.901 is a contract for professional services that section 21.901 excepts 

from the competitive bidding process. 

Furthermore, to the extent Attorney Generai Opinion MW-342 concludes that a 

wntract for the purchase of insurance is not a contract for the purchase of personal 

property subject to competitive bidding under Education Code section 21901(a), we 

overrule it. Likewise, to the extent Attorney Generai Opinion Attorney Generai Opiion 

MW-494 suggests a contract for the purchase of insurance is not personal property for 

purposes of section 21.901 of the Education Code, we overrule it. “Personal property” 

generally is “all property other than real estate,” BLACK’S LAW DKTIONARY 10% (5th ed. 

1979); it includes “goods, chattels, money, notes, bonds, stocks and chases in action 

generally, including intangible property,” id. (citing Bismarck Tribune Co. v. OmahhI, 147 

N.W.Zd 903, 906 @I.D. 1966)). An insurance policy wnstitutes a contract between the 

insurer and insured, International Travelers’ Ass ‘n v. Gunther, 269 S.W. 507, 508 (Tex. 

Civ. App.--San Antonio 1925), rev’d on other puna& 280 S.W. 172 (Tex. Comm’n 

App. 1926, judgm’t adopted). The Texas Supreme Court has concluded that the right to 

receive insurance proceeds payable in the future is “property.” See Brown v. Lee, 371 

S.W.2d 694, 696 (Tex. 1963). Siilarly, a wurt of civil appeals has concluded that a 

spouse’s disability insurance policy is a property right belonging to the community estate. 

Mathews v. Mathews, 414 S.W.Zd 703, 707 (Tex Civ. App.-Austin 1967, no writ). 

In sum, we conclude a contract for the purchase of insurance is a contract that 

section 21.901 of the Education Code requires a school board to competitively bid if the 

value of the contract is 825,000 or more for a twelve-month period. We do not, by this 

.’ conclusion, discount our suggestion in Attorney Generai Opinion MW-342 that a 

wnscientious wnsumer purchases an insurance policy on the basis of an insurer’s 

professionalism and the promptness, etliciency, and honesty with which the insurer 

services claims, as well as on the basis of price. See Attorney General Opinion MW-342 

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Honorable Bill Sims - Page 6 @M-347) 

(1981) at 2. We believe that a school board properly may consider these factors in the 

process of competitive bidding, however. Nothing in Education Code section 21.901 requires a school board to accept the lowest bid submitted. Timothy T. Cooper & 

Janet L. Horton, Competitive Bid Requirements for School District Contract%, 46 TEX. 

B.J. 1154, 1154 (1983). Furthermore., we are unaware of any other statute that requires a 

school hoard to select the lowest bid submitted in response to a request for bids on the 

purh of insurance or any other personal property. See Local Gov’t Code 5 271.005; 

see ulro id. 53 271.004. .021 - .030 (providing for wntracts for purchase of real property 

and for public improvements). 

Rather, the school board only must “act faithgtlly and in the exercise of [its 

members’] best judgment so as to best serve the interest of [its] district.” See Teurs 

Roofing Co. v. Whiteside, 385 S.W.Zd 699, 702 (Tex. Civ. App.-Amsriho 1964, writ 

ref d n.r.e.); Skzpleton v. Trwsell, 196 S.W. 269, 270 (Tar. Civ. App.-Fort Worth 1917, 

no writ); see also Cooper & Horton, supru, at 1154. Generally, in wmpetitive bidding 

situations, a governmental body may reject the lowest bid “‘if in the exercise of an honest 

discretion, another seems to be better for the object to be accomplished.” Cooper & 

Horton, supro, at 1154 (quoting EUGENE MCQUILLIN, THE LAW OF M~NICPAL 

CoRpoRAToNs 4 29.734 at 429-30 (1971)). 

In relation to the procedures a school board must use when competitively bidding 

a wntract under section ,21.901(a), we note that, with the exception of the notice 

requirements provided in subsection (d), section 21.901 articulates no mandatory 

procedures a school district must follow in the competitive bidding process, See &o id. 

Section 271.005 of the Local Government Code authorizes the board of trustees of a 

school district to contract for the use or purchase of personal property, but it does not set 

forth any mandates with which a board must comply. other sections of the Local 

Government Code articulate competitive bidding requirements to which a governmental 

body must comply in certain situations, but the sections are inapplicable to a contract for 

the purchase of insurance. See Local Gov’t Code $8 271.004, ,021 - .030 (per&ring to 

contract for use or purchase of real property or improvement to real property and to 

contract for wnstruction, repair, or renovation of structure, road, highway, or other 

improvement or addition to real property requiring expenditure of more than SlO,OOO). 

Instead, we believe the school board may devise its own bidding procedure, so long as the 

procedure is wnsistent with good business management. See Educ. Code 5 23.26(b) 

(providing board of trustees with exclusive power to manage and govern district’s 

schools); Punen v. Con&o Connv, 196 S.W.Zd 833, 835 (Tex. Civ. App.-Austin 1946, 

no writ); see also Texas Roofing Co., 385 S.W.Zd at 702; Stqleton, 1% S.W. at 270; cJ 

Attorney General Opinion DM-14 (1991) at 3 (concluding that federal law requires local 

school board to competitively bid contracts for purchase of food service management 

services because “[i]n the absence of applicable state regulations, the selection of specifk 

procedures is within the sound discretion of local school boards”). 

of course, if a contract is valued at less than S25,OOO for a twelve-month period, 

Education Code section 21.901 does not require a school board to competitively bid it. In 

p. 1850 
HonorableBill Sims - Page 7 @M-347) 

such a situation, a school board may opt to competitively bid the contract if the board 

determines that good business management requires it. See Paten, 196 S.W.2d at 835; 

see also Texas Roofing Co., 385 S.W.2d at 701; S&pIelon, 196 S.W. at 270; Attorney 

General Opinion DM-106 (1992) at 2 (stating that, even if municipality determines that 

auctioneering services are professional se.rvices and that municipality therefore need not 

competitively bid contract for purchase. of such services, municipality may choose to 

competitively bid contract). If the board opts to competitively bid a contract, the board 

must devise a wmmitive bidding procedure that is consistent with good business 

management. Be Educ. Code 8 23.26@) (providing board of trust= with exclusive 

power to manage and govern district’s schools); PuUen, 196 S.W.Zd at 835; see also 

Texas Roofing Co., 385 S.W.Zd at 702; Shplebn, 196 S.W. at 270; cf. Attorney General 

OpiionDM-14 (1991) at 3. 

To specitically answer your question, then, a school board may not choose 

whether to competitively bid a contract for the purchase of insurance if the value of the 

contract is S25,OOO or more for a twelve-month period, rather, under section 21.901(a) of 

tbe Education Code, a school board must wmpetitively bid such a wntract. You do not 

indicate the value of the wntact about which you ask, we cannot, therefore, determine 

whether the school board must have competitively bid the contract. If the contract was 

vahted at S25,OOO or more for a twelve-month period, the school board must comply with 

the notice requirements articulated in section 21.901(d) of the Education Code. AB to the 

remaining competitive bidding procedures, the school board must select a procedure that 

is consistent with good business management. If the contract is valued at less than 

S25,OOO for a twelve-month period, the school board may competitively bid the project if 

tbe board determines that good business management requires it. In such a situation, the 

board must devise a competitive bidding procedure that is wnsistent with good business 

management. 

SUMMARY 

To the extent Attorney General opinion MW-342 (1981) wneludes that a contract for the purchase of insurance under Education 

Code section 21.901 is a wntract for professional services that 

section 21.901(c) excepts from the competitive bidding process, it is 

overruled. Furthermore, to the extent Attorney General Opinion 

MW-342 concludes that a contract for the purchase of insurance is 

not a contract for the purchase of personal property subject to 

wmpaitive bidding under Education Code section 21.901(a), it is 

overruled. Likewise, to the extent Attorney General Opinion 

Attorney General Opinion MW-494 (1982) suggests that a contract 

for the purchase of insurance is not personal property for purposes of 

section 21.901(a) of the Education Code, we overrule it. 

Under section 21.901(a) of the Education Code, a school board 

must wmpetitively bid a contract for the purchase of insurance if the 

p. 1851 
Honorable Bill Sims - Page 8 @M-347) 

contract is valued at S25.000 or more for a twelve-month period. In 

evaluating which bid to accept, the school board may consider 

factors other than cost, such as the insurer’s professionalism and the 

promptness, e&iency, and honesty with which the insurer services 

Claims. 

When a school board must competitively bid a contract under 

section 21:901(a), it must comply with tbe notice requirements set 

out in subsection (d). The school board must devise the remainder of 

the competitive bidding procedure wnsistent with good business 

management. In the event a school board need not competitively bid 

a contract for the purchase of insumnw because the wntract is 

valued at less than S25,000 for a twelve-month period, the school 

board may choose to competitively bid the wntract if the board 

determines that good business management requires it. The school 

board must devise a competitive bidding procedure that is consistent 

with good business management. 

DAN MORALES 

Attorney General of Texas 

JORGE VEGA 

First Assistant Attorney General 

SARAH J. SHIRLEY 

Chair, Opiion Committee 

Prepared by Kymberly K. Oltrogge 

Assistant Attorney General 

p. 1852