May 28, 1987 

Mr. R. E. Stotzer, Jr. 

Engineer-Director 

State Department of Bighways 

and Public Transportation 

Dewitt C. Greer Highway Bldg. 

11th and Brasos Streets 

Austin, Texas 78701 

Opinion No. JM-712 

Re: Applicability of the out-ofstate bidder provisions of article 

6Ok, V.T.C.S., to an Arkansas 

statute which gives preference to 

certain bidders on highway construction projects 

Dear Mr. Stotzer: 

You have submitted the following facts. In the course of 

awarding contracts for highway projects during the month of April, 

1987. the State Department of Highways and Public Transportation 

(hereinafter the department) received bids for a particular project, 

the lowest of which was submitted by an Arkansas firm. Contracts for 

highway improvements must generally be awarded through a competitive 

bidding process to the lowest bidder. V.T.C.S. arts. 6674h; 6674i. 

Article 601g, V.T.C.S.. however, creates a limited exception to this 

procedure for contracts which.do not involve federal funds. Attorney 

General Opinion JR-484 (1986). The latter statute provides the 

following in pertinent part: 

The state or a governmental 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. 

V.T.C.S. art. 6Olg. $1(b). 

The state of Arkansas has enacted a number of statutes which 

favor certain bids on state contracts over others. The most relevant 

to this opinion are Arkansas Statutes sections 14-293 and 14-614.2. 

The first section establishes a preference for firms "resident in 

Arkansas": 

p. 3297 
Mr. R. E. Stotzer, Jr. - Page 2 (JM-712) 

Preference of Arkansas firms over non-resident 

firms in purchases under competitive bids. All 

public agencies shall, in the purchase of commodities by competitive bidding, accept the lowest 

qualified bid from a firm resident in Arkansas, 

provided that said bid does not exceed the lowest 

qualified bid from a non-resident firm by more 

than five percent (5%). and provided that one or 

more firms resident in Arkansas made written claim 

for a preference at the time the bids were submitted. In calculating the preference to be 

allowed, the appropriate purchasing officials 

pursuant to Act 482 of 1979 shall take the amount 

of each bid of the Arkansas dealers who claimed 

the preference and deduct five percent (5%) from 

its total. If after making such deduction, the 

bid of any Arkansas bidder claiming the preference 

IS lower than the bid of the non-resident firm, 

then the award shall be made to the Arkansas firm 

which submitted the lowest bid regardless of 

whether that particular Arkansas firm claimed the 

preference. 

The preference provided herein shall be 

applicable only in comparing bids where one or 

more bids are by a firm resident in Arkansas and 

the other bid or bids are by a non-resident firm, 

and shalp have no application with respect to 

competing bids if both bidders are firms resident 

in Arkansas as defined herein. . . . (Emphasis 

added). 

Ark. Stat. Ann. §14-293(b)(1979). The term "commodities" is defined 

a8 "supplies, goods, material and equipment of every kind and 

character." Id. 114-293(A)(4). Section 14-614.2 establishes a 

preference for certain bidders on contracts for the performance of 

services or construction of improvements: 

Preference for certain bidders. - In awarding 

contracts covered by the provisions of Act 159 of 

1949, as amended, by Act 183 of 1957, bids of 

contractors who have satisfactorily performed 

prior contracts, and who have paid taxes for not 

less than two (2) successive years immediately 

prior to submitting a bid under The Arkansas 

Employment Security Act, and amendments thereto 

and either The Arkansas Gross Receipts Act and 

amendments thereto or The Arkansas Compensating 

Tax Act and amendments thereto, on any property 

used or intended to be used for or in construction 

or in connection with the contractors construction 

p. 3298 
Mr. R. E. Stotzer. Jr. - Page 3 (JM-712) 

business, and further within the two (2) year 

period have paid any taxes to one (1) or more 

counties [school districts. or municipalities] of 

the State of Arkansas on either real or personal 

property used or intended co be used in performance of or in connection with construction 

contracts, shall be deemed a better bid than the 

bid of a competing contractor who has not paid 

such taxes, whenever the bid of the competing 

contractor is less than three percent (3%) lower, 

and the contractor making a bid as provided by 

this Act which is deemed the better bid, shall be 

awarded the contract. (Emphasis added). 

The first provision applies strictly to contracts for the purchase of 

commodities, while the second applies to contracts which involve the 

construction of improvements and sire preparation. See Op. Ark. Att'y 

Gen. No. 86-404 (1986). The general counsel to thedepartment has 

informed us that the contract for which the Arkansas firm submitted 

the lowest bid is for the planing and asphalt paving of certain 

highways. The contract in question, if it were to be awarded in 

Arkansas, would therefore be subject to section 14-614.2. See 

APAC-Mississippi, Inc. v. Deep South Construction Co., Inc., 704 

S.W.2d 620 (Ark. 1986) (114-614.2 is applicable to contracts awarded 

by the Arkansas State Highway Commission). You ask whether the 

bidding preference established by Arkansas Statutes section 14-614.2 

is within the purview of article 601g. V.T.C.S. That is, you ask 

whether the Arkansas statute requires a Texas bidder on an Arkansas 

highway construction contract to submit a bid at least three percent 

lower than the lowest bid submitted by an Arkansas bidder, thereby 

imposing the same requirement via article 601g on the Arkansas firm 

bidding on the Texas contract. Based on our review of the relevant 

Arkansas authorities, we conclude that the Arkansas provision does not 

establish a preference for Arkansas contractors over Texas contractors 

based solely upon the residence of the contractor. Therefore, the 

Arkansas provision does not trigger the article 601g preference for 

Texas bidders over nonresident bidders. 

Article 6Olg. V.T.C.S., was enacted in 1985 by the Sixty-ninth 

Legislature. Acts 1985, 69th Leg., ch. 83, at 499. The act was 

motivated by statutes in other states, including Arkansas, which 

require out-of-state contractors to submit bids on state contracts 

which are lower by a stated percentage than bids submitted by resident 

contractors in order to be considered for the contract. Bill Analysis 

to B.B. No. 620, 69th Leg. (1985), prepared for House Committee on 

Business and Commerce, filed in Bill File to H.B. No. 620, Legislative 

Reference Library. The purpose of the act is to 

establish a reciprocity requirement in the award 

of state contracts so that bidders from other 

states would face the same underbid requirement 

p. 3299 
Mr. R. E. Stotser, Jr. - Page 4 (JM-712) 

in Texas contracts that Texas bidders would 

experience when bidding on comparable contracts in 

those states. 

The legislative history of article 6Olg was examined in 

General Opinion JM-696 (1987). There we concluded that 

the act is intended to impose on any out-of-state 

company seeking to bid on construction, supplies, 

or services contracts with a uolitical 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. (Emphasis added). 

Attorney 

Although no single member of the legislature can be heard to say what 

the meaning of a statute is, Commissioners' Court of El Paso County v. 

El Paso County Sheriff's Deputies Association, 620 S.W.Zd 900 (Tex. 

Clv. AQQ. - El Paso 1981, writ ref'd n.r.e.), we found the following 

testimony of the author of the bill containing article 601g instructive: 

In neighboring states like Louisiana, Arkansas, 

and New Mexico, there is a rule that says that any 

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

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

order to receive the contract, has to be five 

percent lower than the lowest bidder in that 

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. . . . 

Testimony of Rep. Mark Stiles on H.B. No. 602 before House Committee 

on Business and Commerce, 69th Leg., public hearing (Feb. 18, 1985) 

(transcript available from House Staff Services). In discussing the 

meaning of the phrase "comparable contract," further explanation was 

made of the apparent intention of the bill: 

[W]hat it means is that if in the state of 

Arkansas you have to be five percent lower than 

the lowest bid to receive a state highway project 

bid, that it would be the sama thing here. 

-, 

. . . . 

p. 3300 
C 

Mr. R. E. Stotzer, Jr. - Page 5 (JM-712) 

I think what it basically comes down to, of a 

government entity, if the state of Arkansas 

requires that on all municipal and state work 

that . . . the Texas contractor be five percent 

lower than the lowest [Arkansas resident contractor's] bid, that basically we'd do the same 

thing here. . . . 

Id. It was further emphasized that the act would not establish a 

preference for Texas resident bidders over a nonresident contractor 

unless a preference for resident bidders was already in effect in the 

other state. Id. It becomes necessary, then, to examine Arkansas law 

-- specifically, Arkansas Statutes section 14-614.2 -- to determine 

whether the state of Arkansas imposes particular burdens on out-ofstate contractors bidding on Arkansas state highway contracts that it 

does not impose on Arkansas firms solely on the basis of residence. 

The preference for certain bidders provided in Arkansas Statutes 

section 14-614.2 does not hinge on the residence of the bidding 

contractor. Rather, Arkansas law gives preference to the bids .of 

contractors who satisfy three requirements. First, the contractor 

must have "satisfactorily performed prior contracts," which is defined 

in section 14.614.6 to mean the contractor must have substantially 

completed performance of one or more contracts in the state of 

Arkansas within two years of the date the bids are to be submitted. 

Second, the contractor must have paid taxes for at least two successive years immediately prior to submitting the bid under (a) the 

Arkansas Employment Security Act, as amended (Ark. Stat. Ann. 

$981-1101 -- 81-1108, 81-1111 -- 81-1121) and (b) either the Arkansas 

Gross Receipts Act, as amended (id. 9584-1901 -- 84-1904, 84-1906 -- 

84-1919) or the Arkansas Compensating Tax Act, as amended (id. 

§§84-3101 -- 84-3128). on any property used or intended to be used G 

or in connection with the contractor's construction business. Third, 

the contractor must have paid taxes of any kind within the same 

two-year period directly to one or more Arkansas counties, municipalities, or school districts. See APAC-Mississippi. Inc. v. Deep - 

South Construction Co., Inc., supra. The bid of a contractor who has 

Paid such taxes "shall be deemed a better bid" than the bid of a 

contractor who has not paid such taxes and whose bid is less than 

three percent lower than the bid of the contractor claiming the 

statutory preference. In such cases, the contractor making the bid 

deemed "the better bid" shall be awarded the contract. 

Section 14-614.2 was motivated by an interest to provide 

safeguards and procedures where public funds are expended and by an 

interest in granting a preference in the bidding process to those who 

contribute to the Arkansas economy through construction activities 

within the state. APAC-Mississippi, Inc. v. Deep South Construction 

Co., Inc., supra. It evidently was not motivated by an interest to 

favor Arkansas contractors in the awarding of construction contracts, 

although the three elements of section 14-614.2 do require the 

p. 3301 
Mr. R. E. Stotser, Jr. - Page 6 (JM-712) 

! 

----. 

contractor claiming the preference to have had previous business 

connections with the state. Conceivably, the preference established 

in section 14-614.2 could work in favor of a Texas contractor bidding 

against an Arkansas contractor who had not satisfactorily performed 

prior contracts in Arkansas or paid the designated taxes within the 

prescribed two-year period. Significantly, the Arkansas statute does 

not dictate that an Arkansas contractor be given preference over a 

nonresident contractor when both claim the preference. In such 

instances, the lowest "better bid" would be accepted. See, e.g., Op. 

Ark. Att'y Gen. No. 82-81 (1982). Finally, the statutory preference 

is unavailable when the bid of the contractor claiming the preference 

exceeds the competing contractor's bid by three percent or greater. 

In contrast to Arkansas Statutes section 14-614.2 stands section 

14-293, quoted earlier in this opinion. Section 14-293 plainly 

imposes a burden on nonresident contractors submitting bids on 

contracts for the purchase of commodities by Arkansas public agencies. 

It is only available in the event a nonresident firm and at least one 

Arkansas firm submit bids on the sama contract. It requires the 

Arkansas public agency to accept the lowest bid submitted by an 

Arkansas firm if the adjusted bid of any Arkansas firm claiming the 

statutory preference is lower than the bid of the nonresident firm. 

Clearly, section 14-293 discriminates solely on the basis of residence 

and is the type of provision which article 6Olg, V.T.C.S., was --. 

intended to reciprocate. As we noted earlier, however, section 14-293 

is not relevant to the contract offered by the department in this 

instance. 

SUMMARY 

The provisions of Arkansas Statutes section 

14-614.2, which establishes a preference for 

certain contractors submitting bids on certain 

contracts awarded by Arkansas public entities, do 

not trigger the bidding preference provided in 

article 6Olg, V.T.C.S. An Arkansas contractor 

submitting a bid on a highway construction contract 

awarded by the Texas Department of Highways and 

Public Transportation is not, therefore, subject to 

article 6Olg. 

JIM MATTOX 

Attorney General of Texas 

JACK HIGHTOWER 

First Assistant Attorney General 

p. 3302 
Mr. R. E. Stotzer, Jr. - Page 7 (JM-712) 

P 

MARY KELLER 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEMLRY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Rick Gilpin 

Assistant Attorney General 

p. 3303