Nowmber 5, 1986

HonorableBob Bush Chairman Committeeon Judiciary Texas House of Representat:Lves P. 0. Box 2910 Austin, Texas 78769 OpinionNo.JM-573

Re: Whether a municipal housing authority may participate in the ConsolidatedSupply Program of the Department of Housing and Urban Developmentwithout complyingwith competitivebidding statutes

Dear RepresentativeBush:

You inquirewhether t.hecompetitivebidding requirements of the Department of Housing and 1Jrban Development [HUD]for its Consolidated Supply Program [CSP] meet:the bidding requirements of state law, thereby allowing municipal housing authorities to participate in the Consolidated Supply Program in lieu of seeking competitivebids. We conclude thatparticipation in the CSPwould not constitutecompliance with the requirements of competitive bidding specified in Texas statutes.

The basic concept c,f the CSP is that HUD enters into an open-ended contract with suppliers of common use items under which housing authorities are entitled to make purchases. The housing authoritiesdeal directlywith the suppliers listed in a CSP contract. All purchase orders, bil:.ing.and payments are handled by direct contact between the hous::ngauthorities and the suppliers without further HUD involvement. Copies of CSP catalogs listing current contracts and ordering in:iormation are published by HUD and distributed tohousing authoritiw. See HUD Handbook 7460.8. -
A contractbetweenHUI)and a suppliernormally is for a period of
one year. It is awarded on thebasis of competitivebids submittedby suppliers to HUD in response to formal invitations for bids published by HUD "in appropriate mei:La." The notice published in appropriate media announces that HUD will commence negotiating for the purchase agreements for the currentyear and that offers from supplierswill he received covering specified supply items until a closing date. The supplier certifies that tvr supply item is being made available to housing authorities through a purchase agreement at discountedprices that are lower than those at which the housing authorities could purchase comparable quawities of those items from the supplier through other purchasing ch,annels. Consolidated supply contracts are awarded to responsiblebidders whose bids are at or below the average

p. 2553EonorableBob Bush - Page 2 (JM-573)

-, price for the supply item. If less than threebids are received, the average or below method of award is not used and the award is made to responsible bidders whose!prices are reasonable. A consolidated supply contract does not obligate HUD or any housing authority to purchase any number or anount of the supply items covered by the contract. If there are two or more consolidated supply contracts covering items supplieduder the same specificationand the contracts provide for a price differential, a housing authority shall place in its files a justification if it purchases from a supplier other than the one offering the lowest price. See 24 C.F.R. PS965.601-965.605 - (1985)

. This office prev1ousl.yconcluded that housing authorities, as divisions of cities, are subject to the competitive sealed biddingrequirements of article 2368a. V.T.C.S. Attorney General Opinion MW-132 (1980). In addj.t:ion,article 2368a.3, V.T.C.S., which specifies competitive bidding procedure for public works contracts, expressly applies to housin:Sauthorities. It is our opinion that the bidding procedure used by HUD for consolidated supply contractswould not constitute compliancewith the requirements of the state bidding statutes for contracts thai: are subject to those statutoryprocedures.

The competitive sealed bidding procedure provided in article 2368a for cities "shallbe used for the award of all contracts subject to its provisions." with a different procedure provided for high technology procurements. V.T.C.S. art. 2368a 52(b). Article 2368a. section 2(b)provides, in part. that

[wlhenever the competitive sealed bidding procedure applies to a proposed contract, notice of the time and plac#e when and where such a contract shall be let shaL:L be published in such city once a weak for two (2) consecutiveweeks prior to the time set for 1elXing such contract, the date of the firstpublicittion tobe at least fourteen (14) days prior to the date set for letting said contract; and sr.idcontract shall be let to the lowest responsib:Le bidder.

. . . If there is no newspaper published in such city, then the notice of letting such contract shallbe givenby causing notice thereof to be posted at the city hall for 14 days prior to the time of letting such contract.
Article 2368a.3, V.T.C.S., provides that a housing authority, among other governmentalentities, is required to award a contract for the construction,repair, or renovationof a structure,road,highway,
or other improvement or addition to real property, on the basis of competitivebids. the advertisementofwhich must be published locally and within specified dates. It also provides for mailing notices for bids to requesting organiz;~tions not later than the date on which the firstnewspaper advertisemcztispublished andmandates the opening of

p. 2554HonorableBob Bush - Page 3 (JM-573)

bids at a public meeting cr at the office of the governmentalentity. See V.T.C.S. art. 2368a.:3:, 111-4. Unless all bids are rejected, Gtracts shallbe awarded to the lowestresponsiblebidder,

but a contractmay not be awarded to a bidder who is not the lowestbidder unless prior to the award each lowerbidder is given notice of the proposed award and is giv~$n an opportunityto appearbefore the governing bcdy of the governmental entity or the designated representative of the governing body and present evidence concerning the bidder's responsibility.

Id. 15. - Article 2367a, secticn 1, V.T.C.S., provides that where bidding is required and two or more responsiblebidders submit the lowest and best bids for the proposed city or district contract and the bids are identical,one bidder shallbe selectedby the casting of lots.
Compliance with statutory procedure for competitive bidding is mandatory. See Limestone l:ounty v. Knox, 234 S.W. 131. 134 (Tex.Civ. APP. - Dallas921, no w&:). In Niles v. Harris County Fresh Water Supply District No. lA, 3:6 S.W.2d 637 (Tex.Civ. App. - Waco), writ ref'd, 339 S.W.2d 562 (19611:1. question to be let to the where a statute required the contract "lowest responsiblebidder" after publication of notice, the court stated that "the prime purpose of such a provision is to stimulate competition and compliance with it is mandatory. The term 'lowest responsible bidder' involves compliance with statutory requiremen:rrrelating to competitive bidding." The Texas Supreme Court has s,:atedthat noncompliancewith the mandatory statutoryprocedures for competitivebidding cannot be excused on the ground that no one is actually hurt by the violation. See Texas -- Highway Commissionv. Texas Association of Steel Importers, Inc., 372 S.W.2d 525, 529 (Tex. 1963). Earlier, another court in Headlee v. Fsyer, 208 S.W. 213. 217-18 (Tex. Civ. App. - Dallas 1918, writ dism'd) stated that

[the competitivebidding] act requires the publication of notice of the intention to award the contract, either,in a newspaper or by posting notices at the courthouse door.

. . . It follows then that the commissioners'courthaving adjudged that it would rc:ceive bids on February 14th. and having failed to make publication of that fact, there was in the legal sense no publication at all, and, there being no publication at all, the fact that bidde,rs did attend and no injury resulted is of no consequence, since by the act every contract let without publication is void. Otherwise, the purpose of theLegislature could in every similar case be defeatedby showing that no

p. 2555HonorableBob Bush - Page 4 (JM-573)

injury resulted. The lawmaking authority has decreed that the publication shallbe made in any event, and while itmay appear in this case that what was intended has been accomplished,we feel that the fact xi11 not warrant us in sweeping aside thevital r,equirement of the law.

The legislatureexpresslyhas exemptedcertain contracts from the requirements of competitirr bidding. Article 2368a, section 2(a) provides that, except in the case of exempted procurements, no city with a populationof 5O.OOC ormore shallmake a contractrequiringan expenditure or payment exceeding $10,000 without submitting the proposed contract to competitive sealed bidding. In the case of a city with a population of less than 50,000, a contract for $5,000 or less is not subject to cmnpetitive sealed bidding. The statutory exemptedprocurements include:

(1) procurements made in case of public calamity. where it becomes necessary to act at once to appropriatemoney to relieve thenecessity of the citizensor topreserve the propertyof the city;
(2) .procurements necessary to preserve or protect the put'lic health or safety of the citizens of the city;
(3) procurementsmade necessary by unforeseen damage to public property, machinery, or equipment;
(4) procurements for personal or professional services;
(5) procurementsfor work done and paid forby the day, as such ,irork progresses;
(6) thepurchase of land or right-of-way;and
(7) procurementswhere the functionalrequirements of the city can be satisfied by only one source.

V.T.C.S. art. 2368a. 91. ALno, section 122.014of theHuman Resources Code exempts the procurement of products or servicesofblind or other severely disabled persons from competitive bidding procedures. See - Attorney GeneralOpinions .Jl4-444 (1986);JM-385 (1985). Accordingly, funds for 'purposessuch as the protection of public health may be expended witbout competitivebids, and the requirement of publication of notice of the letting of a contract is dispensed with when such an exceptionexists. See Browning-Ferris,Inc.v. City - ?

p. 2556EonorableBob Bush - Page 5 (JM-573)

of Leon Valley, 590 S.W.2d 729, 734 (Tex. Civ. App. - San Antonio 1979,writ reffdn.r.e.). Obviously, as expresslyprovidedby article 2368a. the statutory procedures for competitivebidding do not apply to citieswith a populatior. of 50,000 or more for contractsof $10,000
or less or to cities with a population of less than 50,000 for contractsof $5,000or less.

The only exceptions to the competitivebidding requirements are those contained in the statutes themselves. See Attorney General Opinions JM-186 (1984); PICI-,535, MW-439 (1982).We are aware of no special exception from the state's bidding requirements that are applicable to municipal housing authorities for contracts to purchase
common use items and equ!.pment. The Housing Authority Law itself contains no special bidd1r.gprocedures for housing authorities that differ from the general law provisions for competitivebidding and no exceptions or exemptions from competitive bidding for housing authorities. See V.T.C.S. art. 1269k. While this office does not construe the chzer powers of a city in the opinionprocess,we point out that article 2368a, section 2(e), V.T.C.S., provides that provisions in reference to notlce, advertisements of notice, requirements
as to the taking of sealed bids based on specifications for public improvementsor purchases, and themanner of letting of contracts,as contained in the charter of a city, if in conflictwith the provisions of article 2368a. shall be followed in such city notwithstanding any otherprovisionof article 2368a. Also, article 2368a.3, section 7(a) provides that to the extent a municipal home-rule charter conflicts with that act, the charterprevails.

SUMMARY

As to contrz.cts that are subject to the competitive bidi.ing requirements specified in Texas statutes for contracts entered into by cities, the comIletltivebidding of the federal Department of Housing and Urban Develcpment for its Consolidated Supply Program would not constitute compliance with or a substitute for the state'sbidding r,equiremants and would not permit municipal housin:gauthorities to participate in the Consolidated Supply Program without seeking competitivebids.
Very trulyyou 

# L-l/ili%h

k JIM MATTOX Attorney General of Texas

JACKRIGHTOWRR FirstAssistantAttorney Gen,eral

p. 2557Honorable Bob Bush - Page 6 (X4-573)

MARY KELLER ExecutiveAssistantAttorneyGeneral

RICK GILPIN Chairman,Opinion Committee
Preparedby Nancy Sutton AssistantAttorney General

p. 2558