Court Opinion

ID: 4130431
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:04:12.723465+00
Date Added: 2024-06-11T14:07:15.130424
License: Public Domain

THE    ATTORNEY          GENERAL
                        OF   TEXAS

Honorable Joe Lucas                  Opinion No.   JM-1038
El Paso County Attorney
Room 201, City-County Building       Re:   Whether a third party
El Paso, Texas 79901                 administrator of an insur-
                                     ance contract is a "profes-
                                     sional" for purposes     of
                                     exemption from competitive
                                     bidding   (RQ-1552)

Dear Mr. Lucas:

     You ask whether the services of a "third party adminis-
trator" (TPA) are "professional services" within the meaning
of Local Government    Code, section 252.022(a)(4).      That
provision provides that the requirement of chapter 252 that
contracts  by municipalities    requiring   expenditures    in
certain amounts be made on competitive bids, does not apply
to an expenditure for *Iaprocurement for personal or profes-
sional services."    Having researched    your question,   we
conclude that whether the services of a TPA are professional
services under chapter 252 depends on the          particular
services which a municipality    contracts with a TPA. to
perform, and that your question is thus a question of fact.
We are unable in the opinion process to determine   questions
of fact.

     As pointed out in the brief accompanying your request,
TPA's are required by Texas law to obtain and maintain     a
"certificate of authority" issued by the commissioner of in-
surance in order to operate in Texas. Section 2(3)(A) of
Insurance Code article 21.07-5 provides:

           'Administrator' or 'third party admini-
        strator' or 'TPA' means a person who receives
        any form of administrative      or service    fee,
        consideration, payment, premium,       reimburse-
        ment, or compensation      for   performing     or
        providing any service, function, or duty, or
        activity respecting insurance or alternatives
        to insurance     in any     administrative      or
        management   capacity,   including      but    not
        limited to     claims   or     expense    review,
        underwriting, administration, and management,
        under a contract or other agreement         to be

                               p. 5380
Honorable Joe Lucas - Page 2    (JM-1038)

        performed in this state or with respect to
        risks located or partially  located in this
        state or on behalf of persons in this state
        for:

           (i)    any plan;

           (ii)    any insurance carrier: or

           (iii)    any person that self insures.

      Clearly, the definition of a TPA as a person  "perform-
ing u    service, function, or duty, or activity   respecting
insurance or alternatives to insurance in any administrative
or management capacity" (emphasis added) is very broad,   and
could include services ranging from simple clerical ones to
complex ones requiring high levels of expertise.

     In Attorney General Opinion JM-940 (1988) we noted with
respect to the scope of the term "professional services"  in
a competitive bidding requirement exception:

           The courts have not adopted a universal
        definition   of the term: however,       several
        cases suggest that it comprehends labor and
        skill that is       'predominately mental     or
        intellectual,   rather    than   physical    or,
        manual.'    Marvland   Casualtv Co. v. Crazy
        Water Co., 160 S.W.2d 102 (Tex. Civ. App. -
        Eastland   1942, no writ).      It no     longer
        includes only the       services of     lawyers,
        physicians, or theologians, but also those
        members   of disciplines    requiring    special
        knowledge or attainment and a high order of
        learning,   skill,    and intelligence.      See
        Attorney   General    Opinion 'NW-344    (1981):
        Black's Law Dictionary      1089-90   (5th   ed.
        1979)(definition of *profession').

Attorney General Opinion JM-940 concluded that the services
of a construction management consultant, as described in the
request, were within the "professional services"   exception
to the competitive  bidding requirements  of Education  Code
section 21.901, relating to contracts for the construction,
maintenance, repair, or renovation of school buildings.

     A brief submitted   in connection   with your request
points to Council of Citv of New Orleans v. Morial, 390 So.
2d 1361 (La. Ct. App. 1980), as "the only case directly  on
point." That case held that the services of a TPA in
connection with the city's health plan were not "profes-
sional services" under an exception to the city charter's
competitive bidding  requirements.   Notably,  however, the

                               P. 5381
Honorable Joe Lucas - Page 3     (JM-1038)

Louisiana court considered in its opinion the specific terms
of the contract between the city and the TPA for the lat-
ter's services.

     In addition to Insurance Code article 21.07-5, we find
one other reference to TPA's in the Texas statutes. Article
6252-3b, V.T.C.S., authorizes the establishment of deferred
compensation plans for public employees,    and requires the
solicitation of bids prior to the adoption of a particular
plan. Section    3B(b) of that article directs the comp-
troller, when soliciting bids for plans authorized      under
section 401(K) of the Internal Revenue Code, to "consider
bids from companies requiring the use of their own agents to
sell their products as well as companies selling their pro-
ducts through a third nartv administrator      or otherwise"
(emphasis added). There is no professional services excep-
tion provided for in article 6252-32, to the competitive bid-
ding requirements of that article an indication, we think,
that the legislature   considered that public contracts   in-
volving the services of TPA's, at least in connection    with
the deferred compensation     plans authorized by     article
6252-3b, could efficiently and economically be subjected   to
competitive bidding requirements.1

     To reiterate, however, we cannot rule whether the ser-
vices of TPA's generally  are "professional services"   under
the competitive   bidding  requirement  exception  in Local
Government Code section 252.022(a)(4).  Again, we think the
characterization of such services as professional     or not

                 a   Gulf Bithulithic Co. v. Nueces Co., 11
s.w.2:. 3E    &x:    Comm'n App. 1928, judgm't     adopted),
considering     applicability    of   competitive    bidding
requirements to a county contract for supervision of county
road construction:

           To hold that contracts for the supervision
        of work done directly by the county must be
        let to the lowest bidder would result in the
        county    obtaining  the   least     competent
        supervision,    as  those   possessing     the
        necessary   skill, experience,   and business
        judgment to supervise a large construction
        program in the most efficient and economical
        manner could not hope to sucessfully   compete
        with those of lesser skill, experience,     or
        business judgment.

                               p. 5282
Honorable Joe Lucas - Page 4      (JM-1038)

depends in the first instance on the specific TPA       services
to be provided under a specific contract.2

                        SUMMARY

           Whether the services of a third party ad-
        ministrator are professional services within
        the meaning  of the competitive bidding   re-
        quirement exception in section 252.022(a)(4)
        of the Local Government Code is a question of
        fact, and depends on the particular  services
        to be provided under a specific contract.

                                   -
                                       JIM     MATTOX
                                       Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUUGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General

     2. Please note, however, that the ruling in Attorney
General Opinion MW-494 (1982) indicates that a contract     for
the purchase   of   insurance would be      subject to      the
competitive bidding  requirements.   While specifically     not
addressing whether    the   "employment of      an   insurance
consultant would be within the exception      for personal   or
professional  services,"   that    opinion   concluded     that
"contracts for the purchase    of insurance by counties are
required . . . to be submitted to competitive bids."     While
Attorney General Opinion MW-494 considered the applicability
of the competitive  bidding requirements   of former article
2368a, V.T.C.S., to insurance purchases by counties, we see
no reason why the same conclusion would not be reached with
respect to insurance purchases   by municipalities under the
current chapter 252 competitive bidding requirements.

                               p. 5383
Honorable Joe Lucas - Page 5     (JM-1038)

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLRY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General

                               p. 5384