Court Opinion

ID: 4131567
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:17:11.259135+00
Date Added: 2024-06-11T14:32:35.104500
License: Public Domain

The Attorney             General of Texas
                                                   July 13. 1982
MARK WHITE                                                                 This Opinion
Attorney General                                                           Overrules  M W 342

                               Mr. George N. Rodriguez, Jr.             Opinion No. m-494
Supreme Court Suildin9
                               County Attorney
P. 0. Box 12548
Austin. TX. 79711. 2549        County of El Paso                        Re:   Whether counties must
51214752501                    206 City-County Building                 require competitive bids on
Telex 910/974.1367             El Paso, Texas   79901                   insurance   contracts    whose
Telecopier  512f475-0296                                                premiums exceed $5.000.00

1607 kin    St., Suite 1400
                               Dear Mr. Rodriguez:
Dallas. TX. 7s201-4709
21417423944                         You have asked whether article 2368a. V.T.C.S., or any similar
                               statute, requires contracts for the purchase of insurance by counties
                               to be awarded through the competitive bidding process.
4824 Alberta Ave.. Suite 160
El Paso. TX. 799652793
915633384                            Article 2368a. V.T.C.S., provides in part:

                                                                county, acting through its
1220 Dallas Ave.. Suite 202
liouston. TX. 770024988
                                          CoSe~Lo2ner8(a~ou~~    and no city in this state
7t-                                       shall hereafter mak: any contract calling for or
                                          requiring an expenditure or payment in an amount
                                          exceeding five thousand dollars ($5.000.00) out 'of
808 Broadway. Suite 312                   any fund or funds of any city or county or
Lubbock. TX. 794ota479
8Mn47.5239
                                          subdivision of any county creating or imposing an
                                          obligation or liability of any nature or character
                                          upon such county or any subdivision of such
4309 N. Tenth. Suite S                    county, or    upon   such city. without      first
McAllen. TX. 78501-1685                   submitting such proposed contract to competitive
51216824547
                                          bids.

200 Main Plaza. Suite 400                    (b)   ....
San Antonio. TX. 78205.2797
51212254191
                                          Provided, that in case of public calamity, where
                                          it becomes necessary to act at once to appropriate
An Equal Opportunity/                     money to relieve the necessity of the citizens.
Affirmative Action Employer               or  to preserve the property of such county,
                                          subdivision, or city, or when it is necessary to
                                          preserve or protect the public health of the
                                          citizens of such county or city, or in case of
                                          unforeseen damage to public property, machinery or
                                          equipment, this provision shall not apply; and
                                          provided further, as to contracts for personal or
                                          professional services; work done by such county or

                                                           p. 1759
Mr. George N. Rodriguez. Jr. - Page 2   (MW-494)

         city and paid for by the day, as such work
         progresses; and    the purchase of     land and
         right-of-way for authorized needs and purposes,
         the provisions hereof requiring competitive bids
         shall not apply and in such cases the notice
         herein provided shall be given but only with
         respect to an intention to issue time warrants
         with right of referendum as contemplated in
         Sections 3 and 4 hereof respectively.

     Section 2(a) is a comprehensive provision applying to "any
contract" requiring an expenditure of over $5,000. It is subject to
the specific exceptions stated in section 2(b). including an exception
for "personal or professional services." In addressing your question,
we have to determine whether'an insurance contract falls within the
comprehensive terms of sectibn 2(a) or whether an exception ~1s
applicable. The exception for personal and professional services is
the only one which needs examination.

     In Attorney General Opinion MW-342 (1981) we held that school
district8 need not let insurance contracts on competitive bids. That
opinion construed section 21.901 of the Education Code which has since
been amended without change in the languagesrelied upon in Attorney
General Opinion MW-342. Section 21.901 reads in part:

            (a) Except as provided in Subsection (e) of
         this section, all contracts proposed to be made by
         any Texas public school board for the purchase of
         any personal property shall be submitted to
         competitive bidding when said property is valued
         at $5,000 or more.

              (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 or for materials used in said
          construction, maintenance, repair or renovation,
          shall be submitted to competitive bidding when
          said contracts are valued at $5,000 or more.

             (c) Nothing in this section shall apply to
          fees received for professional services rendered,
          Including but not limited to architects fees,
          attorney's fees, and fees for fiscal agents.

             .. . .

             (e) If a school building or school equipment
          is destroyed or severely damaged, and the school

                                p. 1760
Mr. George N. Rodriguez, Jr. - Page 3   @U-494)

          board determines that the time delay posed by the
          competitive bidding process would prevent or
          substantially impair the conduct of classes or
          other essential school activities, then contracts
          for the replacement or repair of such building or
          equipment may    be   made   without   resort  to
          competitive bidding as otherwise required by this
          section.

Section 21.901 of the Education Code is structured differently from
article 2368a, V.T.C.S. The Education Code provision states two
categories of contracts subject to competitive bidding -- those for
personal property and those for the construction, maintenance, repair,
or renovation of any building or for the materials used in these
projects. It is not apparent that these two categories cover every
type of contract a school district might enter into. Nor is it
apparent that the exceptions for professional services and for
emergency repairs cover all contracts excluded from the competitive
bidding requirements of section 21.901. See, e.g., Attorney General
Opinion M-950 (1971) (school district may negotiate computer lease
contract without competitive bids).

     Attorney General Opinion MU-342 stated that an insurance contract
did not fit squarely into the category of "personal property" or the
exemption for "professional services" under section 21.901 of the
Education Code. The services provided under it were significant
enough ,to remove the contract from the category of "personal
property," event though they did not constitute "professional
services." Under section 21.901 it is unnecessary to show that an
insurance contract is a contract for "professional services" to remove
it from the competitive bidding requirement. It is only necessary to
show that it cannot fairly be characterized as a contract for the
purchase of personal property. The discussion in Attorney General
Opinion MU-342 of the service aspect of an insurance contract must be
read with section.21.901 in mind. 'It does not resolve the question
before us concerning the construction of article 2368a, V.T.C.S.

     Turning to your question, we next consider whether a contract for
insurance constitutes a contract for personal or professional services
within article 2368a, V.T.C.S. Attorney,General Opinion MU-344 (1981)
considered whether the Board of Trustees of Galveston Wharves must bid
a contract for the services of a container terminal operator at the
port. The opinion concludes that a contract to operate container
terminal facilities was not a~ contract for personal services, even
though the operation of the facilities was complex and technical, and
even though it involved considerable labor costs.        It relied on
judicial definitions which indicated ,that a contract was one for
"personal services" only if the contract price was largely for
employee wages rather than for machinery, profit, taxes, insurance,

                               p. 1761
Mr.   George N. Rodriguez. Jr. - Page 4   (MW-494)

and other items. See Van Zandt v. Fort Worth Press, 359 S.W.2d 893
(Tex. 1962); RadioTKE,    Inc. v. Tiemann. 378 S.W.2d 952 (Tex. Civ.
APP. - Austin 1964, writ ref'd n.r.e.).

     An insurance contract is clearly not a contract for personal
services under the standard developed in Attorney General Opinion
WI-344. In exchange for premiums paid under an insurance contract,
the insured receives financial protection against stated risks.
Incident to the provision of protection the insurance company provides
various services such as claims processing and investment services.
However, the costs of equipment, materials, other overhead, taxes,
profits, and the cost of the financial protection itself contribute in
large part   to the total amount of premiums. Since the cost of
employee wages does not form the major part of the contract price, an
insurance contract is .not a contract for personal services within
article 2368a. V.T.C.S.

     Attorney General Opinion MW-344 discussed the meaning of the
"professional services" exemption in article 2368a, V.T.C.S.       It
relied on cases from other jurisdiction8 which emphasized the body of
special knowledge attributable to a profession, the years of study
necessary to attain competence, and the wide recognition of the
profession and its standards of study. In our opinion, the provision
of insurance coverage does not constitute the provision of
professional services. See Attorney General Opinion MW-342 (1981).
It is therefore subject=     the competitive bidding requirements of
article 2368a, V.T.C.S.

     Your question concerns only the purchase of a contract for
insurance coverage. We do not address the question of whether the
employment of an insurance consultant would be within the exception
for personal or professional services. Contracts for the purchase of
insurance by counties are, however, ,required by article 2368a,
V.T.C.S., to be submitted to competitive bids.

                               SUMMARY

              Article 2368a, V.T.C.S., requires counties to
           award contracts for, the purchase of insurance
           through the competitive bidding process.

                                      &Tg

                                          Attorney General of Texas~

                                   p. 1762
Mr. George N. Rodriguez, Jr. - Page 5     (MW-4?4)

JOHN W. FAINTER, JR.
First Assistant Attorney General

RICHARD E. GRAY III
Executive Assistant Attorney General

Prepared by Susan L. Garrison
Assistant Attorney General

APPROVED:
OPINION COHMITTEE

Susan L. Garrison, Chairman
Rick Gilpin
Jim Moellinger

                                p. 1763