                        Nowmber   5, 1986




Honorable Bob Bush                   Opinion No. JM-573
Chairman
Committee on Judiciary               Re: Whether a municipal housing
Texas House of Representat:Lves      authority may participate in the
P. 0. Box 2910                       Consolidated Supply Program of the
Austin, Texas   78769                Department of Housing and Urban
                                     Development without complying with
                                     competitive bidding statutes

Dear Representative Bush:

     You inquire whether t.hecompetitive bidding requirements of the
Department of Housing and 1JrbanDevelopment [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 competitive bids. We
conclude that participation in the CSP would not constitute compliance
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
authorities deal directly with the suppliers listed in a CSP contract.
All purchase orders, bil:.ing. and payments are handled by direct
contact between the hous::ng authorities and the suppliers without
further HUD involvement. Copies of CSP catalogs listing current
contracts and ordering in:iormationare published by HUD and distri-
buted to housing authoritiw. - See HUD Handbook 7460.8.

      A contract between HUI)and a supplier normally is for a period of
one year. It is awarded on the basis of competitive bids submitted by
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 current year and that offers from suppliers will 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 discounted prices
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 responsible bidders whose bids are at or below the average



                               p. 2553
Eonorable Bob Bush - Page 2   (JM-573)



                                                                         -,

price for the supply item. If less than three bids 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 supplied uder the same specification and 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.y concluded that housing authorities, as
divisions of cities, are subject to the competitive sealed bidding-
requirements 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 contracts would
not constitute compliance with the requirements of the state bidding
statutes for contracts thai:are subject to those statutory procedures.

     The competitive sealed bidding procedure provided in article
2368a for cities "shall be 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 pro-
         cedure applies to a proposed contract, notice of
         the time and plac#ewhen and where such a contract
         shall be let shaL:Lbe published in such city once
         a weak for two (2) consecutive weeks prior to the
         time set for 1elXing such contract, the date of
         the first publicittionto be at least fourteen (14)
         days prior to the date set for letting said
         contract; and sr.id contract shall be let to the
         lowest responsib:Lebidder. . . . If there is no
         newspaper published in such city, then the notice
         of letting such contract shall be given by 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 governmental entities, is required to award a contract for
the construction, repair, or renovation of a structure, road, highway,
or other improvement or addition to real property, on the basis of
competitive bids. the advertisement of which must be published locally
and within specified dates. It also provides for mailing notices for
bids to requesting organiz;~tionsnot later than the date on which the
first newspaper advertisemczt is published and mandates the opening of


                              p. 2554
Honorable Bob Bush - Page 3    (JM-573)




bids at a public meeting cr at the office of the governmental entity.
See V.T.C.S. art. 2368a.:3:,111-4. Unless all bids are rejected,
Gtracts   shall be awarded to the lowest responsible bidder,

          but a contract may not be awarded to a bidder who
          is not the lowest bidder unless prior to the award
          each lower bidder is given notice of the proposed
          award and is giv~$nan opportunity to appear before
          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 responsible bidders submit the lowest and
best bids for the proposed city or district contract and the bids are
identical, one bidder shall be selected by the casting of lots.

     Compliance with statutory procedure for competitive bidding is
mandatory. See Limestone l:ountyv. 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.
                              where a statute required the contract
question to be let to the "lowest responsible bidder" after publica-
tion 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:rr relating to competitive bidding." The
Texas Supreme Court has s,:atedthat noncompliance with the mandatory
statutory procedures for competitive bidding cannot be excused on the
ground that no one is actually hurt by the violation. --    See Texas
Highway Commission v. 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 competitive bidding] act requires the publi-
          cation 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' court having adjudged
          that it would rc:ceivebids 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 the Legislature could in
          every similar case be defeated by showing that no



                              p. 2555
Honorable Bob Bush - Page 4   (JM-573)




         injury resulted.    The lawmaking authority has
         decreed that the publication shall be made in any
         event, and while it may appear in this case that
         what was intended has been accomplished, we feel
         that the fact xi11 not warrant us in sweeping
         aside the vital r,equirementof the law.

     The legislature expressly has exempted certain 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 population of 5O.OOC or more shall make a contract requiring an
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
exempted procurements include:

            (1) procurements made in case of public
         calamity. where it becomes necessary to act at
         once to appropriate money to relieve the necessity
         of the citizens or to preserve the property of the
         city;

            (2) .procurements necessary to preserve or
         protect the put'lic health or safety of the
         citizens of the city;

            (3) procurements made necessary by unforeseen
         damage to public property, machinery, or equip-
         ment ;

             (4) procurements for personal or professional
          services;

             (5) procurements for work done and paid for by
          the day, as such ,irork
                                progresses;

             (6) the purchase of land or right-of-way; and

            (7) procurements where the functional require-
         ments of the city can be satisfied by only one
         source.

V.T.C.S. art. 2368a. 91. ALno, section 122.014 of the Human Resources
Code exempts the procurement of products or services of blind or other
severely disabled persons from competitive bidding procedures. -   See
Attorney General Opinions .Jl4-444
                                 (1986); JM-385 (1985).

     Accordingly, funds for 'purposessuch as the protection of public
health may be expended witbout competitive bids, and the requirement
                                                                         ?
of publication of notice of the letting of a contract is dispensed
with when such an exception exists. -See Browning-Ferris, Inc. v. City


                              p. 2556
Eonorable Bob Bush - Page 5   (JM-573)




of Leon Valley, 590 S.W.2d 729, 734 (Tex. Civ. App. - San Antonio
1979, writ reffd n.r.e.). Obviously, as expressly provided by article
2368a. the statutory procedures for competitive bidding do not apply
to cities with a populatior.of 50,000 or more for contracts of $10,000
or less or to cities with a population of less than 50,000 for
contracts of $5,000 or less.

     The only exceptions to the competitive bidding 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.g procedures for housing authorities that
differ from the general law provisions for competitive bidding 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 opinion process, we point
out that article 2368a, section 2(e), V.T.C.S., provides that provi-
sions in reference to notlce, advertisements of notice, requirements
as to the taking of sealed bids based on specifications for public
improvements or purchases, and the manner of letting of contracts, as
contained in the charter of a city, if in conflict with the provisions
of article 2368a. shall be followed in such city notwithstanding any
other provision of article 2368a. Also, article 2368a.3, section 7(a)
provides that to the extent a municipal home-rule charter conflicts
with that act, the charter prevails.

                              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 comIletltive bidding of the federal
         Department of Housing and Urban Develcpment for
         its Consolidated Supply Program would not con-
         stitute compliance with or a substitute for the
         state's bidding r,equiremantsand would not permit
         municipal housin:g authorities to participate in
         the Consolidated Supply Program without seeking
         competitive bids.

                                         Very truly you


                                    L-l /ili%h
                                         JIM
                                              k
                                                 MATTOX
                                         Attorney General of Texas

JACK RIGHTOWRR
First Assistant Attorney Gen,eral



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




MARY KELLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Nancy Sutton
Assistant Attorney General




                              p. 2558
