                             May 28, 1987




Mr. R. E. Stotzer, Jr.               Opinion No. JM-712
Engineer-Director
State Department of Bighways         Re:   Applicability of the out-of-
   and Public Transportation         state bidder provisions of article
Dewitt C. Greer Highway Bldg.        6Ok,   V.T.C.S., to an Arkansas
11th and Brasos Streets              statute which gives preference to
Austin, Texas   78701                certain bidders on highway con-
                                     struction 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":




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             Preference of Arkansas firms over non-resident
          firms in purchases under competitive bids. All
          public agencies shall, in the purchase of commo-
          dities 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 sub-
          mitted.   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



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         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 per-
         formance 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



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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 Attorney
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).

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 instruc-
tive:
                                                                         -,
          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-ot-
          state 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.

             .   .   .   .




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    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 con-
              tractor'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-of-
    state 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 succes-
    sive 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, munici-
    palities, 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
C
    favor Arkansas contractors in the awarding of construction contracts,
    although the three elements    of section 14-614.2 do require the



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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




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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




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