                                 The Attorney                 General of Texas
                                                        February       8,    1982
MARK WHITE
Attorney General


                               Mr. Homer A. Foerster                                    opinion   No.   w-440
Supreme Court Bullding
P. 0. BOX 12549
                               Executive    Director
Austin. TX. 79711              State Purchasing      and General                        Re:        Authority     of    state
512/475-2501                        Services    Commission                              Purchasing          and      General
Telex 9101974.1367              L.B.J.   State Office    Building                       Services      Commission    to award
Telecopier   512/475.0266
                                Austin,   Texas      78711                              contracts     on competitive    pro-
                                                                                        posals    rather than competitive
1907 Main St.. Suite 1400                                                               bids
Dallas, TX. 75201
21417428944                    Dear Mr. Foerster:

4924 Alberta Ave.. Suite 160
                                      You advise that in October        1980. the State Purchasing         and General
El Paso, TX. 79905             Services      Commission    received    the Report      of   the Operational       Audit
9151533.3484                   Committee of the Governor's           Budget and Planning       Office    recommending
                               that your commission "employ the competitive              sealed proposal      method as
                               an alternative        to   competitive      sealed    bidding,    particularly      when
1220 Dallas Ave., Suite 202
Houston. TX. 77002
                               factors'other      than acquisition      price    are important."      The commission
7131650-0%6                    requests     our nconcurrence"     that this method is permitted         under article
                               3 of article     601b, V.T.C.S.

806 Broadway. Suite 312
                                     Article   6Olb.   section        3.10    states:
Lubbock. TX. 79401
SOSi747.5238
                                           In purchasing        supplies,     materials,     services,      and
                                           equipment      the    commission      may "se,      but     is   not
4309 N. Tenth, Suite S                     limited    to,    the contract      purchase     procedure,      the
McAllan, TX. 79501
5121092-4547
                                           multiple     award contract        procedure,      and the open
                                           market purchase        procedure.       The commission         shall
                                           have the authority          to combine orders        in a system
200 Main Plaza, Suite 400                  of schedule      purchasing,      and it shall      at all times
San Antonio, TX. 78205                     try    to benefit        from purchasing        in bulk.         All
512/225-4191
                                           purchases        of     and     contracts      for       supplies,
                                           materials,      services,      and equipment      shall,     except
An Equal OpportunityI                      as provided      herein,     be based whenever possible            on
Attirmative Action Employel                competitive     bids.      (Emphasis added).

                               The "contract       purchase    procedure"      and the      "open    market     purchase
                               procedure"     are both described      in detail    by subsequent       sections.      Id.
                               OP3.11,    3.12.    Section   3.10   does   not   require     the   commission     to  G
                               either    procedure   to the exclusion        of other     procedures,     but it does
                               require    that all    purchases     and contracts       shall    (except    as therein
                               provided)    be based on competitive       bids "whenever possible."




                                                                 p.    1516
Mr. Homer A. Foerster           - Page 2        (MW-440)




       The exceptions        provided     therein    are few.        As amended in 1981,
section    3.08(a)    of article      601b provides        that competitive      bidding    is
not required      for state agency purchases           of $100 or less (or of $500 or
less    if the commission         should     so prescribe      by rule).       See V.T.C.S.
art.    601b.   13, Acts       1981.   67th Leg.,       ch. 546,      at 226c       Although
certain    required     preferences      affect    the selection       of the “lowest,and
best bid,”     see article       601b. sections       3.20,    3.28,   V.T.C.S.,    the only
other exemp&          provided     by article     601b from the competitive          bidding
requirement     is an exemption        for blind-made        products    found in section
3.22.     With those exceptions,           the commission       is to make purchases       on
competitive     bids “whenever possible.”

        As noted    in Texas Highway Commission    v.                  Texas     Association      of
Steel    Importers,   Inc., 372 S.W.2d 525, 527 (Tex.                  1963):

              Competitive       bidding...        contemplates         a bidding      on
              the     same undertaking             upon     each      of   the     same
              material      items covered         by the contract;           upon the
              same thing.          It    requires        that     all    bidders     be
              placed     upon the same plane of equality                     and that
              they each bid upon the same terms and conditions
              involved       in all       the     items      and parts         of   the
              contract,      and that the proposal             specify     as to all
              bids       the     same,        or      substantially            similar
              specifications.           Its      purpose       is     to    stimulate
              competition,        prevent      favoritism         and secure        the
              best work and materials              at the lowest practicable
              price..    ..    There can be no competitive                bidding    $J
              a legal      sense where the terms of the letting                       of
              the     contract     prevent        or    restrict        competition,
              favor a contractor          or materialman,          or increase      the
              cost     of the work or of the materials                       or other
              items going into the project.                  (Emphasis added).

See also   Sterrett   v.         Bell,    240 S.W.2d 516,    520 (Tex.   Civ.              App.    -
Dallas  1951, no writ);          Attorney    General Opinion B-24 (1973).

       A “bid”     is an offer        to contract,        and an invitation         for bids is
merely a solicitation            of such offers.         See A 6 A Construction          Company,
Inc.   v. City       of Corpus Christi,             527 =.2d       833 (Tex.       Civ.    App. -
Corpus Christ1        1975, no writ);         Lane and Nearn v. Warren, 115 S.W. 903
 (Tex.   Civ.    App.      1909,     writ    ref’d).       In the law of          contracts,       a
“proposal”      is     also     an offer.         Daugherty     v.    Missouri-Kansas-Texas
Railroad     Company of Texas,            221 S.W.Zd 928 (Tex.          Civ.    App. - Austin
1949. no writ).           Thus, the term “competitive              proposals”      does not in
itself   signify      a procedure       different      &om   that-of-“competitive          bids.”
As you      describe        the    proposed      procedure,      however,     and as it          is
delineated      by the rules           the commission         contemplates,       it    does not
provide    for competitive         bidding     in a legal     sense.




                                              p.   1517
Mr. Homer A. Foerster         - Page 3          (MW-440)




       You advise      that “competitive          sealed    proposals”        is a method of
procurement      included      in the “Model Procurement                Code for      State    and
Local Governments” section           3.203 (1979),       developed       by the American Bar
Association      for     statutory      adoption,      and we note           that     the   rules
proposed     by the commission         closely     resemble       the suggested        statutory
provisions       and      accompanying        commentary         by     the     American       Bar
Association.       The suggested         code has not been adopted                by the Texas
Legislature,     however.      and we do not think the commission can implement
it by rule.       In exercising       its rule making power,              the commission may
not act contrary         to the expressed        statutory     purposes;        the commission
must act consistently          with and in furtherance             of those purposes.          See
Attorney      General     Opinion    MW-332 (1981).           The code         provisions,     x
interpreted     by the commission’s          proposed     rules,      are inconsistent       with
the competitive       bidding    requirements       of article       601b, V.T.C.S.

      The inconsistency    is succinctly     pointed                  out by the portion   of the
contemplated     rules    discussing     the    use                   of   “competitive    sealed
proposals.”    It states:

              The competitive         sealed         proposals        method differs
              from competitive         sealed        bidding     in    two important
              ways:

              (I)    it permits discussions     with competing vendors
                     and changes    in    their    proposals  including
                     price; and

              (ii)   it allows  comparative judgmental    evaluations
                     to be made when selecting    among acceptable
                     proposals for award of the contract.

      Again    the proposed      rules    state:

              An important     difference      between competitive       sealed
              proposals     and competitive         sealed    bidding   is the
              finality    of the initial       offers.      Under competitive
              sealed    proposals,     alterations      in the nature      of a
              proposal,      and    in    prices,      may be      made after
              proposals      are    opened.        Such    changes    are    not
              allowed,      however,        under      competitive       sealed
              bi.dding.

       In Nile6   v. Harris County Fresh Water Supply District            No. lA, 336
S.W.2d 637,       637  (Tex.    Civ.    App.   - Waco 1960,     writ     ref’d),      the
governmental     body invited     bids for a sewage treatment       plant and other
facilities,     the notice    to bidders     stating   that plans,    specifications
and bid documents would be furnished,            but that “the bid and other data
submitted     by bidders     will     form the basis       for negotiations        of    a
contract    for all or part” of the work described.             After   negotiations




                                                p.    1518
Mr.   Homer A. Foerster          - Page 4          (MW-440)




with      the low bidder            resulted      in a number of alterations                  of    the
original        bid documents,        a contract        between the governmental            district
and the bidder was signed.                   The court held that the statute                by which
the     fresh      water    supply     district       was governed         required     competitive
bidding,         that the prime purpose              of such a statute           is to stimulate
competition,          that compliance        with such statutes         is mandatory,       and that
the contract           was illegal       because      the proposal       for which competitive
bids      were      called    was not         substantially        similar      to    the   contract
executed,         nor was there substantial             compliance     with the statute.            See
Attorney         General    Opinion      MW-296 (1981).           See also      Attorney     Gene=
Opinions        NW-299 (1981);        MW-91 (1979).          The procedure        followed     by the
fresh water supply district                 in the Nile6 case was somewhat similar                    to
the       “competitive          sealed       proposals        method”        suggested      by      the
commission’s          proposed     rules     and the American Bar Association’s                  Model
Code.        Such a method is inconsistent                   with    the competitive         bidding
reauirement           of   article       601b.     V.T.C.S..       which      anolies      “whenever
possible      .‘I See Headlee v. Fryer,             208 S.W.il3      (Tex. <ii.       App. - Dallas
1919, writ d=‘d).                 Cf. V.T.C.S.         art.   2368a;    Overstreet       v. Houston
County,        365 S.W.2d 4OF(Tex.              Civ.    App. - Houston          1963, writ       ref’d
n.r.e.)      (statute      authorized      changes).

       The use of the term “whenever                possible”     leaves     little      to the
discretion     of the commission.          It means that purchases           are to be made
on competitive      bids unless       in the particular         circumstance         it is not
Possible     to do so.      See Rogers v. Department             of Civil       Service,      111
A.Zd 894 (N.J.       1955),     Although      there may be instances            in which the
commission may properly         determine      that a purchase       on competitive         bids
is not possible,      the controlling        principle     is that purchases          are to be
made on a competitive           bids    basis.       Cf.   V.T.C.S.     art.     601b,     03.07
(emergency     purchases).      The commission’           proposed    rules would permit
the use of the “competitive               sealed     proposals      method” whenever            it
considered      the use of competitive           bids    either    “not practicible”           or
“not advantageous.”         Those terms,        as defined      by the proposed           rules,
are not the substantial         equivalents       of “whenever possible”            ss used by
the legislature      in article      601b.     Cf. Attorney      General Opinion NW-310
(1981)    (commission   may promulgate         %     possible”     rules).

      Of course,        the commission          is not prohibited         from soliciting
information      or proposals       which it may wish later            to incorporate        in
plans and specifications           submitted      to prospective     bidders   regarding       a
contract     thereafter      to be submitted        to competitive      bids,  cf.  article
6252-11~.      V.T.C.S.     (private     consultants),       but it may notcall            for
proposals     and then negotiate         a different      contract    with the preferred
contractor      instead     of submitting         the contract     finally    proposed       to
unrestricted       competitive     bidding.        Texas Highway Commission v. Texas
Association      of Steel     Importers,     s;         Headlee v. Fryer,     supra.      -See
also Attorney       General Opinions MW-139 (1980);            H-972 (1977).




                                              p.    1519
.
     Hr. Homer A. Foerster        - Page 5        (Mu-440)
*,
*




                                           SUMMARY

                         The "competitive      sealed    proposals    method" of
                  procurement     as described     Is inconsistent        with the
                  competitive     bidding   requirements       of article     601b,
                  V.T.C.S.,     and.    whenever     competitive     bidding      is
                  possible,    the competitive       proposal    method may not
                  be used      by the     State     Purchasing      and General
                  Services     Commission     in    lieu    of    a competitive
                  bidding   procedure.

                                                          Very   truly     yours,




                                                                          WHITE
                                                          Attorney       General of   Texas

     JOHN W. FAINTER. JR.
     First Assistant Attorney        General

     RICHARD E. GRAY III
     Executive Assistant       Attorney    General

     Prepared    by Bruce Youngblood
     Assistant    Attorney General

     APPROVED:
     OPINION COMMITTEE

     Susan L. Garrison,      Chairman
     Robert Gauss
     Rick Gllpin
     Bruce Youngblood




                                             p.    1520
