             THE     ATTORNEY            GENERAL
                        OF     TEXAS



                        Auqust 17, 1988




Honorable Andy J. McMullen             Opinion Ro. Jr+940
District Attorney
Hamilton County                        Re: whether a contract for
P. 0. Box 706                          services of a construction
Hamilton, Texas 76531                  management   consultant     '
                                       excepted   from competiti.::
                                       bidding    requirements     of
                                       section 21.901 of the Texas
                                       Education Code    (RQ-1335)

Dear Mr. McMullen:

     You inform us that a school district undergoing   rapid
growth seeks to employ a construction management  consultant
to advise the district on numerous construction    projects.
You add that the consultant    is also a general  contractor
that has performed or is performing work for the district in
its capac~ity as general contractor.    You ask whether     a
contract for the services of a construction       management
consultant is excepted from the competitive bidding require-
ments of section  21.901 of the Texas Education   Code as a
contract for ggprofessional services."  We conclude that   it
is exempted from the competitive bidding requirement.

     Section 21.901 of the       Education     Code   provides   the
following in pertinent part:

            (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 renova-
        tion 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




                                p. 4725
Honorable Andy J. McMullen - Page 2      (JM-940)




        architect#s fees, attorney's     fees, and   fees
        for fiscal agents.

           .   .   .   .

            (e) If a school building or school equip-
        ment is destroyed or severely damaged,     and
        the school 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.

Subchapter B of chapter 271 of the Local Government      Code
provides   competitive  bidding   procedures  for   contracts
awarded by common or independent school districts for the
construction, repair, or renovation of structures   requiring
an expenditure of more than $10,000 from the funds of the
district.   Local Gov't Code § 271.024. Contracts that must
be awarded under the terms of the Professional       Services
Procurement Act, V.T.C.S.    art. 664-4, are exempted    from
these procedures.    ra. 5 271.022.   Article 664-4 requires
contracts for the professional   services of licensed physi-
cians, optometrists, surgeons, architects, certified   public
acountants, or registered engineers to be awarded primarily
on the basis of demonstrated competence and qualifications.

     You describe the duties of the construction     management
consultant as follows:

        The overall    function   of a     construction
        management consultant is to control time and
        cost on behalf of the owner/school     district
        during the construction    process.    In this
        regard his duties include without limitation:
        (1) establishing a project budget;    (2) pre-
        qualifying and interviewing architectural and
        engineering firms and advising the owner/
        school district    on the final      architect/
        engineer   selection:    (3) organizing      the
        design phase of the project:    (4) establish-
        ing a project schedule from design through to
        completion of the construction:    (5) advising
        and consulting with the owner/school district
        on materials, construction   methods, and the
        arrangement   of the construction      contract



                               p. 4726
Honorable Andy J. McMullen - Page 3      (Jw940)




        package;    (6) managing     the bidding     and
        negotiation process:     (7) handling   contract
        awards:   (8) providing coordination among the
        various specialty contractors:     (9) supervis-
        ing the work; and       (10) establishing    the
        project's accounting system. In essence      the
        construction   management   consultant   accepts
        managing responsibility    of the entire con-
        struction process from desi     through to the
        completion of construction. 9"

You do not indicate whether   it is intended that the con-
struction management  consultant  will serve as the prime
contractor or subcontractor  on any project  covered by the
consulting contract.

     Section  21.907 does not define the phrase       *profes-
sional services."  The courts have not adopted a universal
definition of the term: however, several cases suggest that
it comprehends labor and skill,that is "predominantly mental
or intellectual, rather than physical or manual."     FI rvland
C ualtv Co. v. Crazv Water Co. I 160 S.W.Zd 102 (Tex? Civ.
A;;. - 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.     &S    Attorney  General Opinion MB-344
(1981); Black's Law Dictionary 1089-90 (5th ed. 1979) (defi-
nition of l'professionn).

     Section 21.901(c) is a narrow exception to the strong
public policy  favoring competitive  bidding   on contracts
involving the expenditure of public funds. Its purpose    is
to permit a school district to obtain the professional
services of the most competent and experienced   individuals
available. &    Attorney General Opinion MB-342 (1981) and
cases cited therein. This purpose would be thwarted if the
district was required to award contracts for professional
services to the lowest, and possibly       least qualified,
bidders. &     Another reason for dispensing with competi-
tive bidding  is that professional  services,   unlike  con-
struction work and materials, can seldom be measured    with
objective criteria.  Since construction. work and materials



     1. We assume that the school district does not intend
to delegate the power to make    final decisions  to a con-
sultant. $&g.9Attorney General Opinion JM-932 (1988).




                               p. 4727
Honorable Andy J. McMullen - Page 4        (JM-940)




must conform  to specifications of the school district's
choosing, it is reasonable to award contracts for such work
or materials on the basis of the lowest responsible       bid.
However, with work   involving   specialized,  technical,   or
aesthetic judgment, considerations of cost yield to conside-
rations of quality and competence.       The legislature   has
determined that these concerns warrant a departure from the
strict rule of free competition for public contracts.
Attorney  General  Opinions JM-881     (1988); JM-712   (19%
(providing that the legislature may vary policy of strict
competition by providing  exceptions to competitive   bidding
statute).

     We believe that the duties of a construction management
consultant as described in your letter qualify as "profes-
sional services"  for the purposes     of section    21.901(c).
These duties require a high level of knowledge,     experience,
and skill consistent with the standards of professionalism
described above. &,q J. Canterbury, Texas Construction       Law
Manual 5 6.10 (1981); MB
                       )'
v. Metrooolitan  Councrl    2:9 N.W.2d   426    441-44:   (Minn:
1979) (characterizing   &nstruction   manaqe;ent   services   as
professional services). && aeneru         G. Hardie, Construc-
tion Contracts and Specifications    34-;5 (1981); R. Meyers,
The New Cont ctual Arranm           in'construction   Contracts
in the 80ts ::3-118 (1980). We klso note the trend in many
states to except contracts for the services of construction
managers from competitive    bidding requirements    as either
personal or professional services. Sns: State v. Brown       422
N.E.Zd 1254 (Ind. Ct. App. 1981); M naiovi v. Doerner:       546
P.2d 1110 (Or. Ct. App. 1976); Ohio iev. Code Ann.      0 307.86
(Baldwin 1985).

     In Attorney General Opinion NW-530 (1982) this office
concluded that a contract for the services of a construction
manager were within the l'personal services" exception to the
competitive bidding requirement     of article 2368a, V.T.C.S.
That statute, now chapter 252 of the Local Government      Code,
excepted contracts for **personal or professional      services"
from competitive     bidding   requirements    imposed by    the
statute. The duties of the construction         manager were to
include representing,    advising,   and consulting    with the
county procuring his services, ,coordinatinq and overseeing
the work of contractors,     and making   recommendations   con-
cerning the payment of contractors.       The attorney   general
determined   that    because these     services   involved   the
personal, intellectual    or manual   labor of an individual,
they constituted "personal services" within the meaning       of
the statute.    It was therefore      unnecessary   to consider
whether   such    services also     constituted    "professional



                               p,   4728
    Honorable Andy J. McMullen - Page 5     m-940)



h




    servicesH for the purposes   of the exception to competitive
    bidding.  However, the opinion quoted a passage from hunter
    v Whiteaker & Wa hinat=     230 S.W. 1096 (Tex. Civ. App. -
    San Antonio 1921.,swrit rek'd) stating reasons for exempting
    certain contracts from the co;petitive bidding process.   The
    same passage was quoted in Attorney General Opinion MW-342
    (1981) as the rationale   behind the wprofessional  services"
    exception to section 21.901. Thus, it appears that through
    identical reasoning construction man;r;;i:sservices   may be
    characterized either as "personal            n under chapter
    252 of the Local Government Code or "professional   servicesnt
    under section 21.901 of the Education Code. See a&g 64 Am.
    Jur. 2d e                             f 43 (equating profes-
    sional services with personal services).

         Earlier in this opinion, we observed that your descrip-
    tion of the duties of a construction management   consultant
    did not indicate whether the consultant would also serve as
    the prime contractor  or subcontractor  on any construction
    project covered by the consulting contract.     We will now
    discuss the significance of that issue.

         Attorney General Opinion JM-282    (1984) concerned   the
    use of construction management contracts by state universi-
    ties. The facts provided     to us stipulated   that general
    contracting firms were invited to submit bids for the
    construction of a project based on only a general     descrip-
    tion of the project and were asked to include hourly     rates
    for consulting   services, in their bids.     The consulting
    services consisted of preliminary work with the designers of
    the construction project, the preparation of cost estimates
    for the project, the designation of work to be performed by
    subcontractors, and the invitation and acceptance of sub-
    contract bids.     The construction   manager/contractor   was
    allowed to designate    the work  it would perform,    or the
    university could require it to perform preliminary construc-
    tion work. At the close of the design phase and preliminary
    construction phase of the project,     the contractor    would
    submit a guaranteed maximum price for the remainder of     the
    project.   The university could reject the guaranteed maximum
    price and pay the contractor       only for the consulting
    services, or it could accept the price and authorize       the
    contractor to proceed with construction.

         Section 51.907 of the Education    Code provides   that
    contracts for the construction or erection
    improvements at institutions  of higher educat%    %manent
                                                            void
    unless they are made pursuant to the competitive     bidding
    procedures authorized therein. After drawing a distinction
    between contracts  for construction  and contracts  for the




                                  p. 4729
Honorable Andy J. McMullen - Page 6       m-940)




planning or design of a construction project, we concluded
that work done prior to the time a decision is made about
who will perform actual construction consists    of profes-
sional or consultant    services not governed    by section
51.907. Contracts   for such pre-construction services   are
governed  by either article   664-4, V.T.C.S.,   or article
6252-llc, V.T.C.S., which concerns the employment of private
consultants by state agencies. Neither statute    authorizes
competitive bidding; the latter, however, requires an agency
to publicly  invite offers  for consulting  services if the
consulting contract may be valued in excess of $10,006.

     The opinion went on to address the issue of authorizing
the construction manager to perform construction work on the
same project for which it provided pre-construction services
without resort to competitive  bidding. We answered in the
negative, taking note that section 51.907 voids    contracts
for construction work not let in response to sealed competi-
tive bids. We also sounded the following caution:

            Beyond that, in our opinion, a contractor
        who has acted as a consultant for a uni-
        versity in the design of a facility,           the
        estimation of its costs, or the preparation
        of the specifications      therefor,    is    dis-
        qualified   from bidding    on the      resulting
        construction   contract.    The Texas Supreme
        Court, in Texas Hiahwav Commission v. Texas
        Association of Steel INporters.       Inc     [372
        S.W.Zd 525 (Tex. 1963)], adopted the &lana-
        tion of Texas competitive     bidding     statutes
        given in Sterrett v. Bell       [240 S.W.2d    516
         (Tex. Civ. App. - Dallas'1951,       no writ)],
        saying the purpose       and intent of        such
        statutes were well stated there.        In part,
        the Sterrett court said competitive        bidding
        'requires that all bidders be placed upon the
        same plane of equality.'    240 S.W.2d at 520.
        It also said the purpose of such a statute,
        among    other   things,    was    to     'prevent
        favoritism,' and '[t]hat there can be no
        competitive bidding   in a legal sense where
        the terms of the letting of the contract
        prevent or restrict competition, [or] favor a
        contractor or materialman . . . .' &

           A potential bidder is undoubtedly put in a
        favored position over other potential bidders
        if he drafts the specifications of the job to
        be let or participates in the design and



                                p. 4730
Honorable Andy J. McMullen - Page 7      (JN-940)




        cost-estimating decisions of the owner.   All
        bidders are not placed on the same plane of
        equality.   In our opinion, such dual activi-
        ties create a conflict of intersts as well.

Attorney General Opinion JM-282 (1984) at 8. We closed the
opinion by observing that a construction management   consul-
tant was at least within the spirit, if not the letter, of
article 6252-9b, V.T.C.S., which announces a policy   forbid-
ding state officers or employees to hold any interest,
financial or otherwise,   direct or indirect, that is in
substantial conflict with the proper discharge      of their
duties.

     Me believe similar words of caution are warranted here.
Because the construction     management   consultant   will be
responsible for the preparation or coordination of informa-
tion necessary to formulate bid specifications, h,         pro-
ject costs and design requirements,    it will enjoy an over-
whelming advantage over all other potential bidders for the
general contract.    Furthermore, since the consultant     will
manage the bidding and negotiation process,       it will know
what its competitors* bids are, thereby permitting it to
submit a lower bid. Me therefore conclude that the con-
struction management   consultant described in your letter
would be disqualified from bidding on any contract for the
construction of a project for which it serves as consultant
to the school district.

                         SUMMARY
           A contract for the services of a construc-
        tion management consultant   is excepted  from
        competitive bidding by section 21.907(c)    of
        the Texas Education   Code as a contract   for
        llprofessional seNices."    Contracts for the
        construction of projects subject to the con-
        sulting contract must be submitted to com-
        petitive bidding in accordance with section
        21.907. A contractor is disqualified      from
        bidding on a contract for the construction of
        a project for which it serves as construction
        management consultant to a school district.




                               p. 4731
Honorable Andy J. McMullen - Page 8     (JM-940)




                                      JIM     MATTOX
                                      Attorney General of Texas

MARYXRUER
First Assistant Attorney General

Lou MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAXLEY
Special Assistant Attorney General

RICX GILPIN
Chairman, Opinion Committee

Prepared by Steve Araqon
Assistant Attorney General




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