                        OF    TEXAS
                    AUWCIN.   Trcx~s    78711

                        April 6, 1977




The Honorable B. L. DeBerry              Opinion No. H-972
Engineer-Director
State Department of Highways             He: Whether the Depart-
    & Public Transportation              ment of Highways and
Austin, Texas 78701                      Public Transportation can
                                         limit bidding to persons
                                         licensed to do business
                                         in Texas.

Dear Mr. DeBerry:

     You have requested our opinion regarding the authority
of the Texas Department of Highways and Public Transportation
to restrict bidding on contracts for highway projects to
persons licensed to do business in Texas. Competitive
bidding is statutorily required for highway contracts and
the Highway Department is not permitted to attach conditions
which restrict the field of bidders beyond restrictions
imposed by the Legislature.  V.T.C.S. art. 6674h; Texas
Xi;hwaaxCo~63~   Texas e.    of Steel Importers, 372W.2d


     Article 8.01 of the Texas Business Corporation Act
provides:

          No foreign corporation shall have the
          right to transact business in this
          State until it has procured a certificate
          of authority so to do from the Secretary
          of State.

Sec. A. The statute then, '[wlithout excluding other activities,"
lists thirteen acts which specifically do not constitute
"transacting business."  Sec. B. Bidding on contracts is
not among the listed activities.  You ask, therefore, whether
bidding should be deemed "transacting business" for purposes
of article 8.01.




                              P- 4048
The Honorable B. L. DeBerry - page 2   (H-972)



     No Texas court has ever ruled directly on this question,
but other jurisdictions have addressed the problem.  In
Hogan v. City of St. Louis, 75 S.W. 604, 605 (MO. 19031, the
Supreme Court z Missouri explained its rationale thus:

          Now, when our statutes say that a foreign
          corporation shall not "transact business"
          here until it establishes a public office
          in this state, where books are kept and
          process may be served, and until it pays
          its quasi incorporation tax, and takes
          out its license, do they mean that the
          corporation must do all those acts before
          it can lawfully enter into a contract to do
          any business here? Does our law mean that,
          when advertisements inviting bids on public
          or private works in this state are read
          by foreign corporations, they are to under-
          stand that they have not the right to bid and
          have their bids accepted unless they shall
          have already complied with the terms of
          our statute to enable them to transact
          business here?.. No; that is not the meaning
          of our statutes. No such policy of exclusion
          has ever been shown in any of our legislative
          acts. Foreign corporations have always been
          invited and encouraged to come. The obtaining
          of a desirable contract is sometimes an
          inducement for a foreign corporation to come
          into the state. It is not bound to establish
          itself here before it can obtain such a
          contract. -Entering into a contract like the
          one in question undoubtedly is "transacting
          business," within the unlimited meaning of the
          term, but that is not the sense in which the
          term is used in the statute just quoted. As
          there used, it means carrying on the work for
          which the corporation was organized, and, in
          its application to the facts of this case, it
          means performing the work called for by the
          contract.

See also Automotive Material Co. v. American Standard Metal
--
Products Corp., 158 N.E. 698 mlT1927);    State v
                                                L American
Book c,   76 P. 411 (Kan. 1904).




                            p. 4049
   The Honorable B. L; DeBerry - page   3   (H-972)



       On the basis of the rationale from other,jurisdictions,
  it is our opinion that the Texas Supreme Court would probably
  hold that the mere bidding on a contract is not embraced
  within the meaning of "transacting business" in article 8.01
  of the Texas Business Corporation Act. As a result, while
  the Department of Highways and Public Transportation may
  require reasonable qualifications relating to a bidder's
  responsibility, it may not, in our opinion, restrict bidding
  on contracts to persons licensed to do business in Texas.

                           SUMMARY

             We believe ina case of first impression
             in Texas, the Texas Supreme Court would
             probably hold that bidding on a contract
             is not included within the meaning of
             "transacting business" in article 8.01 of
             the Texas Business Corporation Act and thus,
             a state agency may not restrict bidding
             On contracts to persons licensed to do
             business-in Texas.

                           gzg#

                                  Attorney General of Texas

-ROVED:                   u




  Opinion Committee

   jwb




                              P. 4050
