    OFPKEOFTHEATTORNEV
                    GENERAL.
                          STATE
                              OFnx*s
    JOHN CORNYN




                                         October 7, 1999



The Honorable Florence Shapiro                    Opinion No. JC-0124
Chair, State Affairs Committee
Texas State Senate                                Re: Whether Texas Department of Transportation
P.O. Box 12068                                    may restrict material specifications to products of
Austin, Texas 78711                               only one vendor if other vendors have similar
                                                  products of equal quality, and related questions
                                                  (RQ-0069-K)


Dear Senator Shapiro:

         As you know, the Texas Department of Transportation (“TxDOT”) must competitively bid
each contract for the improvement of a state highway or for the materials to be used in the
construction or maintenance of a state highway. TEX. TRANSP.CODE ANN. 5 223.001 (Vernon
1999). TxDOT may specify the materials that must be used by a vendor in performance of a
contract, Id. 5 223.007. For materials to be used in state highway construction and maintenance
contracts, TxDOT has adopted a list of material specifications.    See TEX. DEP’T OF TRANSP.,
DEPARTMENTAL
           MATERIALSPECIFICATIONS
                               (Dec. 1,1998).


         You ask several questions about TxDOT specifications   generally and about one specification
in particular:

               1. Is TxDOT prohibited from restricting material specifications to
               suit the products of only one vendor if other vendors have similar
               products of equal quality? If so, does TxDOT materials specification
               D-9-6240 [now DMS-62401 violate that prohibition?

               2. Can TxDOT include non-functional         characteristics   to further
               restrict a material specification?

We conclude that, as a general rule, TxDOT may not restrict a material specification to only one
vendor when the material is available from another vendor, and may not include requirements in the
specification that are unrelated to the quality or performance of the material. However, we cannot
determine whether the particular TxDOT specification about which you ask is unlawfully restrictive,
because the determination would require us to decide factual matters that are in dispute.
The Honorable Florence Shapiro       - Page 2      (JC-0124)




         When a statute requires a government contract to be competitively bid, as a general rule the
contract may not include a requirement that restricts competition in bidding. See Texas Highway
Comm ‘n v. Texas Ass ‘n of Steel Importers, Inc., 372 S.W.2d 525, 526 (Tex. 1963). Competitive
bidding requirements reflect the legislative goal of providing the best quality of work and materials
at the lowest possible price. Id. at 527. “A governmental body therefore may not adopt policies or
issue bid solicitations or specifications that restrict competition unless such policies, solicitations,
or specifications have a definite and objective relationship to matters of quality and competence or
are adopted pursuant to clear legislative authority.” Tex. Att’y Gen. Op. No. DM-113 (1992) at 7.
The Texas Supreme Court and this office have held that a governmental body may not impose
contract requirements that restrict the source of materials in competitive contracts.

          In Texas Highway Commission v. Texas Association of Steel Importers, Inc., the Texas
Supreme Court considered the validity of a Highway Commission order requiring all materials
furnished under commission construction contracts to be manufactured in the United States or its
territories and possessions. Steel Importers, 372 S.W.2d at 526. “The effect of the order would be
to eliminate from the field of bidders upon highway construction contracts all those who owned or
intended to acquire foreign materials and use them in carrying out highway construction contracts.”
Id. This reduction in available competitors, the court said, circumvented the purpose of competitive
bidding. “‘Its purpose is to stimulate competition, prevent favoritism and secure the best work and
materials for the best interests and benefit of the taxpayers and property owners. There can be no
competitive bidding in a legal sense where the terms ofthe 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.“’ Id. at 527 (quoting Sterrett v. Bell, 240 S.W.2d 516, 520
(Tex. Civ. App.-Dallas 1951, no writ)).

         The Supreme Court        recognized in Steel Importers that a governmental agency is not
prohibited from specifying       the characteristics of the materials it requires for the work to be
performed under a contract.      But, the court said, these requirements should be couched in terms of
the quality specifications of   the materials, not in terms of the materials’ source:

                No one questions the power and authority of the Commission
                to specify the physical and chemical standards for construction
                materials which are to by used in Texas highway construction.          If
                the Commission desires that no rusty steel be used, it may say so.
                Matters of quality should be fixed by quality specitica-
                tions and not by proscriptions as to localities of manufacture or
                fabrication.      Why should not the term “steel, free from rust” be
                used instead of “domestic steel” ifthat is the quality that is desired in
                re-enforcing materials used in highway construction?

Id. at 529,
The Honorable Florence Shapiro     - Page 3      (X-0124)




         Relying on the principles set out in SteelZmporters, this office has declared invalid bidding
requirements andpurchasingpolicies     fhat restricted the source oftheproduct. For example, opinions
have concluded that a county may not award printing jobs only to union printers, see Tex. Att’ y Gen.
Op. Nos. H-1219 (1978) at 2, forbid the purchase of foreign automobiles, MW-139 (1980) at 2, or
award a contract solely on the basis that the bidder was a local merchant, H-1086 (1977) at 2.
Bidding practices that favor a particular contractor have also been disapproved.       This office has
said, for example, that a consultant who helped draft contract specifications could not bid on the
contract because the consultant would have advantage over other bidders. See Tex. Att’y Gen. Op.
Nos. JM-940 (1988) at 7, JM-282 (1984) at 8. Also void are contract requirements that are not
directly related to the quality of the materials or the work to be performed. Thus, this office has
found invalid a policy that rewarded bidders on the basis of bidder’s participation in voluntary
school programs, compliance with minority and women contracting program, or estimates of
economic benefits conferred upon local economy, see Tex. Att’y Gen. Op. Nos. DM-113 (1992) at
7, a requirement that independent contractors provide employees with health insurance; JM-1213
(1990) at l-2, and a requirement that certain percentage of work be performed by contractor’s
employees, JM-881 (1988) at 3.

         Accordingly, we conclude that TxDOT may not restrict material specifications to suit the
products of only one vendor if other vendors have similar products of equal quality, and may not
include nonfunctional characteristics in a specification. Where materials of the required quality are
available from more than one source, a specification that eliminates all but one source defeats the
purpose and intent of the competitive bidding requirement and is prohibited. A requirement not
related to the quality or performance of the material likewise is contrary to competitive bidding
principles.

        Whether TxDOT material SpecificationDMS-6240        violatesthisprohibition,   however, cannot
be determined by this office.

        DMS-6240 is the material specification for “Geogrid forBase/Embankment         Reinforcement.”
S~~TEX.DEP’TOFTRANSP.,DEPARTMENTALMATER~ALSPECIFICATIONS(D~~.
                                                       1,1998). Inapparent
compliance with Steel Importers, the specification describes the characteristics of the material and
its required qualities. For example: “The geogrid shall be a synthetic planar structure formed by a
regular network of integrally connected polymeric tensile elements with apertures designed to
interlock with the surrounding fill material.” On its face, DMS-6240 does not name any particular
company as the sole source of the material.

         However, a TxDOT contractor alleges that the specification is written in such a way that, in
fact, only one company is able to comply with it. See Memorandum from Dock Griffin, Griffin
Industrial Sales, Inc., to Honorable Drew Nixon, Texas State Senate (Mar. 30, 1999). The physical
properties ofthe material are those ofonly one company’s product, the contractor says, and “[tlhese
properties include non functional characteristics that serve no purpose from a design and/or
construction point.” Id. We are also told that the specification has resulted in a higher cost for the
material since only one company is able to supply it. Id.
The Honorable Florence Shapiro      - Page 4      (X-0124)




         On the other hand, TxDOT tells us that “it is not true that Specification D-9-6240 [now
DMS-62401 suits the products of only one vendor, nor that there are other products that are equal
in quality to those called for in the specification; nor is it true that the specification includes non-
functional characteristics.”     Letter from Joanne Wright, Associate General Counsel, Texas
Department of Transportation, to Ms. Elizabeth Robinson, Chair, Opinion Committee (June 9,1999)
(on tile with Opinion Committee).

        Whether TxDOT material specification DMS-6240 is restricted to the products of only one
vendor or includes nonfunctional characteristics is ultimately a question of fact that this office cannot
decide. However, if the material specification is in fact restrictive in this way, it is in violation of
the principles of the competitive bidding statute and is void.
The Honorable Florence Shapiro     - Page 5      (X-0124)




                                        SUMMARY


                       In competitively    bid contracts, TxDOT may not restrict
               material specifications to suit the products of only one vendor if other
               vendors have similar products of equal quality or include
               requirements in the specification that are unrelated to the quality or
               performance of the material. Whether TxDOT material specification
               DMS-6240 violates this prohibition is a question of fact that cannot
               be determined in the opinion process.




                                               JOHIN    CORNYN
                                               Attorney General of Texas



ANDY TAYLOR
First Assistant Attorney General

CLARK RENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Barbara Griffin
Assistant Attorney General - Opinion Committee
