   OFFICE or THE ATTORNEY GENER*L   STATE OF TBXI\S
   JOHN CORNYN




                                           April 28,1999



The Honorable Ken Armbrister                          Opinion No. JC-0037
Chair, Criminal Justice Committee
Texas State Senate                                    Re: How a school district should determine that
P.O. Box 12068                                        a design/build contract will provide the school
Austin, Texas 78711                                   district with the best value for purposes of
                                                      Education Code section 44.031(a), and related
The Honorable Bill Ratliff                            questions (RQ-870)
Chair, Finance Committee
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Dear Gentlemen:

         You ask a series of questions concerning competitive bidding or procurement requirements,
if any, that may apply to school district contracts under chapter 44, subchapter B of the Education
Code. Section 44.031, part of subchapter B, generally requires a school district to contract for all
purchases valued at $25,000 or more in the aggregate for a twelve-month period using the
purchasing method, of eight listed in the statute, that provides the best value to the school district.
You raise the following issues:

                1.      How does a school district determine that a design/build
                        contract provides the “best value” to the school district and
                        must it follow competitive procurement requirements to let a
                        design/build contract?

                2.      With respect to a construction contract valued at more than
                        $15,000, must a school district comply with Local
                        Government Code sections 271.021 through 271.030, which
                        provide for competitive bidding on certain public-work
                        contracts, in addition to any requirements in Education Code
                        sections 44.031 through 44.051, which pertain to school
                        district purchases and contracts?
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               3.      Must an interlocal contract entered on behalf of a school
                       district be competitively bid?

               4.      If a school district participates in a cooperative purchasing
                       program, as provided in Local Government Code sections
                       271.081 through 271.083, must the school district follow
                       competitive procurement procedures?

         Chapter 44, subchapter B of the Education Code governs a school district’s purchases and
contracts. Section 44.031 particularly regulates a school district’s purchasing contracts “valued at
$25,000 or more in the aggregate for each 12-month period,” unless the contract is for the purchase
ofproduce or vehicle fuel. TEX. EDUC.CODEANN. 5 44.031(a) (Vernon Supp. 1999). In general,
a school district must enter such a contract using the method, of eight listed methods, that provides
the district with the “best value”:

                   (a) Except as provided by this subchapter, all school district
               contracts, except contracts for the purchase ofproduce or vehicle fuel,
               valued at $25,000 or more in the aggregate for each 12-month period
               shall be made by the method, of the following methods, that provides
               the best value to the district:

                       (1) competitive bidding;

                       (2) competitive sealed proposals;

                       (3) a request for proposals;

                       (4) a catalogue purchase as provided by Subchapter B,
                Chapter 2157, Government Code;

                        (5) an interlocal contract;

                        (6) a design/build contract;

                          (7) a contract to construct, rehabilitate, alter, or repair
                facilities that involves using a construction manager; or

                         (8) a job order contract for the minor repair, rehabilitation, or
                alteration of a facility.

Id. (footnotes omitted).
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         Section 44.03 1 establishes a bifurcated process for letting a contract, separating the selection
of a purchasing method from the ultimate award of a contract using the chosen method. Under
subsection (a), a district first must evaluate which ofthe eight listedpurchasingmethods will provide
the best value. Then, after the district has chosen the purchasing method it will use, it is to adhere
to the procedures applicable to that purchasing method. Accord Tex. Att’y Gen. Op. No. DM-387
(1996) at 3 (stating that once school district has determined that competitive bidding will provide
best value, school district then must begin competitive bidding process). Subsequent provisions in
chapter 44, subchapter B provide some procedures for procurement and criteria for selecting a
vendor with respect to particular purchasing procedures. See TEX.EDUC.CODEANN. $5 44.03 l(b),
.035, ,037, ,038, ,039, ,040, ,041 (Vernon Supp. 1999). In the absence of specific procurement
procedures or evaluation criteria, the district may evaluate vendors’ submissions using the criteria
listed in section 44.03 l(b):

                    (1) the purchase price;

                    (2) the reputation of the vendor and of the vendor’s goods or services;

                    (3) the quality of the vendor’s goods or services;

                    (4) the extent to which the goods or services meet the district’s needs;

                    (5) the vendor’s past relationship with the district;

                    (6) the impact on the ability of the district to comply with laws and rules
                relating to historically underutilized businesses;

                    (7) the total long-term cost to the district to acquire the vendor’s goods
                or services; and

                    (8) any other relevant factor that a private business entity would consider
                in selecting a vendor.

With this background, we turn to your specific questions.

I.      Determinine that a desienkmild contract constitutes the “best value” under
        Education Code section 44.031(a)f6) and awarding design/build contracts

        You ask how a school district determines that a design/build contract provides the “best
value.” Section 44.03 1 does not define the term “best value.” Nor does it or any other provision in
chapter 44, subchapter B of the Education Code prescribe the method by which a school district is
to determine which purchasing method will afford the district the best value. Section 44.031(b)
expressly lists factors for “determining ro whom to award a contract.” TEX. EDUC. CODE ANN.
3 44.03 l(b) (Vernon Supp. 1999) (emphasis added). Determining to whom to award a contract is
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different than determining which type of contract will afford the best value. Accordingly, section
44.03 l(b) does not purport to define how a school district is to determine which purchasing method
affords it the best value, although these factors indeed may be relevant.

         Because nothing in the statutes expressly defines or directs a school district in determining
best value, we conclude that a school district should establish, by rule, its own procedure and criteria
to determine the purchasing method that will provide the best value in a particular instance. Section
44.031(d), authorizing a school district to adopt rules and procedures for the acquisition of goods
or services, encompasses the power to adopt rules governing the procedure by which a school district
will evaluate the eight possible purchasing methods. See id. 5 44.03 l(d) (Vernon 1996). The criteria
listed in section 44.031(b) may be relevant to determining the purchasing method that will provide
the best value and could inform a district’s decision in choosing one type of contract over another.
See id. 5 44.040(c) (Vernon Supp. 1999) (stating that criteria established by school district for
determining bidder offering best value to school district may include criteria in section 44.03 l(b)).

        Assuming that a school district properly has determined that a design/build contract will
provide the best value, you also ask whether a school district must competitively procure a
design/build contract. See id. $ 44.031(a)(6). You suggest that a school district should use a
combination of competitive bidding with requests for proposal on professional services when
awarding a design/build contract so as not to circumvent the Professional Services Procurement Act,
TEX. GOV’T CODE ANN. ch. 2254, subch. A (Vernon 1999); see id. 5 2254.001 (naming act), which
prohibits competitive bidding on professional services contracts. We conclude that a school district
selecting the design/build purchasing method must comply with section 44.036 of the Education
Code, which effectively adopts a mechanism for competitive procurement-but not competitive
bidding--of design/build contracts, and that compliance with section 44.036 does not conflict with
the Professional Services Procurement Act.

        The Professional Services Procurement Act forbids a school district to competitively bid a
contract for “professional services,” which term is defined as the following services: (1) accounting;
(2) architecture; (3) land surveying; (4) medicine; (5) optometry; (6) professional engineering; or
(7) real-estate appraising. See id. $5 2254.002(2)(A) (Vernon 1999) (defining “professional
services”), 2254.003(a) (forbidding competitive bidding for professional services); see also Tex.
Att’y Gen. LO-96-l 17, at 1 (noting that contract for professional services may not be competitively
bid). With respect to a contract for the professional services of an architect, professional engineer,
or land surveyor-three      professions we imagine are most likely involved in a design/build
contract-a school district must:

                    (1) first select themost highly qualified provider ofthose services
                on the basis of demonstrated competence and qualifications; and

                    (2) then attempt to negotiate with that provider a contract at a fair
                 and reasonable price.
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TEX.GOV’TCODEANN. 5 2254.004(a) (Vernon 1999). A professional-services contract entered in
contravention of the Professional Services Procurement Act is “void as against public policy.” Id.
5 2254.005. Prior attorney general opinions have concluded that, under the Professional Services
Procurement Act, a contract for the construction of a public work may not be awarded on the basis
of competitive bids if architectural or engineering services comprise part of the contract. See Tex.
Att’y Gen. Op. No. JM-1189 (1990) at 4,5; Tex. Att’y Gen. LO-98-060, at 10-11; LO-96-l 17, at
1.

          Section 44.036 of the Education Code effects a competitive procurement scheme for
design/build contracts that differs from competitive bidding. Section 44.036 requires a school
district to prepare two items in connection with each project: a request for qualifications and a
design criteria package. See TEX.EDUC.CODEANN. 5 44.036(d) (Vernon Supp. 1999); see also id.
5 44.036(a)(3) (defining “design criteria package”). The request for qualifications must contain
information to assist a design/build firm that wishes to submit a proposal for the project, such as
“general information on the project site [and]          scope, budget, special systems, [and] selection
criteria      .” See id. 5 44.036(d). The design criteria package includes more detailed information
about the project, see id., such as a legal description and survey ofthe site; requirements for interior
space, special materials, special equipment, quality assurance, site development, and parking;
material quality standards; time schedules, applicable codes and ordinances; and provisions for
utilities. See id. 5 44,036(a)(3). The district or its representative, using a two-phased process, must
first narrow the list of finalist-offerors to no more than five and then select the proposal that will
provide the best value to the district:

                    (1) In phase one, the district shall evaluate each offeror’s
                experience, technical competence, and capability to perform, the past
                performance of the offeror’s team and members of the team, and
                other appropriate factors submitted by the team or firm in response to
                the request for qualifications, except that cost-related or price-related
                evaluation factors are not permitted. .      The district shall qualify a
                maximum of five potential offerors to submit additional information
                regarding technical proposals, implementation, and costing method-
                ologies in response to a formal request for proposals based on the
                design criteria package.

                    (2) In phase two, the district shall evaluate offerors on the basis
                of demonstrated competence and qualifications, considerations of
                the safety and long-term durability of the project, the feasibility of
                implementing the project as proposed, the ability of the offeror
                to meet schedules, costing methodology, or other factors as
                appropriate.      The district shall select the design-build firm that
                submits the proposal offering the best value for the district.
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Id. § 44.036(e). Once the district has selected a design/build firm, section 44.036(f) requires the
“winning” firm’s engineers or architects to complete the design and, prior to or concurrently with
beginning construction, to submit all design elements “for review and determination of scope
compliance by the district’s engineer or architect.”

         The requisites of section 44.036(e) of the Education Code are not inconsistent with the
requisites ofthe Professional Services Procurement Act, sections 2254.001- ,005 ofthe Government
Code. The two phases of the evaluation process established in section 44.036(e) both are relevant
to weighing the qualifications of the various offerors, which a public entity must do under section
2254.004(a)(l) of the Government Code. Section 44.036(e) of the Education Code therefore
instructs a school district how it must fulfill section 2254.004(a)(l) of the Government Code. After
the school district has completed the two-phased analysis section 44.036(e) of the Education Code
sets forth and thereby selected, “on the basis of demonstrated competence and qualifications,” TEX.
GOV’TCODEANN. 5 2254.004(a)(l) (Vernon 1999), the design/build firm submitting the proposal
offering the best value to the district, the school district must “attempt to negotiate with that provider
a contract at a fair and reasonable price, ” id. 5 2254.004(a)(2). Should the negotiations fail, the
school district should attempt to negotiate with the second most highly qualified offeror selected
under section 44.036(e) of the Education Code. See id. $ 2254.004(c). Given this construction
harmonizing section 44.036 of the Education Code and the Professional Services Procurement Act,
it is our opinion that a school district opting to proceed with a design/build contract can and must
comply with both statutes.

II.     Comuetitive    bidding on construction     contract

        You next ask whether, when a school district lets a construction contract, it must comply with
sections 271.021 through 271.030 of the Local Government Code (“chapter 271, subchapter B”),
which prescribe competitive bidding for a contract requiring an expenditure greater than $15,000 to
construct, repair, or renovate a structure, road, highway, or other improvement or addition to real
property. See TEX. LOCALGOV’TCODEANN. 5 27 1.024 (Vernon Supp. 1999). This office has
concluded that a school district deciding under section 44.031 to competitively bid a contract
governed by chapter 271, subchapter B of the Local Government Code must comply with the
competitive bidding procedures articulated there. See Tex. Att’y Gen. Op. No. DM-387 (1996) at
3.

         Although we believe Attorney General Opinion DM-387 correctly interpreted the law as it
existed at the time the opinion was issued, its conclusion has been superseded by the 1997 adoption
of section 44.040 of the Education Code. See Act of May 29, 1997,75th Leg., R.S., ch. 1179, sec.
2, 5 44.040, 1997 Tex. Gen. Laws 4533, 4538. Under section 44.040, a school district nray
competitively bid a contract to construct, rehabilitate, alter, or repair a facility, and if it chooses to
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do so, may bid the contract without complying with Local Government Code chapter 271,
subchapter B in its entirety:

                    (a) Except to the extent prohibited by other law and to the extent
               consistent with this subchapter, a school district nzay use competitive
               bidding to select a contractor to perform construction, rehabilitation,
               alteration, or repair services for a facility.

                   (b) Sections 271.021, 271.022, 271.026, 271.027(a), and
               271.0275-271.030, Local Government Code, apply to a competitive
               bidding process under this section.

                   (c) A school district shall award a competitively bid contract at
               the bid amount to the bidder offering the best value to the district
               according to the selection criteria that were established by the district.
               The selection criteria may include the factors listed in Section
               44.031(b).

TEX. EDUC. CODE ANN. 3     44.040 (Vernon Supp. 1999) (emphasis added).

        Section 44.040 does two things. First, it permits, but does not require, a school district to
competitively bid a contract for construction services. Second, if a school district chooses to
competitively bid the contract, section 44.040 directs which sections of the Local Government Code
apply to the bid process. Because subsection@) explicitly lists those sections ofLocal Government
Code chapter 271, subchapter B that “apply to a competitive bidding process under” section 44.040,
the sections not listed-i.e., sections 271.024,271.025, and 271.027(b)-do not apply. Where the
competitive bidding statutes would require compliance with all provisions ofchapter 271, subchapter
B, section 44.040 of the Education Code would not. If the procedures mandated by chapter 271,
subchapter B conflict with chapter 44, subchapter B of the Education Code, the Education Code
prevails. See id. (citing Educ. Code 8 44.03 l(e)).

        With the enactment of section 44.040, Attorney General Opinion DM-387 has been
superseded by statute to the extent the opinion is inconsistent with the current section 44.040. We
now conclude that a school district may competitively bid a contract to construct, rehabilitate, alter,
or repair a facility, but it is not required to do so under section 44.040. When choosing to
competitively bid a construction contract, a school district must comply with all provisions of
chapter 271, subchapter B of the Local Government Code except sections 271.024, 271.025, and
271.027(b).

III.    Interlocal Coooeration    Contracts

        Your last two questions concern cooperative purchasing methods. You first ask whether an
interlocal contract entered on behalf of a school district must be competitively bid. We conclude that
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neither the Education Code nor the Interlocal Cooperation Act, chapter 79 1 ofthe Government Code,
require it.

         Nothing in section 44.031of the Education Code mandates that a school district require a
representative contracting on the district’s behalf to competitively procure the contract. Subsection
44.031(a) lists an interlocal contract as a purchasing method a school district may select as an
alternative to a contract made by the competitive procurement methods listed. In addition, while
section 44.03 l(b) lists factors a school district may consider in selecting the vendor to whom to
award a particular contract, the list is optional and does not necessarily apply to the individual or
entity purchasing goods or services on the school district’s behalf in an interlocal contract. We find
nothing else in the Education Code that obligates a school district to insist that goods or services
purchased for the district through an interlocal cooperation contract be competitively procured.

        Nor does the Interlocal Cooperation Act, which allows a school district to contract with
another local government, the state, or a state agency to purchase goods or services, require
competitive bidding. See TEX.GOV’TCODEANN.4 79 1.025(a) (Vernon Supp. 1999). The Interlocal
Cooperation Act does not require a local government to impose competitive procurement methods
on the local government’s representative who purchases goods or services on the local government’s
behalf. To the contrary, the Interlocal Cooperation Act could be construed to permit parties to
choose not to competitively bid a contract for the purchase of services if one of the local
governments that was a party to the contract was not required to competitively bid such a contract.
See id. 5 791.012 (Vernon Supp. 1999) (“Local governments that are parties to an interlocal contract
for the performance of a service may, in performing the service, apply the law applicable to a party
as agreed by the parties.“).

        A school district may, of course, direct its agent to competitively procure the contract, but
state law does not require it to do so. A school district also may require its agent to evaluate the
vendors’ submissions using the criteria listed in section 44.031(b) of the Education Code, but the
school district again is not required to do so. Finally, we note that federal law may impose
competitive procedures on the purchase in certain circumstances. See 34 C.F.R. 5 80.36(d) (1998)
(setting policies and procedures for procurement made with federal funds). State law, however, does
not.

IV.     Cooperative   purchasing   proeram

       Lastly, you ask whether a school district that participates in a cooperative purchasing
program under chapter 271, subchapter F of the Local Government Code must follow competitive
procurement procedures to satisfy the “best value” requirements section 44.03 l(a) of the Education
Code imposes.

         At the outset, we note that it is not clear that school district purchases under a local
cooperative purchasing program are subject to section 44.031 of the Education Code. A school
district’s contract under chapter 27 1, subchapter F of the Local Government Code is not squarely
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a contract “valued at $25,000 or more in the aggregate” for purposes of section 44.031(a) of the
Education Code. Instead, a contract under chapter 271, subchapter F of the Local Government Code
is a contract with other local governments or a local cooperative organization, whereby a school
district (or other local government) agrees to participate in a cooperative purchasing program. See
TEX. Lot. GOV’TCODEANN. 5 271.101(l), (2) (v emon Supp. 1999) (defining “local cooperative
organization” and “local government,” respectively). Under section 271.102(a) of the Local
Government Code, a school district may participate in a cooperative purchasing program by
“sign[ing] an agreement with another participating local government or local cooperative
organization” that the school district will:

                    (1) designate a person to act under the direction of, and on behalf
               of, that local government in all matters relating to the program;

                   (2) make payments to another participating local government or
               a local cooperative organization or directly to a vendor under a
               contract made under this subchapter, as provided in the agreement
               between the participating local governments or between a local
               government and a local cooperative organization; and

                    (3) be responsible for a vendor’s compliance with provisions
               relating to the quality of items and terms of delivery, to the extent
               provided in the agreement between the participating local
               governments or between a local government and a local cooperative
               organization.

Id. 3 27 1.102(b). Accordingly, the nature ofthe agreement contemplated under the local cooperative
purchasing program does not obviously fall within the scope of section 44.031 of the Education
Code.

        While it is not obvious that a local cooperative purchasing program agreement falls under
section 44.03 1, there is practical and intuitive logic that such agreements are covered by section
44.03 1. As local cooperative purchasing programs have as their sole function procuring goods and
services, such agreements may be “school district contracts” subject to section 44.03 1. Construed
in this light, cooperative purchasing programs are a kind of interlocal contract, which section
44,031(a)(5) explicitly permits a school district to enter if it represents the best value. Given the
ambiguity in the law, the safest course for school districts to follow is to adhere to section 44.031
when evaluating whether to purchase goods and services through a local cooperative purchasing
program.

         Once a school district has determined that a local cooperative purchasing program will afford
the district the best value, it need not follow any specific competitive procurement process. Section
271.102(c) of the Local Government Code declares that a local government that purchases items
through a cooperative purchasing program “satisfies any state law requiring the local govemrnent
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to seek competitive bids for the purchase of the goods or services.” Accordingly, any purchases
made through a cooperative purchasing program necessarily are deemed to be the result of
competitive procurement.

         Your questions and our answers demonstrate the complexity of the law relating to school
district contracts. It is our opinion that section 44.031 of the Education Code does not require
competitive procurement methods for all school district contracts. To the extent that you, as active
participants in the Seventy-fourth Legislature’s efforts to overhaul the Education Code, intended
something different, we hope this opinion helps you determine whether the current language
accomplishes your goals.

                                         SUMMARY

                       Under section 44.03 1 ofthe Education Code, a school district
               may establish by rule a procedure to select the one purchasing
               method, of the eight listed in that subsection, that will provide the
               best value to the school district. The district should use the procedure
               it adopts to determine when a design/build contract will provide it
               with the best value. When a district determines that a design/build
               contract will provide the best value to a school district, the district
               must award the contract in accordance with both section 44.036 ofthe
               Education Code and section 2254.004(a) of the Government Code.

                         Attorney General Opinion DM-387 (1996) has been
                superseded to the extent it is inconsistent with section 44.040 of the
                Education Code. With respect to a contract to construct, rehabilitate,
                alter, or repair a facility, a school district may, but is not required to,
                competitively bid the contract. If it competitively bids the contract,
                the school district must comply with all provisions ofthe competitive
                bidding statutes in chapter 271, subchapter B of the Local
                Government Code except sections 271.024,27 1.025, and 271.027(b).

                       An interlocal contract executed on behalf of a school district
                need not be awarded on the basis of competitive procurement
                methods unless the school district requires it.

                       A school district may use the cooperative purchasing method,
                provided in chapter 271, subchapter D of the Local Government
                Code, to purchase items. Contracts made through a cooperative
                purchasing program are deemed to comply with state laws requiring
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               competitive bidding so that a school district need not undertake
               separate competitive purchasing procedures.




                                            Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Prepared by Kymberly K. Oltrogge
Assistant Attorney General
