                                           May 22,200O



The Honorable Frank Madla                            Opinion No. JC-0224
Chair, Committee on Intergovernmental
   Relations                                         Re: Whether a school district may procure
Texas State Senate                                   “guaranteed program management” services
P.O. Box 12068                                       under the Professional Services Procurement
Austin, Texas 78711                                  Act, chapter 2254 of the Government Code
                                                     (RQ-0150-JC)

Dear Senator Madla:

        You ask whether a school district may procure “guaranteed program management” services
as professional services under the Professional Services Procurement Act, chapter 2254 of the
Government Code, rather than under subchapter B, chapter 44 ofthe Education Code. We conclude
in the negative. The school district must procure these services under subchapter B of chapter 44
of the Education Code and otherwise comply with the provisions of subchapter B.

         As we understand it, the “guaranteed program management” services you ask about include
all services, except actual construction services, necessary for the construction, improvement, and
renovation of ninety-two percent of the district’s school buildings to be funded with school district
tax bonds. See Letter from Senator Frank Madla, Chair, Texas Senate Committee on Inter-
governmental Relations, to Honorable John Comyn, Texas Attorney General at 2 (Nov. 18, 1999)
[hereinafter “Request Letter”]; Notification of Intent to Select Bond Construction Program
Management Services, at 1; Proposal for Bond Construction Program Management Services, at H-7,
II-8 [hereinafter “Proposal”] (all on file with Opinion Committee). Specifically, they include
architectural, engineering, planning, design, scheduling, procurement, risk management-controlled
insurance programs, construction management, quality control, project close-out, and operation and
management services for the entire building program. Request Letter, supra, at 2; Proposal, supra,
at 11-7, 11-8. They also include “community outreach” and “minority participation program”
services. Request Letter, supua, at 2; Proposal, supra, at 7.

        Apparently, all the guaranteed program management services will be provided by a single
corporate entity, the “program manager.” Seegenerally, Request Letter; Proposal. You tell us that
a school district proposes to contract with the program manager “as its sole architect” pursuant to
the Professional Services Act, chapter 2254 of the Government Code, rather than chapter 44 of the
Education Code because the district “desires professional services versus construction services.”
Request Letter, supra, at 1. The school district in turn will contract for construction services with
The Honorable Frank Madla - Page 2                     (X-0224)




one or more contractors pursuant to chapter 44 of the Education Code and assign those contracts to
the program manager. Id. And the program manager will then guarantee the building program
budget and schedule. Id.

         The Professional Services Procurement Act prohibits a school district from selecting a
provider of “professional services” or awarding a contract for professional services on the basis of
competitive bidding. TEX. GOV’T CODE ANN. $9 2254.002, .003(a) (Vernon 2000). “Professional
services” means the following services: (1) accounting; (2) architecture; (3) landscape architecture;
(4) land surveying; (5) medicine; (6) optometry; (7) professional engineering; (8) real estate
appraising; or (9) professional nursing. Zd. § 2254.002(2). In procuring professional services of an
architect, professional engineer, or land surveyor, a school district must: “(1) first select the most
highly qualified provider of those 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.” Id. 8 2254.004(a). A professional services contract entered in contravention of the
Professional Services Procurement Act is “void 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 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’s-98-060, at 10-11; 96-117, at 1. And a prior attorney
general opinion has opined that a school district contract for the services of a construction
management consultant was a contract for “professional services” for the purposes of former article
21.901 of the Education Code excepting such services from competitive bidding. See Tex. Att’y
Gen. Op. No. JM-940 (1988)’

         The described program management services, of course, include more than architect and
engineering services; the statutory procurement procedure under subchapter B of chapter 44 of the
Education Code, generally governing school districts’ purchases and contracts, is not competitive
bidding; subchapter B was adopted by the legislature subsequent to this office’s opinion concluding
that a school district’s construction management consultant services contract was a “professional
service” for the purposes for former article 21.901 of the Education Code;’ and to the extent of any
conflict, subchapter B generally prevails over other procurement law.




                                                             I er education constmction manager services contract
           ‘See also Tex. Att’y Gen. op. No. MW-530 (1982) (Kgh
within“personal services” exceptionto competitivebidding requirements of former article 2368% TEX. REV. CIV. STAT.
ANN.); Tex. Att’y Gen. LO-98.60 (municipal construction management wntract maybe professional orpersonal service
contract).

         %e Seventy-fourth  Legislature repealed section 21.901, transfeming   its subject matter to section 44.031 of
the Education Code and amending its substance. See Act of May 27,1995,74th       Leg., R.S., ch. 260.5 58(a)(l), 1995
Tex. Gen. Laws 2207.2498.
The Honorable Frank Madla - Page 3                    (JC-0224)




         Subchapter B of chapter 44 of the Education Code was enacted by the legislature in 1995 and
amended in 1997 and 1999.’ Subchapter B authorizes procurement methods in addition to
competitive bidding, including design/build and, as relevant here, construction management for
construction and improvement of school facilities. See TEX.EDUC.CODEANN.5 44.03 1(a) (Vernon
Supp. 2000); see also Over-ton A. Currie, Esq. et al., The Owner Contemplating Litigation and Its
Alternatives: An Overview, in CONSTRUCTION          LITIGATION:REPRESENTING       THE OWNER3, 10
(Robert F. Cushman et al. eds., 2d ed. 1990) (four major construction contractual structures are (1)
general contractor with subcontractors (traditional) method, (2) multiple prime contractors structure,
(3) various construction management schemes, and (4) design-build contracting). These construction
methods incorporate acompetitiveprocurement mechanism consistent with the Professional Services
Procurement Act or direct compliance with that act. See TEX. EDUC.CODEANN. $5 44.036(e),
.037(c), .038(e) (Vernon Supp. 2000); see also Tex. Att’y Gen. Op. No. JC-0037 (1999) at 3-4
(discussing procurement scheme for design/build). They also include specific restrictions and
procedures regarding engineering, architectural, and other ancillary services involved in these
construction methods. See TEX. EDUC.CODEANN. $5 44.037(c), .038(c) (Vernon Supp. 2000).
Thus, while subchapter B’s purchasing provisions do not generally apply to “professional services,”
see id. 5 44.03 l(f), they do apply to the construction management method for constructing school
facilities involving construction manager services, see id. $5 44.031(a)(7), ,037, ,038.

        Although you do not tell us the program manager’s contract price, given the magnitude of
the school district building program and the breadth ofthe guaranteed program management services
in question, we assume it exceeds $25,000. Section 44.03 1 regulating a school district’s purchasing
contracts of $25,000 or more in aggregate yearly value provides as follows:

                        (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, ofthe following methods, thatprovides
                the best value for the district:

                              (1) competitive bidding;

                              (2) competitive sealed proposals;

                             (3) a request for proposals, for services other than
                 construction services:

                              (4) a catalogue purchase         ;




         ‘SeeActofMay 27,1995,74tb Leg., RX, ch. 260.5 1, 1995 Tex. Gen. Laws 2207,2425-26; Act of May 27,
1997,75th Leg., R.S., ch. 1179, $4 l-2, 1997 Tex. Gen. Laws 4533; Act of May 28, 1999, 76th Leg., R.S., ch.1225,
$5 l-10, 1999 Tex. Gen. Laws 4257.
The Honorable Frank Madla - Page 4                 (JC-0224)




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




                        (e) To the extent ofany conflict, this subchapter prevails over
                any other law relating to the purchasing of goods or services except
                a law relating to contracting with historically underutilized
                businesses.

                        (t) This section does not apply to a contract for professional
                services rendered, including services of an architect, attorney, or
                fiscal agent. A school district may, at its option, contract for
                professional services rendered by a financial consultant or a
                technology consultant in the manner provided by Section 2254.003,
                Government Code, in lieu of the methods provided by this section.

Id. 5 44.031(a), (e), (f) (emphasis added).

         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. Tex. Att’y
Gen. Op. No. JC-0037 (1999) at 2. Under subsection (a) of section 44.03 1, a district must first
evaluate which of the eight listed purchasing methods will provide the best value. Id.; see also TEX.
EDUC. CODE ANN. 5 44.035(a) (Vernon Supp. 2000) (school district considering construction
contract using method specified in section 44.031(a) must before advertising determine which
method provides 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. Tex. Att’y Gen. Op. No.
JC-0037 (1999) at 2. Subsequent provisions in subchapter B provide some procedures for
procurement and criteria for selecting a vendor with respect to a particular purchasing method. Id.;
TEX. EDUC. CODE ANN. $5 44.035-,041 (Vernon Supp. 2000). Sections 44.037 and 44.038 set out
specific procedures for the construction manager method for constructing, improving, or repairing
a facility, and entering into a contract for the services of a construction manager as well as services
of an engineer or architect for the project. See TEX. EDUC.CODEANN. $5 44.037, ,038.

        Section 44.037 deals with the construction manager-agent method and a contract for the
services of a construction manager-agent. Id. 5 44.037(a). A construction manager-agent is a “legal
The Honorable Frank Madla - Page 5                (JC-0224)




entity that provides consultation to the school district regarding construction, rehabilitation,
alteration, or repair of the facility[,]” and “represents the district in a fiduciary capacity.” Id.
5 44.037(b). Before or concurrently with the selection of the manager-agent, a school district is
required to select or designate an engineer or architect on the basis ofdemonstrated competence and
qualification pursuant to section 2254.004 of the Government Code (the Professional Services
Procurement Act) if the architect or engineer is not a full-time school district employee. Id.
5 44.037(c). The district’s engineer or architect may not serve as the manager-agent unless hired
under a separate or concurrent procurement procedure in accordance with subchapter B. Id. Finally,
the manager-agent must be selected on the basis of demonstrated competence and qualification in
the same manner as engineers or architects under section 2254.004 of the Government Code. Id.
5 44.037(b).

         Section 44.038 deals with the construction manager-at-risk method and entering into a
contract for the services of a construction manager-at-risk. Id. § 44.038(a). A manager-at-risk is a
“legal entity that assumes the risk for construction, rehabilitation, alteration, or repair of a facility
at the contracted price as a general contractor and provides consultation to the school district
regarding construction during and after the design ofthe facility.” Id. $44.038(b). The manager-at-
risk itself must be selected in either a one-step or two-step process as set out in subsections (e), (f),
and (g) of section 44.038. A school district must prepare a “request for proposal” in the one-step
(which may include proposed fees and prices) or a “request for qualifications” in the two-step
process (which may include fees and prices only in the second step) and state the selection criteria,
which may include “offeror’s experience, past performance, safety record, proposed personnel and
methodology, and other appropriate factors that demonstrate the capability of the construction
manager-at-risk.” Id. 5 44.03X(e). The district must select the offeror submitting a proposal “that
offers the best value for the district based on the published selection criteria and on its ranking
evaluation[,]” and attempt to negotiate with that offeror. Id. 5 44.038(g). Again, a school district
must before or concurrently with the selection of the manager-at-risk select or designate an engineer
or architect, and the engineer or architect, if not a full-time school district employee, must be
selected in accordance with section 2254.004 of the Government Code. Id. $ 44.038(c).
Significantly, the manager-at-risk may not serve as the district’s architect, engineer, or manager-
agent. Id. Moreover, the district must provide or contract separately “for inspection services, the
testing of construction materials engineering, and the verification testing services necessary for
acceptance and facility by the district[,]” in accordance with section 2254.004 of the Government
Code. Id. 5 44.038(d).

         In sum, section 44.031 establishes the permissible purchasing methods for contracts,
excepting contracts for produce, fuel, or professional services subject to the Professional Services
Procurement Act, over $25,000 in aggregate yearly value. Tex. Att’y Gen. Op. No. K-205 (2000)
at 9. The school district in question is limited to one of the permissible methods. See id. at 10
(because designated broker of record not authorized by section 44.03 1 and 44.033, junior college
district may not use broker to purchase insurance). Once it has chosen a method, it must comply
with the procedures applicable to that method. The method described to us appears closest to the
The Honorable Frank Madla - Page 6               (JC-0224)




construction manager method under subsection (a)(7) of section 44.03 1 involving the services of a
construction manager-at-risk as described in section 44.038(a).

        In addition to architect and engineering services, the program manager will provide
“construction management” services. See Request Letter; Proposal. In fact, most of the other
services that you tell us the program manager will provide-planning,            design, scheduling,
procurement, risk management-controlled insurance programs, quality control, project close-out, and
operation and management services for the entire building program-fall under or are variations of
the services provided by a construction manager. See Richard D. Conner, Contracting for
Construction Management Services, in 3 LEGALHANDBOOKFORARCHITECTS,ENGINEERSAND
CONTRACTORS141, 142 (Albert Dib ed., 1987) (“The construction management [“CM”] delivery
system is a team approach with project planning, design, and construction being treated as integrated
tasks. Typically, the CM works with the owner and design professional from the beginning of
design until project completion; his responsibilities include engineering design review,
constructability considerations, contracting strategies, and project control.“); id. at 143-44
(describing construction manager tasks and functions during predesign, design, and construction
phases). Additionally, the program manager upon or after assignment of the construction contracts
will guarantee the project’s schedule and budget. This guarantee appears to be simply a variation
on the guaranteed maximum price contract with a construction manager used in the construction
industry and referred to as a construction manager-at-risk contracting method. Id. at 146-47.

        If the school district you ask about has determined that the construction manager-at-risk
method provides the best value to the school district, see TEX. EDUC. CODEANN. $5 44.031(a),
.035(a) (Vernon Supp. 2000), it must comply with the requirements of section 44.038 in using that
method and contracting for the services of a construction manager-at-risk. See id. 5 44.038(a); Cole
v. Texas Army Nat ‘IGuard, 909 S.W.2d 535,539 (Tex. App.-Austin 1995, writ denied) (“‘[Wlhere
a [statutory] power is granted, and the method of its exercise prescribed, the prescribed method
excludes all others, and must be followed.“‘) (quoting Foster v. City of Waco, 255 S.W. 1104,1105
(Tex. 1923)). Under that provision, the construction manager-at-risk must be selected according to
the procedures set forth in subsections (e), (f), and (g) of section 44.038. Architect and engineering
services must be obtained separately from the construction manager-at-risk services pursuant to the
Professional Services Procurement Act, chapter 2254 of the Government Code. Accordingly, the
school district may not under the Professional Services Procurement Act contract for “guaranteed
program services” that include both construction manager-at-risk and architect and engineering
services to be rendered by a single “program manager.”

       Sections 44.031 and 44.038 of the Education Code prevail over Attorney General Opinion
JM-940 to the extent the opinion is inconsistent with these statutes. Accordingly, Attorney General
Opinion JM-940 (1988) is superseded by statute.
The Honorable Frank Madla - Page 7             (X-0224)




                                      SUMMARY

                      A school district may not under the Professional Services
               Procurement Act contract for “guaranteed program services” that
               include both construction manager-at-risk and architect and
               engineering services to be rendered by a single “program manager.”
               Attorney General Opinion N-940 (1988) is superseded by statute.




                                            JOHN     CORNYN
                                            Attorney General of Texas


ANDY TAYLOR
First Assistant Attorney General

CLARK RENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General - Opinion Committee
