Untitled Texas Attorney General Opinion ( 1988 )

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
p. 4732