Can a South Carolina public service water district refuse to let a developer hire a licensed water contractor of their choice and instead require the developer to pay whoever the district picks from its approved-contractor list?

Plain-English summary

Several public service water districts in Anderson County, South Carolina, were running their new-line installation work this way: a developer who needed a new water line could not just hire any licensed water utility contractor. Instead, the district itself put the work out for bid, but only to contractors on the district's "approved list." The developer then paid whichever contractor the district selected.

Developers complained that this was driving up costs and shutting them out of work, especially developers who were themselves licensed water utility contractors but could not get on the approved list. Three state legislators asked the AG whether this practice was lawful.

The AG's answer is mostly yes. Public service water districts created under S.C. Code § 33-36-1310 have a long list of statutory powers in § 33-36-1360, including the power to authorize who builds and operates their projects (§ 33-36-1360(A)(16)) and the power to obtain and operate under permits, licenses, certificates, and approvals from state and federal agencies (§ 33-36-1360(A)(17)). The AG looked at the kinds of qualifications the districts were imposing, things like a South Carolina Contractor's License, evidence of authority to do business, performance and payment bonds, liability insurance, project references, and concluded that those qualifications can fairly be tied back to the regulatory permits, licenses, and approvals the district itself has to operate under. Where that link exists, the AG says § 33-36-1360(A)(17) "may well require" the district to confirm the contractor's qualifications.

This is not a green light for any contractor restriction the district wants to impose. The AG's reasoning ties the legality back to the district's statutory duties to comply with regulatory requirements. Restrictions that are not tethered to those duties would not draw the same support from the opinion. The AG also explicitly notes that the office cannot make factual findings about whether any specific district's specific approved-contractor list crosses the line.

What this means for you

If you're a developer in a SC public service water district

You probably do not have a free-choice right to pick your own water utility contractor for new-line work in the district. Under this opinion, the district's statutory powers include authorizing who builds the project (§ 33-36-1360(A)(16)) and confirming that contractors meet the qualifications required to comply with the district's permits and regulatory approvals (§ 33-36-1360(A)(17)). If the district uses an approved-contractor list whose criteria are tied to the district's regulatory obligations, the AG's reading is that the district is on solid statutory ground.

Practical points if you are pushing back on a specific list:

• Ask for the district's stated rationale linking each qualification to a permit, license, certificate, or approval from a regulatory agency. The AG's reasoning depends on that link.
• If a qualification has no regulatory hook (it is, for example, an arbitrary minimum project count or a relationship requirement), you have a stronger argument that the district's authority does not reach that far. The AG's opinion rests on the regulatory-permit theory; it does not bless every imaginable contractor restriction.
• Cost grievances alone are not the legal issue. The AG explicitly declines to second-guess price-comparison disputes; those are not part of the statutory analysis.

If you're a developer who is also a licensed water utility contractor

You're in a particularly tough spot under this opinion. The AG accepts the district's authority to require qualifications even if you cannot meet some of them yourself (and therefore cannot do the work on your own property). Two things to consider:

• Identify which specific qualifications you are missing. If they are bonded-coverage or insurance limits, those are typically tied to permit or regulatory requirements and the AG's reasoning supports them.
• If you believe the qualifications are pretextual or designed to favor incumbent contractors, the path is litigation or, more practically, asking the legislature to amend § 33-36-1360 to limit district discretion. The AG views the existing statute as broadly enabling.

If you're on the board of a SC public service water district

This opinion supports your existing approved-contractor list, but only to the extent each requirement on the list ties back to a permit, license, certificate, or approval the district itself must comply with. To shore up your defensibility:

• Document, in your procurement policy, the regulatory provision each qualification supports. "South Carolina Contractor's License" maps to state licensing law. "Performance bond" and "payment bond" map to state and federal requirements for utility construction. "Liability insurance" maps to risk allocation under your operating permits.
• Keep your approved-list criteria neutral and reproducible. Anything that looks like a pretext for favoritism (specific subcontractor requirements, vague "experience" tests) draws greater legal risk because it lacks the regulatory hook the AG's reasoning relies on.
• Consider an open application window with published criteria and an appeal process. The AG's opinion does not require this, but it reduces the risk that an aggrieved developer will get a court interested in the case.

If you're a municipal or construction attorney

The opinion turns on a careful reading of § 33-36-1360(A)(17): the district must "obtain" permits, licenses, certificates, or approvals "as may be necessary" and must "construct, maintain, and operate the project in accordance with such" approvals. The AG bridges from that operating duty to a power (and possibly a duty) to confirm contractor qualifications that ensure compliance. Two practice notes:

• The AG explicitly assumes the contractor qualifications it is reviewing are "broadly representative" of district practice. A district that imposes idiosyncratic, non-regulatory criteria does not get the same statutory cover.
• The opinion does not address antitrust, equal protection, or restraint-of-trade theories. A developer with a colorable theory under one of those doctrines is not foreclosed by this opinion; the AG's analysis is limited to the statutory authority question.

Common questions

Q: Can a SC public service water district make me use a contractor from its approved list?
A: Likely yes, when the qualifications on that list are tied to the district's regulatory compliance obligations. Section 33-36-1360 gives districts broad powers, including § 33-36-1360(A)(16) (authorize project construction by any qualified person) and § 33-36-1360(A)(17) (obtain and operate under regulatory permits and approvals). The AG reads these together to support an approved-list approach when qualifications hook into regulatory requirements.

Q: What kinds of qualifications can the district require?
A: The AG looked at and accepted the following: a South Carolina Contractor's License, qualification statement of company, evidence of authority to do business in South Carolina, proof of liability insurance, proof of a 100% performance bond, proof of a 100% payment bond, list of primary subcontractors, list of primary material suppliers, list of references, and a list of completed water-distribution projects from the prior five years.

Q: I'm a developer who is also a licensed water utility contractor. Can I do the work on my own property?
A: Not necessarily. If you cannot meet the district's qualifications, the AG's opinion says the district has authority to refuse. The opinion does not draw a special exception for owner-developers.

Q: Why is the cost so much higher when the district picks the contractor?
A: That's a market and procurement question, not a legal one. The AG declined to investigate factual claims about pricing. If the bid process is restricted to a small approved list, prices are likely to reflect that, but the legal authority of the district to use such a list is supported by this opinion.

Q: Can I challenge an approved-contractor decision?
A: You can. The AG cannot adjudicate factual disputes, so a real challenge has to go to court. The strongest path is showing that a specific qualification is not tied to a permit, license, certificate, or regulatory approval, in which case the district's authority under § 33-36-1360(A)(17) does not reach it.

Q: What is a public service district under § 33-36-1310?
A: A nonprofit corporation incorporated for the purpose of providing water (or water and sewer) services that has converted into a public service district under Title 33, Chapter 36, Article 14. These are public bodies but were originally formed as nonprofits.

Background and statutory framework

Title 33, Chapter 36, Article 14 of the South Carolina Code (S.C. Code §§ 33-36-1310 et seq.) lets nonprofit corporations that were organized to provide water or water and sewer services become "public service districts," picking up the powers of public utilities. Once converted, the district has a long enumerated list of statutory powers in § 33-36-1360, including:

• "(16) authorize the construction, operation, maintenance of any project by any person, firm, or corporation, including political subdivisions and agencies of any state of the United States;" and
• "(17) apply to the appropriate agencies of the State, the United States or any state, and to any other proper agency for and obtain from them permits, licenses, certificates, or approvals as may be necessary; and construct, maintain, and operate the project in accordance with such license, permits, certificates, or approvals."

The legislators' question was whether these powers extend to telling a developer they cannot pick their own contractor. The AG's analytical move is to focus on (A)(17). To "construct, maintain, and operate the project in accordance with" the regulatory permits, the district has to confirm that whoever does the work meets the qualifications those permits require. The AG then assumes the kinds of qualifications a developer would have to satisfy to be on the approved list (Contractor's License, performance and payment bonds, insurance, references, project history) are "broadly representative" of regulatory-permit-tied requirements, and concludes that the district may well be statutorily required to confirm them.

The AG also flags an ordinary limit on AG opinions: this office cannot find facts. It can interpret statutes and apply them to assumed facts, but it cannot adjudicate whether any specific district's specific approved-list practice crosses a legal line. See Op. S.C. Att'y Gen., 2006 WL 1207271 (April 4, 2006). A developer who believes a particular qualification is pretextual or untethered to the regulatory framework would have to raise that issue in court.

Citations and references

Statutes:

• S.C. Code § 33-36-1310 (formation of public service district)
• S.C. Code § 33-36-1360 (rights and powers of public service district)
• S.C. Code § 33-36-1360(A)(16) (power to authorize project construction by qualified persons)
• S.C. Code § 33-36-1360(A)(17) (power and duty to obtain regulatory permits and to construct in accordance with them)

Prior AG opinions:

• Op. S.C. Att'y Gen., 2006 WL 1207271 (April 4, 2006), AG opinions cannot adjudicate or investigate factual questions

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-addressing-whether-a-public-service-district-can-impose-contractor-qualifications-under-s-c-code-section-33-36-1360-et-seq/
• Original PDF: https://www.scag.gov/media/mp2fles2/cashr-chapmand-gilreathl-os-11042-final-opinion-7-3-2025.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ALAN WILSON
ATTORNEY GENERAL

July 03, 2025

The Honorable Richard Cash
Member, South Carolina Senate
P.O. Box 8002
Anderson, SC 29622

The Honorable Don Chapman
Member, South Carolina House of Representatives

The Honorable Lee Gilreath
Member, South Carolina House of Representatives

Dear Senator Cash and Representatives Chapman and Gilreath:

Attorney General Alan Wilson has referred your letter to the Opinions section. Your letter requests an opinion addressing the following:

We are writing today to seek an opinion about public service water districts organized under the provisions of S.C. Code § 33-36-1310.

It has been brought to our attention that a number of the public service water districts in Anderson County prohibit a developer from using a licensed water utility contractor of their choice to perform work. Instead, when a developer needs a new line run, many of the water districts have a policy of contracting directly with a utility contractor using a bid process that is limited to those contractors who are on the water districts' approved list. Then, the developer is responsible for paying whichever utility contractor is selected by the water district.

The complaint we have received about limiting a developer's contracting ability is that the cost of the work is much higher when the water district puts the work out for bid to contractors on its approved list. Also, there are times when a developer is also a licensed water utility contractor but cannot meet all the requirements to get on an approved list and therefore cannot do the work on his own property. Enclosed is an example of what a contractor must do to try to get on the approved list.

We understand the high priority that public service water districts must place on maintaining a safe and reliable system. However, we seek an opinion of whether it is legal for a public service water district to prohibit a developer from contracting with a licensed water utility contractor to perform work and instead mandating that the district contract with a licensed utility contractor using a bid process limited to contractors that are on the water districts' "approved list."

Law/Analysis

Your letter states that several service water districts were formed under the provisions of S.C. Code § 33-36-1310 which authorizes a nonprofit corporation incorporated for the purposes of providing water or water and sewer services to become a public service district. S.C. Code § 33-36-1360 within the same article lists the rights and powers of such a district. These rights and powers include the power to:

(16) authorize the construction, operation, maintenance of any project by any person, firm, or corporation, including political subdivisions and agencies of any state of the United States;

(17) apply to the appropriate agencies of the State, the United States or any state, and to any other proper agency for and obtain from them permits, licenses, certificates, or approvals as may be necessary; and construct, maintain, and operate the project in accordance with such license, permits, certificates, or approvals;

Id. This Office cannot find facts in an opinion, but will assume the facts presented for purposes of analysis. See Op. S.C. Att'y Gen., 2006 WL 1207271 (April 4, 2006) ("Because this Office does not have the authority of a court or other fact-finding body, we are not able to adjudicate or investigate factual questions."). In order to provide guidance, this opinion will assume the enclosed contractor qualifications are broadly representative of the qualifications the water districts have imposed for inclusion on the approved contractor lists. Those qualifications include: a South Carolina Contractor's License, qualification statement of company, evidence of authority to do business in the State of South Carolina, proof that Contractor can provide limits of liability insurance coverage, proof that Contractor can provide a 100% performance bond, proof that Contractor can provide a 100% payment bond, list of primary subcontractors, and a list of primary material suppliers. Additionally, the form asks for a list of references and a list of water distribution projects completed within the last five years. Assuming arguendo that these requirements are called for by or related to compliance with permits, licenses, certificates, or approvals from agencies of the State, the United States or any state, or other proper agency, S.C. Code § 33-36-1360(A)(17) may well require such districts to confirm these qualifications.

Sincerely,

Matthew Houck
Assistant Attorney General

REVIEWED AND APPROVED BY:

Robert D. Cook
Solicitor General