Does a Texas school district have to use competitive bidding to hire a food service management company?

Texas AG Opinion DM-0014: School Food Service Contracts Must Be Competitively Awarded

Plain-English summary

The Texas Education Agency asked the Attorney General two questions about the deals school districts sign with food service management companies, the firms hired to run a district's cafeterias. First, must a district select that contractor through competitive bidding? Second, can the district let the management company handle the purchasing of food and supplies for it?

On the first question, the Attorney General concluded that districts taking part in federal school nutrition programs (the National School Lunch Program, the School Breakfast Program, and the Summer Food Service Program) must award food service management contracts on a competitive basis. The reason is federal, not state. The federal regulations behind those programs require every procurement, whatever its dollar value, to be conducted "in a manner that provides maximum open and free competition." Texas law by itself did not force competitive bidding for these service contracts; the Education Code's bidding rules covered things like building construction and energy-conservation work, not food service management. But the federal regulations filled that gap, and because Texas had no specific implementing regulation choosing a method, each local board had discretion to use either competitive bidding or competitive proposals.

On the second question, the Attorney General concluded a board may not delegate the purchasing of food and supplies to the management company. Buying for a public body is a power that involves judgment and discretion, assessing needs, writing specifications, evaluating bids, negotiating terms, and a public body cannot surrender or barter away that kind of discretionary duty without statutory authorization. The board can use agents for purely ministerial tasks, and it can lean on consultants for technical advice as long as no discretion passes to them, but the purchasing function itself stays with the board. The sample contracts made the point sharper: they let the company give credit to itself for discounts and favor local suppliers, exactly the kind of self-interested arrangement that could shrink competition.

Currency note

This opinion was issued in 1991. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The Education Code provisions cited here (sections 21.901 and 21.9012) were recodified in the 1990s, and the federal nutrition-program regulations have been revised many times. Verify current law before relying on any specific rule or citation mentioned here.

Common questions

Did a Texas school district have to competitively bid a cafeteria management contract?
Under this opinion, yes, if the district participated in federal school nutrition programs. The federal regulations governing those programs required the contract to be awarded on a competitive basis, even though Texas law alone did not compel it.

Competitive bidding or competitive proposals, which one?
The opinion left that to the local board. Because Texas had no regulation specifying a method, the district could choose either competitive bidding or competitive proposal procedures, as long as the process gave maximum open and free competition.

Could the district let the management company do its purchasing?
No. The opinion concluded that buying food and supplies is a discretionary duty of the board that cannot be delegated to the company by contract or otherwise. The board could assign ministerial tasks to staff or hire consultants for technical advice, but the purchasing decisions had to stay with the board.

Background and statutory framework

The opinion sits at the intersection of federal program rules and Texas school-contract law. Districts that join the National School Lunch Program and related programs accept the federal procurement standards that come with the funds. Those regulations let a district use its own procurement procedures consistent with state and local law, but only so long as the procurements meet federal standards, and one of those standards is that all procurement transactions, sealed bid or negotiated and regardless of dollar value, provide maximum open and free competition. The Summer Food Service Program went further, with a statute requiring food service management contracts to be made "on a competitive basis only." Texas law supplied no parallel mandate for these service contracts: the Education Code provisions on competitive bidding addressed personal-property purchases, building construction and repair, and energy-conservation installations, none of which reached food service management. The Attorney General read the federal regulations as filling that gap and leaving the choice of competitive method to local boards. On the delegation question, the opinion applied the established rule that a public body may not surrender or barter away statutory duties requiring judgment and discretion, and identified purchasing as one such nondelegable power, while allowing delegation of ministerial tasks and use of monitored consultants.

Citations

Federal statutes and regulations:

• 42 U.S.C. §§ 1751-1763 (National School Lunch Program)
• 42 U.S.C. § 1773 (School Breakfast Program)
• 42 U.S.C. § 1761 (Summer Food Service Program; subsection (f)(1) requires competitive-basis contracting)
• 7 C.F.R. §§ 210.16, 210.21 (procurement standards for participating school districts)
• 7 C.F.R. § 3015.182 (maximum open and free competition)
• 7 C.F.R. §§ 220.16(c), 225.17(c) (parallel breakfast and summer-program standards)

Texas statutes and rules:

• TEX. EDUC. CODE ANN. §§ 21.901, 21.9012 (school district competitive bidding)
• TEX. EDUC. CODE ANN. § 21.914 (national school breakfast program participation)
• 19 TEX. ADMIN. CODE § 65.111(b) (administration of school nutrition programs)

Prior opinions referenced: Attorney General Opinions JM-1189 (1990), JM-940 (1988).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0014
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1991/dm0014.pdf

Original opinion text

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

Office of the Attorney General
State of Texas

March 28, 1991

Dr. Thomas Anderson
Interim Commissioner
Texas Education Agency
1701 N. Congress Ave.
Austin, Texas 78701-1494

Opinion No. DM-14

Re: Whether competitive bidding is required for a contractor selected to operate food services in a public school district (RQ-2096)

Dear Dr. Anderson:

Your predecessor requested our opinion on issues relating to contracts between school districts and food service management companies. The first question was whether the selection of a contractor for a food service management contract must be accomplished pursuant to competitive bidding. The sample contracts provided indicate that the food service management company shall provide services in conjunction with the school districts' participation in federal school nutrition programs, including the National School Lunch Program, 42 U.S.C. §§ 1751-1763; 7 C.F.R. pt. 210, the School Breakfast Program; 42 U.S.C. § 1773; 7 C.F.R. pt. 220, and the Summer Food Service Program. 42 U.S.C. § 1761; 7 C.F.R. pt. 225. We will therefore assume for purposes of this opinion that the questions refer to contracts with food service management companies that are governed by federal law and regulations implementing these programs.[1] We conclude that federal laws and regulations governing such contracts require school districts to award them pursuant to competitive procedures.

Federal regulations adopted pursuant to the provisions referenced above authorize and govern contracts between school districts and food service management companies. See 7 C.F.R. §§ 210.16 (National School Lunch Program), 220.7(d) (School Breakfast Program), 225.15(g) (Summer Food Program). The regulations impose certain procurement policies on participating agencies, including school districts. Under the National School Lunch Program, for example, a school district

may use its own procurement procedures which reflect applicable State and local laws and regulations, provided that procurements made with Program funds adhere to the standards set forth in 7 C.F.R. Part 3015.

7 C.F.R. § 210.21(c). Regulations implementing the School Breakfast Program and the Summer Food Service Program contain an identical requirement. See id. §§ 220.16(c), 225.17(c).

A school district participating in the federal programs must also

[a]dhere to the procurement standards specified in § 210.21 [quoted above] when contracting with the food service management company.

Id. § 210.16(a)(1). One such standard provides the following:

All procurement transactions, regardless of whether by sealed bids or by negotiation and without regard to dollar value shall be conducted in a manner that provides maximum open and free competition.

Id. § 3015.182.

The cumulative effect of these regulations is to require all contracts with food service management companies to be open to competition, either through competitive bidding or competitive proposal procedures. See, e.g., [case citation illegible in scan] v. New York, 442 N.Y.S.2d 265 (N.Y. App. Div. 1981) (contract for summer school food program awarded pursuant to competitive bidding). In the case of the Summer Food Program, competition for food service management contracts is expressly required by statute. 42 U.S.C. § 1761(f)(1) (contracts with food service management companies may be made "on a competitive basis only"). The federal regulations identify maximum open and free competition as the guiding standard in the awarding of a food service management contract, but leave it to state and local law and regulations to determine what specific procedures shall be employed.

Aside from contracts for non-professional services related to the construction, maintenance, repair, or renovation of public school buildings, Texas law does not compel public school boards to award contracts for services on a competitive basis. The two provisions of the Education Code that supply procedures governing competition for school district contracts, sections 21.901 and 21.9012, do not apply to contracts with food service management companies. Section 21.901 of the Education Code attaches a general competitive bidding requirement to a public school board's award of three types of contracts valued at $10,000 or more: (1) contracts for the purchase of personal property, (2) contracts for the construction, maintenance, repair or renovation of any building; and (3) contracts for the purchase of materials used in the construction, maintenance, repair or renovation of a building. Section 21.9012 of the Education Code governs a school board's contracts for services relating to the installation of energy conservation devices in school buildings. Because these provisions are inapplicable in this instance, it is unnecessary to consider your predecessor's argument that food service management contracts are professional services for purposes of the competitive bidding exception contained in section 21.901.

The absence of applicable state law and regulations, however, does not relieve local school boards participating in federal school nutrition programs from compliance with the mandate of the federal regulations. To the contrary, we believe local school boards are required to adopt procedures that ensure food service management contracts are awarded on a competitive basis, either by competitive bidding or competitive proposal procedures. In the absence of applicable state regulations, the selection of specific procedures is within the sound discretion of local school boards.[2]

The second inquiry is whether a school district may delegate to a food service management company the authority to purchase food and supplies required under a food services management contract. Your agency proposes a procedure whereby the food service management company supervises the bidding process for the school district in conformity with section 21.901, but vests final decision-making authority in the board of trustees, "either by review and approval of the process, or by a direct decision." Contracts for the purchase of consumable items, food, for example, are subject to section 21.901. See Erwin [name illegible in scan], 228 S.W.2d 882 (Tex. Civ. App.—Dallas 1950, writ ref'd n.r.e.) ("personal property" generally includes everything subject to ownership that does not come under the denomination of real estate).

In the absence of statutory authorization, a public body may not delegate, surrender, or barter away statutory duties that involve the exercise of judgment and discretion. See [case citation illegible in scan], 239 S.W.2d 915 (Tex. Civ. App.—San Antonio 1951, no writ); [case citation illegible in scan], 45 S.W.2d 714 (Tex. Civ. App.—Waco 1931, no writ). The power to make purchases for a public body has been included among such nondelegable powers. [Citation illegible in scan.] The public body may, however, appoint agents to perform ministerial, nondiscretionary tasks relating to nondelegable powers. Id.

Section 21.901 places the ultimate power and duty to make contracts in the board of trustees. It does not expressly require the board to perform every task associated with the procurement function, but the duty to make contracts clearly requires the exercise of considerable discretion in all phases of the bidding process, including the assessment of the needs of the district, the formulation of specifications, the evaluation and selection of products and bids, and the negotiation of contract terms. Some aspects of these functions might be delegable to administrative personnel of a school district or to consultants employed to provide professional advice on specialized or technical matters, provided no discretionary authority is delegated to the consultant and the employment of the consultant is carefully monitored to avoid conflicts of interest. See, e.g., Attorney General Opinions JM-1189 (1990); JM-940 (1988). However, in view of the significant discretion that must be exercised on behalf of a school district in all phases of the competitive bidding process, we conclude that the purchasing function may not be delegated to a food service management company by contract or otherwise.

SUMMARY

Public school districts participating in federal school nutrition programs must award contracts for the management of school food services on a competitive basis. In the absence of applicable state regulations, local school boards have discretion to determine whether competitive bidding or competitive proposal procedures shall apply. A school board may not delegate the purchase of food products and supplies to a food service management company by contract or otherwise.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

SUSAN GARRISON
Acting Chairman, Opinion Committee

Prepared by Steve Aragon
Assistant Attorney General

[1] A food service management company is defined by relevant federal regulations as "a commercial enterprise or a nonprofit organization which is or may be contracted with by the school food authority to manage any aspect of the school food service." 7 C.F.R. § 210.2. A school food authority is "the governing body which is responsible for the administration of one or more schools" and has the legal authority to operate the federal school nutrition program or is otherwise approved by the Food and Nutrition Service of the United States Department of Agriculture to participate in the program. Id. Administration of school nutrition programs in Texas public schools is expressly delegated to public school districts. 19 T.A.C. § 65.111(b); see also Educ. Code § 21.914 (governing board of school district responsible for participation in national school breakfast program).

[2] The sample contract delegates the purchasing function to the food service management company and authorizes it to give preference to local suppliers and to take advantage of local trade discounts and advantages that may not be available on contracts that are competitively bid. The contract also authorizes the company to benefit its own interests by granting it the right to take credit for discounts not attributable to its operation on the district's premises. The contract thus imposes a standard that could be interpreted to encourage a reduction or elimination of competition in the interest of economy and allow the company to act in its own interest.