Can a Texas county set goals for awarding contracts to minority and women-owned businesses?

Plain-English summary

McLennan County was weighing a policy to bring more minority and women-owned businesses into its contracting. The county's district attorney asked the Attorney General three things: does the state law that allows such programs punch a hole in competitive bidding, is the county's specific draft policy legal, and does the underlying state law violate the Constitution's equal protection guarantee.

On the constitutional question, the Attorney General concluded the state law, Local Government Code section 381.004, is fine on its face. The law lets a county set up a program "designed to reasonably increase" minority and women-owned business participation by setting a contract percentage goal. The key word is "goal." The U.S. Supreme Court, in the Croson case, struck down a city rule that flatly required contractors to give 30 percent of each contract to minority-owned firms, because a hard race-based set-aside gets the most demanding constitutional scrutiny and the city had not justified it. But section 381.004 does not carve up contracts by race; it authorizes an aspirational goal, so the statute itself does not run afoul of the Fourteenth Amendment.

The Attorney General was careful about what it would not say. It would not declare the county's specific draft policy "legal," because judging a particular local policy is not what an AG opinion does. And whether any given county program actually survives an equal protection challenge depends on facts, especially the county's reasons for adopting it and whether those reasons hold up, which an opinion cannot resolve. On the bidding question, the AG saw no conflict: unlike a Dallas school-district policy it had previously found problematic because that policy fed into how bids were judged, McLennan County's draft did not set criteria for choosing among bids, so there was nothing to reconcile with competitive bidding.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Equal protection doctrine on race-conscious government contracting has developed considerably since 1993, and the cited Local Government Code provisions have been amended, so confirm current law before relying on anything described here.

Background and statutory framework

Counties are subject to the competitive bidding requirements of Local Government Code section 262.023. Section 381.004 was adopted by the 71st Legislature as Senate Bill 24 (Acts 1989, 71st Leg., ch. 1060, § 3), which also amended section 262.024 (the limited exemptions to the section 262.023 bidding requirements).

The Attorney General began with Attorney General Opinion DM-113 (1992), which had analyzed a Dallas Independent School District policy that let the district weigh a bidder's location and participation in the district's minority and women business enterprise program in judging the bidder's "responsibility." DM-113 explained that in enacting competitive bidding statutes the Legislature decided the government's interest in the best work at the lowest practicable price is secured by maximum competition, that a body subject to competitive bidding must promote the unmistakable legislative policy favoring unrestricted competition, that only the Legislature may vary that policy by enacting exceptions, and that a governmental body may not adopt bid policies, solicitations, or specifications restricting competition unless they bear a definite and objective relationship to quality and competence or are adopted pursuant to clear legislative authority (citing Texas Highway Commission v. Texas Ass'n of Steel Importers, Inc. and Attorney General Opinion JM-712 (1987)).

Section 381.004(d) provides that "[a] program established under this section may be designed to reasonably increase participation by minority and women-owned businesses in public contract awards by the county by establishing a contract percentage goal for those businesses."

On equal protection, the opinion looked to City of Richmond v. J. A. Croson Co., 488 U.S. 469 (1989), where the U.S. Supreme Court reviewed a Richmond plan requiring prime contractors to subcontract at least 30 percent of each contract's dollar amount to minority-owned business enterprises. A majority treated a governmental plan apportioning opportunities by race as subject to strict scrutiny, requiring a compelling state interest and narrow tailoring, and concluded Richmond had failed to show it adopted the plan to remedy past discrimination.

Citations

• Local Government Code § 381.004, § 381.004(d) (county programs to increase minority and women-owned business participation by setting a contract percentage goal)
• Local Government Code § 262.023 (county competitive bidding requirements), § 262.024 (limited exemptions)
• U.S. Const. amend. XIV, § 1 (equal protection)
• Acts 1989, 71st Leg., ch. 1060, § 3 (Senate Bill 24, adopting § 381.004)
• Texas Highway Commission v. Texas Ass'n of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963) (competitive bidding favors unrestricted competition)
• City of Richmond v. J. A. Croson Co., 488 U.S. 469 (1989) (race-based contracting set-aside subject to strict scrutiny)
• Attorney General Opinions DM-113 (1992), DM-121 (1992), JM-712 (1987)

Common questions

Does state law let a Texas county favor minority and women-owned businesses in contracting?
The opinion concluded Local Government Code section 381.004 authorizes a county to establish a program "designed to reasonably increase participation" by minority and women-owned businesses by setting a contract percentage goal. It frames this as a goal, not a mandatory set-aside.

Is that state law unconstitutional under equal protection?
No, not on its face. The Attorney General concluded section 381.004 does not apportion contracting opportunities by race, so it does not violate the Fourteenth Amendment. The opinion distinguished the rigid 30 percent set-aside the Supreme Court struck down in Croson.

Would the AG say the county's specific policy was legal?
No. The opinion concluded that judging whether a particular county policy is "legal" is outside the opinion process, and that whether a specific program survives an equal protection challenge depends on factual matters, including the county's reasons for adopting it, that an opinion cannot resolve.

Did the proposed policy clash with competitive bidding?
The Attorney General saw no conflict. Unlike the school-district policy in a prior opinion, which influenced how bids were evaluated, McLennan County's draft did not set criteria the county would use in selecting among bids, so there was no inconsistency with competitive bidding to analyze.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0226
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0226.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

DAN MORALES
ATTORNEY GENERAL

June 9, 1993

Honorable John W. Segrest
Criminal District Attorney
McLennan County
219 North 6th Street, Suite 200
Waco, Texas 76701

Opinion No. DM-226

Re: Whether section 381.004 of the Local Government Code creates an exemption to competitive bidding requirements and related questions (RQ-498)

Dear Mr. Segrest:

On behalf of McLennan County, you ask several questions which relate to a proposed policy entitled "Minority/Women-Owned Business Involvement Policy" which is currently under consideration by the McLennan County Commissioners Court.

The proposed policy has three major facets. First, in an effort to increase minority and women-owned business participation, it would establish a directory of such businesses and procedures to inform such businesses of contracting opportunities. Second, it would attempt to increase the use of minority and women-owned businesses by prime contractors by (i) incorporating a notice in bid packets that discrimination against such businesses is prohibited, (ii) requiring bidders to state how they intend to use such businesses; and (iii) requesting bidders to supply information regarding their past use of such businesses. The proposed policy states that "[n]othing in this section [regarding the competitive bidding process] shall be construed to constitute a restriction on who the contractor may hire or contract with in the performance of the contract. Nor does this provision seek to establish a quota." Third, with respect to purchases under $10,000.00 which are not subject to competitive bidding, the proposed policy would set a goal that one third of the county's contracts for such purchases be awarded to minority and women-owned businesses.

First, you note that in Attorney General Opinion DM-113 (1992), we considered whether the Dallas Independent School District ("DISD") was authorized to consider such factors as a bidder's location, compliance with DISD's Minority and Women Business Enterprise Contracting and Purchasing Program, and involvement with DISD, when evaluating the bidder's "responsibility." We concluded:

The courts conclude that the legislature, in enacting competitive bidding statutes, has determined that the government's interest in obtaining the best work or product at the lowest practicable price is secured by requiring maximum competition for government contracts. . . . A governmental body subject to a competitive bidding statute must act to promote the unmistakable legislative policy favoring unrestricted competition. . . . Only the legislature may vary this policy by enacting exceptions to competitive bidding. . . . A governmental body therefore may not adopt policies or issue bid solicitations or specifications that restrict competition unless such policies, solicitations, or specifications have a definite and objective relationship to matters of quality and competence or are adopted pursuant to clear legislative authority.

Attorney General Opinion DM-113 at 7 (1992) (emphasis added) (citing Texas Highway Comm'n v. Texas Ass'n of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963); Attorney General Opinion JM-712 (1987)). You further note that unlike DISD which is not statutorily authorized to deviate from strict competitive bidding criteria, the county is subject to section 381.004 of the Local Government Code.[1] You suggest, however, that the extent to which section 381.004 authorizes counties "to implement policies requiring bidders to submit evidence of socially responsible contracting practices . . . is unclear." You ask whether section 381.004 creates an exception to competitive bidding requirements and whether the proposed policy is "legal."

We have reviewed the proposed policy you submitted with your opinion request and see no reason to consider the effect of section 381.004 on competitive bidding requirements because it is not apparent to us that the proposed policy is inconsistent with competitive bidding. Unlike the DISD policy we considered in Attorney General Opinion DM-113, the proposed policy's provisions regarding the competitive bidding process do not appear to set forth any criteria which the county will consider in selecting bids. We note, however, that the determination whether a particular county policy is "legal" is beyond the purview of the opinion process. See Attorney General Opinion DM-121 (1992) at 1.

You also ask whether section 381.004 violates the equal protection clause of the fourteenth amendment of the United States Constitution. U.S. Const. amend. XIV, § 1. The United States Supreme Court considered the constitutionality of a "minority business utilization plan" adopted by the City of Richmond, Virginia in City of Richmond v. Croson, 488 U.S. 469 (1989). That plan required prime contractors awarded city contracts to subcontract at least thirty percent of the dollar amount of each contract to "minority owned business enterprises." A construction company challenged the plan, alleging that it was unconstitutional under the fourteenth amendment's equal protection clause. The court affirmed the judgment of a lower court that the plan violated the fourteenth amendment.

Although the justices were far from uniform in their approach, a majority of the justices appears to have agreed that a plan of a governmental body to apportion opportunities on the basis of race is subject to strict scrutiny. See Croson, 488 U.S. at 498-508. Therefore, the governmental body must have a compelling state interest in enacting the plan, and the plan must be narrowly tailored to achieve that interest. Id. A majority of the court concluded that the City of Richmond had failed to demonstrate a compelling state interest because it had failed to show that it had enacted the plan to remedy past discrimination. Id.

Section 381.004 of the Local Government Code does not apportion county contracting opportunities on the basis of race. It merely authorizes counties to establish programs "designed to reasonably increase participation by minority and women-owned businesses in public contract awards by the county by establishing a contract percentage goal for those businesses." Local Gov't Code § 381.004(d). Therefore, we do not believe that section 381.004 violates the fourteenth amendment. The determination whether a particular county program authorized by section 381.004 violates the fourteenth amendment would require the resolution of factual matters, such as determinations regarding the county's reasons for adopting the program and the verity of those reasons, that are not amenable to the opinion process. Attorney General Opinion DM-121 at 1-2.

SUMMARY

The determination whether a particular county policy is "legal" is beyond the purview of the opinion process. Section 381.004 of the Local Government Code does not violate the equal protection clause of the fourteenth amendment of the United States Constitution. The determination whether a particular county program violates the fourteenth amendment's equal protection clause would require the resolution of factual matters, such as determinations regarding the county's reasons for adopting the program and the verity of those reasons, that are not amenable to the opinion process.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Attorney General for Litigation

RENEA HICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Mary R. Crouter
Assistant Attorney General

[1] Generally, counties are subject to competitive bidding requirements set forth in section 262.023 of the Local Government Code. Section 381.004 of the Local Government Code was adopted by the 71st Legislature as Senate Bill 24. Acts 1989, 71st Leg., ch. 1060, § 3, at 4307. Senate Bill 24 also amended section 262.024 of the Local Government Code which sets forth limited exemptions to the competitive bidding requirements of section 262.023.