How must a Texas school district procure a single 'program manager' for a big building program?

Plain-English summary

A Texas school district planning to rebuild and renovate most of its schools (about 92 percent of its buildings, paid for with bond money) wanted to hire one company as a single "program manager" to handle nearly everything except the actual construction: architecture, engineering, planning, design, scheduling, procurement, insurance, construction management, quality control, project close-out, even community outreach and minority participation. The program manager would also guarantee the project's budget and schedule. The district proposed to hire that company as "its sole architect" under the Professional Services Procurement Act (chapter 2254 of the Government Code), reasoning it wanted professional services, not construction services, and to handle the actual building under separate contracts assigned to the program manager. Senator Frank Madla asked whether that was allowed.

The opinion said no. The Professional Services Procurement Act covers a defined list of "professional services" (accounting, architecture, landscape architecture, land surveying, medicine, optometry, professional engineering, real estate appraising, professional nursing) and forbids selecting those providers by competitive bidding; instead the district picks the most qualified and negotiates a fair price. But the bundle the district described went far beyond architecture and engineering. It was, in substance, a construction-management arrangement, specifically a construction-manager-at-risk deal, where a single entity assumes the risk of building at a guaranteed price while also consulting on the project. Texas has a separate statute that governs exactly that: subchapter B of chapter 44 of the Education Code, enacted in 1995 and amended in 1997 and 1999, which lists the procurement methods a school district must use for contracts of $25,000 or more and which, to the extent of any conflict, prevails over other purchasing law.

Under subchapter B, a district first decides which listed method gives the best value, then follows that method's procedures. The construction-manager-at-risk method (sections 44.031(a)(7) and 44.038) has its own selection process and, critically, requires the district to obtain its architect and engineer separately under the Professional Services Procurement Act, and forbids the construction-manager-at-risk from also serving as the district's architect, engineer, or manager-agent. So the district could not roll construction management and design services into one "program manager" contract under chapter 2254. The construction-manager work had to go through chapter 44, and the design work had to be procured separately. The opinion also held that its 1988 Opinion JM-940, which had treated a construction-management consultant contract as a "professional service," was superseded by the later statutes.

Currency note

This opinion was issued in 2000. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

Senator Frank Madla (what the opinion held): The opinion answered that a school district could not procure the bundled "guaranteed program management" services under the Professional Services Procurement Act, and that the construction-manager services had to be procured under subchapter B of chapter 44 of the Education Code.

School districts (what the opinion held for them): The opinion held a district must first choose the best-value procurement method from the chapter 44 list and follow that method's procedures; for a construction-manager-at-risk arrangement it must comply with section 44.038, select the manager-at-risk through that section's process, obtain architect and engineering services separately under the Professional Services Procurement Act, and not let the manager-at-risk also serve as architect, engineer, or manager-agent.

Program managers and design/construction firms (what the opinion held for them): The opinion held that a single firm could not be hired to provide both construction-manager-at-risk services and architect and engineering services for a district building program under one Professional Services Procurement Act contract.

Common questions

Can a school district hire one company to manage and design an entire building program?
Not as a single bundled professional-services contract. The opinion concluded a district may not use the Professional Services Procurement Act to contract for combined construction-manager-at-risk and architect/engineering services under one "program manager."

Which law governs construction-manager contracts for school districts?
Subchapter B of chapter 44 of the Education Code. The opinion concluded that subchapter, not the Professional Services Procurement Act, governs the construction-management method, and that it prevails over other purchasing law to the extent of any conflict.

Do architect and engineering services still go through the Professional Services Procurement Act?
Yes, but separately. The opinion explained that under section 44.038 the district must obtain its architect and engineer separately under chapter 2254, and the construction-manager-at-risk may not also serve as the district's architect or engineer.

What happened to the older opinion that treated this as a professional service?
The opinion held that Opinion JM-940 (1988) was superseded by the later statutes (sections 44.031 and 44.038 of the Education Code) to the extent it was inconsistent with them.

Background and statutory framework

The Professional Services Procurement Act bars a school district from selecting a professional-services provider or awarding a professional-services contract by competitive bidding (Tex. Gov't Code §§ 2254.002, 2254.003(a)); it defines "professional services" by an enumerated list (§ 2254.002(2)), requires selecting the most highly qualified provider and then negotiating a fair price (§ 2254.004(a)), and makes a contract entered in violation of the Act "void against public policy" (§ 2254.005). Prior opinions had read the Act to bar competitive bidding for a public-works construction contract when architectural or engineering services form part of it.

Subchapter B of chapter 44 of the Education Code, enacted in 1995 and amended in 1997 and 1999, governs school district purchasing contracts of $25,000 or more in aggregate yearly value and lists permitted methods: competitive bidding, competitive sealed proposals, requests for proposals (for non-construction services), catalogue purchases, interlocal contracts, design/build, a contract using a construction manager, and job-order contracts (Tex. Educ. Code § 44.031(a)). To the extent of any conflict, subchapter B prevails over other purchasing law except laws on historically underutilized businesses (§ 44.031(e)), and the section does not apply to professional-services contracts such as those of an architect, attorney, or fiscal agent (§ 44.031(f)). The process is bifurcated: a district first determines which method provides the best value (§ 44.035(a)), then follows that method's procedures. Section 44.037 governs the construction-manager-agent method (a consultant representing the district in a fiduciary capacity), and section 44.038 governs the construction-manager-at-risk method (an entity that assumes the risk of building at a contracted price as general contractor while consulting on construction). Both require the district to select its architect or engineer separately under section 2254.004 of the Government Code, and section 44.038 bars the manager-at-risk from also serving as the district's architect, engineer, or manager-agent and requires separate contracting for inspection and materials-testing services.

The opinion found the proposed bundle closest to the construction-manager-at-risk method, with its budget-and-schedule guarantee resembling a guaranteed-maximum-price construction-manager-at-risk contract. Where a statute prescribes a method of exercising a power, that method excludes all others and must be followed (Cole v. Texas Army Nat'l Guard, 909 S.W.2d 535 (Tex. App.-Austin 1995, writ denied), quoting Foster v. City of Waco, 255 S.W. 1104 (Tex. 1923)). Accordingly, the district could not contract under the Professional Services Procurement Act for combined construction-manager-at-risk and architect/engineering services under a single program manager, and Opinion JM-940 (1988) was superseded by statute.

Citations

Statutory provisions:

• Tex. Gov't Code Ann. § 2254.002 (Vernon 2000)
• Tex. Gov't Code Ann. § 2254.003(a) (Vernon 2000)
• Tex. Gov't Code Ann. § 2254.004(a) (Vernon 2000)
• Tex. Gov't Code Ann. § 2254.005 (Vernon 2000)
• Tex. Educ. Code Ann. § 44.031(a), (e), (f) (Vernon Supp. 2000)
• Tex. Educ. Code Ann. § 44.035(a) (Vernon Supp. 2000)
• Tex. Educ. Code Ann. § 44.037 (Vernon Supp. 2000)
• Tex. Educ. Code Ann. § 44.038 (Vernon Supp. 2000)

Cases:

• Cole v. Texas Army Nat'l Guard, 909 S.W.2d 535 (Tex. App.-Austin 1995, writ denied)
• Foster v. City of Waco, 255 S.W. 1104 (Tex. 1923)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0224
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2000/jc0224.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor character-level errors from the source OCR have been corrected; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS

JOHN CORNYN

May 22, 2000

The Honorable Frank Madla
Chair, Committee on Intergovernmental Relations
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Opinion No. JC-0224

Re: Whether a school district may procure "guaranteed program management" services under the Professional Services Procurement 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 of the 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 Intergovernmental Relations, to Honorable John Cornyn, 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 II-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 II-7, II-8. They also include "community outreach" and "minority participation program" services. Request Letter, supra, at 2; Proposal, supra, at 7.

Apparently, all the guaranteed program management services will be provided by a single corporate entity, the "program manager." See generally 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 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. §§ 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. Id. § 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. § 2254.004(a). A professional services contract entered in contravention of the Professional Services Procurement Act is "void against public policy." Id. § 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).[1]

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;[2] and to the extent of any conflict, subchapter B generally prevails over other procurement law.

Subchapter B of chapter 44 of the Education Code was enacted by the legislature in 1995 and amended in 1997 and 1999.[3] 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. CODE ANN. § 44.031(a) (Vernon Supp. 2000); see also Overton A. Currie, Esq. et al., The Owner Contemplating Litigation and Its Alternatives: An Overview, in CONSTRUCTION LITIGATION: REPRESENTING THE OWNER 3, 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 a competitive procurement mechanism consistent with the Professional Services Procurement Act or direct compliance with that act. See TEX. EDUC. CODE ANN. §§ 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. CODE ANN. §§ 44.037(c), .038(c) (Vernon Supp. 2000). Thus, while subchapter B's purchasing provisions do not generally apply to "professional services," see id. § 44.031(f), they do apply to the construction management method for constructing school facilities involving construction manager services, see id. §§ 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 of the guaranteed program management services in question, we assume it exceeds $25,000. Section 44.031 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 of produce or vehicle fuel, valued at $25,000 or more in the aggregate for each 12-month period shall be made by the method, of the following methods, that provides 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 . . . ;

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

...

(e) To the extent of any 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.

(f) 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. § 44.031(a), (e), (f) (emphasis added).

Section 44.031 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 44.031, a district must first evaluate which of the eight listed purchasing methods will provide the best value. Id.; see also TEX. EDUC. CODE ANN. § 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. §§ 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. CODE ANN. §§ 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. § 44.037(a). A construction manager-agent is a "legal 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. § 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 of demonstrated 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. § 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. § 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 of the 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. § 44.038(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. § 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. § 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. JC-0205 (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 44.031 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 construction manager method under subsection (a)(7) of section 44.031 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 LEGAL HANDBOOK FOR ARCHITECTS, ENGINEERS AND CONTRACTORS 141, 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. CODE ANN. §§ 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. § 44.038(a); Cole v. Texas Army Nat'l Guard, 909 S.W.2d 535, 539 (Tex. App.-Austin 1995, writ denied) ("'[W]here 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.

[1] See also Tex. Att'y Gen. Op. No. MW-530 (1982) (higher education construction manager services contract within "personal services" exception to competitive bidding requirements of former article 2368a, TEX. REV. CIV. STAT. ANN.); Tex. Att'y Gen. LO-98-60 (municipal construction management contract may be professional or personal service contract).

[2] The Seventy-fourth Legislature repealed section 21.901, transferring 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, § 58(a)(1), 1995 Tex. Gen. Laws 2207, 2498.

[3] See Act of May 27, 1995, 74th Leg., R.S., ch. 260, § 1, 1995 Tex. Gen. Laws 2207, 2425-26; Act of May 27, 1997, 75th Leg., R.S., ch. 1179, §§ 1-2, 1997 Tex. Gen. Laws 4533; Act of May 28, 1999, 76th Leg., R.S., ch. 1225, §§ 1-10, 1999 Tex. Gen. Laws 4257.

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 JM-940 (1988) is superseded by statute.

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General - Opinion Committee