Could Harris County require a construction contractor to perform at least 25 percent of the work with the contractor's own employees?

Texas AG Opinion JM-881: County Construction Bids and Self-Performance Rules

Plain-English summary

Harris County asked whether its construction bid specifications could require a contractor's own employees to perform at least 25 percent of the work.

The Attorney General said no. The county's construction contracts were governed by statutes requiring competitive bidding. Local Government Code section 262.025 prescribed the contents of the bidding notice but did not authorize a specification limiting the work a successful bidder could subcontract.

Competitive-bidding law sought to stimulate competition, prevent favoritism, and obtain the best work and materials at the lowest practicable price. A rule excluding or disadvantaging contractors because they planned to subcontract work would restrict that competition.

The county did retain discretion to decide that a particular bid was not responsible. That decision had to be informed, non-arbitrary, and supported by objective facts about the bidder's ability to perform, not a general rule against subcontracting.

Currency note

This opinion was issued in 1988. 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.

Common questions

Could the county require 25 percent self-performance?

No. The opinion concluded that the county could not place that condition in its construction bid specifications.

Why was the requirement unlawful?

It restricted competition without authorization in the competitive-bidding statute.

Could the county reject the lowest-dollar bid?

Yes. Local Government Code § 262.027 called for the lowest and best bid from a responsible bidder, not automatic acceptance of the lowest price.

Could planned subcontracting alone make a bidder irresponsible?

No. The county could not categorically decide that contractors intending to subcontract some work were unable to submit responsible bids.

When could the county reject a bid as not responsible?

When commissioners had an objective, fact-supported reason showing that the particular bidder could not perform responsibly.

Background and statutory framework

The opinion identified the County Building Authority Act, County Certificate of Obligations Act, and County Purchasing Act, then codified in Local Government Code chapters 293, 271, and 262, as governing county construction contracts exceeding $5,000.

Section 262.025 required public notice of the specifications and other bidding terms. Local Government Code § 262.027 directed the county to award the contract to the responsible bidder submitting the lowest and best bid or reject all bids and solicit new ones. If the county proposed to select someone other than the lowest-dollar bidder meeting specifications, lower bidders received notice and an opportunity to address responsibility before the commissioners court.

Sterrett v. Bell, 240 S.W.2d 516, 520 (Tex. Civ. App. - Dallas 1951, no writ), explained that bidding terms could not prevent or restrict competition, favor a contractor or material supplier, or increase costs. Texas Highway Commission v. Texas Association of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963), applied that principle to reject a domestic-material restriction under a similar statute.

Citations

Statutory authority:

• Local Government Code chapters 271, 293, and 262
• Local Government Code section 262.025 and § 262.027
• Former V.T.C.S. article 6674h

Cases:

• Sterrett v. Bell, 240 S.W.2d 516, 520 (Tex. Civ. App. - Dallas 1951, no writ)
• Texas Highway Commission v. Texas Association of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963)
• Corbin v. Collin County Commissioners' Court, 651 S.W.2d 55 (Tex. App. - Dallas 1983, no writ)

Prior Attorney General materials referenced: MW-439 (1982), MW-344 (1981), MW-296 (1981), MW-139 (1980), H-1219 (1978), H-1086 (1977), H-972 (1977), and JM-712 (1987).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-881
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0881.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Obvious character-level OCR errors have been corrected, but minor errors may remain; the linked PDF is authoritative.

THE ATTORNEY GENERAL
OF TEXAS

April 1, 1988

Honorable Mike Driscoll Opinion No. JM-881
Harris County Attorney
1001 Preston, Suite 634 Re: Whether Harris County
Houston, Texas 77702 may require in its bid
specifications for con-
struction contracts that a
minimum of 25 percent of
the work be performed by
the contractor's employees
(RQ-1230)

Dear Mr. Driscoll:

You ask our opinion about the following question:

May Harris County include a provision in its bid specifications for county construction contracts which requires that a minimum of twenty-five percent of the work be performed by the contractor's employees?

We conclude that the county is not permitted to include such a provision in bid specifications for construction contracts.

Construction contracts entered into by the county requiring an expenditure exceeding $5,000 must comply with the County Building Authority Act, the County Certificate of Obligations Act, and the County Purchasing Act, chapters 293, 271, and 262 of the Local Government Code, see also Acts 1987, 70th Leg., ch. 722, § 5; Acts 1987, 70th Leg., ch. 785, § 1; and Acts 1987, 70th Leg., ch. 802, § 1 (amending article 2368a.5, V.T.C.S., the County Purchasing Act, subsequent to the repeal and codification of the article in the Local Government Code).

Section 262.025 of the Local Government Code provides that a "competitive bidding notice" must be published in the public press prior to the deadline for the acceptance of bids. The notice must contain:

(1) the specifications describing the item to be purchased or a statement of where the specifications may be obtained;

(2) the time and place for receiving and opening bids and the name and position of the county official or employee to whom the bids are to be sent;

(3) whether the bidder should use lump-sum or unit pricing;

(4) the method of payment by the county; and

(5) the type of bond required by the bidder. (Emphasis added.)

Local Gov't Code § 262.025. Nothing in this section authorizes the inclusion of a provision in specifications limiting the amount of work which may be performed by a subcontractor of a successful bidder.

The Local Government Code requires a county to either award a contract "to the responsible bidder who submits the lowest and best bid" or to "reject all bids" and solicit for new ones. Local Gov't Code § 262.027. However,

[a] contract may not be awarded to a bidder who is not the lowest dollar bidder meeting specifications unless, before the award, each lower bidder is given notice of the proposed award and is given an opportunity to appear before the commissioners court and present evidence concerning the lower bidder's responsibility.

Local Gov't Code § 262.027. As one appeals court has noted, the statute has one paramount objective:

[T]o stimulate competition, prevent favoritism and secure the best work and materials at the lowest practicable price, for the best interests and benefit of the taxpayers and property owners. There can be no competitive bidding in a legal sense where the terms of the letting of the contract prevent or restrict competition, favor a contractor or material man, or increase the cost of the work or of the materials or other items going into the project.

Sterrett v. Bell, 240 S.W.2d 516, 520 (Tex. Civ. App. - Dallas 1951, no writ). The Supreme Court quoted this language with approval in Texas Highway Commission v. Texas Association of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963). In this case, the court considered a highway department rule that restricted bids to those bids from contractors furnishing construction materials manufactured only in the United States. The court rejected that rule as a violation of a competitive bidding statute (V.T.C.S. art. 6674h), similar to the statute under consideration here. The court stated that an administrative body subject to a competitive bidding statute must act only to promote the unmistakable legislative policy favoring unrestricted competition for public contracts. 372 S.W.2d at 529. See Attorney General Opinions MW-439 (1982); MW-344, MW-296 (1981), MW-139 (1980); H-1219 (1978); H-1086, H-972 (1977). See also Attorney General Opinion JM-712 (1987) (legislature may vary policy of strict competition by providing exceptions to key principle of competitive bidding statute.)

The county thus has no power to limit the competition generated by bidding. Nor may it reject a bid by imposing a condition for the selection of the lowest responsible bidder when the condition could not be used to limit the solicitation of the bid. Attorney General Opinions H-1219; H-1086.

Of course, the county is not required to accept a bid merely because it is the lowest. The statute only requires that the county accept the lowest and best bid proffered. The county may make an informed, non-arbitrary decision based on the facts that a particular bid is not a responsible one. Corbin v. Collin County Commissioners' Court, 651 S.W.2d 55 (Tex. App. - Dallas 1983, no writ). This does not mean that the county may determine that contractors who intend to subcontract some of the work due under a contract cannot submit responsible bids. Such a determination would be flatly illegal, either as an advance disqualification for bids or as a rationale for rejecting a lower bid in favor of a higher one. But if the commissioners have an objective reason, supportable by facts fairly known to them, that a particular bidder cannot perform responsibly because of some objective impediment, they may consider rejecting that bid, and the rejection would not be an abuse of discretion. Corbin, supra.

SUMMARY

The County Building Authority, Certificate of Obligation, and County Purchasing Acts, chapters 293, 271, and 262 of the Local Government Code, require that a county award certain construction contracts by a process of competitive bidding. Solicitations for bids may not be limited by requiring that bidders promise to perform work using their own employees. The county may make an informed, non-arbitrary decision that a particular bid is not a responsible one.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU McCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Don Bustion
Assistant Attorney General