How many design-build highway contracts can TxDOT sign, and what's the minimum project cost?

Plain-English summary

The chair of the Texas House Transportation Committee asked the AG to sort out an apparent conflict over how the Texas Department of Transportation could use design-build contracts (contracts where a single firm handles both design and construction of a highway project) in the 2016-2017 budget cycle. The general law, section 223.242 of the Transportation Code, lets the Department sign a design-build contract for a highway project estimated to cost $150 million or more, but caps the Department at no more than three such contracts per fiscal year. A budget provision, Rider 47 of the 2015 General Appropriations Act, spoke in different numbers: it referred to no more than ten design-build contracts over the 2016-2017 biennium for projects estimated at $250 million or more.

The AG addressed the two numbers separately. On the count of contracts, the two provisions conflict to the extent the rider would allow more contracts than the statute. But Rider 47 itself anticipated that conflict and said that where general law sets a lower limit, "the limitation established by general law prevails." So the statutory cap of three design-build contracts per fiscal year controls.

On the dollar threshold, the AG concluded there was no real conflict. Section 223.242 sets a $150 million floor on the size of a project eligible for a design-build contract. Rider 47's reference to $250 million did not raise that floor; it only limited how many of the larger ($250 million and up) projects the Department could put under design-build contracts. The rider said nothing about projects between $150 million and $250 million, so it did not stop the Department from using design-build contracts for those. The AG noted the settled rule that an appropriations rider may not alter existing substantive law, and concluded the Department may enter into a design-build contract for a highway project with a construction cost estimate of $150 million or more.

Currency note

This opinion was issued in 2016. 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. The design-build provisions of the Transportation Code and the appropriations riders discussed here addressed the 2016-2017 biennium specifically and have almost certainly changed since 2016, so confirm the current law before relying on these specifics.

What the opinion meant for those who asked

The House Transportation Committee and the Legislature (as the opinion described it): The opinion told the committee that Rider 47 was valid as a limit on the use of appropriated funds but did not override the substantive design-build limits in section 223.242. Where the rider and the statute conflicted on the number of contracts, the general-law limit of three per fiscal year prevailed, consistent with the rider's own savings language.

The Texas Department of Transportation (as the opinion described it): The opinion described the Department's design-build authority for the 2016-2017 biennium as capped at three highway design-build contracts per fiscal year, with an eligible project floor of $150 million in estimated construction cost, and explained that the rider's $250 million reference limited only the count of the larger projects rather than setting a higher minimum.

Highway contractors and the construction industry (as the opinion described it): The opinion described which projects remained eligible for design-build delivery, projects estimated at $150 million or more, and confirmed the rider did not foreclose design-build contracts for projects between $150 million and $250 million.

Common questions

Can TxDOT use design-build contracts for highway projects?
Under this opinion, yes, within limits. The AG concluded that section 223.242 of the Transportation Code authorized the Department to enter into design-build contracts for qualifying highway projects.

How many design-build contracts could TxDOT sign in a year under this opinion?
The AG concluded the Department could not enter into more than three design-build contracts for highway projects in each fiscal year, the limit set by general law.

Did Rider 47 raise the minimum project cost to $250 million?
No. The AG concluded Rider 47 limited only the number of design-build contracts for projects estimated at $250 million or more, and did not raise the $150 million project-size floor set in section 223.242.

Which controls when a budget rider conflicts with a statute?
The AG applied the rule that an appropriations rider may not alter existing substantive law, and noted that Rider 47 itself provided that the limit established by general law prevails, so the statutory three-per-fiscal-year cap controlled.

What was the minimum project size for a TxDOT design-build contract?
The AG concluded the Department could enter into a design-build contract for a highway project with a construction cost estimate of $150 million or more.

Background and statutory framework

Section 223.242 of the Transportation Code authorizes the Department to enter into design-build contracts for highway projects with a construction cost estimate of $150 million or more, and limits the Department to no more than three such contracts per fiscal year (Tex. Transp. Code §§ 223.242, 223.242(d), 223.242(d-1), 223.242(d)(1)). The "design-build method" is defined as a single-entity contract for both design and construction of a facility (Tex. Transp. Code § 223.241(2)). The Legislature had raised the project-cost floor from $50 million to $150 million in 2015 (Act of May 29, 2015, 84th Leg., R.S., ch. 314, § 7, 2015 Tex. Gen. Laws 1449, 1451).

Rider 47 to the Department's appropriations addressed the same subject with different numbers, authorizing no more than ten design-build contracts in the 2016-2017 biennium for highway projects estimated at $250,000,000 or more, while expressly providing that a lower limit set by general law prevails (General Appropriations Act, 84th Leg., R.S., ch. 1281, art. VII-31, 2015 Tex. Gen. Laws 4343, 5070). The AG reconciled the two by applying the rule that a rider may not alter existing substantive law, holding the statutory three-per-fiscal-year cap controls and the rider's $250 million figure does not displace the $150 million eligibility floor (Strake v. Ct. App. for First Sup. Jud. Dist. of Tex., 704 S.W.2d 746 (Tex. 1986)).

Citations

Statutory provisions:

• Tex. Transp. Code § 223.241(2) (definition of design-build method)
• Tex. Transp. Code § 223.242 (design-build contract authority)
• Tex. Transp. Code § 223.242(d) ($150 million project-cost floor)
• Tex. Transp. Code § 223.242(d)(1) (no more than three contracts)
• Tex. Transp. Code § 223.242(d-1) (per-fiscal-year contract limit)
• Act of May 29, 2015, 84th Leg., R.S., ch. 314, § 7, 2015 Tex. Gen. Laws 1449, 1451 (2015 amendment raising floor from $50 million to $150 million)
• General Appropriations Act, 84th Leg., R.S., ch. 1281, art. VII-31, 2015 Tex. Gen. Laws 4343, 5070 (Rider 47)

Cases:

• Strake v. Ct. App. for First Sup. Jud. Dist. of Tex., 704 S.W.2d 746 (Tex. 1986)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0077
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2016/kp0077.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

April 25, 2016

The Honorable Joseph C. Pickett Opinion No. KP-0077
Chair, Committee on Transportation
Texas House of Representatives Re: Authority of the Texas Department of
Post Office Box 2910 Transportation to enter into design-build
Austin, Texas 78768-2910 contracts during the 2016-2017 fiscal
biennium (RQ-0063-KP)

Dear Representative Pickett:

You ask for clarification regarding "the authority of the Texas Department of Transportation ("Department") to enter into design-build contracts during the 2016-2017 fiscal biennium." [1] You explain that your question arises due to a potential conflict between section 223.242 of the Transportation Code and a rider to the General Appropriations Act of the Eighty-fourth Legislature. Request Letter at 1.

Section 223.242 of the Transportation Code authorizes the Department to enter into design-build contracts for highway projects in certain circumstances. See TEX. TRANSP. CODE § 223.242. [2] Relevant to your request, subsection (d) authorizes the Department to "enter into a design-build contract for a highway project with a construction cost estimate of $150 million or more." Id. § 223.242(d). [3] Furthermore, the Department "may not enter into more than three contracts" under section 223.242 in each fiscal year. Id. § 223.242(d-1). The Eighty-fourth Legislature's General Appropriations Act likewise includes restrictions related to the cost of the Department's design-build contracts and the total number of design-build contracts that the Department may enter into. Rider 47 to the Department of Transportation's appropriations states:

Limitation on Expenditures for Design-Build Contracts. The Department of Transportation is authorized to expend funds appropriated by this Act to enter into no more than ten design-build contracts in the 2016-2017 biennium for highway projects that have an estimated construction cost to the department of $250,000,000 or more per highway project. If provisions in Transportation Code § 223.242, or similar general law, establish a limit on the number of design-build contracts that the Department of Transportation may enter into in each fiscal year or biennium that is less than the amount authorized by this section, then the limitation established by general law prevails.

General Appropriations Act, 84th Leg., R.S., ch. 1281, art. VII-31, 2015 Tex. Gen. Laws 4343, 5070. In light of section 223.242 of the Transportation Code, you ask whether Rider 47 is valid and the extent of the Department's "authority to enter into design-build contracts during the 2016-2017 fiscal biennium." Request Letter at 4. Section 223.242 and Rider 47 include restrictions on both the number of design-build contracts that the Department may enter into and the estimated construction cost per project, and we will address each in turn.

With regard to the number of design-build contracts that the Department may enter into, section 223.242 limits the Department to no more than three design-build contracts per fiscal year. See TEX. TRANSP. CODE § 223.242(d-1). In contrast, Rider 47 limits the Department to "no more than ten design-build contracts in the 2016-2017 biennium for highway projects that have an estimated construction cost to the department of $250,000,000 or more per highway project." See General Appropriations Act, 84th Leg., R.S., ch. 1281, art. VII-31, 2015 Tex. Gen. Laws 4343, 5070. Thus, the two provisions conflict to the extent that Rider 47 authorizes the Department to enter into more design-build contracts in a fiscal year. Rider 47 acknowledges the possibility of a conflict, however, and it recognizes that "the limitation established by general law prevails." Id. Pursuant to the general law found in section 223.242, during a fiscal year the Department "may not enter into more than three" design-build contracts for highway projects. TEX. TRANSP. CODE § 223.242(d)(1).

With regard to the minimum construction cost estimate of design-build contracts, section 223.242 authorizes the Department to enter into such a contract with an estimated construction cost of $150 million or more, so long as the other statutory requirements are met. Id. § 223.242(d). You suggest that Rider 47 may establish "a minimum project construction cost estimate of $250 million." Request Letter at 2. Rider 47 limits only the number of design-build contracts with estimated costs exceeding $250 million that the Department may enter into. See General Appropriations Act, 84th Leg., R.S., ch. 1281, art. VII-31, 2015 Tex. Gen. Laws 4343, 5070. It does not speak to or otherwise limit the Department from entering into design-build contracts with an estimated construction cost of between $150 and $250 million. Thus, Rider 47 is a restriction or qualification on the use of appropriated funds that does not conflict with the general law in section 223.242. See Strake v. Ct. App. for First Sup. Jud. Dist. of Tex., 704 S.W.2d 746, 748 (Tex. 1986) (explaining that a rider may not alter existing substantive law). The Department may therefore enter into a design-build contract for a highway project with a construction cost estimate of $150 million or more.

SUMMARY

Pursuant to section 223.242 of the Transportation Code, the Department of Transportation may enter into a design-build contract for a highway project with a construction cost estimate of $150 million or more. The Department may not enter into more than three such contracts in each fiscal year.

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

[1] Letter from Honorable Joseph C. Pickett, Chair, House Comm. on Transp., to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Oct. 29, 2015), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] "Design-build method" is defined as "a project delivery method by which an entity contracts with a single entity to provide both design and construction services for the construction, rehabilitation, alteration, or repair of a facility." TEX. TRANSP. CODE § 223.241(2).

[3] In 2015, the Legislature amended section 223.242 by increasing from $50 million to $150 million the minimum project construction cost estimate for a design-build contract. See Act of May 29, 2015, 84th Leg., R.S., ch. 314, § 7, 2015 Tex. Gen. Laws 1449, 1451 (codified at TEX. TRANSP. CODE § 223.242(d)).