TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-02-00439-CV
Texas Lottery Commission and Linda Cloud, Executive Director, Appellants
v.
Scientific Games International, Inc. and Pollard Banknote Limited, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
NO. GN201204, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING
OPINION
In February 2002, the Executive Director of the Texas Lottery Commission publicly
announced that she would begin to take into account a vendor=s anticipated economic impact on the state in
awarding contracts worth over $100,000. Scientific Games International, Inc. (SGI) and Pollard Banknote
Limited, two out-of-state companies that design and manufacture instant-ticket games for state lotteries,
sought a declaratory judgment that the Commission lacks the authority to adopt this new policy. The trial
court agreed with SGI and Pollard and granted summary judgment in their favor. We hold that the Texas
Lottery Commission may not consider a vendor=s anticipated economic impact on the state when making its
procurement decisions and affirm the summary judgment.
BACKGROUND
SGI and Pollard each design and manufacture instant-ticket games for state lotteries. SGI is
incorporated in Georgia, where it produces its instant tickets. Pollard is a Canadian company that produces
its instant tickets in both Canada and the United States. Neither SGI nor Pollard produces tickets in Texas.
The design and manufacture of instant-ticket games is a highly specialized business.
Worldwide, there are only three or four companies qualified to produce instant tickets to Texas=s
specifications. These companies include SGI, Pollard, and Oberthur Gaming Technologies (OGT), a
French company with a manufacturing plant in San Antonio.
In 1999, these three companies competed for a three-year contract to provide the Texas
Lottery=s instant-ticket games. Considering the cost to the state and the quality of the product, the
Executive Director awarded SGI the contract and Pollard the back-up contract. OGT protested the
award. See 16 Tex. Admin. Code ' 401.103 (2002). OGT argued that the Commission should broadly
interpret the government code provisions setting out its procurement authority to allow it to consider the
overall economic impact on the state that would result from awarding the contract to an in-state bidder. The
Executive Director disagreed, determining that consideration of economic impact would violate her duty to
Apromote competition to the maximum extent possible@ in Commission procurement procedures. Tex.
Gov=t Code Ann. ' 466.101(a) (West 1998). She also relied on a statutory requirement that the
Commission favor an in-state bidder only to break a tie when the cost to the state and quality of the product
are identical in competing bids. See id. ' 466.106(a) (West 1998). The Commission affirmed the
determination of the Executive Director.
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The Commission maintained this position until February 2002. That month, it held a public
meeting to consider adding a potential vendor=s economic impact on the state to the factors it considers
when awarding a contract. The agenda for the meeting indicated that the discussion was prompted by
recent amendments to section 2155.074 of the government code.1 Section 2155.074 is part of a statute
that governs the procurement policies of the Texas Building and Procurement Commission and some other
state agencies. In 2001, the legislature passed an amendment to allow these agencies to consider a potential
vendor=s economic impact on the state when making their procurement decisions. See Act of May 17,
2001, 77th Leg., R.S., ch. 1422, ' 14.16, 2001 Tex. Gen. Laws 5021, 5068 (codified at Tex. Gov=t Code
Ann. ' 2155.074(b)(8) (West Supp. 2003)). Section 2155.074 is specifically not applicable to the
Lottery Commission, which is governed by its own procurement statute. See Tex. Gov=t Code Ann. '
466.105(a) (West 1998) (Lottery Commission not subject to general procurement statute, including
government code section 2155.074).
After hearing comments of the Commission=s staff and interested parties, the Executive
Director reversed her longstanding policy and announced that the Commission would now consider the
Apotential vendor=s economic impact on the state@ in awarding contracts worth over $100,000, beginning
with the upcoming procurement for instant-ticket games.
1
The relevant agenda item stated, AReport, possible discussion and/or action on the implementation
of government code, ' 2155.074(b)(8) relating to a vendor=s economic impact to Texas in connection with
a procurement.@
3
SGI and Pollard sued the Commission to enjoin consideration of economic impact on the
state in the imminent instant-ticket procurement. They also sought a declaration that the Commission lacks
the statutory authority to consider economic impact on the state in any of its procurement decisions. The
trial court granted the temporary restraining order. The parties then filed cross-motions for summary
judgment. The court granted SGI and Pollard=s joint motion and denied the Commission=s motion.
DISCUSSION
The Commission claims that the trial court erred in granting SGI and Pollard=s joint motion
because (1) SGI and Pollard lack standing, and (2) the Commission does have the statutory authority to
consider potential economic impact on the state in making its procurement decisions.
Standing
The issue of standing is a legal question which we review de novo. El Paso Cmty.
Partners v. B&G/Sunrise Joint Venture, 24 S.W.3d 620, 624 (Tex. App.CAustin 2000, no pet.).
Standing is a component of subject-matter jurisdiction and is therefore essential to a court=s power to
decide a case. Texas Ass=n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 444-45 (Tex. 1993);
Benker v. Texas Dep=t of Ins., 996 S.W.2d 328, 330 (Tex. App.CAustin 1999, no pet.). To
establish standing, one must show a justiciable interest by alleging an actual or imminent threat of
injury peculiar to one=s circumstances and not suffered by the public generally. Benker, 996
S.W.2d at 330; see also Hunt v. Bass, 664 S.W.2d 323, 324 (Tex. 1984).
4
The Commission claims that SGI and Pollard lack standing. It argues that they have failed
to show how any injury they might suffer differs from that of the public at large. It also contends
that SGI and Pollard have shown only a speculative, not an actual or imminent threat of injury. We
find the Commission=s arguments unpersuasive.
As outlined above, the Commission announced that it was amending its historical
procurement process to include a potential vendor=s anticipated economic impact on the state as a
factor in its evaluation of certain bids, including contract proposals for instant-ticket games. It is
uncontested that only three or four companies worldwide qualify to bid for instant-ticket-game
contracts. One of those companies, OGT, has a manufacturing plant in Texas and would
unquestionably benefit from the Commission=s consideration of a bidder=s likely economic impact
on the state, an evaluation that would no doubt disadvantage SGI and Pollard, which do not have
plants in Texas. Both OGT and the appellees have indicated that they intend to bid at the
Commission=s next instant-ticket-game procurement.
The public at large is not qualified to bid on lottery contracts; manufacture of
instant-ticket games is a major part of SGI and Pollard=s business; inclusion of an economic-
impact factor would benefit OGT at the expense of SGI and Pollard. These facts are more than
sufficient to show an actual or imminent threat of injury peculiar to the appellees= circumstances
and not suffered by the public generally. SGI and Pollard unquestionably have standing. We
overrule the Commission=s third issue.
Commission Authority
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We now turn to the question of whether the trial court erred in granting summary judgment
in favor of SGI and Pollard. Because the propriety of a summary judgment is a question of law, we review
the trial court=s decision de novo. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex. 1994); Texas
Dep=t of Ins. v. American Home Assurance Co., 998 S.W.2d 344, 347 (Tex. App.CAustin 1999, no
pet.). The standards for reviewing a motion for summary judgment are well established: (1) the movant for
summary judgment has the burden of showing that no genuine issue of material fact exists and that it is
entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue
precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every
reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor.
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). The Commission does not
rely here on arguments that it raised below, but challenges the legal sufficiency of the grounds
alleged in SGI and Pollard=s motion for summary judgment.2 See McConnell v. Southside Indep.
Sch. Dist., 858 S.W.2d 337, 343 (Tex. 1993).
An administrative agency has only those powers conferred upon it by clear and
unmistakable language. Public Util. Comm=n v. City Pub. Serv. Bd., 53 S.W.3d 310, 315 (Tex.
2001). When the legislature expressly confers a power on an agency, it also impliedly intends
2
Normally, when the trial court grants one party=s motion for summary judgment and denies the
other, we review both motions and if we find that the trial court erred, we will reverse and render the
judgment that the trial court should have rendered. See Bradley v. State ex rel. White, 990 S.W.2d 245,
247 (Tex. 1999). In its brief, the Commission asks that we reverse the trial court=s summary judgment in
favor of SGI and Pollard and render judgment in its favor. But at oral argument the Commission conceded
that it was only challenging the legal sufficiency of SGI and Pollard=s summary-judgment grounds.
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that the agency have whatever powers are reasonably necessary to fulfill its express functions or
duties. Public Util. Comm=n v. GTE-Southwest, Inc., 901 S.W.2d 401, 407 (Tex. 1995). An
agency may not, however, exercise what is effectively a new power on the theory that such
exercise is expedient for the agency=s purposes. Id.
Section 466.101(a) of the government code provides that:
The [E]xecutive [D]irector [of the Lottery Commission] may establish procedures for the
purchase or lease of facilities, goods, and services and make any purchases, leases, or
contracts that are necessary for carrying out the purposes of this chapter. The procedures
must, as determined feasible and appropriate by the [E]xecutive [D]irector, promote
competition to the maximum extent possible.
Tex. Gov=t Code Ann. ' 466.101(a). Section 446.101(b) provides that A[i]n all procurement decisions, the
[E]xecutive [D]irector shall take into account the particularly sensitive nature of the lottery and shall act to
promote and ensure . . . the objective of producing revenues for the state treasury.@ Id. ' 466.101(b). The
Commission argues that consideration of economic impact both promotes competition and fulfills the
legislative objective of producing revenues for the state treasury. We disagree.
The Commission=s arguments are partially based on a narrow interpretation of how it
proposes to measure a bidder=s economic impact on the state. It claims that its upcoming request for
proposal would have measured economic impact entirely in terms of additional full-time positions and wages
that performance of the winning proposal would add to the state.3 The Commission then contends that
3
The Commission has appended to its brief a document purporting to be the request for
proposal that it would have issued had it not been enjoined by the trial court. It also filed a motion to
supplement the appellate record with this document. Because the document was not part of the record
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consideration of economic impact actually promotes competition because Aall vendors who bid will be
required to seek the best way to increase the number of employees in Texas, resulting in an impact on
Texas=s economy.@ This argument depends on an unreasonable interpretation of the words Apromote
competition@ in the context of this statute. See Southwestern Life Ins. Co. v. Montemayor, 24 S.W.3d
581, 583 (Tex. App.CAustin 2000, pet. denied) (A[i]mplications of statutory intent are forbidden if
the legislature =s intent can be gathered from a reasonable interpretation of the statute as
written@). Under the Commission=s reading of the statute, the language requiring the Executive Director to
Apromote competition to the maximum extent possible@ does not substantively restrict the criteria the
Commission may consider in its procurement procedures. The Commission instead implies that
Apromot[ing] competition@ means only that each potential bid must be evaluated under the same criteria.
Such a broad reading of the word Acompetition@ is misplaced in the context of a statute addressing
procurement policies. See Texas Workers= Comp. Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591, 593
(Tex. 2000) (construing statute in context of express statutory scheme developed by legislature).
In enacting competitive-bidding statutes, the legislature seeks to maximize competition for
government contracts in order to obtain the best work or product at the lowest practicable price. See
Texas Highway Comm=n v. Texas Ass=n of Steel Importers, 372 S.W.2d 525, 527 (Tex. 1963). An
below, we denied the motion. See Tex. R. App. P. 34.5(c).
Relatedly, we reject the Commission=s argument in its fourth issue that it was improper to grant
summary judgment in favor of SGI and Pollard because the record did not contain a request for proposal
implementing its new policy. SGI and Pollard sought and received a declaration that the Commission could
not utilize any economic impact factor in its procurement decisions. Their summary-judgment proof was
legally sufficient to prove this proposition.
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agency subject to a competitive-bidding statute is therefore limited in its procurement decisions to
considerations relating to quality or price in the absence of explicit statutory authority to consider additional
factors. Cf. id. Section 466.101(a) requires the Commission to promote competition to the maximum
extent possible and does not explicitly grant the Commission the authority to consider factors other than
quality or price. We reject the Commission=s contention that considering economic impact actually
promotes competition.
The Commission next claims section 466.101(b) requires the Executive Director to take
into account the objective of producing revenues for the state treasury in making her procurement decisions.
See Tex. Gov=t Code Ann. ' 466.101(b). The Lottery Commission is somewhat unique in that it exists in
order to produce revenues for the state by selling Achances@ to receive a prize. See id. ' 466.002(5) (West
1998). Section 466.101(b) simply requires the Commission to consider its bottom line when awarding
contracts. That is, it requires the Executive Director to consider the objective of producing revenues for the
state treasury from the lottery itself. See id. ' 466.101(b). By lowering its expenses through the use of
competitive bidding, the Commission will ensure higher revenues for the state treasury through the operation
of the lottery. Section 466.101(b) does not authorize the Commission to jeopardize lottery revenues to
favor other economic benefits such as increased employment in the state or increased collection of franchise
taxes.
Other provisions of the government code confirm our conclusion that the legislature did not
intend to authorize the Commission to consider the general economic impact on the state in making its
procurement decisions. In section 466.106(a), the legislature has stated that the Commission may give a
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preference to goods produced in this state only when the cost and quality of competing bids are equal. 4
When the legislature has spoken so directly, an agency may not act in a way that effectively nullifies the
legislature=s pronouncement, even though the matter may fall within the general regulatory field of that
agency. See, e.g., Central Educ. Agency v. Sellhorn, 781 S.W.2d 716, 718 (Tex. App.CAustin 1989,
writ denied). The legislature has determined that a potential bidder=s Texas location is relevant only when
the cost and quality set out in competing bids are equal. See Tex. Gov=t Code Ann. ' 466.106(a).
However, by favorably considering a bidder=s potential economic impact on the state, the Commission will
in fact create an in-state preference unrelated to cost or quality.
The Commission now argues that by giving credit only to a bidder who creates new jobs in
Texas (its alleged measure of economic impact, which is not part of the record before this court), it would
not be favoring an in-state bidder. The Commission asserts a distinction without a difference. Even if its
restricted policy were before us, which it is not, we would reject the assertion that such a measure of
economic impact would not advantage in-state bidders and thus run afoul of section 466.106(a). Simply
put, by considering economic impact in the bidding process, the Commission would not be promoting
competition to the maximum extent possible, as section 466.101(a) requires. We overrule the
Commission=s first two issues.5
4
The Commission has interpreted the term Acost,@ as used in this statute, to mean the price at
which the Executive Director can purchase goods or services. See 16 Tex. Admin. Code ' 401.101(a)(16)
(2002).
5
We reject the Commission=s argument the section 315.003 of the government code indicates that
the legislature intended the Commission to consider economic impact in its procurement decisions. See Tex.
Gov=t Code Ann. ' 315.003 (West 1998) (stating that Athe continuing policy of this state is to maintain and
10
create conditions that will sustain and promote the economy, employment, and economic opportunities for
the people of Texas@). Chapter 315 requires a state agency, when requested by the Lieutenant Governor
or Speaker of the House, to prepare an economic-impact statement for pending legislation that directly
affects that agency. See id. ' 315.002-004 (West 1998). It has nothing to do with agency procurement
policies. See id. The general statement of policy that the Commission relies on does not expand any
agency=s procurement authority.
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Having determined that the trial court did not err in declaring that the Commission lacked
statutory authority to consider economic impact on the state in making its procurement decisions, we need
not address the Commission=s contention that such policy is consistent with its own rules. See Tex. R. App.
47.1.
CONCLUSION
The Commission is subject to a competitive-bidding statute. Absent explicit statutory
authority to the contrary, it must base its procurement decisions on factors relating to quality and price.
Because the Commission does not possess the statutory authority to consider the general economic impact
on the state in making its procurement decisions, we affirm the summary judgment in favor of SGI and
Pollard.
Bea Ann Smith, Justice
Before Chief Justice Law, Justices B. A. Smith and Puryear
Affirmed
Filed: February 21, 2003
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