May 28, 1987
Mr. R. E. Stotzer, Jr. Opinion No. JM-712
Engineer-Director
State Department of Bighways Re: Applicability of the out-of-
and Public Transportation state bidder provisions of article
Dewitt C. Greer Highway Bldg. 6Ok, V.T.C.S., to an Arkansas
11th and Brasos Streets statute which gives preference to
Austin, Texas 78701 certain bidders on highway con-
struction projects
Dear Mr. Stotzer:
You have submitted the following facts. In the course of
awarding contracts for highway projects during the month of April,
1987. the State Department of Highways and Public Transportation
(hereinafter the department) received bids for a particular project,
the lowest of which was submitted by an Arkansas firm. Contracts for
highway improvements must generally be awarded through a competitive
bidding process to the lowest bidder. V.T.C.S. arts. 6674h; 6674i.
Article 601g, V.T.C.S.. however, creates a limited exception to this
procedure for contracts which.do not involve federal funds. Attorney
General Opinion JR-484 (1986). The latter statute provides the
following in pertinent part:
The state or a governmental agency of the state
may not award a contract for general construction,
improvements, services, or public works projects
or purchases of supplies, materials, or equipment
to a nonresident bidder unless the nonresident's
bid is lower than the lowest bid submitted by a
responsible Texas resident bidder by the same
amount that a Texas resident bidder would be
required to underbid a nonresident bidder to
obtain a comparable contract in the state in which
the nonresident's principal place of business is
located.
V.T.C.S. art. 6Olg. $1(b).
The state of Arkansas has enacted a number of statutes which
favor certain bids on state contracts over others. The most relevant
to this opinion are Arkansas Statutes sections 14-293 and 14-614.2.
The first section establishes a preference for firms "resident in
Arkansas":
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Mr. R. E. Stotzer, Jr. - Page 2 (JM-712)
Preference of Arkansas firms over non-resident
firms in purchases under competitive bids. All
public agencies shall, in the purchase of commo-
dities by competitive bidding, accept the lowest
qualified bid from a firm resident in Arkansas,
provided that said bid does not exceed the lowest
qualified bid from a non-resident firm by more
than five percent (5%). and provided that one or
more firms resident in Arkansas made written claim
for a preference at the time the bids were sub-
mitted. In calculating the preference to be
allowed, the appropriate purchasing officials
pursuant to Act 482 of 1979 shall take the amount
of each bid of the Arkansas dealers who claimed
the preference and deduct five percent (5%) from
its total. If after making such deduction, the
bid of any Arkansas bidder claiming the preference
IS lower than the bid of the non-resident firm,
then the award shall be made to the Arkansas firm
which submitted the lowest bid regardless of
whether that particular Arkansas firm claimed the
preference.
The preference provided herein shall be
applicable only in comparing bids where one or
more bids are by a firm resident in Arkansas and
the other bid or bids are by a non-resident firm,
and shalp have no application with respect to
competing bids if both bidders are firms resident
in Arkansas as defined herein. . . . (Emphasis
added).
Ark. Stat. Ann. §14-293(b)(1979). The term "commodities" is defined
a8 "supplies, goods, material and equipment of every kind and
character." Id. 114-293(A)(4). Section 14-614.2 establishes a
preference for certain bidders on contracts for the performance of
services or construction of improvements:
Preference for certain bidders. - In awarding
contracts covered by the provisions of Act 159 of
1949, as amended, by Act 183 of 1957, bids of
contractors who have satisfactorily performed
prior contracts, and who have paid taxes for not
less than two (2) successive years immediately
prior to submitting a bid under The Arkansas
Employment Security Act, and amendments thereto
and either The Arkansas Gross Receipts Act and
amendments thereto or The Arkansas Compensating
Tax Act and amendments thereto, on any property
used or intended to be used for or in construction
or in connection with the contractors construction
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Mr. R. E. Stotzer. Jr. - Page 3 (JM-712)
business, and further within the two (2) year
period have paid any taxes to one (1) or more
counties [school districts. or municipalities] of
the State of Arkansas on either real or personal
property used or intended co be used in per-
formance of or in connection with construction
contracts, shall be deemed a better bid than the
bid of a competing contractor who has not paid
such taxes, whenever the bid of the competing
contractor is less than three percent (3%) lower,
and the contractor making a bid as provided by
this Act which is deemed the better bid, shall be
awarded the contract. (Emphasis added).
The first provision applies strictly to contracts for the purchase of
commodities, while the second applies to contracts which involve the
construction of improvements and sire preparation. See Op. Ark. Att'y
Gen. No. 86-404 (1986). The general counsel to thedepartment has
informed us that the contract for which the Arkansas firm submitted
the lowest bid is for the planing and asphalt paving of certain
highways. The contract in question, if it were to be awarded in
Arkansas, would therefore be subject to section 14-614.2. See
APAC-Mississippi, Inc. v. Deep South Construction Co., Inc., 704
S.W.2d 620 (Ark. 1986) (114-614.2 is applicable to contracts awarded
by the Arkansas State Highway Commission). You ask whether the
bidding preference established by Arkansas Statutes section 14-614.2
is within the purview of article 601g. V.T.C.S. That is, you ask
whether the Arkansas statute requires a Texas bidder on an Arkansas
highway construction contract to submit a bid at least three percent
lower than the lowest bid submitted by an Arkansas bidder, thereby
imposing the same requirement via article 601g on the Arkansas firm
bidding on the Texas contract. Based on our review of the relevant
Arkansas authorities, we conclude that the Arkansas provision does not
establish a preference for Arkansas contractors over Texas contractors
based solely upon the residence of the contractor. Therefore, the
Arkansas provision does not trigger the article 601g preference for
Texas bidders over nonresident bidders.
Article 6Olg. V.T.C.S., was enacted in 1985 by the Sixty-ninth
Legislature. Acts 1985, 69th Leg., ch. 83, at 499. The act was
motivated by statutes in other states, including Arkansas, which
require out-of-state contractors to submit bids on state contracts
which are lower by a stated percentage than bids submitted by resident
contractors in order to be considered for the contract. Bill Analysis
to B.B. No. 620, 69th Leg. (1985), prepared for House Committee on
Business and Commerce, filed in Bill File to H.B. No. 620, Legislative
Reference Library. The purpose of the act is to
establish a reciprocity requirement in the award
of state contracts so that bidders from other
states would face the same underbid requirement
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Mr. R. E. Stotser, Jr. - Page 4 (JM-712)
in Texas contracts that Texas bidders would
experience when bidding on comparable contracts in
those states.
The legislative history of article 6Olg was examined in Attorney
General Opinion JM-696 (1987). There we concluded that
the act is intended to impose on any out-of-state
company seeking to bid on construction, supplies,
or services contracts with a uolitical subdivision
in Texas the same burdens that are imposed, if
any, upon Texas resident bidders by the state
in which the nonresident's principal place of
business is located. (Emphasis added).
Although no single member of the legislature can be heard to say what
the meaning of a statute is, Commissioners' Court of El Paso County v.
El Paso County Sheriff's Deputies Association, 620 S.W.Zd 900 (Tex.
Clv. AQQ. - El Paso 1981, writ ref'd n.r.e.), we found the following
testimony of the author of the bill containing article 601g instruc-
tive:
-,
In neighboring states like Louisiana, Arkansas,
and New Mexico, there is a rule that says that any
public work awarded in that state, if an out-ot-
state contractor like a contractor from Texas bids
a project in that state, then the Texas bidder, in
order to receive the contract, has to be five
percent lower than the lowest bidder in that
state. This is Arkansas, for instance. . . . If
a state like Arkansas, New Mexico, Louisiana, New
York, wherever, requires that an out-of-state
contractor be lower by a certain amount in order
to receive that bid, we will require those state
contractors to do the same thing in Texas. . . .
Testimony of Rep. Mark Stiles on H.B. No. 602 before House Committee
on Business and Commerce, 69th Leg., public hearing (Feb. 18, 1985)
(transcript available from House Staff Services). In discussing the
meaning of the phrase "comparable contract," further explanation was
made of the apparent intention of the bill:
[W]hat it means is that if in the state of
Arkansas you have to be five percent lower than
the lowest bid to receive a state highway project
bid, that it would be the sama thing here.
. . . .
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Mr. R. E. Stotzer, Jr. - Page 5 (JM-712)
I think what it basically comes down to, of a
government entity, if the state of Arkansas
requires that on all municipal and state work
that . . . the Texas contractor be five percent
lower than the lowest [Arkansas resident con-
tractor's] bid, that basically we'd do the same
thing here. . . .
Id. It was further emphasized that the act would not establish a
preference for Texas resident bidders over a nonresident contractor
unless a preference for resident bidders was already in effect in the
other state. Id. It becomes necessary, then, to examine Arkansas law
-- specifically, Arkansas Statutes section 14-614.2 -- to determine
whether the state of Arkansas imposes particular burdens on out-of-
state contractors bidding on Arkansas state highway contracts that it
does not impose on Arkansas firms solely on the basis of residence.
The preference for certain bidders provided in Arkansas Statutes
section 14-614.2 does not hinge on the residence of the bidding
contractor. Rather, Arkansas law gives preference to the bids .of
contractors who satisfy three requirements. First, the contractor
must have "satisfactorily performed prior contracts," which is defined
in section 14.614.6 to mean the contractor must have substantially
completed performance of one or more contracts in the state of
Arkansas within two years of the date the bids are to be submitted.
Second, the contractor must have paid taxes for at least two succes-
sive years immediately prior to submitting the bid under (a) the
Arkansas Employment Security Act, as amended (Ark. Stat. Ann.
$981-1101 -- 81-1108, 81-1111 -- 81-1121) and (b) either the Arkansas
Gross Receipts Act, as amended (id. 9584-1901 -- 84-1904, 84-1906 --
84-1919) or the Arkansas Compensating Tax Act, as amended (id.
§§84-3101 -- 84-3128). on any property used or intended to be used G
or in connection with the contractor's construction business. Third,
the contractor must have paid taxes of any kind within the same
two-year period directly to one or more Arkansas counties, munici-
palities, or school districts. - See APAC-Mississippi. Inc. v. Deep
South Construction Co., Inc., supra. The bid of a contractor who has
Paid such taxes "shall be deemed a better bid" than the bid of a
contractor who has not paid such taxes and whose bid is less than
three percent lower than the bid of the contractor claiming the
statutory preference. In such cases, the contractor making the bid
deemed "the better bid" shall be awarded the contract.
Section 14-614.2 was motivated by an interest to provide
safeguards and procedures where public funds are expended and by an
interest in granting a preference in the bidding process to those who
contribute to the Arkansas economy through construction activities
within the state. APAC-Mississippi, Inc. v. Deep South Construction
Co., Inc., supra. It evidently was not motivated by an interest to
C
favor Arkansas contractors in the awarding of construction contracts,
although the three elements of section 14-614.2 do require the
p. 3301
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Mr. R. E. Stotser, Jr. - Page 6 (JM-712)
----.
contractor claiming the preference to have had previous business
connections with the state. Conceivably, the preference established
in section 14-614.2 could work in favor of a Texas contractor bidding
against an Arkansas contractor who had not satisfactorily performed
prior contracts in Arkansas or paid the designated taxes within the
prescribed two-year period. Significantly, the Arkansas statute does
not dictate that an Arkansas contractor be given preference over a
nonresident contractor when both claim the preference. In such
instances, the lowest "better bid" would be accepted. See, e.g., Op.
Ark. Att'y Gen. No. 82-81 (1982). Finally, the statutory preference
is unavailable when the bid of the contractor claiming the preference
exceeds the competing contractor's bid by three percent or greater.
In contrast to Arkansas Statutes section 14-614.2 stands section
14-293, quoted earlier in this opinion. Section 14-293 plainly
imposes a burden on nonresident contractors submitting bids on
contracts for the purchase of commodities by Arkansas public agencies.
It is only available in the event a nonresident firm and at least one
Arkansas firm submit bids on the sama contract. It requires the
Arkansas public agency to accept the lowest bid submitted by an
Arkansas firm if the adjusted bid of any Arkansas firm claiming the
statutory preference is lower than the bid of the nonresident firm.
Clearly, section 14-293 discriminates solely on the basis of residence
and is the type of provision which article 6Olg, V.T.C.S., was --.
intended to reciprocate. As we noted earlier, however, section 14-293
is not relevant to the contract offered by the department in this
instance.
SUMMARY
The provisions of Arkansas Statutes section
14-614.2, which establishes a preference for
certain contractors submitting bids on certain
contracts awarded by Arkansas public entities, do
not trigger the bidding preference provided in
article 6Olg, V.T.C.S. An Arkansas contractor
submitting a bid on a highway construction contract
awarded by the Texas Department of Highways and
Public Transportation is not, therefore, subject to
article 6Olg.
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney General
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Mr. R. E. Stotzer, Jr. - Page 7 (JM-712)
P
MARY KELLER
Executive Assistant Attorney General
JUDGE ZOLLIE STEMLRY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Rick Gilpin
Assistant Attorney General
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