.
May 14, 1987
ElonorableMark W. Stiles Opinion No. n-696
chairman
County Affairs Conduittee Re: Definition of "principal place
Texas House of Repres&tatives of business" for purposes of article
P. 0. Box 2910 60113, V.T.C.S.. the out-of-state
Austin, Texas 78769 bidding act
Dear Representative Stiles:
Tou ask about the proper construction of article 6Olg, V.T.C.S.
Thereinafter the act], which governs bids submitted by nonresidents
to political subdivisions in Texas for constructlou, supplies, and
services. Specifically, you ask about' the proper construction of
the phrase "principal place of business' that is set forth in the
statutory definitions of "nonresident bidder" and "Texas resident
bidder" found in section l(a) of the act.
Section l(b) of the act provides the following:
T'he state or a govermnsntal 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. (Emphasis added).
Section l(a)(2). of article 6Olg. provides that "'[nlonresident
bidder' means a bidder whose principal place of business is not in
this state, but excludes a contractor whos.&ultimate parent company or
majority owner has its principal place of business in this state."
(Emphasis added.) Section l(a)(3) provides that "'Texas resident
bfdder' means a bidder whose principal place of business is in this
state, and includes a contractor whose ultimate parent company or
majority owner has its principal place of business in this state.'
(Emphasis added.) The act itself does not define the phrase
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Honorable Mark W. Stiles - Page 2 (m-696)
"principal place of business." You express concern that political
s&divisions in this state are construing "principal place of
business" in such a way as to permit companies having, for example,
only one permanent office in the state with as few as one employee
engaged in activities other than submitting bids to governmenral
agencies to compete on an equal footing with Texas resident bidders.
You assert that this does not comport with the legislature's intent
when it enacted the statute.
In construing a statute, we must look to the intent of the
legislatiare and construe the statute so as to give effect to chat
intent. Knight v. International Harvester Credit Corp., 627 S.W.2d
382 (Tex. 1982). In determining legislative intent. we must consider
the end to be attained. the mischief to be remedied, and the purposes
to be accomplished. Flowers v. Den se -Ta eler h Co., 472 S.W.2d 112
(Tex. 1971); Calvert v. Kadane, 427 S.W.2d 605 (Tex. 1968). When the
words of a statute are subject to two reasonable Interpretations and
are therefore ambiguous. one may consider the legislative history of
the statute to determine which meaninn of the words the legislature
intended. San Antonio General Drive&, Helpers Local No, 657 v.
Thornton, 299 S.W.2d 911 (Tex. 1957); Miller v. Calverc, 418 S.W.2d
869 (Tex. Civ. App. - Austin 1967, no writ). Specifically, in
attempt&g to- dis&rn legislative intent from an examination of the
legislative history of a statute, one looks to the purpose the
original enactment served, the discussion of statutory meaning in
committee reports, the effect of amendments. whetha? accepted or
rejected, and the remarks in debatc preceding passage. Johnson v.
Department of Treasury, I.B.S., 700 F.2d 971 (5th Cir. 1983); Rogers
v. Frito-Lay, Inc., 611 F.2d 1074 (5th Cit. 1980). cert. denied, 449
U.S. 889 (1980),
On the basis of our examination of both the Bouse Committee on
Business and Commerce and Iiouse of Representatives discussions of the
bill, we conclude that the act is intended to impose on any out-of-
state company seeking co bid on construction. supplies, or services
contracts with a political 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. In the
public hearing before the House Committee on Buslnass and Commerce,
the House author of the bill made the following remarks explaining the
purpose of the proposed bill:
In neighboring states. like Louisiana, Arkansas,
and New Mexico, there is a rule that says any
public work awarded In that state, if an out-of-
state contractor like a contractor from Texas bids
a project in that state, than the Texas bidder, in
order to receive the contract, has to be five
percent lower than the lowest bidder in that
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Honorable Mark W. Stiles - Page 3 (JM-696)
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. . . .'
Teshony of Rep. Mark Stiles on Tex. B.B. No. 602 before House
Cosmlttee on Business and Commerce, 69th Leg., public hearing (Feb.
18, 1985) (transcript available from House Staff Services). In the
House discussion prior to the bill's passage to engrossment, the liouse
author of the bill explained that it was designed to create a
"reciprocity requirement in the award of state contracts so chat
bidders from other.states would face the same under-bid requirements
in Texas contracts that Texas bidders would experience from bidding on
comparable contracts in those states."
In Attorney General Opinion JM-616 (1987). we declared:
[T]he term 'principal place of business' as used
in article 601g does not necessarily refer to the
place of incorporation or organization of a
fompany . or to the residence of Its majority
owner. It means the place where the person'
whether natural or artificial, maintains offices
and transacts business. I.e., where the person's
business affairs are conducted. See National
Truckers Service, Inc. v. Aero SystG Inc., 480
S.W.2d 455 (Tax. Civ. App. - Fort Worth 1972. writ
ref'd n.r.e.). The 'principal place of business'
can sometimes be different from the place of the
person's general offices, see Dryden v. Ranger
Refining 6 Pipe Line Co., 280 F. 257 (5th Cir.
1922). but when a business ouerates in a number of
states and no one state is clearly the state in
which its activities are principally conducted,
the state from which centralized general
supervision is exercised may be considered the
location of the 'principal place of business,'
particularly if a substantial part of its
operations are also conducted there. See Jackson
v. Tennessee Valley Authority. 462 F.upp. 45
(D.C. Term. 1978). Cf. In re' Commonwealth 011
Refining Co., Inc., 596 F.2d 1239 (5th Clr. 1979).
It Is clear that the bill is intended to treat as a "Texas resident
bidder" a bidder that has more In Texas than merely an office In the
state with an employee who submits bids to various political sub-
divisions. "Principal" has been defined to mean "chief, leading,
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liouorableMark W. Stiles - Page 4 (JM-696)
ttost important or considerable, primary, original' highest in rank'
authority, character, importance, or degree." Stilwell Co. v.
Commissioner of Taxation, 100 N.W.2d 504, 507 (Minn. 1959); Kelp v.
Burgess. 115 P.s 583, 584 (Kan. 1911).
The issue of whether an office or establishment is a "principal
place of business" requires, of course, a determination of fact,
Kibler v. Transcontinental & Western Air, 63 F. Supp. 724. 726 (E.D.
N.Y. 1945)' the resolution of which would be inappropriate in the
opinion process. We do conclude, however, chat, for purposes of
article 6Olg, V.T.C.S., a bidder's "principal place of business"
refers to the place-where the bidder maintains offices and a sub-
stantial part of its operations are also conducted there.
For purposes of article 601g, V.T.C.S., which
governs bids submitted by nonresidents to political
subdivisions in Texas for construction, supplies,
and services, a bidder's "principal place of
business" refers to the state in which the bidder
maintains an office and a substantial part of its
operations are also conducted there.
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney General
MARY KELLER
Executive Assistant Attorney General
JDDGE ZOLLIE STZAKLKT
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General
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