How did Texas school districts have to procure insurance and related administrator services under Education Code section 44.031?

TX AG Opinion DM-0418: How did school districts procure insurance?

Plain-English summary

The Commissioner of Education asked whether newly enacted Education Code section 44.031 changed Opinion DM-347’s rules for school-district insurance purchases. The Attorney General concluded that the statute superseded DM-347 where inconsistent but preserved its central classification: buying insurance was not buying a professional service. Whether insurance counted as personal property no longer controlled because section 44.031 applied broadly to school-district contracts outside its stated exceptions.

For contracts worth at least $25,000 in the aggregate during a twelve-month period, section 44.031 required a district to use whichever of six listed methods provided the best value: competitive bidding, competitive sealed proposals, a request for proposals, a qualifying catalogue purchase, an interlocal contract, or a design-build contract. The exception covered professional services, produce, and vehicle fuel.

Neither section 44.031 nor section 44.033 limited an insurance contract to twelve months. A multi-year agreement nevertheless had to comply with Local Government Code section 271.903(a) by preserving the district’s right to terminate at the end of a budget period, conditioning continuation on the board’s best efforts to obtain and appropriate funds, or including both protections. The opinion also noted section 271.009’s twenty-five-year limit.

The phrase “in the aggregate” required districts to add the value of contracts for like products that normally would be purchased together. Aggregation decided whether a formal procurement process was required; it did not force the district to place all like products in a single contract. This reading aligned the threshold language with section 44.032’s prohibition on separate, sequential, or component purchases used to evade procurement requirements.

Whether a licensed third-party administrator provided exempt professional services depended on its actual functions. The school board had to assess whether the work required predominantly mental or intellectual skills, years of education and service, and membership in a discipline with accepted standards of special study or attainment. Pricing and acquiring reinsurance for a district’s self-insurance fund were not professional services because purchasing insurance through an agent remained an insurance purchase.

A mixed contract retained separate treatment. Nonprofessional services and products above the applicable threshold had to use the statutory procurement process. Professional services not governed by the Professional Services Procurement Act could, but did not have to, be acquired through section 44.031 or 44.033.

Currency note

This opinion was issued in 1996. 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.

Who this opinion affected (as of 1996)

School boards: Boards selected the procurement method providing best value and decided, from the services actually promised, whether a third-party administrator fell within the professional-services exception.

District procurement staff: They had to aggregate like products normally bought together to test the statutory threshold, while remaining free to execute separate contracts after the threshold determination.

Insurance vendors and brokers: Insurance contracts were outside the professional-services exception and therefore subject to the applicable procurement method when their aggregate value crossed the statutory threshold.

Third-party administrators: Their exemption turned on the nature of their contracted functions, not merely on licensure or the administrator label.

Common questions

Did DM-0418 require competitive bidding for every large insurance contract?
No. Section 44.031 replaced a bidding-only rule with six possible methods. The board had to choose the method providing the best value to the district.

Could a school district sign an insurance contract longer than twelve months?
Yes. The opinion found no twelve-month duration cap in sections 44.031 or 44.033, but required a multi-year contract to satisfy section 271.903(a).

Which insurance contracts had to be aggregated?
The opinion required cumulative valuation of like products that a district normally would purchase together. It did not require all insurance or all district contracts to be combined indiscriminately.

Was every licensed third-party administrator a professional-service provider?
No categorical answer was possible. The board had to examine the administrator’s actual duties under the contract and apply the opinion’s professional-service criteria.

Were reinsurance procurement duties professional services?
Not when the duties meant pricing and acquiring reinsurance for the district’s self-insurance fund. The opinion treated that work as purchasing insurance, even when performed through an agent.

Background and statutory framework

Opinion DM-347 had interpreted former Education Code section 21.901 to require competitive bidding for school-district insurance purchases of at least $25,000 and had overruled Opinion MW-342. The 1995 Legislature repealed section 21.901 and enacted section 44.031, broadening the covered contracts and replacing mandatory competitive bidding with a best-value choice among six procurement methods.

Section 44.033 supplied an alternative procedure for personal-property purchases valued from $10,000 through $24,999.99 in a twelve-month period. It required publication of vendor categories and price quotations, but its reference to a twelve-month purchasing period did not limit contract duration.

Section 44.032 defined and prohibited separate, sequential, and component purchases made to avoid procurement law. DM-0418 used that anti-splitting rule and the ordinary meaning of “aggregate” to define which proposed purchases counted together.

The professional-services discussion revisited Opinion JM-1038 because that opinion relied on a repealed version of the Insurance Code’s administrator statute. DM-0418 drew its criteria from DM-347, Opinion MW-344, Maryland Casualty, Transportation Displays, and Wooddell, but left application to the school board’s factual determination.

Citations

Statutes:

• Tex. Educ. Code §§ 21.901, 44.031, 44.032, 44.033
• Tex. Gov’t Code chs. 791, 2157; §§ 311.011, 2157.061-.067
• Tex. Local Gov’t Code §§ 252.022, 271.009, 271.082, 271.083, 271.903
• Tex. Ins. Code arts. 21.07-5, 21.07-6
• V.T.C.S. art. 664-4
• 28 Tex. Admin. Code chs. 3, 5, 7, 9, 15, 23

Cases:

• Maryland Casualty Co. v. Crazy Water Co., 160 S.W.2d 102 (Tex. Civ. App.-Eastland 1942, no writ)
• Transportation Displays, Inc. v. City of New Orleans, 346 So. 2d 359 (La. Ct. App. 1977)
• Wooddell v. Dailey, 230 S.E.2d 466 (W. Va. 1976)
• Wallace v. Commissioners’ Court of Madison County, 281 S.W. 593 (Tex. Civ. App.-Waco 1926), rev’d on other grounds, 15 S.W.2d 535 (Tex. 1929)
• Gulf Bitulithic Co. v. Nueces County, 297 S.W. 747 (Tex. Civ. App.-San Antonio 1927), rev’d on other grounds, 11 S.W.2d 305 (Tex. 1928)

Related opinions:

• Tex. Att’y Gen. Ops. DM-347 (1995); MW-342 (1981); MW-344 (1981); JM-1038 (1989); JM-940 (1988); DM-106 (1992); JM-1136 (1990); JM-890 (1988)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0418
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1996/dm0418.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General

State of Texas

DAN MORALES

ATTORNEY GENERAL

September 23, 1996

Mr. Mike Moses
Commissioner of Education
Texas Education Agency
1701 North Congress Avenue
Austin, Texas 78701-1494

Opinion No. DM-418

Re: Whether section 44.031 of the Education Code, enacted by Act of
May 27, 1995, 74th Leg., R.S., ch. 260, § 1, 1995 Tex. Sess. Law Serv. 2207,
2425-26, changes the conclusion reached in Attorney General Opinion DM-347
(1995) and related questions (RQ-836)

Dear Commissioner Moses:

You request this office to reconsider Attorney General Opinion DM-347 (1995) in
light of newly enacted section 44.031 of the Education Code, see Act of May 27, 1995,
74th Leg., R.S., ch. 260, § 1, 1995 Tex. Sess. Law Serv. 2207, 2425-26. You also ask
several questions regarding the competitive bidding process as it applies to public schools.

In Attorney General Opinion DM-347, issued May 4, 1995, this office considered
whether section 21.901 of the Education Code, repealed by Act of May 27, 1995, 74th
Leg., R.S., ch. 260, § 58(a)(1), 1995 Tex. Sess. Laws 2207, 2498, requires a school
district to competitively bid a contract for the purchase of insurance. Attorney General
Opinion DM-347 (1995) at 1. Overruling Attorney General Opinion MW-342 (1981),
Attorney General Opinion DM-347 concluded that the purchase of insurance does not
constitute the purchase of professional services exempt from competitive bidding
requirements. Attorney General Opinion DM-347 (1995) at 5. Rather, the opinion
determined that a contract to purchase insurance constitutes a contract to purchase
personal property; accordingly, section 21.901 of the Education Code required a school
district to competitively bid the purchase unless the value of the contract for one year is
less than $25,000. Id. The opinion did not limit its conclusion to the purchase of a
particular kind of insurance, e.g., property and casualty insurance.

At the time this office issued Attorney General Opinion DM-347, section 21.901
of the Education Code provided in pertinent part as follows:

(a) Except as provided in this section, all contracts proposed to
be made by any Texas public school board for the purchase of any
personal property, except produce or vehicle fuel, shall be submitted
to competitive bidding for each 12-month period when said property
is valued at $25,000 or more, in the aggregate for each 12-month

period.

(b) Except: as provided in Subsection (e) of this section, all
contracts proposed to be made by any Texas public school board for
the construction, maintenance, repair or renovation of any building
shall be submitted to competitive bidding when said contracts are
valued at more than $15,000... ..

(c) Nothing in this section shall apply to fees received for
professional services rendered, including but not limited to
architect[’]s fees, attorney’s fees, and fees for fiscal agents.

Subsequent to the issuance of Attorney General Opinion DM-347, the Seventy-
fourth Legislature repealed section 21.901, transferring its subject matter to section
44.031 of the Education Code and amending the substance. Section 44.031 provides in
pertinent part as follows:

(a) Except as provided by this section, all school district
contracts, except contracts for the purchase of produce or vehicle
fuel, valued at $25,000 or more in the aggregate for each 12-month
period shall be made by the method, of the following methods, that
provides the best value to the district:

(1) competitive bidding;
(2) competitive sealed proposals;
(3) a request for proposals;

(4) a catalogue purchase as provided by Subchapter B,
Chapter 2157, Government Code;1

(5) an interlocal contract;2 or

1Chapter 2157, subchapter B of the Government Code provides that the General Services
Commission or a state agency may purchase an automated information system through a catalogue
purchase procedure. Gov't Code § 2157.061. A vendor who wishes to sell automated information .
systems to state agencies using the catalogue purchase method must apply to the General Services
Commission for designation as a qualified information systems vendor. Id. § 2157.062(a); see also id.
§§ 2157.064, .065 (pertaining to regional and statewide qualification of vendors and prescribing standards
and criteria for qualification of vendors). A qualified information systems vendor must publish and
price its products and services to a state agency. Id. §§ 2157.062(b)(1), .066.

A state agency may purchase or lease an automated information system directly from a qualified
information systems vendor. Id. § 2157.063(a). The purchase or lease must, however, be the “best value
available.” id. A local government, such as a school district, may avail itself of the catalogue purchase
procedure if the local government qualifies for cooperative purchasing under Local Government Code
sections 271.082 and 271.083. Id. § 2157.067(a).

2Chapter 791 of the Government Code controls the formation of interlocal cooperation contracts.
Under section 791.011(a), “[a] local government may contract or agree with another local government to

(6) a design/build contract.3

(b) In determining to whom to award a contract, the district
may consider;

(1) the purchase price;

(2) the reputation of the vendor and of the vendor's goods
or services;

(3) the quality of the vendor’s goods or services;

(4) the extent to which the goods or services meet the
district’s needs;

(5) the vendor’s past relationship with the district;

(6) the impact on the ability of the district to comply with
laws and rules relating to historically underutilized businesses,

(7) the total long-term cost to the district to acquire the
vendor’s goods or services; and

(footnote continued)

perform governmental functions and services.” The term “local government” means a county,
municipality, special district, or other political subdivision, or a combination of two or more of those
entities. Gov't Code § 791.003(4). The term “political subdivision” includes “any corporate and political
entity organized under state law.” Id. § 791.003(5).

A local government that is a party to an interlocal cooperation contract also may contract with a
state agency, as defined by section 771.002 of the Government Code. Id. § 791.011(b). A contract
between a local government and an entity that is neither another local government nor a state agency is
not an interlocal cooperation contract under chapter 791 of the Government Code.

Parties may enter an interlocal contract only for one of two purposes:

(1) [to] study the feasibility of the performance of a governmental function
or service by an interlocal contract; or
(2) [to] provide a governmental function or service that each party to the

contract is authorized to perform individually.

Id. §791.011(c). Thus, no party to an interlocal contract may perform a function or service that is
inconsistent with the authority of any party to the contract.

3in Attorney General Opinion JM-1189 this office described a design/build contract as a contract
in which an “owner contracts with a single party for both the design and construction of the entire
project,” as opposed to the traditional arrangement in which the owner contracts with both an architect
and a contractor. Attorney General Opinion JM-1189 (1990) at 2 (citing Hal G. Block, As the Walls
Came Tumbling Down: Architects’ Expanded Liability Under Design-Buiid/Construction Contracting,
17 JOHN MARSHALL LL. REV. 1 (1984)).

(8) any other relevant factor that a private business entity
would consider in selecting a vendor.

(c) The state auditor may audit purchases of goods or services
by the district.

(d) The district may adopt rules and procedures for the
acquisition of goods or services.

(e) To the extent of any conflict, this section prevails over any
other law relating to the purchasing of goods and services except a
law relating to contracting with historically underutilized businesses.

(f) This section does not apply to fees received for professional
services rendered, including architect’s fees, attorney’s fees, and fees
for fiscal agents. [Footnotes added.]

Thus, section 44.031 “[s]ets forth methods by which all school district contracts shall be
made, except contracts for the purchase of produce or vehicle fuel, valued at $25,000 or
more in the aggregate for each 12-month period.” Senate Research Center, Bill Analysis
176, S.B. 1, 74th Leg., R.S. (1995). Also, fees received for professional services rendered
are not subject to section 44.031. Educ. Code § 44.031(f).

We found nothing in the legislative history explaining the legislature’s motivation
for altering schools’ purchasing procedures.‘ We believe the revision is consistent with

4As introduced, section 44.031(a), (b), (c) substantially duplicated section 21.901(a), (b), (c):

Sec. 44.031 [21.901]. CONTRACTS--COMPETITIVE BIDDING. (a)
Except as provided by [in] this section, all contracts proposed to be made by the
[any Texas public school] board of trustees of a school district for the purchase of
any personal property, except produce or vehicle fuel, must [shall] be submitted
to competitive bidding for each 12-month period when the [said] property is
valued at $25,000 or more, in the aggregate for each 12-month period.

(b) Except as provided by [in] Subsection (c) [of this section], all contracts
proposed to be made by the [any Texas public school] board of trustees of a
school district for the construction, maintenance, repair, or renovation of any
building must [shall] be submitted to competitive bidding when the [said]
contracts are valued at more than $15,000. In this section, maintenance includes
personnel.

(c) This [Nothing in this] section does not [shall] apply to fees received
for professional services rendered, including [but not limited to] architects [sic]
fees, attorney’s fees, and fees for fiscal agents.

S.B. 1, 74th Leg., R.S. (1995) (as introduced).

The Senate Committee on Education amended subsection (b), the provision requiring the board
of trustees of a school district to competitively bid a contract for the construction, maintenance, repair, or
renovation of a building, by adding a provision permitting a board to award the contract “by the method

one of the primary purposes of Senate Bill 1, however, which was to allow more local
control over schools. See Education for Tomorrow: The Public Schools Reform Act of
1995 at 1 (explaining that S.B. 1 proposes to rein in powers of State Board of Education),
2 (explaining that S.B. 1 proposes to establish regional education service centers), 6
(explaining that S.B. 1 would allow local school districts, rather than State Board of
Education, to adopt textbooks) (available in bill file). We deduce, therefore, that the
legislature wanted each local school district to have more control over the means by which
the school district awards contracts. Although section 44.031 now allows a school district
‘flexibility to select the means it will use to award a particular contract from the list in
subsection (a), the school district always must have as its goal obtaining the best value for
the school district. See Educ. Code § 44.031(a).

Section 44.031 prevails over Attorney General Opinion DM-347 to the extent the
opinion is inconsistent with the statute. Nevertheless, section 44.031 does not affect our
conclusion in Attorney General Opinion DM-347 that a contract for the purchase of
insurance is not a contract for professional services. See Attorney General Opinion
DM-347 (1995) at 5.

Whether a contract for the purchase of insurance is a contract to purchase personal
property no longer matters in the context of section 44.031. Under section 44.031 of the
Education Code, a school board must award all contracts not for professional services,
produce, or vehicle fuel in accordance with subsection (a), so long as the value of the
contract exceeds $24,999.99 in the aggregate for a twelve-month period.

_ (footnote continued)

that provides the best value to the district.” The amendment provided a nonexclusive list of five different
methods a board might use: competitive bidding, competitive sealed proposals; catalogue purchase; a
group purchasing program; or an open market contract. The amendment further listed those factors a
board must consider in determining the best value to the district. The committee did not amend
subsection (a), pertaining to contracts for the purchase of personal property generally. The full Senate
approved the committee substitute for subsection (b) without amendment.

The House Committee on Public Education clarified subsection (b) by deleting the competitive
repair, or renovation of a building by using the one of five listed methods that provides the best value to
the district. The five listed methods were substantially the same as the five listed in the Senate’s version
of the bill.

The conference committee amended section 44.031 to the form in which the legislature finally
passed it. Both the Senate and the House of Representatives passed a resolution noting that the conference
committee had amended section 44.031 differently from either the previous senate or house version of the
bill. See SR. 1258, 74th Leg., R.S. (1995); H.R. 1145, 74th Leg., R.S. (1995). Each resolution explained
that the revisions were necessary to “clarify the manner in which school district[s] can make purchases of
personal property and to impose consistent restrictions on purchases of personal property and certain
buildings contracts made in relation to buildings.” S.R. 1258, 74th Leg., R.S., 65 (1995).

You first ask whether Attorney General Opinion DM-347 precludes a school
district from using any of the purchasing methods listed in section 44.031(a). Clearly, it
does not. To the extent Attorney General Opinion DM-347 concludes that a school
district must competitively bid a contract for the purchase of insurance, section 44.031 of
the Education Code supersedes the opinion. A school district must award a contract to
purchase insurance, provided the value of the contract exceeds $24,999.99 in the
aggregate for a twelve-month period, using one of the methods listed in section 44.031(a).
The board of trustees of the school district must select the method “that provides the best
value to the district.” Educ. Code § 44.031(a).

You next ask whether Attorney General Opinion DM-347 precludes a school
district from executing an insurance contract for a period longer than twelve months. It
does not. Neither section 44.031 of the Education Code nor Attorney General Opinion
DM-347 limits the length of contract the board of a school district may enter. But see
Local Gov’t Code § 271.009 (limiting term of contract to twenty-five years). The board
of trustees of a school district must award a contract in accordance with section 44.031(a)
if the value of the contract is $25,000 or more in the aggregate for each twelve-month
period covered in the contract.

A multi-year contract must, however, contain a clause retaining to the school
board “the continuing right to terminate at the expiration of each budget period of the
[school district] during the term of the contract....” Id. § 271.903(a); see id.
§ 271.903(b) (defining “local government” to include school district). In the alternative,
the school board may condition the contract on “a best efforts attempt by [the school
board} to obtain and appropriate funds for payment of the contract....” Id.
§ 271.903(a). The school board also may include both provisions in the contract,
providing the school district a continuing right to terminate and conditioning the contract

• on the school board’s best efforts to appropriate funding. Id.

Third, you ask whether a school district may, under section 44.033 of the
Education Code, execute an insurance contract for a period longer than twelve months.
Section 44.033 provides an alternative method for the purchase of personal property
valued between $10,000 and $25,000.5 As this office determined in Attorney General
Opinion DM-347, a contract to purchase insurance is a contract to purchase personal

property.

Section 44.033(a) also permits a school district to purchase items of personal property, the value
of which is at least $10,000 but less than $25,000, in the aggregate, for a 12-month period, in accordance
with section 44.031(a) and (b).

Section 44.033 provides in pertinent part as follows:

(a) A school district shall purchase personal property as
provided by this section if the value of the items is at least $10,000
but less than $25,000, in the aggregate, for a 12-month period. In
the alternative, the school district may purchase those items in
accordance with Sections [sic] 44.031 (a) and (b).

(b) For each 12-month period, the district shall publish a notice
in two successive issues of any newspaper of general circulation in
the county in which the school is located. If there is no newspaper in
the county in which the school is located, the advertising shall be
published in a newspaper in the county nearest the county seat of the
county in which the school is located, specifying the categories of
personal property to be purchased under this section and soliciting
the names . . . of vendors that are interested in supplying any of the
categories to the district. For each category, the district shall create
a vendor list consisting of each vendor that responds to the published
notice and any additional vendors the district elects to include.

(c) Before the district makes a purchase from a category of
personal property, the district must obtain written or telephone price
quotations from at least three vendors from the list for that
category.... The purchase shall be made from the lowest

responsible bidder.

We find nothing in section 44.033 prohibiting a school district from entering a
contract for the purchase of insurance with a duration longer than twelve months. But see
Local Gov’t Code § 271.009 (limiting term of contract to twenty-five years). Subsection
(b) does not limit the length of a contract; rather, it requires a school district to publish
notice seeking vendors interested in supplying the school district with those goods the
school district will be purchasing in the upcoming twelve-month period. If, therefore, a
school district executes a multi-year insurance contract, it need not advertise for insurance
vendors until the twelve-month period during which the school district will be executing a
new insurance contract.

If the school district enters a multi-year contract, it must comply with section
271.903(a) of the Local Government Code. See supra at 6. Thus, the contract must
include a clause retaining to the school district the continuing right to terminate the
contract at the end of the school district’s budget period, a clause conditioning the
continuation of the contract on the school board’s best efforts to appropriate funds for the

payment of the contract, or both.
Your fourth question causes us to consider the value requirement articulated in

sections 44.031(a) and 44.033(a). You ask whether a school district must aggregate
different types of insurance, e.g., workers’ compensation insurance and health insurance,

to determine the value, for purposes of ascertaining the methods the school district may
use to purchase the insurance. You also ask whether a school district may assume that it
need not aggregate coverage in different “lines” of insurance, as defined by rule of the
commissioner of insurance, for purposes of section 44.031(a) and section 44.033(a). You
ask whether a school district must aggregate insurance coverage under different types of
insurance if the coverage is available under a single contract in the local market.

You do not indicate any particular rule of the commissioner of insurance that
defines “lines” of insurance. We note that the Department of Insurance has, in its rules,
categorized the various types of insurance as follows: life, accident, and health insurance,
see 28 T.A.C. ch. 3; property and casualty insurance, see id. ch. 5; title insurance, see id.
ch. 9; surplus lines insurance, see id. ch. 15; and prepaid legal service, see id. ch. 23. We
understand you to inquire whether, for purposes of determining the value of a contract, a
school district may consider, for example, the value of its health insurance coverage
separately from the value of its property insurance coverage, its workers’ compensation
coverage, or its life insurance coverage. We believe the answer to your question lies in the
phrase “in the aggregate” in sections 44.031(a) and 44.033(a).

The Education Code does not define either the phrase “in the aggregate” or the
term “aggregate”; nor do we find a definition elsewhere in state law. In common usage,
see Gov’t Code § 311.011, the phrase “in the aggregate” means “considered as a whole.”
WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 64 (1990). The term “aggregate”
denotes the “[e]ntire number, sum, mass, or quantity of something; total amount; complete
whole.” BLACK’s LAW DICTIONARY 60 (5th ed. 1979); see also BRYAN A. GARNER, A
DICTIONARY OF MODERN LEGAL USAGE 30 (1987). In examining the definitions of
“aggregate,” we note that the word appears to connote a collection of associated items.6
See 1 OXFORD ENGLISH DICTIONARY 252-53 (2d ed. 1989).

Section 44.031(a) provides that, in general, a school district must use one of the
specified purchasing methods to contract for anything, except professional services,
vehicle fuel, or produce, “valued at $25,000 or more in the aggregate for each 12-month
period....” Clearly, the school district need not add together the value of all of the
contracts it proposes to execute during a 12-month period. If it did, a school district
always would cross the $25,000 line and have to award all of its contracts in accordance
with section 44.031(a). On the other hand, we believe the phrase “in the aggregate” in
section 44.031 of the Education Code limits a school district’s authority to consider the
value of each purchase separately.

Section 44.032(b) of the Education Code forbids, in certain circumstances, an
officer, employee, or agent of a school district to make or authorize “separate, sequential,

SFor example, in law the term “aggregate” means “[c]omposed of many individuals united into
one association.” 1 OxFORD ENGLISH DICTIONARY 252 (2d ed. 1989). In zoology, the term means
“[c]onsisting of distinct animals united into a common organism.” Id. In physics, the term refers to “[a]
mass formed by the union of homogenous particles.” Id. at 253.

or component purchases” of items that “in normal purchasing practices would be
purchased in one purchase,” see Educ. Code § 44.032(a)(1), (2), (3). Without
determining that “in the aggregate” is duplicative of the restriction on separate, sequential,
or component purchases as a matter of law, we believe we must construe the phrase
consistently with the restriction, as well as the common usage of the word “aggregate.”
Accordingly, we conclude that the phrase “in the aggregate” requires a school district
cumulatively to value contracts for like products that a school district normally would
purchase together, but only for purposes of determining when a formal procurement
process is required by law.7

As you suggest, whether a school district may aggregate different insurance
coverages may depend upon the local market; the question also may depend upon the
types of coverage involved, the size or location of the school district, and other factors
that we are unable to predict. Possibly, one school district would normally contract to
purchase certain products together, while another school district normally would not
contract to purchase the same products together.

Again, the statute expressly requires a school district to consider the aggregate
value of certain contracts to be executed in a twelve-month period only in reference to
determining whether the school district must use one of the methods listed in section
44.031(a) of the Education Code to make the contract. We do not read section 44.031(a)
to require a school district to make the contracts for like products “in the aggregate.”
Thus, once a school district has aggregated the value of contracts it desires to enter during
the twelve-month period to determine whether it must make the contract using one of the
methods listed in section 44.031(a), it may enter each contract separately.

In your final question you ask whether the services of a third-party administrator
who is licensed under Insurance Code article 21.07-6 are professional services that a
school district need not bid under section 44.031(f). Article 21.07-6, section 1(1) defines
“administrator” as “a person8 who collects premiums or contributions from or who adjusts
or settles claims in connection with life, health, and accident benefits or annuities for
residents of this state.” (Footnote added.) See also 28 T.A.C. § 7.1601. The definition
excludes certain persons, such as an employer on behalf of its employees, a health
maintenance organization, or a person who adjusts or settles claims in the normal course
of his or her practice as a licensed attorney. Ins. Code art. 21.07-6, § 1(1)(A), (D), (K).
Incidentally, the definition of “administrator” also excludes “a self-insurance pool

7Cf. 29 C.F.R. § 5.15(o)(2) (1992) (exempting from Contract Work Hours and Safety Standards
Act purchase or contract “in the aggregate amount of $2,500.00 or less” and stating that, to determine
aggregate amount, one must include “all property and services which would properly be grouped together
in a single transaction”).

8Article 21.07-6, section (1)(7) of the Insurance Code defines “person” as “an individual,

partnership, corporation, organization, government or governmental subdivision or agency, business trust,
estate trust, association, or other legal entity.”

composed of political subdivisions of this state that participate in a fund or pool through
interlocal agreements and... any nonprofit entity that acts solely on behalf of a fund,
pool, agency, or body... .” Id. § 1(1)(O).

To become a licensed third-party administrator, a person must obtain a certificate
of authority from the commissioner of insurance. Id. § 3(a). In its application for a
certificate of authority, an applicant must provide the commissioner with copies of
organizational documents, such as the articles of incorporation and bylaws; a description
of the administrator; if the applicant is not domiciled in this state, a power of attorney
appointing the commissioner as the administrator’s attorney; financial audits; and any
other information the commissioner requires. Id. § 4; see also 28 T.A.C. §§ 7.1603,
.1605. The commissioner of insurance must approve the application if he or she is
satisfied that the application meets the following criteria:

(1) the granting of the application would not violate a federal or
state law;

(2) the financial condition of an administrator applicant or those
persons who would operate or control an administrator applicant are
such that the granting of a certificate of authority would not be
adverse to the public interest;

(3) the applicant has not attempted through fraud. or bad faith
to obtain the certificate of authority;

(4) the applicant has complied with this article and rules
adopted by the board under this article; and

(5) the name under which the applicant will conduct business in
this state is not so similar to that of another administrator or insurer
that it is likely to mislead the public.

Ins. Code art. 21.07-6, § 5(a).

Once the commissioner of insurance has approved an application for a certificate
of authority, the third-party administrator must obtain and maintain a fidelity bond. Id.
§ 6(a); see also 28 T.A.C. § 7.1613. The third-party administrator also must submit to
examinations by the commissioner of insurance or the commissioner’s designee, which
examination will include a review of all of the administrator’s written agreements with
various insurers9 and plans,10 as well as a review of the administrator’s financial
statements. Ins. Code art. 21.07-6, § 8(c); see also 28 T.A.C. § 7.1610.

9An “insurer” for purposes of article 21.07-6 of the Insurance Code is “a person who transacts a
life, health, or accident insurance business under the law of this state.” Ins. Code art. 21.07-6, § 1(5).

104 “plan” is “a plan, fund, or program established, adopted, or maintained by a plan sponsor or
insurer to the extent that the plan, fund, or program is established, adopted, or is maintained to provide

In Attorney General Opinion JM-1038 this office considered whether the third-
party administrator of an insurance contract provides professional services, the purchase
of which need not be competitively bid under chapter 252 of the Local Government Code.
Attorney General Opinion JM-1038 (1989) at 1. (Like section 44.031 of the Education
Code, Local Government Code section 252.022(a)(4) excepts from the requirement that a
municipality competitively bid certain expenditures “a procurement for . . . professional
services.”) Using the definition of “administrator” or “third party administrator” in
Insurance Code article 21.07-5, repealed by Act of May 29, 1989, 71st Leg., R.S., ch.
1094, § 4, 1989 Tex. Gen. Laws 4477, 4491, the opinion stated that an administrator is a
person who receives a fee or compensation “for performing or providing any service,
function, or duty, or activity respecting insurance . . . in any administrative or management
capacity.” Attorney General Opinion JM-1038 (1989) at 1-2. Because of the breadth of
the definition, the opinion stated, a third-party administrator may “include services ranging
from simple clerical ones to complex ones requiring high levels of expertise.” Id. at 2.

The opinion then considered the nature of professional services. As the opinion
noted, this office previously defined professional services to include any member of a
discipline “requiring special knowledge or attainment and a high order of learning, skill,
and intelligence.” Id. (quoting Attorney General Opinion JM-940 (1988)). This office
refrained, however, from determining whether the services offered by a third-party
administrator are professional services because the specific services a third-party
administrator performs will depend upon a particular contract. Id. at 3-4.

We believe the conclusion reached in Attorney General Opinion JM-1038 is
subject to reexamination because the legislature repealed article 21.07-5 of the Insurance
Code, the statute on which the opinion relied. As compared to the definition of
“administrator” in the now-repealed article 21.07-5, the definition in article 21.07-6 is
explicit: a third-party administrator collects life, health, and accident insurance premiums
or contributions and adjusts or settles life, health, and accident insurance claims. See Ins.
Code art. 21.07-6, § 1(1). The application procedures and approval criteria in article
21.07-6 are similar to those in article 21.07-5, although not identical. Compare Ins. Code
art. 21.07-6, §§ 4, 5 with id. art. 21.07-5, §§ 4, 6, repealed by Act of May 29, 1989, 71st
Leg., R.S., ch. 1094, § 4, 1989 Tex. Gen. Laws 4477, 4491.

In Attorney General Opinion DM-347 this office discussed the nature of
professional services more fully than in Attorney General Opinion JM-1038:

According to Attorney General Opinion MW-344, a professional
service is one requiring “‘predominantly mental or intellectual, rather
than physical or manual,”” skills. Attorney General Opinion MW-344
(1981) at 4 (quoting Maryland Casualty Co. v. Crazy Water Co.,

(footnote continued)
indemnification or expense reimbursement for any type of life, health, or accident benefit.” Ins. Code art.
21.07-6, § 1(6).

160 S.W.2d 102, 105 (Tex. Civ. App.--Eastland 1942, no writ)).
Furthermore, a “professional” works in a profession that “‘requires
years of education and service for one to attain competence and
[that] calls for a high order of intelligence, skill and learning.”” Id.
(quoting Transportation Displays, Inc. v. City of New Orleans, 346
So. 2d 359, 363 n.5 (La. Ct. App. 1977)).

Finally, [Attorney General Opinion MW-344] discussed “[t]he
most useful standard for judging the scope of ‘profession’”” from
Wooddell v. Dailey, 230 S.E.2d 466 (W. Va. 1976). Id. at 5. The
Wooddell court concluded that the services of an interior decorator
were not professional services. The Wooddell court did not,
however, limit the term “professional services” to the professions of
theology, law, or medicine, nor to professions specifically recognized
as such by statute. Id. (citing Wooddell, 230 S.E.2d at 469-70).
Rather, while “‘most occupations, trades, business or callings require
a diversity of knowledge and skill,” not all such occupations, trades,
business or callings could be called “professions.” Id. (quoting
Wooddell, 230 S.E.2d at 470). A professional is only one who “‘is a
member of [a] discipline with widely accepted standards of required
study or specified attainments in special knowledge as distinguished
from mere skill.” Id. (quoting Wooddell, 230 S.E.2d at 470).

Attorney General Opinion DM-347 (1995) at 3-4 (footnote omitted).

We find little evidence in the Insurance Code that the services of a third-party
administrator require predominantly mental or intellectual skills, the acquisition of which
entail years of education and service. See id. at 3. Additionally, we find little evidence
that a third-party administrator belongs to a “discipline with widely accepted standards of
required study or specified attainments in special knowledge as distinguished from mere
skill.” See id. at 3-4 (quoting Attorney General Opinion MW-344 (1981) at 5 [quoting
Wooddell v. Dailey, 230 S.E.2d 466 (1976)]). We cannot say as a matter of law,
however, that a third-party administrator does not provide professional services; such a
decision depends, in part, on the actual functions a third-party administrator performs.
We do not know, for example, whether the duty of the third-party administrator to pay
claims is ministerial, that is, whether the third-party administrator pays claims on the
orders of the school district, or whether the third-party administrator must interpret the
law to determine whether to pay a particular claim.11

11We do not mean to suggest that, even if a third-party administrator interprets the law to
determine whether to pay a particular claim, the services of the third-party administrator are professional
services for purposes of Education Code section 44.031(f).

Furthermore, this office generally abstains from determining whether a particular
service is a professional service for purposes of a statute other than the Professional
Services Procurement Act, V.T.C.S. art. 664-4, because of the fact-based nature of such a
determination. See, e.g., Attorney General Opinions DM-106 (1992) at 2; JM-1136
(1990) at 2-3; JM-1038 (1989) at 3. But see Attorney General Opinion JM-940 (1988) at

4. In our opinion, the school board is the proper authority to determine the actual
   functions of a particular third-party administrator for purposes of section 44.031 of the
   Education Code.

Of course, except for the professional services listed in the Professional Services
Procurement Act, V.T.C.S. art. 664-4, a school district may contract for professional
services using any appropriate method listed in section 44.031(a) of the Education Code.
Cf. Attorney General Opinion DM-106 (1992) at 2. Compare Educ. Code § 44.031(f)
with Local Gov’t Code § 252.022(a)(4).

You ask whether “reinsurance procurement duties” included in a claims
administration contract with a licensed third-party administrator are professional services
for purposes of section 44.031(f) of the Education Code. You do not indicate what

“reinsurance procurement duties” are. From the phrase itself, we guess that such duties
consist of pricing and acquiring, on behalf of a school district, reinsurance for the school
district’s self-insurance fund. As this office stated in Attorney General Opinion DM-347,
the purchase of insurance, even through an agent, is not a purchase of professional
services. To the extent “reinsurance procurement duties” include other duties that we
cannot guess, we do not determine whether such duties are professional services.

You ask whether a school board must award, in accordance with section 44.031 or
44.033 of the Education Code, a contract for professional services as well as
nonprofessional services. To the extent that a contract, valued at $25,000 or more in the
aggregate for a twelve-month period, is for anything other than professional services,
produce, or vehicle fuel, a school district must award it using the one method among the
six listed in section 44.031 that provides the best value to the school district. See Educ.
Code § 44.031(a), (f). Likewise, to the extent a contract, valued at between $10,000 and
$24,999.99, inclusive, in the aggregate for a twelve-month period, is for the purchase of
personal property, a school district must award the contract either by competitively
bidding the contract or in accordance with section 44.031(a) and (b). See id. § 44.033(a).
The school board may, but need not, award any professional services included in the
contract that are not covered by the Professional Services Procurement Act, V.T.C.S. art.
664-4, in accordance with section 44.031 or section 44.033, depending on the value of the
contract. See Wallace v. Commissioners’ Court of Madison County, 281 S.W. 593, 595
(Tex. Civ. App.-Waco 1926), rev'd on other grounds, 15 S.W.2d 535 (Tex. 1929)
(stating that where contract included some services requiring technical knowledge and
some services or products that do not, those that do not must be competitively bid); see
also Gulf Bitulithic Co. v. Nueces County, 297 S.W. 747, 753 (Tex. Civ. App.--San
Antonio 1927), rev'd on other grounds, 11 S.W.2d 305 (Tex. 1928); Attorney General
Opinion JM-890 (1988) at 4 (quoting Wallace v. Commissioners’ Court of Madison Co.,

281 S.W. 593 (Tex. Civ. App.—Waco 1926, rev’d on other grounds, 15 S.W.2d 535 (Tex.
1929)).

SUMMARY

Newly enacted section 44.031 of the Education Code prevails
over Attorney General Opinion DM-347 to the extent the opinion is
inconsistent with the statute. Section 44.031 does not conflict with
the conclusion in Attorney General Opinion DM-347 that a contract
for the purchase of insurance is not a contract for professional
services. Additionally, whether a contract for the purchase of
insurance is a contract to purchase personal property no longer
matters in the context of section 44.031.

To the extent Attorney General Opinion DM-347 concludes that
a school district must competitively bid a contract, valued at more
than $24,999.99 in the aggregate for a twelve-month period, for the
purchase of insurance, section 44.031 of the Education Code
supersedes the opinion. A school district must award such a contract
using one of the methods listed in section 44.031(a). The board of
trustees of the school district must select the method “that provides
the best value to the district.”

Neither section 44.031 of the Education Code nor Attorney
General Opinion DM-347 precludes a school district from executing
an insurance contract for a period longer than twelve months. A
multi-year contract must, however, comply with section 271.903(a)
of the Local Government Code.

Nothing in section 44.033 of the Education Code prohibits a
school district from entering a contract for the purchase of insurance
with a duration longer than twelve months. Section 44.033(b) of the
Education Code does not limit the length of a contract; it merely
requires a school district to publish notice seeking vendors interested
in supplying the school district with those goods the school district
will be purchasing in the upcoming twelve-month period. If the
school district enters a multi-year contract, it must comply with
section 271.903(a) of the Local Government Code.

The requirement in sections 44.031 and 44.033 of the Education
Code, referring to the value of purchases “in the aggregate” indicates
that a school district cumulatively must value contracts for like
products that a school district normally would purchase together, but
only for purposes of determining when a formal procurement process
is required by law.

Whether a third-party administrator, licensed under article
21.07-6 of the Insurance Code, provides a professional service
depends upon whether the service requires predominantly mental or
intellectual, rather than physical or manual, skills; whether years of
education and service are necessary for a practitioner to attain
competence as a third-party administrator, and whether a third-party
administrator belongs to a discipline with widely accepted standards
of required study or specified attainments in special knowledge as
distinguished from mere skill.

To the extent “reinsurance procurement duties” consist of
pricing and acquiring, on behalf of a school district, reinsurance for
the school district’s self-insurance fund, such duties are not
professional services.

To the extent that a contract, valued at $25,000 or more in the
aggregate for a twelve-month period, is for anything other than
professional services, produce, or vehicle fuel, a school district must
award it using the one method among the six listed in section 44.031
of the Education Code that provides the best value to the school
district. Likewise, to the extent a contract, valued at between
$10,000 and $24,999.99, inclusive, in the aggregate for a twelve-
month period is for the purchase of personal property, a school
district must award the contract either by competitively bidding the
contract or in accordance with section 44.031(a) and (b). The school
board may, but need not, award any professional services included in
the contract that are not covered by the Professional Services
Procurement Act, V.T.C.S. art. 664-4, in accordance with section
44.031 or section 44.033, depending on the value of the contract.

DAN MORALES
Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Kymberly K. Oltrogge
Assistant Attorney General