Can a company be hired as a city's construction manager-at-risk if a related company is already the project's design engineer in Texas?

TX AG Opinion GA-0782: Can a related company be the construction manager-at-risk when one of its affiliates is the city's design engineer?

Plain-English summary

A state representative asked whether Local Government Code section 271.118 keeps a company from being selected as a city's construction manager-at-risk if a related company has already been chosen as the project's design engineer. Section 271.118 is part of subchapter H of chapter 271, which lets a governmental entity use alternative delivery methods for construction and sets out the procurement rules for each. The construction-manager-at-risk method makes one entity act as the general contractor that assumes the risk of building the project at the contracted price while also advising the entity on construction during and after design.

The question named subsection (d), but the Attorney General explained that subsection (c) is the part that actually addresses the design engineer. Subsection (c) requires the entity, before or concurrently with picking the construction manager-at-risk, to select the engineer or architect who prepares the construction documents. It then bars that engineer, architect, or construction-manager-agent from also serving as the construction manager-at-risk "unless the engineer or architect is hired to serve as the construction manager-at-risk under a separate or concurrent procurement." Reading that plain language, the opinion reasoned that if a single entity may hold both roles when hired through separate procurements, then two related entities can hold the design-engineer role and the construction-manager-at-risk role too. The opinion cited Leland v. Brandal for the rule that unambiguous statutory language controls.

Subsection (d) is about something different. It requires the governmental entity to provide or contract, independently of the construction manager-at-risk, for the inspection services, construction-materials testing, and verification testing needed to accept the facility, using the professional-services procurement rules in Government Code section 2254.004. It does not speak to the relationship between the design engineer and the construction manager-at-risk. So neither subsection (c) nor (d) forbids the arrangement the representative described, as long as the roles were procured separately.

Currency note

This opinion was issued in 2010. 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.

Subchapter H of chapter 271 of the Local Government Code, including section 271.118, may have been amended since 2010. Confirm the current statutes before relying on anything below.

Who this opinion affected (as of 2010)

Cities and other governmental entities using construction-manager-at-risk delivery: The opinion told them that section 271.118 did not bar selecting a construction manager-at-risk whose related company was the project's design engineer, provided the two roles came through separate procurement processes. It also reminded them that subsection (d) required them to separately contract for inspection and testing services under Government Code section 2254.004.

Construction firms and engineering firms with affiliated entities: The opinion told them that an affiliation between the design-engineer entity and the construction-manager-at-risk entity was not, by itself, disqualifying under section 271.118, so long as each role was separately procured.

Common questions

Does Texas law stop affiliated companies from holding both the design-engineer and construction-manager-at-risk roles on a city project?
Not under section 271.118, according to this opinion, as long as the two roles were filled through separate procurement processes.

Why did the opinion answer under subsection (c) when the question asked about subsection (d)?
Because subsection (c) is the part of section 271.118 that actually addresses the design engineer's relationship to the construction manager-at-risk. Subsection (d) covers inspection and testing services, not that relationship.

What does subsection (c) actually allow?
It allows the same entity to serve as both the design engineer and the construction manager-at-risk if that entity is hired under a separate or concurrent procurement. The opinion reasoned that if one entity can do both, related entities can split the two roles.

Background and statutory framework

Subchapter H of chapter 271 of the Local Government Code authorizes governmental entities to use alternative construction-delivery methods and prescribes the procurement procedures for them (Tex. Loc. Gov't Code Ann. §§ 271.111-.121 (Vernon 2005 & Supp. 2009)). Section 271.118 authorizes the construction-manager-at-risk method and sets the procedures for entering a contract for those services (id. § 271.118(a)). A construction manager-at-risk assumes the risk of building the facility at the contracted price as a general contractor and advises the entity on construction during and after design (id. § 271.118(b)). A contract made in violation of the subchapter is void, and a court may enjoin its performance (id. § 271.112(f)).

Subsection 271.118(c) requires the entity, before or concurrently with selecting the construction manager-at-risk, to select the design engineer (an engineer or architect who prepares the construction documents and complies with chapters 1001 and 1051 of the Occupations Code), and it prohibits that engineer, architect, or construction-manager-agent from serving as the construction manager-at-risk unless hired under a separate or concurrent procurement (id. § 271.118(c); Tex. Occ. Code Ann. §§ 1001.001-.604, 1051.001-.801 (Vernon 2004 & Supp. 2009)). Because the same entity may hold both roles when separately procured, the opinion concluded related entities may hold them too (Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008)). Subsection 271.118(d) requires the entity to provide or contract, independently of the construction manager-at-risk, for inspection, construction-materials testing, and verification testing under Government Code section 2254.004, and does not address the design-engineer relationship (Tex. Loc. Gov't Code Ann. § 271.118(d); Tex. Gov't Code Ann. § 2254.004 (Vernon 2008)).

Citations

Statutes:

• Tex. Loc. Gov't Code Ann. §§ 271.111-.121, 271.112(f), 271.118(a)-(d) (Vernon 2005 & Supp. 2009)
• Tex. Occ. Code Ann. §§ 1001.001-.604, 1051.001-.801 (Vernon 2004 & Supp. 2009)
• Tex. Gov't Code Ann. § 2254.004 (Vernon 2008)

Cases:

• Leland v. Brandal, 257 S.W.3d 204 (Tex. 2008)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0782
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2010/ga0782.pdf

Original opinion text

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

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

June 24, 2010

The Honorable Todd Hunter
Chair, Committee on Judiciary & Civil Jurisprudence
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0782

Re: Whether section 271.118 of the Local Government Code prohibits a company from being selected as a construction manager-at-risk for a municipal project if a related company has been selected as the project manager and design engineer (RQ-0831-GA)

Dear Representative Hunter:

Subchapter H of chapter 271 of the Local Government Code authorizes a governmental entity to use various alternative delivery methods for the construction of certain projects and sets forth the procurement procedures for those methods. See TEX. LOC. GOV'T CODE ANN. §§ 271.111-.121 (Vernon 2005 & Supp. 2009). Section 271.118 of subchapter H authorizes the construction manager-at-risk¹ method and prescribes the specific procedures a governmental entity must follow "[i]n using that method and in entering into a contract for the services of a construction manager-at-risk." Id. § 271.118(a) (Vernon Supp. 2009).² You ask "whether . . . 271.118(d) prohibits a company from being selected as a Construction Manager at Risk for a City project if a related company has been chosen as the City's project manager and design engineer on the project."³

While you specifically ask about subsection 271.118(d), it is subsection 271.118(c) that addresses the selection of the "design engineer" in relation to the selection of a construction manager-at-risk. See id. § 271.118(c). "Before or concurrently with selecting a construction manager-at-risk," subsection 271.118(c) requires a governmental entity to select or designate an engineer or architect (the "design engineer") who prepares the construction documents for the project and is responsible for complying with chapters 1001 and 1051 of the Occupations Code, which govern the practice of engineering, architecture, and related practices. See id. § 271.118(c); TEX. OCC. CODE ANN. §§ 1001.001-.604 (Vernon 2004 & Supp. 2009) (chapter 1001); id. §§ 1051.001-.801 (chapter 1051). Subsection (c) prohibits "the governmental entity's engineer, architect, or construction manager-agent for a project" from serving as the construction manager-at-risk "unless the engineer or architect is hired to serve as the construction manager-at-risk under a separate or concurrent procurement conducted" as provided by subchapter H. TEX. LOC. GOV'T CODE ANN. § 271.118(c) (Vernon Supp. 2009) (emphasis added). Thus, subsection (c) expressly permits the same entity to serve as the design engineer and as the construction manager-at-risk if hired pursuant to separate procurement processes. See Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008) ("If the statute's language is unambiguous, its plain meaning will prevail."). If the same entity may serve in both capacities pursuant to separately procured contracts, it logically follows that the statute does not prohibit related entities from serving as the design engineer and as the construction manager-at-risk.

Subsection 271.118(d) requires a governmental entity to "provide or contract for, independently of the construction manager-at-risk, the inspection services, the testing of construction materials engineering, and the verification testing services necessary for acceptance of the facility." TEX. LOC. GOV'T CODE ANN. § 271.118(d) (Vernon Supp. 2009). The governmental entity must select such service providers in accordance with section 2254.004 of the Government Code. See id.; see also TEX. GOV'T CODE ANN. § 2254.004 (Vernon 2008) (setting forth procurement procedures for contracting for professional services of an architect, an engineer, or a surveyor). Subsection 271.118(d) does not address the selection of the design engineer in relation to the selection of the construction manager-at-risk.

Accordingly, in response to your specific question, we conclude that neither subsection 271.118(c) nor subsection 271.118(d) prohibits selection of a company as a construction manager-at-risk for a city project if a related company has been selected pursuant to a separate procurement process as the design engineer for the project.

[Footnote 1: "A construction manager-at-risk is a sole proprietorship . . . or other legal entity that assumes the risk for construction . . . of a facility at the contracted price as a general contractor and provides consultation to the governmental entity regarding construction during and after the design of the facility." TEX. LOC. GOV'T CODE ANN. § 271.118(b) (Vernon Supp. 2009).]

[Footnote 2: "A contract entered into or an arrangement made in violation of . . . subchapter [H] . . . is void[,]" and "[a] court may enjoin performance of a contract made in violation of this subchapter." Id. § 271.112(f).]

[Footnote 3: Request Letter at 1 (available at http://www.texasattorneygeneral.gov). While you ask about "project manager," you do not explain the term's meaning, and section 271.118 does not use that term. See TEX. LOC. GOV'T CODE ANN. § 271.118 (Vernon Supp. 2009). Thus, we limit our discussion to the related company's role as a design engineer.]

SUMMARY

Neither subsection 271.118(c) nor subsection 271.118(d) of the Local Government Code prohibits selection of a company as a construction manager-at-risk for a city project if a related company has been selected pursuant to a separate procurement process as the design engineer for the project.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

ANDREW WEBER
First Assistant Attorney General

NANCY S. FULLER
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee