Can the Texas mental health department buy or lease property for community services without using the state purchasing agency?

Texas AG Opinion JM-1252: Must the Mental Health Department Use the State Purchasing Agency to Acquire Property?

Plain-English summary

The Commissioner of the Texas Department of Mental Health and Mental Retardation asked whether the department could buy or lease property for its community-based services without going through the state's central purchasing system. The department's theory was that section 2.13 of the Mental Health and Mental Retardation Act, read together with a competitive-procurement provision in section 4.03C, let it acquire property under its own system rather than under the State Purchasing and General Services Act (article 601b, V.T.C.S.).

The Attorney General disagreed. Article 601b requires the State Purchasing and General Services Commission to purchase, lease, rent, or otherwise acquire all supplies, materials, services, and equipment for all state agencies, and to handle a state agency's need for space (leasing space for the agency, with the State as lessee, when state-owned space is not available). The department is a state agency, and under the office's earlier reasoning in Attorney General Opinion JM-978 (1988), a state agency is subject to article 601b unless the legislature exempts it.

The opinion found no such exemption in the Mental Health and Mental Retardation Act. Section 2.13 authorizes the department to cooperate, negotiate, and contract with local agencies, hospitals, private organizations, foundations, community centers, physicians, and persons to plan, develop, and provide community-based services. Section 4.03C directs the department to design a competitive procurement (or similar) system that a mental health or mental retardation authority must use in awarding certain contracts to provide services. Nothing in either section indicated the legislature meant to exempt the department's own leases or purchases of property from article 601b. Even where section 4.03C's procurement system might apply to a contract between a departmental facility outreach program and a private provider, that section reaches contracts with a provider; the department's separate acquisition of the space or property used to render the services stays subject to article 601b.

So when the department acquires property, personal or real, to be used in delivering community-based services, it must follow the State Purchasing and General Services Act, not a procurement route of its own.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis, and both the mental-health statutes and the state purchasing law have since been recodified. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

The Department of Mental Health and Mental Retardation: The opinion told the department that its purchases and leases of property for community-based services ran through the State Purchasing and General Services Commission under article 601b. Its service-contracting powers under the Mental Health and Mental Retardation Act did not carry an implied exemption from the central purchasing law.

The State Purchasing and General Services Commission: The opinion confirmed the commission's role as the acquiring authority for the department's property and space, consistent with its statutory charge to acquire supplies, materials, services, and equipment for all state agencies.

Mental health and mental retardation authorities and providers: The opinion drew the line between contracting to provide services (which the department's own competitive-procurement system under section 4.03C could govern) and the department's acquisition of the underlying property (which stayed under article 601b).

Common questions

Did section 2.13 of the Mental Health and Mental Retardation Act let the department skip the state purchasing law?
No. The opinion found nothing in section 2.13 (or in section 4.03C) exempting the department's property leases or purchases from article 601b.

What does article 601b require?
It required the State Purchasing and General Services Commission to purchase, lease, rent, or otherwise acquire supplies, materials, services, and equipment for all state agencies, and to arrange an agency's space needs. A state agency was subject to it unless the legislature exempted the agency.

Does the department's own procurement system under section 4.03C change the answer?
No. Section 4.03C governs certain contracts to provide services. The department's separate acquisition of the property or space used to deliver those services remained subject to article 601b.

Background and statutory framework

Article 601b, V.T.C.S., the State Purchasing and General Services Act, provided that the State Purchasing and General Services Commission "shall purchase, lease, rent, or otherwise acquire all supplies, materials, services, and equipment for all state agencies" (with exceptions such as certain purchases by a state-owned hospital or clinic under section 3.01(a)(4), delegations under sections 3.06 and 3.08, and emergency purchases under section 3.07). Article 6 of the act addressed space: a state agency needing space submits a written request to the commission (section 6.02(a)), and if state-owned space is not available the commission may lease space for the agency, with the State, acting through the commission, as lessee (section 6.05). The department is a state agency within article 601b, and Attorney General Opinion JM-978 (1988) had noted that a state agency is subject to article 601b unless exempted by the legislature.

The Mental Health and Mental Retardation Act (V.T.C.S. article 5547-201 et seq.) supplied the department's service authority. Section 2.13 (article 5547-202) let the department cooperate, negotiate, and contract with local agencies, hospitals, private organizations, foundations, community centers, physicians, and persons to plan, develop, and provide community-based services. Article 5547-204 governed community-based services, including the department's duty to contract with "designated providers," and section 4.01A defined "mental health or mental retardation authority" to include a designated provider and a departmental facility outreach program. Section 4.03C directed the department to design a competitive procurement or similar system for a mental health or mental retardation authority to use in awarding certain service contracts (those between a private provider and an authority, involving state funds or state-oversight funds, and initially awarded on or after August 30, 1989).

The opinion concluded that neither section 2.13 nor section 4.03C exempted the department's property acquisitions from article 601b. Section 4.03C applies to contracts with a provider; even if it reached a departmental facility outreach program's contract with a private provider, the department's acquisition of the space or property to be used in rendering the services was not exempt from article 601b. The office supported that distinction with Attorney General Opinion JM-445 (1986) (purchases by the Texas Surplus Property Agency subject to article 601b) and again JM-978 (1988), and compared Attorney General Opinion H-459 (1974) (the predecessor to article 601b did not apply to a short-term rental of space by the Texas Rehabilitation Commission for a client).

Citations

Statutory authorities:

• V.T.C.S. art. 601b, the State Purchasing and General Services Act (including §§ 3.01(a), 3.06, 3.07, 3.08, 6.02(a), 6.05)
• V.T.C.S. art. 5547-201 et seq., the Mental Health and Mental Retardation Act
• V.T.C.S. art. 5547-202, § 2.13 (department's authority to contract for community-based services)
• V.T.C.S. art. 5547-204, §§ 4.01A, 4.03, 4.03C (community-based services; competitive procurement system)
• V.T.C.S. art. 5547-203 (community centers)

Prior Attorney General opinions referenced:

• Attorney General Opinion JM-978 (1988) (state agency subject to article 601b unless exempted)
• Attorney General Opinion JM-445 (1986) (Texas Surplus Property Agency purchases subject to article 601b)
• Attorney General Opinion H-459 (1974) (predecessor to article 601b did not apply to a short-term space rental by the Texas Rehabilitation Commission for a client)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1252
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1252.pdf

Original opinion text

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

November 30, 1990

Mr. Dennis R. Jones
Commissioner
Texas Department of Mental Health and Mental Retardation
P. O. Box 12668
Austin, Texas 78711-2668

Opinion No. JM-1252

Re: Whether section 2.13 of the Mental Health and Mental Retardation Act authorizes the Department of Mental Health and Mental Retardation to purchase and/or lease real and personal property for the purpose of providing community-based services without following the procedures of the State Purchasing and General Services Act (RQ-2049)

Dear Commissioner Jones:

You ask whether section 2.13 of the Texas Mental Health and Mental Retardation Act authorizes the Texas Department of Mental Health and Mental Retardation [the "department"], to purchase or lease personal property, or to lease real property, in connection with the provision of community-based mental health and mental retardation services under that act, without being subject to the provisions of the State Purchasing and General Services Act, V.T.C.S. article 601b. See V.T.C.S. art. 5547-201 et seq. (the Texas Mental Health and Mental Retardation Act).

Article 601b provides that the State Purchasing and General Services Commission [the "commission"] "shall purchase, lease, rent, or otherwise acquire all supplies, materials, services, and equipment for all state agencies."[Footnote 1] Id. § 3.01(a). Article 6 of that act provides that "[w]hen a state agency needs space to carry on its functions [it] shall submit a written request for the space to the commission." Id. § 6.02(a). If state-owned space is not available "the commission may lease space for the agency from another source." Id. § 6.05(a). Under such a lease contract "the State of Texas, acting through the commission, is the lessee." Id. § 6.05(e).[Footnote 2]

The department is clearly a state agency within the purview of the provisions of article 601b. See id. § 1.02(2) (defining "state agency"). Attorney General Opinion JM-978 (1988) noted that a "state agency . . . is subject to the provisions of article 601b . . . unless exempted by the legislature." You suggest that the department has authority under the circumstances you describe to purchase or lease personal property or to lease real property without being subject to the requirements of article 601b.

Article 5547-204 provides specifically for the department's duties regarding "community-based services," the context in which your question about the department's purchasing and leasing authority has arisen. Section 4.03, in subsection (a), lists the minimum services that must be available in each service area and, in subsection (b), directs the department to contract with "designated providers" in each service area to provide the services directly or by subcontract. "Designated providers" may be "community centers"[Footnote 3] operated by certain local governmental entities, other local agencies, or private providers. § 4.03(b). "If the Department is unable to identify or contract with a designated provider in a service area, the Department shall provide the services required under this article directly through a departmental facility outreach program." Id.

Section 4.01A of article 5547-204 provides that the term "mental health or mental retardation authority" is used in the article to refer to both a "designated provider" and a "departmental facility outreach program." You indicate in your request that under some contracts with designated providers, and for some departmental outreach programs established under article 5547-204, the department must acquire and provide equipment, supplies, and facilities to be used by such mental health or mental retardation authorities in rendering the community-based services. You suggest that section 2.13 of the Mental Health and Mental Retardation Act, if read together with section 4.03C, provides the department with authority to acquire such property under the "competitive procurement system" established under section 4.03C, rather than under the requirements of article 601b. We disagree.

Section 2.13 of article 5547-202 provides:

    The Department may cooperate, negotiate and contract with local agencies, hospitals, private organizations and foundations, community centers, physicians and persons to plan, develop and provide community-based mental health and mental retardation services.

Section 4.03C of article 5547-204 reads, in pertinent part:

    (a) This section applies only to a contract to provide service for persons with mental retardation or mental illness at the community level, including residential services, that:

        (1) is between a private provider and a mental health or mental retardation authority;

        (2) involves the use of state funds or funds for which the state has oversight responsibility; and

        (3) is initially awarded on or after August 30, 1989.

    (b) The department shall design a competitive procurement or similar system that a mental health or mental retardation authority shall use in awarding a contract under this section.

See also 25 T.A.C. §§ 401.377 - 401.385 (the department's rules promulgated pursuant to section 4.03C).

We find nothing in sections 2.13 or 4.03C which indicates that the legislature intended these sections to provide exemptions from article 601b for leases or purchases of property by the department.

Even if the procurement system provided for in section 4.03C might arguably be made applicable to departmental procurements where the mental health or mental retardation authority to be contracting for services with a private provider is a departmental facility outreach program, that section applies only to contracts with a provider. If, under such a contract, a departmental facility outreach program is to provide space or property to be used in rendering the services, the department's acquisition of such space or property is not exempt from article 601b. See Attorney General Opinion JM-445 (1986) (purchases by Texas Surplus Property Agency with funds from Service Charge Trust Fund subject to article 601b). See Attorney General Opinion JM-978 (1988) (administration of medicaid program for Department of Human Services). Compare Attorney General Opinion H-459 (1974) (the predecessor to article 601b did not apply to a short-term rental of space by the Texas Rehabilitation Commission for a client of the commission).

                   SUMMARY

      Where the Department of Mental Health and Mental Retardation purchases or leases personal property, or leases real property, to be used in connection with the provision of community-based services by a mental health or mental retardation authority under the Mental Health and Mental Retardation Act, section 2.13 of that act does not exempt those acquisitions from the provisions of article 601b, the State Purchasing and General Services Act.

                               JIM MATTOX
                               Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General

Footnote 1: Section 3.01(a)(4) makes exception for "materials, supplies, or equipment purchased by a state-owned hospital or clinic" under the circumstances set out there. Section 3.06 provides that the commission may delegate to a state agency authority to purchase supplies, materials, and equipment in accordance with commission-prescribed procedures. Section 3.07 provides for emergency purchases. Section 3.08 provides that "state agencies are delegated the authority to purchase supplies, materials, and equipment if the purchase does not exceed $500" but that the commission shall prescribe procedures for these purchases. You neither reference any of these provisions nor supply us with facts indicating they are relevant to the situations you are concerned about. We will therefore not address them here.

Footnote 2: See also 1 T.A.C. §§ 113.1 et seq. (commission rules regarding purchasing), 115.31 et seq. (commission rules regarding leasing of space).

Footnote 3: See V.T.C.S. art. 5547-203 (providing for establishment and operation of "community centers").