How did Texas's nonresident-bidder reciprocity rule affect highway contracts, and could an out-of-state bidder lower its bid after opening?
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This page answers the general question as of 1986. Ezel answers yours: what it means for your facts, under current Texas law, with citations.
Texas AG Opinion JM-484: Highway Bidder Preferences
Plain-English summary
The highway department asked how House Bill 620's reciprocal preference for Texas resident bidders affected the competitive-bidding statutes for highway construction and improvement contracts. The opinion limited its answer to state and locally funded projects because the statute excluded contracts involving federal funds. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
JM-484 concluded that article 601g and article 6674i were not in conflict. It said article 601g created "a limited exception to the 'lowest bidder' requirement" by applying the same differential against a nonresident bidder that the bidder's home state applied against Texas bidders. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
The opinion rejected post-opening negotiation. It said the department could not let nonresident bidders adjust their bids after opening, but could reject all bids and readvertise. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Currency note
This opinion was issued in 1986. 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.
Common questions
Did the reciprocity rule override the highway bidding statutes?
No. JM-484 read the statutes together and treated article 601g as a limited, later-enacted exception to the lowest-bidder rule. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Did the rule apply to federally funded projects?
No. The opinion quoted section 1(c): the provision "does not apply to a contract involving federal funds." Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Could an out-of-state bidder lower its price after bids were opened?
No. The opinion said neither statute authorized that negotiation and that allowing it would defeat competitive bidding. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
What could the department do instead?
JM-484 said the department could reject all bids and readvertise. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Background and statutory framework
Article 6674i required highway contracts to go to the lowest bidder while allowing rejection of all bids. Article 601g imposed a reciprocity differential against certain nonresident bidders on nonfederal public contracts. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
The opinion distinguished Texas Highway Commission v. Texas Association of Steel Importers because that case concerned an administrative restriction without legislative authorization, while JM-484 addressed an enacted statute. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Citations and references
- article 601g, V.T.C.S.
- articles 6674h and 6674i, V.T.C.S.
- House Bill No. 620, Acts 1985, 69th Leg., ch. 83, at 330
- 23 U.S.C. section 101 et seq.
- 23 C.F.R. sections 635.107 and 635.108
- Texas Highway Commission v. Texas Association of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963)
- Corbin v. Collin County Commissioners' Court, 651 S.W.2d 55, 56 (Tex. App. - Dallas 1983, no writ)
- Gordon v. Lake, 356 S.W.2d 138, 139 (Tex. 1962)
- Flowers v. Pecos River Railroad Co., 156 S.W.2d 260, 263-64 (Tex. 1941)
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Source
- Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0484
- Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0484.pdf
Original opinion text
Best-effort transcription from a scanned PDF via OCR. Minor errors may remain; the linked PDF is authoritative.
The Attorney General of Texas
JIM MATTOX
Attorney General
April 24, 1986
Mr. Mark G. Goode
Engineer-Director
State Department of Highways and Public Transportation
11th and Brazos Streets
Austin, Texas 78701
Opinion No. JM-484
Re: Whether House Bill No. 620, Acts 1985, 69th Leg., supersedes articles 6674h and 6674i, V.T.C.S., which require competitive bidding
Dear Mr. Goode:
On behalf of the State Department of Highways and Public Transportation, you ask how House Bill No. 620, see Acts 1985, 69th Leg., ch. 83, at 330 (codified at V.T.C.S. art. 601g), affects competitive bidding for certain highway construction and improvement contracts. Article 601g provides, 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.
Sec. 1(b).
Section 1(c) of this act specifies that this provision "does not apply to a contract involving federal funds." Accordingly, we address your questions only in the context of state and locally funded projects. See generally 23 U.S.C. § 101 et seq.; 23 C.F.R. §§ 635.107, 635.108 (may not restrict competition on federally aided projects on the basis of state residency). Moreover, you do not ask nor do we address the constitutionality of the statute. See generally White v. Massachusetts Council of Construction Employers, Inc., 460 U.S. 204 (1983) (upheld a city's requirement that 50 percent of the workforce on public works projects be city residents).
Your specific questions are as follows:
Does House Bill No. 620 override and thus take precedence over the department's specific competitive bidding statutes, namely articles 6674h, 6674i, and related statutes?
We have long conformed with the legal principle that parties submitting bids in connection with public contracts generally do so upon the same or equal basis. We could hardly have done otherwise in view of the holding in Texas Highway Commission v. Texas Association of Steel Importers, 372 S.W.2d 525 (Tex. 1963). We, nevertheless, tender the following scenario in order to pose our second question in the event that you should answer our first question in the affirmative. [Scenario involving negotiations to allow nonresidents to lower bids by the appropriate differential.]
You suggest that article 601g is in conflict with articles 6674h and 6674i, V.T.C.S. Article 6674h deals primarily with advertising the opening of competitive bidding, not with the awarding of contracts. Consequently, you focus primarily on article 6674i. Article 6674i authorizes the rejection of any and all bids but requires that the contract be awarded to the "lowest bidder." Article 601g includes the word "responsible" in describing low bidders. Since there is no qualification in article 6674i other than "lowest bidder," you submit that the two statutes cannot both be applied. Further, you contend that, because article 6674i applies specifically to highway contracts whereas article 601g is "general," article 6674i should control. We disagree.
Article 6674i and article 601g are not in conflict. In the first place, you suggest that the unqualified term "lowest bidder" in article 6674i allows the department no discretion in awarding contracts. This is not necessarily the case. The statutory grant of discretion in article 6674i to reject any and all bids must be read together with the requirement that the contract be awarded to the lowest bidder. See Corbin v. Collin County Commissioners' Court, 651 S.W.2d 55, 56 (Tex. App. - Dallas 1983, no writ); A & A Construction Co., Inc. v. City of Corpus Christi, 527 S.W.2d 833, 835 (Tex. Civ. App. - Corpus Christi 1975, no writ); see also Owen of Georgia, Inc. v. Shelby County, 648 F.2d 1084, 1094 n.11 (6th Cir. 1981); cf. Attorney General Opinion H-1086 (1977).
Moreover, two statutes on the same subject should both be given effect if possible. Gordon v. Lake, 356 S.W.2d 138, 139 (Tex. 1962). Although article 6674i applies specifically to highway contracts, it refers in general to competitive bidding on all such contracts. In contrast, although article 601g applies to a broader range of public works contracts, it refers only to one specific aspect of awarding such contracts. Consequently, we believe that article 601g could be considered more specific than article 6674i and should therefore be construed as an exception to article 6674i. See Flowers v. Pecos River Railroad Co., 156 S.W.2d 260, 263-64 (Tex. 1941); Attorney General Opinion JM-356 (1985). In any event, it is a later enactment and will prevail to the extent of conflict.
Your second question relates to the holding in Texas Highway Commission v. Texas Association of Steel Importers, Inc., 372 S.W.2d 525 (Tex. 1963). In this case, the Texas Supreme Court determined that the Highway Commission lacked authority to require that its construction contracts specify that materials used or furnished under the contracts be manufactured in the United States. The court reasoned that the commission lacked the implied authority to include this provision because its inclusion would defeat the primary purpose of the competitive bidding statutes. 372 S.W.2d at 529-30; see also Attorney General Opinions H-1086 (1977); O-1831 (1940).
The decisions in Texas Highway and Attorney General Opinion O-1831 were founded on statutory construction. In Texas Highway, the Supreme Court emphasized that it was not dealing with legislative restrictions but with an administrative order. 372 S.W.2d at 527. The court stated that "had the Legislature proscribed foreign materials, we would have an entirely different question." Id. In the instant case a statute rather than a highway department policy or rule is at issue. Consequently, the allusion in your second question that House Bill No. 620 is in conflict with Texas Highway is inapposite.
As part of your second question, you present a scenario in which nonresident bidders who submit the actual lowest bid, i.e., prior to consideration of the differential, would be allowed to adjust their bids. We do not believe that article 6674i or article 601g authorizes this type of "negotiation." House Bill No. 620 creates a limited exception to the "lowest bidder" requirement in article 6674i by providing for a differential against nonresident bidders that is equivalent to the differential against Texas bidders in that nonresident bidder's state. This is based on the concept of reciprocity. It does not impliedly repeal article 6674i. It does not waive the requirement that bidding be competitive. We believe that entering into negotiations to allow nonresident bidders to "adjust" their bids would defeat the purpose of both article 6674i and article 601g. See Attorney General Opinion MW-296 (1981). As indicated, the highway department holds only the powers granted expressly or by necessary implication by the Texas Legislature. Neither article 6674i nor article 601g authorizes the department to enter into the negotiations in question. Of course, the department may, if it chooses to do so, reject all the bids and readvertise.
SUMMARY
Article 6674i, V.T.C.S., and House Bill No. 620, Acts 1985, 69th Leg., ch. 83, at 330 (codified at V.T.C.S. art. 601g) are not in conflict. Article 601g creates a limited exception to the "lowest bidder" requirement in article 6674i by providing for a differential against nonresident bidders that is equivalent to the differential against Texas bidders in that nonresident bidder's state. The State Department of Highways and Public Transportation may not enter into negotiations to allow nonresident bidders to "adjust" their bids after the bids have been opened. The department may, of course, reject all bids and readvertise.
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney General
MARY KELLER
Executive Assistant Attorney General
ROBERT GRAY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jennifer Riggs
Assistant Attorney General
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