No. JM-0616 (1987).

• Case Date: January 08, 1987
• Court: Texas

Texas Attorney General Opinions 1987. No. JM-0616 (1987). January 8, 1987Opinion No. JM-616Mattox Opinion No. JM-616Office of the Attorney General State of TexasHonorable Mike Driscoll Harris County Attorney 1001 Preston, Suite 634 Houston, Texas 77002Opinion No. JM-616 Re: Constitutionality of article 601g, V.T.C.S., regarding out-of-state bidders on public contracts, and related questions Dear Mr. Driscoll: Your office has asked whether article 601g, V.T.C.S., enacted in 1985 (Acts 1985, 69th Leg., ch. 83, at 449) is constitutional. Subsections (b) and (c) of section 1 of the statute provide: (b) 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. (c) This section does not apply to a contract involving federal funds. A "nonresident bidder" and a "Texas resident bidder" are defined by subsections (a)(2) and (a)(3) of section 1 to mean: (2) 'Nonresident bidder' means a bidder whose principal place of business is not in this state, but excludes a contractor whose ultimate parent company or majority owner has its principal place of business in this state. (3) 'Texas resident bidder' means a bidder whose principal place of business is in this state, and includes a contractor whose ultimate parent company or majority owner has its principal place of business in this state. V.T.C.S. art. 601g, s 1. Although the clause qualifying the terms "nonresident bidder" and "Texas resident bidder" is clumsy, we believe its meaning can be fairly ascertained. In each definition, respectively, the clause excludes or includes "a contractor whose ultimate parent company or majority owner has its principal place of business in this state." The statute looks to the reality of control, not to legal fictions. Cf. Culcal Stylco, Inc. v. Vornado, Inc., 103 Cal.Rptr. 419 (Cal.App.--[2nd Dist.] 1972). The phrase, "ultimate parent company or majority owner," is awkward, but clearly has reference to the person or entity ultimately having the power to control the business activities of the contractor/bidder, either directly or indirectly. The relationship of subsidiary and parent corporations is discussed in Rimes v. Club Corporation of America, 542 S.W.2d 909 (Tex.Civ.App.--Dallas 1976, writ ref'd n.r.e.), and International Order of Twelve Knights and Daughters of Tabor v. Fridia, 91 S.W.2d 404 (Tex.Civ.App.--Waco 1936, no writ). See 15 Tex.Jur.3d Corporations ss 113, 14 (1981). Similarly, the term "principal place of business" as used in article 601g does not necessarily refer to the place of incorporation or organization of a company, or to the residence of its majority owner. It means the place...