Texas Highway Com'n v. Texas Ass'n of Steel Imp., Inc., A-9515

• Decision Date: 06 November 1963
• Docket Number: No. A-9515,A-9515
• Parties: TEXAS HIGHWAY COMMISSION et al., Petitioners, v. TEXAS ASSOCIATION OF STEEL IMPORTERS, INC., et al., Respondents.
• Court: Texas Supreme Court

Page 525

372 S.W.2d 525

TEXAS HIGHWAY COMMISSION et al., Petitioners, v. TEXAS ASSOCIATION OF STEEL IMPORTERS, INC., et al., Respondents.

No. A-9515.

Supreme Court of Texas.

Nov. 6, 1963.

Rehearing Denied Dec. 11, 1963.

Waggoner Carr, Atty. Gen., H. Grady Chandler, Asst. Atty. Gen., Austin, for petitioners.

William B. Dazey, Houston, for respondents.

NORVELL, Justice.

Article 6674h, Vernon's Ann.Tex.Stats. provides in part that:

'All contracts proposed to be made by the State Highway Department for the improvement of any highway constituting a part of the State Highway System or for materials to be used in the construction or maintenance thereof shall be submitted to competitive bids.'

On March 28, 1960, the Texas Highway Commission passed its Minute Order No. 48,644 which reads as follows:

'All construction contracts, beginning with the January 1961 letting, shall include a provision that materials furnished under such contracts shall be manufactured in the United States, its territories and possessions. It is further understood and directed that where finished construction material is manufactured in a United States or territories mill it will be considered as a domestic product and will be acceptable under the terms of this Order provided all other requirements of the specifications are met.'

The Court of Civil Appeals has held that Minute Order No. 48,644 is void because it is contrary to the provisions of Article 6674h above quoted. See 364 S.W.2d 749. The effect of the order would be to eliminate from the field of bidders upon highway construction contracts all those who owned or intended to acquire foreign materials and use them in carrying out highway construction contracts. Quite obviously the field of material suppliers would be drastically reduced. For example, it is shown without dispute that during the first seven months of the year 1960, the year in which the anti-foreign order was passed, forty-four per cent of all reinforcing steel and ninety-five per cent of all prestressed wire strand used in Texas highway construction was manufactured outside the United States. As an incidental matter, it was admitted that all the foreign materials used had passed the same tests and met the same specifications as their domestic counterparts and that no instance of a failure of imported materials used in highway construction was known to the Department. If the suppliers in one field of materials, such as steel, will be reduced by approximately fifty per cent, it seems obvious that the clear purpose for which Article 6674h was enacted is being circumvented.

It is stated by McQuillin that where the subject matter of the contract is not a monopoly, but where there are several manufacturers who produce a certain article or where the material can be secured from two or more different localities, 'it is held in nearly all the decisions that bidding cannot be restricted to bids on an unpatented article manufactured by a particular firm or material from a particular locality.' (Emphasis supplied.) 10 McQuillin Municipal Corporations, 3rd Ed., Sec. 29.49, pp. 304-5. If the Highway Commission could (without express statutory authority) restrict the locality from which it would accept manufactured materials, it could as well restrict such materials to those manufactured within the State of Texas or any particular county within the state. We are not here concerned with restrictions which could be imposed by the Congress of the United States or the Legislature of the State of Texas but with the order of an administrative authority which must act in accordance with and not contrary to the acts of the legislative branch of government. Had the Legislature proscribed foreign materials, we would have an entirely different question. There might be some constitutional objection to such a statute, but in the present case the Legislative decision is one favoring free and unrestricted bidding.

A number of cases hold that provisions in an ordinance or an administrative order restricting hours of labor and providing that no aliens may be used on public improvements are invalid. Such restrictions have been avoided on both constitutional and statutory grounds. Undoubtedly some of the cases construing various constitutional provisions with reference to restrictions on the hours of labor would not be followed today. Texas has statutes relating to such matters which are applicable to highway construction. Article 5165, Vernon's Ann.Tex.Stats. See, Scott v. Vilbig Const. Co., Tex.Civ.App., 140 S.W.2d 874, no wr. hist. However, aside from any constitutional question that may be involved, it seems that a nonstatutory restriction in the form of an ordinance or administrative order restricting employment to native and naturalized Americans is invalid because it is contrary to a statute providing for competitive bids. Glover v. People ex rel. Raymond, 201 I11. 545, 66 N.E. 820; Taylor v. City of Philadelphia, 261 Pa. 458, 104 A. 766. Cf. Bohn v. Salt Lake City, 79 Utah 121, 8 P.2d 591, 81 A.L.R. 215, wherein it appeared that a state statute provided that in the employment of labor upon public works, preference should be given to citizens of the United States and those having declared their intention to become citizens and it was held that the City could not restrict the employment preference to heads of families who were residents of Salt Lake City.

The purpose and intent of competitive bidding ordinances and statutes are well stated in Sterrett v. Bell, Tex.Civ.App., 240 S.W.2d 516, 520 (no wr. hist.) wherein it was said:

"Competitive bidding' requires due advertisement, giving opportunity to bid, and contemplates a bidding on the same undertaking upon each of the same material items covered by the contract; upon the same thing. It requires that all bidders be placed upon the same plane of equality and that they each bid upon the same terms and conditions involved in all the items and parts of the contract, and that the proposal specify as to all bids the same, or substantially similar specifications. Its purpose is to stimulate competition, prevent favoritism and secure the best work and materials at the lowest practicable price, for the best interests and benefit of the taxpayers and property owners. There can be no competitive bidding in a legal sense where the terms of the letting of the contract prevent or restrict competition, favor a contractor or materialman, or increase the cost of the work or of the materials or other items going into the protect.'

In Taylor v. City of Philadelphia, 261 Pa. 458, 104 A. 766, the Supreme Court of Pennsylvania was concerned with the validity of ordinances of the City of Philadelphia which in effect provided that 'in all contracts * * * for the construction of public buildings, * * * it shall be specified that the work of cutting and preparing (building) stone for use shall be done in Philadelphia.'

The two lowest bidders submitted alternative bids. The bid of Fuller & Company was $2,570,000, subject to a deduction of $155,000 if the provisions of the ordinances as to the Philadelphia preparation of building stone were eliminated. Gill and Sons submitted a bid of $2,535,000 with a $110,000 reduction if the Philadelphia stone preparation requirements were eliminated. The Gill bid was accepted despite the fact that the Fuller bid was lower if the requirement as to place of cutting and preparing the building stone be eliminated. Taylor, as a taxpayer, sought to enjoin the execution of the proposed contract with Gill and Sons. The Supreme Court held that a purported legislative enactment which sought to authorize the insertion of such restrictive clauses in municipal ordinances was invalid because it was a species of special legislation not permitted by the Pennsylvania constitution. The Court then said, 'The act of 1917 (above mentioned) being eliminated, it remains to consider the validity of the ordinances themselves. * * * (T)he only question is whether the ordinances violate the provisions of the Act * * * requiring all work and materials furnished to the city under contracts to be let to the lowest responsible bidder.'

The Court made clear the distinction between a statute,-an expression of a higher legislative authority-and an ordinance. It then pointed out that, '(a)n act of the Legislature can, of course, be modified by the Legislature itself,' but this modification cannot be effected by City ordinance nor, (it would follow) by the order of an administrative body. The Court concluded by saying:

'No case has been found which is direct authority to sustain the validity of municipal ordinances such as are here in question where the effect is to conflict with an express statutory provision requiring contracts to be let to the lowest responsible bidder. That the cost here has been increased because of the ordinances cannot be disbuted in view of the difference in the bids of both contestants. From what has been said the judgment of the court below must be reversed.'

See also, 10 McQuillin, Municipal Corporations, 3rd Ed., Sec. 29.30, p .268.

Undoubtedly the Minute Order is violative of the competitive bidding law, unless it can be supported upon the thesis asserted by the Attorney General, namely, that the Commission found that foreign steel is sometimes rusty, that it is sometimes improperly or defectively threaded, that it is often difficult to test foreign materials at the place of manufacture, that sometimes foreign steel is improperly marked, and that for these reasons a rejection of substantial amounts of foreign products at the jobsite takes place.

All of these matters relate to quality of materials and convenience of the employees of the State Highway Department. As pointed out by the respondents, the order itself makes no effort to provide definite and objective physical and chemical standards which must be met by the contractor insofar as materials are concerned. The...