1. (a) Eligibility. To be eligible to bid on department contracts, potential bidders must satisfy the requirements listed in this section.

2. (b) Confidential Questionnaire. Unless waived under subsection (c) of this section, a potential bidder must be prequalified in accordance with this section to be eligible to bid on a construction or maintenance contract.

   1. (1) A potential bidder must:

      1. (A) submit a Confidential Questionnaire to the department's Construction Division in Austin 10 days prior to the last day of bid opening, in a form prescribed by the department, which shall include certain information concerning the bidder's equipment and experience as well as financial condition;
      2. (B) have its certified public accountant submit the audited and other financial information required by the current edition of the department's Bulletin Number 2, titled "Accounting Procedures in Determination of Contractor's Financial Resources";
      3. (C) satisfactorily comply with any technical qualification requirements determined by the department to be necessary for a specific project; and
      4. (D) for the purpose of bidding on federal-aid projects, properly complete the Certification of Eligibility Status form contained in the Confidential Questionnaire.
   2. (2) The department will make its examination and determination under this subsection based on the information submitted, and will advise the potential bidder of its approved bidding capacity. Information adverse to the potential bidder contained in the Certification of Eligibility Status form will be reviewed by the department and the Federal Highway Administration, and may result in the bidder being declared ineligible to submit bids on federal-aid projects.
   3. (3) Satisfactory audited financial information will grant a 12-month period of qualification from the date of the financial statement.
   4. (4) A three month grace period of qualification, for the purpose of preparing and submitting current audited information, will be granted prior to the expiration date of the financial statement.
   5. (5) The department may require current audited information at any time if circumstances develop which are factors that could alter the firm's financial condition, ownership structure, affiliation status, or ability to operate as an on-going concern.

3. (c) Bidders Questionnaire. The department may waive audited financial qualification requirements as provided by this subsection.

   1. (1) The department will waive the qualification requirements of subsection (b) of this section if:

      1. (A) the engineer's estimate is $300,000 or less;
      2. (B) the project is a maintenance project; or
      3. (C) the project pertains to specialty items not normal to the department's roadway projects program.

   2. (2) A waiver will not be given under paragraph (1) of this subsection if the executive director determines that audited financial qualification should be required due to:

      1. (A) safety considerations;
      2. (B) the complexity of the work; or
      3. (C) the potential impact of the work on adjacent property owners.

   3. (3) To be eligible to bid on a contract for which the audited financial qualification requirements have been waived under this subsection, or on a contract to be awarded under §9.19 of this subchapter, a bidder must:

      1. (A) submit a bidder's questionnaire to the department's headquarters office in Austin 10 days prior to the date the bid opens, in a form prescribed by the department, which includes certain information concerning a bidder's equipment and experience;
      2. (B) submit unaudited and other data as required in the instructions to the bidder's questionnaire;
      3. (C) satisfactorily comply with any technical qualification requirements determined by the department to be necessary on a specific project; and
      4. (D) for a federal-aid project, properly complete the Certification of Eligibility Status form contained in the bidder's questionnaire. Information adverse to the potential bidder contained in the certification will be reviewed by the department and by the Federal Highway Administration, and may result in the bidder being declared ineligible to submit bids on a federal-aid project.

   4. (4) The department will make its examination and determination under this subsection based on the information submitted, and advise the bidder of its approved bidding capacity.

      1. (A) A bidder with no prior experience in construction or maintenance, or a negative working capital position (i.e., financial statements indicate that current liabilities exceed current assets), will receive a bidding capacity of $300,000.

      2. (B) An experienced bidder with sufficient working capital and financial capability, as determined by the department, will receive a bidding capacity of:

         1. (i) $500,000 for a bidder submitting compiled financial information if the principals of the bidder have at least one year experience in construction or maintenance and have satisfactorily completed at least two projects in these fields;
         2. (ii) $1,000,000 for a bidder submitting compiled financial information if the principals of the bidder have at least two years experience in construction or maintenance and have satisfactorily completed at least four projects in these fields. Those contractors possessing more than two years experience will be granted an additional $250,000 in bidding capacity for each additional year of experience in construction or maintenance, with a maximum bidding capacity of $3,000,000; and
         3. (iii) over $1,000,000 for a bidder submitting reviewed financial information if the principals of the bidder have at least three years of experience in construction or maintenance and have satisfactorily completed at least six projects in these fields. The amount of the bidding capacity will be determined by multiplying the net working capital by a factor determined by the department based upon the expected dollar volume of projects to be awarded and the number of bidders prequalified by the department. In the event that this calculation does not result in an amount greater than $1,000,000, the bidder will receive a bidding capacity of $1,000,000.

4. (d) Affiliated entities. In making examinations and determinations under this section, the department will make a determination of bidder affiliations. Bidders the department determines are affiliated are not eligible to submit bids for the same project. A bidder that is determined to be affiliated solely because of a family relationship may request, in accordance with this subsection, an exception to its ineligibility.

   1. (1) For purposes of this subchapter:

      1. (A) two or more firms are affiliated if:

         1. (i) the firms share common officers, directors, or stockholders;
         2. (ii) a family member of an officer, director, or stockholder of one firm serves in a similar capacity in another of the firms;
         3. (iii) an individual who has an interest in, or controls a part of, one firm either directly or indirectly also has an interest in, or controls a part of, another of the firms;
         4. (iv) the firms are so closely connected or associated that one of the firms, either directly or indirectly, controls or has the power to control another firm;
         5. (v) one firm controls or has the power to control another of the firms; or
         6. (vi) the firms are closely allied through an established course of dealings, including but not limited to the lending of financial assistance; and
      2. (B) a family member of an individual is the individual's parent, parent's spouse, step-parent, step-parent's spouse, sibling, sibling's spouse, spouse, child, child's spouse, spouse's child, spouse's child's spouse, grandchild, grandparent, uncle, uncle's spouse, aunt, aunt's spouse, first cousin, or first cousin's spouse.
   2. (2) To request the exception, a bidder must submit to the executive director a written request explaining the basis for the exception accompanied by supporting evidence. The written request must be received not later than the 30th day before the date of the bid opening for which the exception is requested.

   3. (3) The department will review the request and supporting evidence provided to determine the affiliation or independence of the potential bidders. The department will consider, in addition to other affiliation criteria:

      1. (A) transactions between the potential bidders; and

      2. (B) the extent to which the potential bidders share:

         1. (i) equipment;
         2. (ii) personnel;
         3. (iii) office space; and
         4. (iv) finances.
   4. (4) The department will not grant an exception if the bidders affiliated by a family relationship are not independent.
   5. (5) The executive director will review the department's finding and will send to the bidder the final written determination. An exception granted to the bidder remains in effect for future bid openings unless the exception is revoked under paragraph (6) of this subsection.
   6. (6) The granting of an exception under this subsection does not remove the classification of the bidders as affiliated. The department reserves the right to conduct follow-up reviews and revoke the exception if the follow-up reviews indicate that the bidders are no longer independent.
   7. (7) Affiliated bidders that are granted an exception under this subsection and that have been sanctioned in accordance with Subchapter G of this chapter must meet the exception criteria in Subchapter G to be eligible to bid.
5. (e) Building contracts. To be eligible to bid on a building contract, a potential bidder must satisfactorily comply with any financial, experience, technical, or other requirement contained in the governing specifications applicable to the project.
6. (f) Financial statements. For purposes of this section, an audited financial statement involves an examination of the accounting system, records, and financial statements by an independent certified public accountant in accordance with generally accepted auditing standards. Based on the examination, the auditor expresses an opinion concerning the fairness of the financial statements in conformity with generally accepted accounting principles. A reviewed financial statement is substantially less in scope than an audited financial statement, and consists primarily of inquiries of company personnel and analytical procedures applied to financial data by an independent certified public accountant. Only negative assurance is expressed by the auditor, meaning the auditor is not aware of any material modifications that should be made in order for the financial statements to conform to generally accepted accounting principles. A compiled financial statement is limited to presenting in the form of financial statements information that is the representation of management. No opinion or any other form of assurance is expressed on the statements by the auditor.

Source Note:The provisions of this §9.12 adopted to be effective November 23, 1994, 19 TexReg 8867; amended to be effective September 22, 1995, 20 TexReg 7086; amended to be effective December 12, 1999, 24 TexReg 10901; amended to be effective January 4, 2001, 25 TexReg 13007; amended to be effective June 17, 2004, 29 TexReg 5795; amended to be effective December 11, 2008, 33 TexReg 10054.