Untitled Texas Attorney General Opinion

OFFICE OF THE ATTORNEY GENERAL . STATE OF TEXAS

JOHN CORNYN

June 19,200l

Ms. Victoria J.L. Hsu, P.E. Opinion No. JC-0390

Executive Director

Texas Board of Professional Engineers Re: Whether the licensing and registration

1917 III-35 South requirements of the Texas Engineering Practice Act

Austin, Texas 78741 apply to the activities of a federal contractor on a

federal enclave and related questions (RQ-0344-JC)

Dear Ms. Hsu:

On behalf of the Texas Board of Professional Engineers (the “Board”), you ask several

questions about the application of the Texas Engineering Practice Act’s licensing and registration

provisions to a particular private corporation that employs engineers who practice engineering in

Texas. ’ We conclude that, to the extent those engineers practice engineering under contracts

procured by the federal government pursuant to federal procurement laws and regulations under

which the federal government assesses engineers’ qualifications, federal law preempts the Act’s

licensing and registration requirements. The corporation and its divisions are not required to register

with the Board and their employees and independent contractors are not required to be licensed by

the Board based on engineering performed pursuant to such contracts.

You ask about the Act’s application with respect to Lockheed Martin Corporation (“LMC”)

and Lockheed Martin Aeronautics Company (“LM Aero”), an unincorporated division of LMC.

Although you have not provided us with any factual information about those entities’ engineering

activities in Texas, we have received extensive briefing from LMC. We accept LMC’s factual

assertions as true.

We understand that LMC is a Delaware corporation that does business throughout the United

States and in several locations overseas.* “[I]ts activities in Texas are almost entirely federal

government related and are mainly in the defense industry.” LMC Brief, note 2, at 1. LMC

locations in Texas design, develop, and manufacture military products or provide services under

contracts with the United States Government for the military or the National Aeronautics and Space

Administration (“NASA”). Id. at 2. These contracts are procured under federal statutes, see, e.g.,

‘Letter from Ms. Victoria J.L. Hsu, P.E., Executive Director, Texas Board of Professional Engineers, to

Honorable John Comyn, Texas Attorney General (Jan. 30,200l) (on file with Opinion Committee) [hereinafter Request

Letter].

2Brief from Stephen L. Tatum, Brown, Herman, Dean, Wiseman, Liser & Hart, L.L.P., to Honorable

John Comyn, Texas Attorney General, at 1 (March 20,200l) (on file with Opinion Committee) [hereinafter LMC BriefJ.

Ms. Victoria J.L. Hsu, P.E. - Page 2 (JC-0390)

1OU.S.C. 60 2302 - 2331(1994 & Supp. V 1999) (military procurement), 41 U.S.C. ch. 7 (1994 &

Supp. IV 1998) (general federal procurement policy), and extensive regulations governing federal

acquisitions, known as the Federal Acquisition Regulations (“FAR”), see 48 C.F.R. chs. 1 (general

federal acquisition regulation), 2 (United States Department of Defense FAR), 18 (NASA FAR)

(2000). See LMC Brief, note 2, at 8-11. LMC asserts that “[w]ith some minor exceptions, none of

the LMC facilities in Texas design, develop, manufacture, or sell any product for or provide any

service to anyone but the United States Government for the United States Military or NASA, foreign

governments by and through the United States Government, or other foreign governments subject

to the United States Government regulation and approval.” Id. at 2-3.

LM Aero operates Air Force Plant 4 on a federal enclave in Tan-ant County and manufactures

military aircraft under contracts with the United States Government and other foreign governments.

Id. at l-2,3. The jurisdiction of the State of Texas in this federal enclave is limited by a 1942 deed

of cession, pursuant to which the state ceded to the United States exclusive jurisdiction over the land.

See Bd. OfEqualization v. Gen. Dynamics Corp., 344 S.W.2d 489 (Tex. Civ. App.-Fort Worth 1961,

writ ref d n.r.e.) (determining validity of this federal enclave); see also Vincent v. Gen. Dynamics

Corp., 427 F. Supp. 786, 796 (N.D. Texas 1977) (holding that Texas civil statutes not in effect at

time cession was perfected do not apply on federal enclave); id. at 798-99 (noting that part of Air

Force Plant 4 was located in federal enclave and part was not).

Before we turn to your questions, we briefly review the key provisions of the Texas

Engineering Practice Act, TEX.REV.CIV.STAT.ANN. art. 3271a (Vernon 1968 & Supp. 2001) (the

“Act”). The Act generally prohibits a person who is not licensed by the Board from practicing

engineering in this state. See id. 0 1.2(a)(l) (Vernon Supp. 2001); see also id. 0 20 (licensing

exceptions). Under the Act, “practice of engineering” or “practice of professional engineering”

means

any service or creative work, either public or private, [requiring]

engineering education, training and experience in the application of

special knowledge or judgment of the mathematical, physical, or

engineering sciences to such services or creative work.

The activities included in the practice of engineering include

services, designs, analyses, or other work performed for a public or

private entity in connection with utilities, structures, buildings,

machines, equipment, processes, systems, works, projects, and

industrial or consumer products or equipment of a mechanical,

electrical, electronic, chemical, hydraulic, pneumatic, geotechnical,

or thermal nature and include other professional services necessary

for the planning, progress, and completion of any engineering service.

Id. 0 2(4).

Ms. Victoria J.L. Hsu, P.E. - Page 3 (JC-0390)

The Act gives the Board authority over both individual engineers and engineering firms. The

Act establishes minimum standards for licensing engineers and authorizes the Board to administer

an examination. See id. $5 12,14. “The Board shall issue a license upon payment of the license fee

as provided for in this Act, to any applicant, who, in the opinion of the Board, has satisfactorily met

all the requirements of this Act. The license shall authorize the practice of professional

engineering.” Id. $ 15(a). Section 20 of the Act excepts certain persons from this licensing

requirement, including, for example, “officers and employees of the Government of the United

States while engaged within this state in the practice of the profession of engineering for said

Government.” Id. 8 20(a)(2). Section 17 of the Act extends the Board’s regulatory authority to

engineering firms, which must register with the Board:

A sole proprietorship, firm, co-partnership, corporation, or

joint stock association may engage or offer to engage in the practice

of professional engineering in this State, provided:

(1) the entity is registered with the Board; and

(2) such practice is carried on by only professional engineers

licensed in this State.

Id. 8 17(a). In addition to its authority to license engineers and register firms, see id. $0 15, 17, the

Board has the authority to discipline engineers, see id. 9 22, and to bring an action against “any

individual person, sole proprietorship, firm, partnership, or other entity to enjoin any violation of any

provision of this Act or any rule or regulation of the Board,” id. 8 8(a).

Your questions are as follows:

1. Is LMC required to register with the Board pursuant to section

17 of the Act?

2. Do the registration requirements of section 17 extend to

Lockheed Martin Aeronautics Company (LM Aero), an unincorporat-

ed division of LMC, doing business in Texas since 1943 on a federal

enclave?

3. Would the registration requirements of section 17 extend to

LM Aero if it was an incorporated subsidiary of LMC doing business

on a federal enclave or an incorporated subsidiary doing strictly

defense contracting business for the federal government off the

enclave[?]

Request Letter, supra note 1, at l-2. In a fourth, unnumbered question, you also ask whether the

Act’s licensing requirements apply to non-licensed engineers who work as independent contractors

for LMC at its facility on the federal enclave on a part-time basis. See id. at 2. You ask, in essence,

about the application of the Act’s registration requirement to LMC and LM Aero and about the

Ms. Victoria J.L. Hsu, P.E. - Page 4 (JC-0390)

application of the Act’s licensing requirements to independent contractors employed by the

companies on the federal enclave.

The Act gives the Board extensive authority over the practice of engineering in this state.

As we explain below, however, we conclude that the Act’s licensing and registration requirements

do not apply to LMC and LM Aero and their employees and independent contractors to the extent

they practice engineering under contracts procured by the federal government pursuant to federal

procurement laws and regulations under which the federal government assesses engineers’

. qualifications. Our conclusion is based on United States Supreme Court decisions holding that such

federal procurement laws and regulations preempt states from regulating the qualifications of federal

contractors.

As noted above, LMC informs us that the federal government procures goods and services

from LMC and LM Aero in Texas pursuant to federal statutes, see 10 U.S.C. $0 2302 - 233 1 (1994

& Supp. V 1999) (military procurement), 41 U.S.C. ch. 7 (1994 & Supp. IV 1998) (general federal

procurement policy), and the Federal Acquisition Regulations, 48 C.F.R. ch. l(2000) (FAR). These

provisions give the acquiring officer the discretion to determine whether a bidder is responsible. For

example, the general federal acquisition regulation charges the contracting officer with determining

whether a prospective contractor is responsible. See id. 9 9.103(b). To be determined responsible,

a prospective contractor, must, among other things, have a record of integrity and the necessary

technical skills. See id. tj 9.104-1(d), ( e) ; see also 10 U.S.C. $5 2302(3)(E) (1999) (defining

“responsible source” according to 41 U.S.C. 9 403), 2305 (United States Department of Defense

awards to “responsible source”); 41 U.S.C. $403(7)(D), (E) (1998) (defining “responsible source”

as prospective contractor who has various qualifications, including “a satisfactory record of integrity

and business ethics” and “the necessary organization, experience, accounting and operational

controls, and technical skills, or the ability to obtain such organization, experience, controls, and

skills”). LMC provides no specific information regarding the statutory basis for its work producing

military products for foreign governments in Texas. See LMC Brief, supra note 2, at 3 (“Similar

restrictions and requirements apply to contracts with foreign governments and contracts with the

United States Government on behalf of foreign governments.“). We assume for purposes of this

opinion that the United States Government assesses the responsibility of engineers performing such

contracts under these provisions or similar statutes and regulations.

United States Supreme Court precedent holds that federal statutes and regulations pursuant

to which the federal government assesses the qualifications and responsibility of federal contractors

preempt state laws governing their qualifications and responsibility. In Leslie Miller, Inc. v.

Arkansas, 352 U.S. 187 (1956), the Court held that Arkansas licensing rules could not be applied

to a contractor who had been hired by the federal government to build facilities for an air force base

in that state. Similar to the FAR, the federal procurement provisions in effect at that time provided

that the contract should be awarded “‘to that responsible bidder whose bid, conforming to the

invitation for bids, will be the most advantageous to the Government, price and other factors

considered. “’ Id. at 188 (citation omitted). Reasoning that “[slubjecting a federal contractor to the

Arkansas contractor license requirements would give the State’s licensing board a virtual power of

review over the federal determination of ‘responsibility’ and would thus frustrate the expressed

federal policy of selecting the lowest responsible bidder,” id. at 190 (citations omitted), the Court

Ms. Victoria J.L. Hsu, P.E. - Page 5 (JC-0390)

held that the federal and state regulatory schemes conflicted, see id. Similarly, in Sperry v. Florida,

373 U.S. 379 (1963), the Court held that the State of Florida could not apply its “unauthorized

practice of law” regulations to a nonlawyer in Florida registered to practice before the federal Patent

Office because “[a] State may not enforce licensing requirements which, though valid in the absence

of federal regulation, give ‘the State’s licensing board a virtual power of review over the federal

determination’ that a person or agency is qualified and entitled to perform certain functions.” Id. at

385 (citing Leslie Miller, Inc. v. Arkansas, 352 U.S. at 190).

Significantly, the United States Court of Appeals for the Fourth Circuit recently concluded

that this Supreme Court precedent precluded the application of the Commonwealth of Virginia’s

licensing and registration requirements to private investigators working solely for the Federal Bureau

of Investigation (“FBI”) providing background investigations for security clearances. See United

States v. Virginia, 139 F.3d 984 (4th Cir. 1998). The FBI had hired the private investigators

pursuant to the Federal Acquisition Regulations. Id. at 986. The court of appeals concluded that

[gliven the near identity of the federal and state regulatory schemes

at issue in Leslie Miller and this case, Leslie Miller compels the

conclusion that-by adding to the qualifications necessary for an

investigator to do background checks for the FBI-the Virginia

regulatory scheme frustrates the objectives of the federal procurement

laws by allowing the state to “second-guess” the FBI’s responsibility

determination and by giving the state licensing board “a virtual power

of review over the federal determination of ‘responsibility.“’

Id. at 989. The court of appeals upheld the district court’s order permanently enjoining Virginia

from enforcing the state regulations against investigators based solely on their participation in the

FBI program. See id. at 987,990.

Like the state regulatory schemes at issue in these cases, the Texas Engineering Practice

Act’s licensing requirements authorize the Board to assess the qualifications of engineers, including

not only their technical expertise, see TEX.REV.CIV.STAT. ANN. art. 3271 a $0 12(a) (Vernon Supp.

2001) (education and training), 14 (examination), but also their character and reputation, see id.

9 12(b). The Board may discipline its licensees by suspending or revoking their licenses for various

causes including “[a]ny gross negligence, incompetency, or misconduct in the practice of

professional engineering.” Id. 9 22(a). With certain exceptions, a person who is not licensed by the

Board is prohibited from practicing engineering in this state. See id. $3 1.2, 15, 20 (licensing

exceptions). Although the Act’s registration requirement, section 17, does not vest the Board with

the same degree of authority to assess the qualifications of engineering firms, it does provide that

a “sole proprietorship, firm, co-partnership, corporation, or joint stock association” may not engage

or offer to engage in the practice of professional engineering in this state unless “such practice is

carried on by only professional engineers licensed in this State,” see id. 8 17(a), effectively making

a firm’s authority to practice engineering contingent on the licensing of its employees, and all of the

Board discretion that licensing entails. In addition, the Board is empowered to bring an action not

only against individual engineers but also against “any . . . sole proprietorship, firm, partnership, or

other entity to enjoin any violation of any provision of this Act or any rule or regulation of the

Ms. Victoria J.L. Hsu, P.E. - Page 6 (JC-0390)

Board,” id. § 8(a). Thus the Act gives the Board the authority to bring an action against an

engineering firm for violating section 17 and to enjoin it from practicing engineering in this state.

We conclude that this regulatory scheme, like the Virginia regulatory scheme regulating private

investigators, frustrates the objectives of the federal procurement laws by allowing the state to

“second-guess” the federal government’s determination that an engineer or engineering firm is

responsible and by giving the state licensing Board “a virtual power of review over the federal

determination of ‘responsibility.“’ United States v. Virginia, 139 F.3d at 989.

Accordingly, we conclude that the Act’s licensing and registration requirements do not apply

to LMC and LM Aero and their employees and independent contractors to the extent they perform

engineering services in this state that have been procured by the United States Government pursuant

to federal procurement laws and regulations under which the federal government assesses engineers’

qualifications. Accord 1977-78 Va. Op. Att’y Gen. 3 13 (“whether a state licensing requirement for

engineering work is prohibited where an individual is performing engineering services exclusively

for the federal government depends upon an examination of the relevant federal statute or federal

policy permitting such activity”; where grounds for licensing contractors under state law are similar

to federal procurement provisions, state law and the federal policy conflict) (citing LeslieMiller, Inc.

v. Arkansas, 352 U.S. 187 (1956)). This office, which is not a fact-finding body,3 is unable to

determine whether LMC, LM Aero, their employees, or independent contractors perform other

engineering services that bring them within the ambit of the Act’s licensing and registration

requirements.

Before turning to your specific questions, we note that your request letter focuses on the

activities of LMC and LM Aero on the federal enclave in Tar-rant County given the State of Texas’

limited civil jurisdiction in that area. See Bd. of Equalization, 344 S.W.2d 489; Vincent, 427 F.

Supp. at 796. It appears, however, that all engineering that takes place on the federal enclave in

Tarrant County has been procured by the federal government pursuant to federal procurement laws

and regulations such as the FAR. Because that federal law preempts the Texas Engineering Practice

Act’s licensing and registration requirements both on and off the federal enclave, it is not necessary

for us to address the extent to which Texas’ 1942 deed of cession limits the Act’s application on the

federal enclave. Again, we assume for purposes of this opinion that the United States Government

assesses the responsibility of engineers working under foreign-military contracts under federal law

or regulations. See supra, at 4. If LM Aero’s work for foreign governments on the federal enclave

is not procured pursuant to such federal law, the effect of the deed of cession might be relevant.

In answer to your specific questions, whether LMC is required to register with the Board

pursuant to section 17 of the Act depends upon whether LMC performs any engineering services in

this state that are not procured by the United States Government pursuant to federal procurement

laws and regulations under which the federal government assesses engineers’ qualifications. LMC’s

brief suggests that it may perform some engineering services in this state that are not subject to

3See, e.g., Tex. Att’y Gen. Op. Nos. JC-0020 (1999) at 2 (stating that investigation and resolution of fact

questions cannot be done in opinion process); M-l 87 (1968) at 3 (“[Tlhis office is without authority to make . . . factual

determinations.“); O-29 11 (1940) at 2 (“[Tlhis . . . presents a fact question which we are unable to answer.“).

Ms. Victoria J.L. Hsu, P.E. - Page 7 (JC-0390)

federal procurement laws and regulations. See LMC Brief, supra note 2, at 2-3 (“With some minor

exceptions, none of the LMC facilities in Texas design, develop, manufacture, or sell any product

or provide any service to anyone but the United States Government for the United States Military

or NASA, foreign governments by and through the United States Government, or other foreign

governments subject to the United States Government regulation and approval.“) (emphasis

added); Letter from Beale Dean, Brown, Herman, Dean, Wiseman, Liser, & Hart, L.L.P., to

Dr. C. Walter May, Jr., Director of Licensing, Texas Board of Professional Engineers, at 2 (Nov. 29,

2000) (“Although certain LMC operations . . . do some commercial work [in Texas], it is such a

small portion of the work performed in Texas as to be statistically insignificant at this time.“). This

office has no information about the nature of those activities and therefore cannot determine whether

LMC might be required to register with the Board on the basis of those activities. See note 3 supra.

We do conclude as a matter of law, however, that the Board may not require LMC to register based

on engineering it performs under contracts procured by the United States Government pursuant to

federal procurement laws and regulations under which the federal government assesses engineers’

qualifications, such as the FAR.

Your second and third questions ask about the Board’s jurisdiction over LM Aero. Again

you ask if the section 17’s registration requirement extends to LM Aero, “an unincorporated division

of LMC, doing business in Texas since 1943 on a federal enclave” and if that requirement would

extend to LM Aero “if it was an incorporated subsidiary of LMC doing business on a federal enclave

or an incorporated subsidiary doing strictly defense contracting business for the federal government

off the enclave.” See Request Letter, supra note 1, at 2. You appear concerned not only about the

Board’s jurisdiction in the federal enclave in Tar-rant County but also about LM Aero’s status as an

unincorporated division of LMC, perhaps because section 17 of the Act makes no reference to such

entities. See TEX.REV. CIV.STAT.ANN. art. 3271a, 4 17(a) (Vernon Supp. 2001) (requiring

registration of a “sole proprietorship, firm, co-partnership, corporation, or joint stock association”).

As with LMC, the Board may not require LM Aero to register based on engineering the

company performs under contracts procured by the United States Government pursuant to federal

procurement laws and regulations under which the federal government assesses engineers’

qualifications, such as the FAR. Given that your question about registration is answered by

preemption principles, it is not necessary for us to consider the extent to which the deed of cession

limits the Act’s application on the federal enclave. Nor do we need not reach the question whether

the Act’s registration requirement extends to LMC Aero as unincorporated division of a corporation.

Finally, we are somewhat confused about your fourth question regarding independent

contractors. Again, you ask if “non-licensed contract engineers, who are not full time employees

of LMC, [are] subject to the [] Act when providing engineering services to LMC on a federal

enclave?” See Request Letter, supra note 1, at 2. You state that the Board takes the position that

“section 20(a)(2) [of the Act] does not provide an exemption for non-licensed contract engineers and

that such individuals are subject to the [] Act even when working on a federal enclave.” Id. -

As we have noted, section 20(a)(2) of the Act provides an exemption from the Act’s licensing

requirements for “officers and employees of the Government of the United States while engaged

within this state in the practice of the profession of engineering for said Government.” TEX.REV.

Ms. Victoria J.L. Hsu, P.E. - Page 8 (JC-0390)

CIV.STAT.ANN. art.

3271a, 0 20(a)(2) (V emon Supp. 2001). This exemption by its plain terms

applies only to officers and employees of the United States; it does not apply to either employees

or independent contractors of a private entity. However, the rationale of Leslie Miller and its

progeny applies to an independent contractor employed by a prime contractor as a subcontractor on

a contract procured under federal procurement laws and regulations such as the FAR. As with

contractors, the FAR vests the federal government with the right to assess the responsibility of

subcontractors. See 48 C.F.R. 4 9.104-4 (2000). Moreover, at least two courts have extended Leslie

Miller preemption to state attempts to license federal subcontractors. See Airport Constr. &

Materials, Inc., v. Bivens, 649 S.W.2d 830 (Ark. 1983) (Leslie Miller rule applied to subcontractors

on federal project because federal policy of selecting the lowest responsible bidder would have been

frustrated by subjecting even the subcontractor to state regulations); Elec. Constr. Co. v. Flickzhger,

485 P.2d 547, cert. denied, 404 U.S. 952 (1971) (under Leslie Miller, Arizona could not require

federal subcontractor to obtain a state contractor’s license).

Accordingly, we conclude that an independent contractor employed by LMC or LM Aero,

either on or off the federal enclave, as a subcontractor on a contract procured by the federal

government pursuant to federal procurement laws and regulations under which the federal

government assesses engineers’ qualifications is not subject to the Act’s licensing requirements. Of

course, a person who works as a part-time independent contractor for LMC or LM Aero and who

also practices engineering for other clients might be subject to the Act’s licensing requirements

based on those other engineering activities.

Ms. Victoria J.L. Hsu, P.E. - Page 9 (JC-0390)

SUMMARY

To the extent engineers practice engineering under contracts

procured by the federal government pursuant to federal procurement

laws and regulations under which the federal government assesses

engineers’ qualifications, federal law preempts the Texas Engineering

Practice Act’s licensing and registration requirements. A corporation

and its divisions are not required to register with the Texas Board of

Professional Engineers and their employees and independent

contractors are not required to be licensed by the Board based on

engineering performed pursuant to such contracts.

Attorney General of Texas

ANDY TAYLOR

First Assistant Attorney General

SUSAN D. GUSKY

Chair, Opinion Committee

Mary R. Crouter

Assistant Attorney General - Opinion Committee