Texas Government Code 2254: Professional, Consulting, Legal

Texas Government Code Chapter 2254 sets the rules state agencies, cities, counties, districts, and other public bodies must follow when they hire outside professionals, consultants, or contingent-fee attorneys. It splits the work into three tracks: licensed professionals under Subchapter A, advisory consultants under Subchapter B, and outside legal counsel paid on contingency under Subchapter C. Each track has its own selection procedure, and each carries a hard consequence for skipping steps: a contract that violates the chapter is void.

Who and What the Chapter Covers

Section 2254.002 defines “governmental entity” broadly. It reaches state agencies and departments, counties, municipalities, districts, authorities, and other political subdivisions, along with local government corporations acting on behalf of a political subdivision on construction projects, and publicly owned utilities.¹ If a Texas public body is hiring outside help, Chapter 2254 almost certainly applies somewhere in the transaction.

One boundary matters early: Subchapter B’s consulting rules apply to state agencies, not to every political subdivision. Counties, cities, and school districts hiring an advisor are not carrying the same notification burden a state agency would face.

Subchapter A: Licensed Professionals and No Competitive Bidding

Subchapter A applies only to services within the licensed practice of specific professions. The list in Section 2254.002 covers accounting by certified public accountants, architecture and landscape architecture, land surveying, medicine (including surgery), optometry, professional engineering, real estate appraising by state-certified or state-licensed appraisers, professional nursing by registered nurses, and forensic science by forensic analysts or experts.¹

The core rule is in Section 2254.003, and it surprises people used to standard government purchasing. Competitive bidding is prohibited. The governmental entity must choose based on demonstrated competence and qualifications, then negotiate a fair and reasonable price.¹ Price cannot influence who gets selected. It comes up only after the most qualified provider has been identified.

The reasoning is practical. When the work is designing a bridge or advising on a public health matter, choosing the cheapest option carries risks that outweigh any savings. The legislature decided technical competence has to come first.

Step-Down Negotiation for Architects, Engineers, and Surveyors

Section 2254.004 layers a more specific procedure on top of the general rule, and it applies only to architectural, engineering, and land surveying services. After the entity selects the most highly qualified provider, it tries to negotiate a fair and reasonable price. If that negotiation fails, the entity must formally end it, move to the next-ranked provider, and start price talks over.¹ The entity continues down the ranked list until it reaches an agreement.

The statute doesn’t expressly forbid returning to a previously rejected firm, but the structure reads as a one-way path down the list, and most procurement offices treat it that way. Note also that this stepped process is limited to architects, engineers, and surveyors. The other licensed professions in Subchapter A follow the broader Section 2254.003 framework: qualifications first, fair price after, without the formal “negotiate, fail, move on” sequence.

Subchapter B: Consulting Services for State Agencies

Consulting services are a separate category. The statute defines them as studying or advising a state agency under a contract that isn’t a traditional employer-employee relationship.¹ Policy analysis, management studies, and IT assessments typically fall here rather than under Subchapter A.

Before a state agency can hire a consultant at all, Section 2254.026 requires two findings: a substantial need for the services, and an inability to do the work adequately with in-house staff or through an interagency contract. This “try internal first” gate is Subchapter B’s sharpest departure from Subchapter A, where the question is only which qualified professional to hire.

Major Consulting Contracts

A “major consulting services contract” is one reasonably expected to exceed $15,000, or $25,000 for institutions of higher education other than public junior colleges.¹ Crossing that threshold triggers three extra requirements:

The agency must notify the Legislative Budget Board and the governor’s Budget and Planning Office before entering the contract.
The governor’s Budget and Planning Office must issue a finding of fact that the services are necessary. Without it, the contract is void. Higher education institutions (other than public junior colleges) can have their chief executive officer make this finding instead, provided it’s included in the published invitation.
At least 30 days before signing, the agency must publish an invitation for consultants to submit offers in the state business daily.

Selecting a Consultant

Section 2254.027 tells agencies to select consultants based on demonstrated competence, knowledge, qualifications, and the reasonableness of the proposed fee. Price is part of the initial evaluation here, unlike Subchapter A where it’s deferred. The statute also adds a preference: when other considerations are equal, favor a Texas-based consultant, or one that will manage the contract entirely from an office in the state.¹

Consulting contracts exceeding $50,000 require written notice to the Legislative Budget Board under Section 2254.0301. The stacked notification rules reflect a legislative wariness about agencies contracting out work their own staff could perform.

Subchapter C: Contingent Fee Legal Contracts

Subchapter C governs contracts where an outside attorney’s pay depends on the outcome of the case. These face the tightest scrutiny in the chapter because they combine public money with litigation risk.

Before signing, the governmental entity must make written findings on three points: there is a substantial need for the legal services, the entity’s own attorneys and staff cannot handle the work, and the entity cannot reasonably hire private lawyers on a straight hourly basis, either because the nature of the case makes hourly billing impractical or because the entity lacks appropriated funds to cover estimated hourly costs.¹ The third finding is the hardest to satisfy in practice: the entity has to explain why a contingent fee is the only workable payment structure.

The Multiplier and the Percentage Cap

Section 2254.106 sets the math. The contingent fee is computed by multiplying a base fee by a negotiated multiplier that accounts for the expected difficulty, the expenses the firm risks, the likelihood of no recovery, and any anticipated delays. The multiplier cannot exceed four without prior legislative approval.¹

On top of that, the contract must cap the fee at a stated percentage of the total recovery. Different percentage caps are allowed for different recovery ranges and for cases that settle versus those that go to trial or appeal. The ceiling is 35 percent, and exceeding it requires the legislature’s advance approval. The attorney ends up with whichever number is lower, the multiplier calculation or the percentage cap.

For state governmental entities, a contingent fee contract with an estimated recovery above $100,000 requires additional advance notice to the Legislative Budget Board.

What Happens When the Rules Are Skipped

Section 2254.005 states that any contract entered into or arrangement made in violation of Subchapter A is “void as against public policy.”¹ That language is absolute. Good-faith performance on both sides doesn’t rescue the deal, and neither does the quality of the completed work. If procurement was flawed, the contract has no legal force.

Subchapter B carries the same rule for major consulting contracts. Section 2254.028(b) makes a major consulting services contract void if it was entered without the required finding from the governor’s Budget and Planning Office. The practical consequence in both subchapters is severe. A provider who performed under a void contract may have no legal basis to collect, and a competing firm that lost out has grounds to challenge the award. Texas courts have treated the voidance provisions as exactly what the statute says, without softening them on equitable grounds.

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Texas Constitution and Statutes. Texas Government Code 2254 – Professional and Consulting Services