(a) A local government may contract or agree with another local government or a federally recognized Indian tribe, as listed by the United States secretary of the interior under 25 U.S.C. § 479a-1, whose reservation is located within the boundaries of this state to perform governmental functions and services in accordance with this chapter.
(b) A party to an interlocal contract may contract with a:
(1) state agency, as that term is defined by § 771.002; or
(2) similar agency of another state.

(b-1) A local government that is authorized to enter into an interlocal contract under this section may not contract with an Indian tribe that is not federally recognized or whose reservation is not located within the boundaries of this state.
(c) An interlocal contract may be to:
(1) study the feasibility of the performance of a governmental function or service by an interlocal contract; or
(2) provide a governmental function or service that each party to the contract is authorized to perform individually.
(d) An interlocal contract must:
(1) be authorized by the governing body of each party to the contract unless a party to the contract is a municipally owned electric utility, in which event the governing body may establish procedures for entering into interlocal contracts that do not exceed $100,000 without requiring the approval of the governing body;
(2) state the purpose, terms, rights, and duties of the contracting parties; and
(3) specify that each party paying for the performance of governmental functions or services must make those payments from current revenues available to the paying party.
(e) An interlocal contractual payment must be in an amount that fairly compensates the performing party for the services or functions performed under the contract.
(f) An interlocal contract may be renewed.
(g) A governmental entity of this state or another state that makes purchases or provides purchasing services under an interlocal contract for a state agency, as that term is defined by § 771.002, must comply with Chapter 2161 in making the purchases or providing the services.
(h) An interlocal contract between a governmental entity and a purchasing cooperative may not be used to purchase engineering or architectural services.
(i) Notwithstanding Subsection (d), an interlocal contract may have a specified term of years.
(j) For the purposes of this subsection, the term “purchasing cooperative” means a group purchasing organization that governmental entities join as members and the managing entity of which receives fees from members or vendors. A local government may not enter into a contract to purchase construction-related goods or services through a purchasing cooperative under this chapter in an amount greater than $50,000 unless a person designated by the local government certifies in writing that:
(1) the project for which the construction-related goods or services are being procured does not require the preparation of plans and specifications under Chapter 1001 or 1051, Occupations Code; or
(2) the plans and specifications required under Chapters 1001 and 1051, Occupations Code, have been prepared.