BILL ANALYSIS

Senate Research Center	H.B. 3485
88R22460 ATP-F	By: Bell, Keith et al. (Johnson)
	Business & Commerce
	5/12/2023
	Engrossed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Currently, a contractor can suspend work if an owner fails to pay the contractor an undisputed amount within the legally specified timeframes. This right is found within the public Prompt Pay Act in the Government Code and the private Prompt Pay Act in the Property Code. However, when original construction contracts are amended with change orders, contractors can find this right jeopardized. H.B. 3485 extends this right to address issues caused by pending change orders.

Change orders are amendments to original construction contracts that change the contractor's scope of work. They can range from small changes, such as including an additional window, to major changes, such as entirely new building structures. Contracts often include clauses that require a contractor to continue working while a change order is still pending. This is intended as a measure to keep projects on time and within budget. However, this leaves contractors without an idea of how, or if, they will be paid for the labor and materials they have invested into the project.

H.B. 3485 addresses this gap left by the Prompt Pay Act and provides contractors with a method to curb potential losses on a project that may not be financially sound or caused by a dispute between the owner and another contractor. Currently, contractors are at risk of being uncompensated for labor and material that have been invested in a project.

H.B. 3485 amends the public Prompt Pay Act in Chapter 2251 of the Government Code to allow a contractor to elect not to proceed with additional work directed by a governmental entity if:

� The contractor has not received a fully executed change order for the additional work; and

� The aggregate or anticipated value of the additional work plus any other outstanding additional work requests exceeds 10% of the original contract amount.

H.B. 3485 amends the private Prompt Pay Act in Chapter 28 of the Property Code to allow a contractor to elect not to proceed with additional work directed by an owner if:

� The contractor has not received a fully executed change order for the additional work; and

� The aggregate or anticipated value of the additional work plus any other outstanding additional work requests exceeds 10% of the original contract amount.

H.B. 3485 clarifies that a contractor who elects not to proceed with additional work directed by an owner or governmental entity is not responsible for damages associated with the choice not to proceed.

H.B. 3485 amends current law relating to a contractor's or subcontractor's right to elect not to proceed with additional work under a contract.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Subchapter D, Chapter 2251, Government Code, by adding Section 2251.0521, as follows:

Sec. 2251.0521.� UNSIGNED CHANGE ORDER.� (a) Defines "public work contract" and "subcontract."

(b) Authorizes a vendor to elect not to proceed with additional work directed by a governmental entity under a public work contract if:

(1)� the vendor has not received a written, fully executed change order for the governmental entity-directed additional work; and

(2)� the aggregate actual or anticipated value of the additional work under the vendor's contract terms plus any previous governmental entity-directed additional work for which the vendor has not received a written, fully executed change order exceeds 10 percent of the vendor's original public work contract amount.

(1)� the subcontractor has not received a written, fully executed change order for the governmental entity-directed additional work from the vendor; and

(2)� the aggregate actual or anticipated value of the additional work under the subcontractor's subcontract terms plus any previous governmental entity-directed additional work for which the subcontractor has not received a written, fully executed change order exceeds 10 percent of the subcontractor's subcontract amount.

(d) Provides that a vendor or subcontractor who elects not to proceed with additional work as provided by this section is not responsible for damages associated with the election not to proceed.

SECTION 2. Amends Chapter 28, Property Code, by adding Section 28.0091, as follows:

Sec. 28.0091. UNSIGNED CHANGE ORDER. (a) Authorizes a contractor or subcontractor to elect not to proceed with additional work directed by an owner if:

(1) the contractor or subcontractor has not received a fully written, fully executed change order for the owner-directed additional work; and

(2)� the aggregate actual or anticipated value of the additional work plus any previous owner-directed additional work for which the contractor or subcontractor has not received a written, fully executed change order exceeds 10 percent of the contractor's or subcontractor's original contract amount.

(b)� Provides that a contractor or subcontractor who elects not to proceed with additional work as provided by this section is not responsible for damages associated with the election not to proceed.

SECTION 3. Makes application of Section 2251.0521, Government Code, and Section 28.0091, Property Code, as added by this Act, prospective.

SECTION 4. Effective date: September 1, 2023.