By: Wentworth S.B. No. 1374
A BILL TO BE ENTITLED
AN ACT
1-1 relating to arbitration of a claim against a state agency for
1-2 claims arising out of a contract for the improvement of real
1-3 property.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 5, Civil Practice and Remedies Code, is
1-6 amended by adding Chapter 111 to read as follows:
1-7 CHAPTER 111. ARBITRATION OF CLAIM AGAINST STATE AGENCY FOR
1-8 BREACH OF BUILDING CONTRACT
1-9 Sec. 111.001. DEFINITIONS. In this chapter:
1-10 (1) "Building contract" means a written contract for
1-11 the improvement of real property.
1-12 (2) "Contractor" means a person who has entered into a
1-13 contract directly with a state agency. The term does not include a
1-14 subcontractor who has entered into a contract with a contractor.
1-15 (3) "State agency" means the state or an agency,
1-16 department, commission, bureau, board, office, council, court, or
1-17 other entity that is in any branch of state government, and that is
1-18 created by the constitution or a statute of this state, including a
1-19 university system or institution of higher education as defined by
1-20 Section 61.003, Education Code. The term does not include a
1-21 county, municipality, court of a county or municipality, special
1-22 purpose district, or other political subdivision of this state.
1-23 (4) "Third party neutral" means a person or
2-1 institution who serves as a mediator or arbitrator as defined in
2-2 Chapter 154, Section 154.021 et seq, Texas Civil Practice and
2-3 Remedies Code.
2-4 Sec. 111.002. ARBITRATION. Any building contract covered by
2-5 this chapter shall be considered to have an arbitration clause as a
2-6 part of the contract covering any dispute or claim between a
2-7 contractor and a state agency arising out of the contract,
2-8 including the breach thereof. A party to a contract with a claim
2-9 or dispute against the other party shall give 30 days written
2-10 notice or the nature and extent of the claim or dispute. If the
2-11 matters are not resolved within this notice period, either party
2-12 may commence arbitration by giving the other a written request for
2-13 arbitration and arbitrators shall be appointed. The arbitrators
2-14 shall be selected as provided in the contract, provided however,
2-15 that all arbitrators shall be uninterested parties and have no
2-16 affiliation with either party. If the contract does not provide
2-17 for the selection of arbitrators, each party shall appoint one
2-18 arbitrator. All arbitrators shall be uninterested parties and have
2-19 no affiliation with either party to the contract. The parties
2-20 shall make their appointments within 10 business days after a
2-21 written request for arbitration is delivered from one party to
2-22 another. The third arbitrator shall be appointed within 10
2-23 business days after the appointment of the party arbitrators. The
2-24 arbitration shall be conducted within 60 business days after the
2-25 appointments are made. The decision of the arbitrators shall be
3-1 binding on the parties. The arbitration shall be governed by and
3-2 may be compelled and enforced under the Texas General Arbitration
3-3 Act (Article 224 et seq., Revised Statutes) or under the United
3-4 States Arbitration Act (9 U.S.C. Section 1 et seq.) if applicable.
3-5 The arbitration award shall not include punitive or exemplary
3-6 damages nor attorney's fees.
3-7 Sec. 111.003. BUILDING DISPUTE RESOLUTION FUND. (a) The
3-8 purpose of this subchapter is to provide immediately available
3-9 funds for prompt and efficient resolution of disputes arising out
3-10 of Building Contracts between Contractors and State Agencies.
3-11 (b) The Dispute Resolution Fund is established in the Office
3-12 of the Comptroller of Public Accounts to be used by the
3-13 administrator as a nonlapsing revolving fund only for carrying out
3-14 the purposes of this chapter. To this fund shall be credited all
3-15 "dispute resolution fees" as defined below, collected from
3-16 Contractors entering into building contracts with state agencies.
3-17 (c) The comptroller may invest money in the fund not
3-18 currently needed to meet the administrator's responsibilities under
3-19 this chapter in the manner provided by applicable law. Income
3-20 received on investments shall be credited to the fund.
3-21 (d) The comptroller shall adopt rules necessary for the
3-22 administration, collection, reporting, and payment of the fees
3-23 payable or collected under this section.
3-24 Sec. 111.004. ADMINISTRATION OF BUILDING DISPUTE RESOLUTION
3-25 FUND. (a) The Center for Public Policy Dispute Resolution at the
4-1 University of Texas Law School (CPPDR) shall be the administrator
4-2 of the fund. Money in the fund may be disbursed by the
4-3 administrator for the following purposes and no others:
4-4 (1) administrative expenses, personnel and training
4-5 expenses, and equipment maintenance and operating costs related to
4-6 implementation of this chapter, including payment of fees for the
4-7 services of CPPDR in administering the selection of third party
4-8 neutrals and referral of appropriate cases to third party neutrals;
4-9 (2) costs related to the payment of fees and expenses
4-10 of third party neutrals to convene and conduct construction-related
4-11 dispute resolution processes as called for in the relevant building
4-12 contract or statute or rule pertaining to building contracts;
4-13 (3) costs of assessment, evaluation, and reporting on
4-14 the effectiveness and efficiency of these dispute resolution
4-15 processes in achieving the goals of this subchapter;
4-16 (4) costs, in an amount not to exceed $100,000
4-17 annually, of a dispute resolution education program, whose end is
4-18 to train both public and private parties in the availability and
4-19 use of dispute resolution procedures;
4-20 (5) costs, in an amount not to exceed $150,000
4-21 annually, of interagency and private contracts to provide technical
4-22 assistance for the design or construction-related dispute
4-23 resolution systems.
4-24 Sec. 111.005. BUILDING DISPUTE RESOLUTION FEE. (a) There
4-25 is hereby imposed a fee on every contractor entering into a
5-1 building contract, exceeding $25,000.00 in contract price, with a
5-2 state agency. This fee is in addition to all taxes or other fees
5-3 levied on the activities of contractors.
5-4 (b) The state agency shall collect the fee from the
5-5 contractor at the time of the execution of the contract, or at the
5-6 time at which a payment or performance bond is required to be
5-7 executed in favor of the agency, whichever is later; or in the
5-8 alternative, the fee may be collected by the agency by withholding
5-9 the appropriate percentage of the contract amount from each payment
5-10 to be made to the contractor according to the terms of the
5-11 individual contract, as additional "retainage".
5-12 (c) The state agency shall remit to the comptroller the
5-13 funds collected under this sub-chapter for deposit in the Building
5-14 Dispute Resolution Fund according to the rules established per
5-15 Section 111.003(d) of this subchapter.
5-16 Sec. 111.006. DETERMINATION OF FEE. (a) Except as
5-17 otherwise provided in this section, the rate of the fee shall be
5-18 five cents per one hundred dollars of the contractor's fee as
5-19 agreed in the building contract until the balance in the fund has
5-20 reached $250,000.00 The comptroller shall certify to the
5-21 administrator the date on which the balance in the fund exceeds
5-22 $250,000.00. The fee shall not be collected or required to be paid
5-23 on or after the first day of the second month following the
5-24 comptroller's certification to the administrator that the balance
5-25 in the fund exceeds $250,000.00.
6-1 (b) If the balance in the fund falls below $200,000.00, the
6-2 comptroller shall certify such fact to the administrator. On
6-3 receiving the comptroller's certification, the administrator shall
6-4 instruct the state agencies to resume collecting the fee until
6-5 suspended in the manner provided in Section 111.005(b).
6-6 (c) The fee levied under this section shall be due and
6-7 collected beginning 30 days after the effective date of this
6-8 Chapter.
6-9 SECTION 2. This Act applies only to a breach of contract
6-10 occurring on or after the effective date of this Act, without
6-11 regard to whether the contract was entered into before, on, or
6-12 after that date. A breach of contract occurring before the
6-13 effective date of this Act is governed by the law in effect at the
6-14 time the breach of contract occurred, and that law is continued in
6-15 effect for that purpose.
6-16 SECTION 3. The importance of this legislation and the
6-17 crowded condition of the calendars in both houses create an
6-18 emergency and an imperative public necessity that the
6-19 constitutional rule regarding bills to be read on three several
6-20 days in each house be suspended, and these rules are hereby
6-21 suspended, and that this Act take effect and be in force from and
6-22 after its passage, and it is so enacted.