By: Harris S.B. No. 1616 A BILL TO BE ENTITLED AN ACT 1-1 relating to arbitration of certain claims against the Texas 1-2 Department of Criminal Justice arising from the construction of 1-3 certain state correctional facilities. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Title 4, Subtitle G, Government Code, is amended 1-6 by adding Chapter 510 to read as follows: 1-7 CHAPTER 510. ARBITRATION OF STATE CORRECTIONAL FACILITIES 1-8 CONSTRUCTION CLAIMS. 1-9 Sec. 510.001. SHORT TITLE. This act may be referred to as 1-10 the State Correctional Facilities Construction Claims Arbitration 1-11 Act. 1-12 Sec. 510.002. FINDINGS; DECLARATION OF POLICY. 1-13 (a) The legislature finds that: 1-14 (1) The massive program for construction of 1-15 correctional facilities in the state pursuant to subsection (e) of 1-16 Article 3, Section 49-h of the state constitution has resulted in 1-17 the submission to the department of several claims in excess of $10 1-18 million for excess costs purportedly incurred by state prison 1-19 construction contractors during the construction program. 1-20 (2) Due to their size and complexity, these large 1-21 claims differ in character from smaller state construction contract 1-22 claims that may arise from time to time, and are particularly 1-23 amenable to resolution through a one-time-only arbitration process. 2-1 (3) These large claims present many common issues of 2-2 fact and law that would enable economical adjudication through the 2-3 application of generally recognized construction contract 2-4 arbitration procedures. 2-5 (4) Providing state prison construction contractors a 2-6 one-time-only administrative process for achieving speedy and final 2-7 resolution of large, complex claims and receiving just and due 2-8 compensation without resort to litigation against the state would 2-9 promote judicial economy, preserve the state's sovereign immunity 2-10 from civil suit, and maintain the credibility of the state as a 2-11 fair business partner in major construction projects such as the 2-12 recent expansion of the state's correctional system. 2-13 (5) The adjudication and reimbursement of valid claims 2-14 for excess costs incurred by state prison construction contractors 2-15 in the course of constructing state correctional facilities 2-16 pursuant to subsection (e) of Article 3, Section 49-h of the state 2-17 constitution is an authorized use of the proceeds of those general 2-18 obligation bonds when such costs have been determined by an 2-19 independent arbitration panel to have been valid and within the 2-20 scope of the original construction contract. 2-21 (b) For the purpose of promoting fairness and judicial 2-22 economy, it is the policy of the state to provide for full and fair 2-23 adjudication of large, complex claims arising from the state's 2-24 recent prison construction program according to generally 2-25 recognized binding arbitration procedures, without resort to 3-1 litigation or waiver of the state's sovereign immunity from civil 3-2 suit. It is the policy of the state to pay that part of any such 3-3 claim determined to be valid and within the scope of the original 3-4 construction contract by a qualified, independent arbitration panel 3-5 from the proceeds of general obligation bonds authorized and issued 3-6 to finance the prison construction program. 3-7 Sec. 510.003. DEFINITIONS. In this chapter: 3-8 (a) "Commission" means the Correctional Facilities 3-9 Construction Claims Commission. 3-10 (b) "Eligible claim" means a claim submitted to the 3-11 commission by a state prison construction contractor for $10 3-12 million or more in aggregate claimed excess costs incurred in the 3-13 course of performing one or more contracts for construction of one 3-14 or more state correctional facilities pursuant to subsection (e) of 3-15 Article 3, Section 49-h of the state constitution. Claims by the 3-16 same person attributable to different contracts or facilities shall 3-17 be aggregated for the purpose of determining eligibility. 3-18 (c) "State prison construction contractor" means a person 3-19 who contracted with the department to provide goods or services in 3-20 furtherance of the construction of one or more state correctional 3-21 facilities, and includes both prime contractors and subcontractors. 3-22 Sec. 510.004. CORRECTIONAL FACILITIES CONSTRUCTION CLAIMS 3-23 COMMISSION. 3-24 (a) The Correctional Facilities Construction Claims 3-25 Commission is created as an agency of the executive branch of state 4-1 government. 4-2 (b) The commission shall be composed of three retired state 4-3 or federal district or appellate judges who are experienced in the 4-4 adjudication of construction contract disputes. Members of the 4-5 commission shall be appointed by the governor from a list of at 4-6 least six nominees which shall be submitted by the chief justice of 4-7 the supreme court within 30 days of the effective date of this act. 4-8 (c) The governor shall designate one member of the 4-9 commission as the presiding officer of the commission to serve in 4-10 that capacity at the pleasure of the governor. 4-11 (d) Members of the commission shall serve on a full-time 4-12 basis and shall be compensated as provided by legislative 4-13 appropriation. 4-14 (e) Each member of the commission is an officer of the state 4-15 as that term is used in the constitution, and each member shall 4-16 qualify by taking the official oath of office. 4-17 Sec. 510.005. GENERAL POWERS AND DUTIES OF THE COMMISSION. 4-18 (a) The commission shall have the power and duty to make 4-19 final determination of all eligible claims submitted by state 4-20 prison construction contractors. 4-21 (b) The commission may issue such orders and undertake such 4-22 other actions as may be necessary to the discharge of its duties, 4-23 including administration of oaths; examination of witnesses; 4-24 receipt of evidence; issuance of compulsory process; and levy of 4-25 appropriate procedural sanctions upon the parties. 5-1 (c) The deliberations of the commission shall be exempt from 5-2 the Texas Open Meetings Act, and the records of the proceedings of 5-3 the commission shall be available to the public in the same manner 5-4 and to the same extent as records of proceedings conducted in the 5-5 district courts of this state. The proceedings of the commission 5-6 are exempt from the Texas Administrative Procedure Act. 5-7 (d) The commission may receive legislative appropriations 5-8 for salaries and administrative expenses and employ such staff as 5-9 may be necessary for the discharge of its duties. 5-10 (e) The commission may contract with any person or state 5-11 agency other than the department for administrative and support 5-12 services. 5-13 Sec. 510.006. PROCEEDINGS; PARTIES. 5-14 (a) The commission shall determine what amount of money, if 5-15 any, shall be paid on an eligible claim submitted to the commission 5-16 by a state prison construction contractor. The commission shall 5-17 conduct quasi-judicial, binding arbitration proceedings in 5-18 accordance with generally recognized construction contract 5-19 arbitration practice. The commission shall establish its own 5-20 procedures, which shall generally conform to, but shall not be 5-21 governed by, the rules of civil procedure and evidence established 5-22 for the district courts of this state. 5-23 (b) Parties to arbitration proceedings before the commission 5-24 shall be the department, represented by the attorney general, and 5-25 any state prison construction contractors with eligible claims. 6-1 (c) The parties to an arbitration proceeding before the 6-2 commission may settle at any time during the proceeding, at which 6-3 time the commission shall enter an agreed order incorporating the 6-4 terms of the parties' settlement. 6-5 (d) The commission shall commence arbitration proceedings 6-6 within 60 days of the date the last commissioner is appointed by 6-7 the governor and qualified to serve. 6-8 Sec. 510.007. EFFECT OF COMMISSION ORDER. The commission 6-9 shall issue an order containing findings of fact and conclusions of 6-10 law and announcing its decision as to the amount, if any, to be 6-11 awarded to a state prison construction contractor bringing an 6-12 eligible claim. The arbitration award shall not include punitive 6-13 or exemplary damages. There shall be no appeal from a decision of 6-14 the commission, which shall be final and binding upon all parties. 6-15 A commission order shall be enforceable in the same manner as 6-16 orders of the district courts of this state. 6-17 Sec. 510.008. PAYMENT OF ARBITRATION AWARD. 6-18 (a) A state prison construction contractor receiving an 6-19 arbitration award from the commission shall be entitled to payment 6-20 in full from the proceeds of general obligation bonds issued 6-21 pursuant to subsection (e) of Article 3, Section 49-h of the state 6-22 constitution. No other state funds maybe used to satisfy an 6-23 arbitration award under this act. In the event of sufficient funds 6-24 are not available from the bond proceeds to satisfy all arbitration 6-25 awards granted by the commission, the available funds shall be 7-1 divided among the state prison construction contractors receiving 7-2 arbitration awards on a pro-rata basis. 7-3 (b) The comptroller of public accounts shall disburse funds 7-4 from the state treasury in satisfaction of an arbitration award as 7-5 soon as practicable after receipt from the commission of a 7-6 certified copy of the commission order making the award. 7-7 (c) The public finance authority shall issue general 7-8 obligation bonds previously authorized by subsection (e) of Article 7-9 3, Section 49-h of the state constitution to the extent necessary 7-10 to finance any arbitration award under this act. The issuance of 7-11 such bonds, if necessary, and the disbursement of funds from bond 7-12 proceeds to satisfy an arbitration award under this act shall not 7-13 require the approval of the bond review board or the attorney 7-14 general. 7-15 Sec. 510.009. NO WAIVER OF SOVEREIGN IMMUNITY. This act is 7-16 intended to provide an administrative process for resolving claims 7-17 against the state without resort to civil suit. Accordingly, 7-18 nothing in this act shall be construed as a waiver of the state's 7-19 sovereign immunity from civil suit. 7-20 Sec. 510.010. TIME LIMIT. All proceedings before the 7-21 commission shall be completed on or before June 1, 1996. Upon 7-22 completion of its duties, the commission shall forward a final 7-23 report of its activities and findings to the governor, the 7-24 lieutenant governor and the speaker of the house of 7-25 representatives. The report may include such recommendations as 8-1 the commission may deem appropriate regarding future administration 8-2 of contracts for construction of state correctional facilities. 8-3 Sec. 510.011. EXPIRATION OF ACT. This act expires and the 8-4 commission shall cease to exist on December 31, 1996. 8-5 SECTION 2. The importance of this legislation and the 8-6 crowded condition of the calendars in both houses create an 8-7 emergency and an imperative public necessity that the 8-8 constitutional rule requiring bills to be read on three several 8-9 days in each house be suspended, and this rule is hereby suspended, 8-10 and that this Act take effect and be in force from and after its 8-11 passage, and it is so enacted.