By: Cain, Ellis S.B. No. 629 Harris, Wentworth A BILL TO BE ENTITLED AN ACT 1-1 relating to contract claims against a unit of state government. 1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-3 SECTION 1. Subtitle F, Title 10, Government Code, is amended 1-4 by adding Chapter 2260 to read as follows: 1-5 CHAPTER 2260. RESOLUTION OF CERTAIN CONTRACT CLAIMS 1-6 AGAINST THE STATE 1-7 SUBCHAPTER A. GENERAL PROVISIONS 1-8 Sec. 2260.001. DEFINITIONS. In this chapter: 1-9 (1) "Contract" means a written contract between a unit 1-10 of state government and a contractor for: 1-11 (A) goods; 1-12 (B) services; or 1-13 (C) a project as defined by Section 2166.001. 1-14 (2) "Contractor" means an independent contractor who 1-15 has entered into a contract directly with a unit of state 1-16 government. The term does not include: 1-17 (A) a contractor's subcontractor, officer, 1-18 employee, agent, or other person furnishing goods or services to a 1-19 contractor; 1-20 (B) an employee of a unit of state government; 1-21 or 1-22 (C) a student at an institution of higher 1-23 education. 1-24 (3) "Institution of higher education" has the meaning 2-1 assigned by Section 61.003, Education Code. 2-2 (4) "Unit of state government" means the state or an 2-3 agency, department, commission, bureau, board, office, council, 2-4 court, or other entity that is in any branch of state government 2-5 and that is created by the constitution or a statute of this state, 2-6 including a university system or institution of higher education. 2-7 The term does not include a county, municipality, court of a county 2-8 or municipality, special purpose district, or other political 2-9 subdivision of this state. The term does not include the Texas 2-10 Department of Transportation. 2-11 Sec. 2260.002. APPLICABILITY. This chapter does not apply 2-12 to a claim for personal injury or wrongful death arising from the 2-13 breach of a contract. 2-14 Sec. 2260.003. DAMAGES. (a) The total amount of money 2-15 recoverable on a claim for breach of contract under this chapter 2-16 may not, after deducting the amount specified in Subsection (b), 2-17 exceed the balance due and owing on the contract price, including 2-18 orders for additional work. 2-19 (b) Any amount owed the unit of state government for work 2-20 not performed under a contract or in substantial compliance with 2-21 its terms shall be deducted from the amount in Subsection (a). 2-22 Sec. 2260.004. REQUIRED CONTRACT PROVISION. (a) Each unit 2-23 of state government that enters into a contract to which this 2-24 chapter applies shall include as a term of the contract a provision 2-25 stating that the dispute resolution process used by the unit of 2-26 state government under this chapter must be used to attempt to 3-1 resolve a dispute arising under the contract. 3-2 (b) The attorney general shall provide assistance to a unit 3-3 of state government in developing the contract provision required 3-4 by this section. 3-5 Sec. 2260.005. EXCLUSIVE PROCEDURE. The procedures 3-6 contained in this chapter are exclusive and required prerequisites 3-7 to suit in accordance with Chapter 107, Civil Practice and Remedies 3-8 Code. 3-9 Sec. 2260.006. SOVEREIGN IMMUNITY. This chapter does not 3-10 waive sovereign immunity to suit or liability. 3-11 (Sections 2260.007-2260.050 reserved for expansion 3-12 SUBCHAPTER B. NEGOTIATION OF CLAIM 3-13 Sec. 2260.051. CLAIM FOR BREACH OF CONTRACT; NOTICE. (a) A 3-14 contractor may make a claim against a unit of state government for 3-15 breach of a contract between the unit of state government and the 3-16 contractor. The unit of state government may assert a counterclaim 3-17 against the contractor. 3-18 (b) A contractor must provide written notice to the unit of 3-19 state government of a claim for breach of contract not later than 3-20 the 180th day after the date of the event giving rise to the claim. 3-21 (c) The notice must state with particularity: 3-22 (1) the nature of the alleged breach; 3-23 (2) the amount the contractor seeks as damages; and 3-24 (3) the legal theory of recovery. 3-25 (d) A unit of state government must assert, in a writing 3-26 delivered to the contractor, any counterclaim not later than the 4-1 90th day after the date of notice under Subsection (b). A unit of 4-2 state government that does not comply with this subsection waives 4-3 the right to assert the counterclaim. 4-4 Sec. 2260.052. NEGOTIATION. (a) The chief administrative 4-5 officer or, if designated in the contract, another officer of the 4-6 unit of state government shall examine the claim and any 4-7 counterclaim and negotiate with the contractor in an effort to 4-8 resolve them. Except as provided by Subsection (b), the 4-9 negotiation must begin not later than the 60th day after the later 4-10 of: 4-11 (1) the date of termination of the contract; 4-12 (2) the completion date in the original contract; or 4-13 (3) the date the claim is received. 4-14 (b) A unit of state government against which a claim is 4-15 filed is entitled to delay the beginning of negotiation until after 4-16 the 180th day after the date of the event giving rise to the claim. 4-17 (c) Each unit of state government with rulemaking authority 4-18 shall develop rules to govern the negotiation of a claim under this 4-19 section. If a unit of state government does not have rulemaking 4-20 authority, that unit shall follow the rules adopted by the attorney 4-21 general. 4-22 Sec. 2260.053. PARTIAL RESOLUTION OF CLAIM. (a) If the 4-23 negotiation under Section 2260.052 results in the resolution of 4-24 some disputed issues by agreement or in a settlement, the parties 4-25 shall reduce the agreement or settlement to writing and each party 4-26 shall sign the agreement or settlement. 5-1 (b) A partial settlement or resolution of a claim does not 5-2 waive a party's rights under this chapter as to the parts of the 5-3 claim that are not resolved. 5-4 Sec. 2260.054. PAYMENT OF CLAIM FROM APPROPRIATED FUNDS. A 5-5 unit of state government may pay a claim resolved in accordance 5-6 with this subchapter only from money appropriated to it for payment 5-7 of contract claims or for payment of the contract that is the 5-8 subject of the claim. If money previously appropriated for payment 5-9 of contract claims or payment of the contract is insufficient to 5-10 pay the claim or settlement, the balance of the claim may be paid 5-11 only from money appropriated by the legislature for payment of the 5-12 claim. 5-13 Sec. 2260.055. INCOMPLETE RESOLUTION. If a claim is not 5-14 entirely resolved under Section 2260.052 on or before the 270th day 5-15 after the date the claim is filed with the unit of state 5-16 government, unless the parties agree in writing to an extension of 5-17 time, the contractor may file a request for a hearing under 5-18 Subchapter C. 5-19 (Sections 2260.056-2260.100 reserved for expansion 5-20 SUBCHAPTER C. CONTESTED CASE HEARING 5-21 Sec. 2260.101. DEFINITION. In this subchapter, "office" 5-22 means the State Office of Administrative Hearings. 5-23 Sec. 2260.102. REQUEST FOR HEARING. (a) If a contractor is 5-24 not satisfied with the results of negotiation with a unit of state 5-25 government under Section 2260.052, the contractor may file a 5-26 request for a hearing with the unit of state government. 6-1 (b) The request must: 6-2 (1) state the factual and legal basis for the claim; 6-3 and 6-4 (2) request that the claim be referred to the State 6-5 Office of Administrative Hearings for a contested case hearing. 6-6 (c) On receipt of a request under Subsection (a), the unit 6-7 of state government shall refer the claim to the State Office of 6-8 Administrative Hearings for a contested case hearing under Chapter 6-9 2001, Government Code, as to the issues raised in the request. 6-10 Sec. 2260.103. HEARING FEE. (a) The chief administrative 6-11 law judge of the office may set a fee for a hearing before the 6-12 office under this subchapter. 6-13 (b) The chief administrative law judge of the office shall 6-14 set the fee in an amount that: 6-15 (1) is not less than $250; and 6-16 (2) allows the office to recover all or a substantial 6-17 part of its costs in holding hearings. 6-18 (c) The chief administrative law judge of the office by rule 6-19 may establish a graduated fee scale, increasing the fee in relation 6-20 to the amount in controversy. 6-21 (d) The office may: 6-22 (1) assess the fee against the party who does not 6-23 prevail in the hearing; or 6-24 (2) apportion the fee against the parties in an 6-25 equitable manner. 6-26 Sec. 2260.104. HEARING. (a) An administrative law judge of 7-1 the office shall conduct a hearing in accordance with the 7-2 procedures adopted by the chief administrative law judge of the 7-3 office. 7-4 (b) Within a reasonable time after the conclusion of the 7-5 hearing, the administrative law judge shall issue a written 7-6 decision containing the administrative law judge's findings and 7-7 recommendations. 7-8 (c) The administrative law judge shall base the decision on 7-9 the pleadings filed with the office and the evidence received. 7-10 (d) The decision must include: 7-11 (1) the findings of fact and conclusions of law on 7-12 which the administrative law judge's decision is based; and 7-13 (2) a summary of the evidence. 7-14 Sec. 2260.105. PAYMENT OF CLAIM. (a) The unit of state 7-15 government shall pay the amount of the claim or part of the claim 7-16 if the administrative law judge finds, by a preponderance of the 7-17 evidence, that under the laws of this state the claim or part of 7-18 the claim is valid. 7-19 (b) A unit of state government shall pay a claim under this 7-20 subchapter from money appropriated to it for payment of contract 7-21 claims or for payment of the contract that is the subject of the 7-22 claim. If money previously appropriated for payment of contract 7-23 claims or payment of the contract is insufficient to pay the claim, 7-24 the balance of the claim may be paid only from money appropriated 7-25 by the legislature for payment of the claim. 7-26 Sec. 2260.106. PREJUDGMENT INTEREST. Chapter 304, Finance 8-1 Code, applies to a judgment awarded to a claimant under this 8-2 chapter, except that the applicable rate of interest may not exceed 8-3 six percent. 8-4 Sec. 2260.107. EXECUTION ON STATE PROPERTY NOT AUTHORIZED. 8-5 This chapter does not authorize execution on property owned by the 8-6 state or a unit of state government. 8-7 SECTION 2. This Act takes effect September 1, 1999. 8-8 SECTION 3. (a) This Act applies only to a claim pending or 8-9 arising on or after the effective date of this Act, without regard 8-10 to whether the contract was entered into before, on, or after that 8-11 date. 8-12 (b) Notwithstanding Subsection (b), Section 2260.051, 8-13 Government Code, as added by this Act, a claimant must provide 8-14 written notice to the unit of state government for a claim pending 8-15 before the effective date of this Act not later than the 180th day 8-16 after that date. 8-17 SECTION 4. The importance of this legislation and the 8-18 crowded condition of the calendars in both houses create an 8-19 emergency and an imperative public necessity that the 8-20 constitutional rule requiring bills to be read on three several 8-21 days in each house be suspended, and this rule is hereby suspended.