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.