LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 20, 2001
TO: Honorable Steven Wolens, Chair, House Committee on State
Affairs
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB3581 by Davis, John (Relating to the procedure for
awarding certain contracts by a state agency or school
district.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB3581, As Introduced: positive impact of $0 through the biennium *
* ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 0 *
* 2005 0 *
* 2006 0 *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Savings/(Cost) from State *
* Highway Fund *
* 0006 *
* 2002 $(8,591,352) *
* 2003 (8,591,352) *
* 2004 (8,591,352) *
* 2005 (8,591,352) *
* 2006 (8,591,352) *
*****************************************************
Technology Impact
None.
Fiscal Analysis
This bill would not allow state agencies or school districts to specify
materials required in a construction or repair project unless those
materials are necessary in order to meet the agency's or school
district's minimum needs. Proposals would be required to include a
method for protesting material specifications. If protested, the agency
would have to have an independent test performed to verify that the
specified materials are, in fact, necessary to meet agency minimum
needs. If an agency fails to produce independent test data to support
the need for specific materials, other materials may be substituted.
Methodology
According to the Texas Department of Transportation (TxDOT), there would
be additional cost to perform the required independent testing if bid
proposals were protested. It is assumed by TxDOT that universities would
be able to perform the required independent testing under contract to
TxDOT. It is estimated that the average cost to have a university do
this work would be approximately $250,000 per material (or small group of
similar materials) and would require approximately 3 to 10 years to
obtain an adequate amount of performance information. According to
TxDOT, they estimated 10 percent of highway construction contracts would
be protested. However, a more conservative estimate of 3 percent of
highway construction contracts is assumed would be protested. Based on
the number of fiscal year 2000 highway construction contracts awarded, an
estimated 34 material specification protests would be received.
Anticipated annual impact due to the need for independent studies as a
result of these material specification protests would be approximately
$8,500,000 (or 12 independent studies at $250,000).
Passage of this bill would also lead to contractor utilization of
materials such as flexible base, hot mix, concrete, and seal coat that
would be at a risk for premature failure. TxDOT estimated a 5 percent
failure rate on approximately 50 percent of the contracts involved in a
material specification protest. However, a more conservative estimate of
2 percent failure rate on approximately 20 percent of the contracts
involved in a material specification protest is assumed. Based on the
quantity of materials purchased during fiscal year 2000, the estimated
fiscal impact due to premature failure for the materials would be $91,352
annually.
According to the General Services Commission (GSC), the agency has
estimated there would be an increase in architect or engineer (A/E) fees
to cover the cost of the tests, but these cost could be absorbed within
existing project management funds.
Local Government Impact
The Texas Association of School Administrators (TASA), the Texas
Association of School Building Officials (TASBO) and Northeast ISD
indicated that HB 3581 would have a significant fiscal impact on local
school districts. Northeast ISD is a rapidly growing district that has
been involved in numerous building projects. Staff reported that school
buildings cost approximately $10 million. HB 3581 would allow vendors to
protest the specification of certain materials. District staff estimate
that 3% of vendors would protest. Delays resulting from material
testing and writing product specifications reports are estimated at 2-3
months per protest. Testing a single material can cost $3,000-$5,000.
A product specification report can cost approximately $6,000-$12,000.
In addition to expenses related to testing and specification reports,
once the district signs a general contractor to a project, any delay
would result in increased cost to the district. Costs associated with
delays are estimated at $100,000 per month.
Source Agencies: 305 General Land Office, 303 General Services
Commission, 601 Texas Department of Transportation
LBB Staff: JK, RB, GS, DW