78R2011 CLG-D

By:  Davis of Dallas                                              H.B. No. 1780

relating to payment to a subcontractor under a public work contract. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Chapter 2253, Government Code, is amended by adding Subchapter E to read as follows:
Sec. 2253.101. APPLICABILITY OF SUBCHAPTER TO PRIME CONTRACTOR. This subchapter applies only to a prime contractor that enters into a public work contract with a governmental entity. Sec. 2253.102. RIGHT TO ALTERNATIVE DISPUTE RESOLUTION. In a dispute between a subcontractor and prime contractor involving payment for the provision of any public work labor or material under a public work contract, the parties may engage in negotiations and mediation under this subchapter to attempt to resolve the dispute without litigation. The alternative dispute resolution remedy provided by this subchapter is not an exclusive remedy. Sec. 2253.103. REQUIRED CONTRACT PROVISION. (a) Each prime contractor that enters into a written contract with a subcontractor for the provision of public work labor or material shall include as a term of the contract a provision stating that the dispute resolution process established under this subchapter may be used to attempt to resolve any dispute for payment arising under the contract. (b) The attorney general on request shall provide assistance to a prime contractor in developing the contract provision required by this section. (c) The contract provision required by this section is considered to be part of the contract without regard to whether the provision is included in the contract. Sec. 2253.104. CLAIM FOR PAYMENT; NOTICE. (a) To initiate negotiation and mediation under this subchapter, a subcontractor who has a written agreement with a prime contractor to provide public work labor or material under a public work contract must make a claim against the prime contractor for payment of any balance due and owing for any labor performed or material delivered under the contract. The prime contractor may assert a counterclaim against the subcontractor. (b) A subcontractor must provide written notice of a claim under this section to the prime contractor and to the governmental entity that awarded the public work contract not later than the 120th day after the date on which the claimed labor was performed or the claimed material was delivered. (c) The notice for a claim under this section must contain: (1) a copy of the written agreement between the subcontractor and prime contractor; (2) a sworn statement of the amount claimed; and (3) the information required to be provided by a payment bond beneficiary under Section 2253.043(a). (d) A prime contractor must assert any counterclaim in a writing delivered to the subcontractor and governmental entity not later than the 14th day after the date of notice under Subsection (b). A prime contractor that does not comply with this subsection waives the right to assert the counterclaim in a negotiation and mediation under this subchapter and in any proceeding subsequent to the negotiation and mediation. Sec. 2253.105. RULES TO GOVERN DISPUTE RESOLUTION. (a) The governing body of each governmental entity with rulemaking authority shall develop rules to govern the negotiation and mediation of a claim under this subchapter. If a governmental entity does not have rulemaking authority, the governmental entity shall follow the model rule adopted under Subsection (b). (b) A model rule for negotiation and mediation under this subchapter shall be provided for voluntary adoption by the governing bodies of governmental entities through the coordinated efforts of the State Office of Administrative Hearings and the office of the attorney general. (c) Rules for mediation adopted under this section at a minimum must provide that: (1) the mediation process is nonbinding; (2) the mediator shall be neutral and impartial and controls the procedure of the mediation; (3) the parties shall cooperate fully with the mediator; (4) each party must be represented by at least one officer with authority to negotiate a resolution of the dispute; (5) the mediation shall be conducted expeditiously with as little delay as possible; (6) the mediation procedure and the statements made by the participants shall be treated as offers of settlement under the applicable rules of evidence and are inadmissible for any purpose, including impeachment, in any judicial, administrative, or other similar proceeding; (7) the mediator shall be disqualified as a witness, consultant, or expert in any proceeding relating to the subject matter of the mediation; and (8) at the beginning of the mediation the parties should agree in writing to all provisions and rules of the mediation procedure as modified by the mediator and further agreement of the parties. (d) In developing rules under this section, the governing body of a governmental entity may use any alternative dispute resolution procedures developed by the governing body under Section 2009.051 to the extent those procedures do not conflict with this subchapter. Sec. 2253.106. NEGOTIATION. Not later than the 14th day after the date a claim under Section 2253.104 is received, the chief administrative officer of the governmental entity shall examine the claim and any counterclaim received and shall direct negotiations between the prime contractor and subcontractor, including the scheduling of a meeting between the two parties, in an effort to resolve the dispute. The negotiations must begin not later than the 14th day after the date on which the prime contractor and subcontractor are directed to begin negotiations. Sec. 2253.107. PARTIAL RESOLUTION OF CLAIM. (a) If the negotiation under Section 2253.106 results in the resolution of some disputed issues by agreement or in a settlement, the parties shall reduce the agreement or settlement to writing and each party shall sign the agreement or settlement. (b) A partial settlement or resolution of a claim does not waive a party's rights under this chapter as to the parts of the claim that are being negotiated or mediated and that are not resolved. (c) If a claim is not entirely resolved under Section 2253.106 on or before the 180th day after the date notice of the claim is filed with the prime contractor under Section 2253.104, the subcontractor may file a request for a mediation under this subchapter with the governing body of the governmental entity that directed the negotiations under Section 2253.106. Sec. 2253.108. MEDIATION; EARLY AGREEMENT TO MEDIATE. (a) Before the 180th day after the date notice of the claim is filed with the prime contractor under Section 2253.104, the parties may agree to mediate a claim made under this subchapter. (b) The mediation shall be conducted in accordance with rules adopted under Section 2253.105. Sec. 2253.109. AMOUNTS RECOVERABLE. (a) The total amount of money recoverable on a claim under this subchapter may not, after deducting the amount specified in Subsection (b), exceed an amount equal to the sum of: (1) the balance due and owing on the contract price; and (2) the amount or fair market value of orders or requests for additional work made by a prime contractor to the extent that the orders or requests for additional work were actually performed. (b) Any amount that would be owed the subcontractor for work not performed under a contract or in substantial compliance with its terms shall be deducted from the amount recoverable under Subsection (a). Sec. 2253.110. ADDITIONAL REMEDIES. If a resolution resulting in a settlement between the parties is not reached through the alternate dispute resolution procedure established by this subchapter, or if the parties elect not to engage in negotiations or mediation under this subchapter, a subcontractor may pursue any other applicable remedy available under this chapter or state or federal law. SECTION 2. This Act takes effect September 1, 2003, and applies only to a contract entered into on or after that date.