Part 3.
OFFICE OF THE ATTORNEY GENERAL
Chapter 68.
NEGOTIATION AND MEDIATION OF CERTAIN CONTRACT DISPUTES
The Office of the Attorney General ("OAG") adopts new Chapter 68,
Subchapters A-C, §§68.1, 68.3, 68.5, 68.7, 68.21, 68.23, 68.25,
68.27, 68.29, 68.31, 68.33, 68.35, 68.37, 68.47, 68.49, 68.51, 68.53, 68.55,
68.57, 68.59, 68.61, without changes to the proposed text as published in
the March 31, 2000, issue of
Texas Register
(25 TexReg. 2728) relating to procedures for the negotiation and mediation
of certain breach of contract claims asserted by contractors against the State
of Texas pursuant to §9 of House Bill 826, 76th. Leg., R.S., Chapter
68 (1999)(codified at Government Code, Chapter 2260) and will not be republished.
Historically, the State of Texas has been immune from suit on a contract
on the basis of sovereign immunity. Contractors seeking to assert and recover
damages on a breach of contract claim had to obtain legislative consent to
sue and a legislative appropriation to satisfy any resulting judgment. With
the enactment of Chapter 2260, the legislature has established a new and exclusive
administrative process by which a contractor who enters into a written contract
with a unit of state government for goods, services or projects, may pursue
a breach of contract claim for damages. Chapter 2260 requires a contractor
who asserts a breach of contract claim and the contracting unit of state government
to attempt to resolve the contractor's claim and any counterclaim through
negotiation, and authorizes, but does not require, the parties to mediate
their dispute. If the contractor's claim is not resolved in its entirety within
the statutory time frame, the contractor may request a contested case hearing
before the State Office of Administrative Hearings ("SOAH"). Chapter 2260
authorizes the SOAH administrative law judge to render a non-appealable decision
ordering the unit of state government to pay damages up to $250,000. If the
contractor's claim exceeds $250,000, Chapter 2260 requires the administrative
law judge to issue a written report of his or her findings to the legislature,
recommending that the legislature either appropriate money to pay all or part
of a valid claim or deny such appropriation and withhold consent to sue.
Section 2260.052(c) requires that the OAG and the units of state government
with rulemaking authority adopt rules to establish negotiation and mediation
provisions. The units of state government without rulemaking authority must
follow the rules adopted by the OAG. Section 2260.052(c) also directs the
OAG and the SOAH to provide model rules for negotiation and mediation that
units of state government with rulemaking authority may voluntarily adopt
or modify as they deem appropriate and that units of state government without
rulemaking authority may use as a practice guide. The model rules have no
force and effect in and of themselves and are merely offered as a framework
for agencies with rulemaking authority to consider while drafting their rules.
The model rules can be found by visiting the Site Index at the OAG's website,
http://www.oag.state.tx.us. Additionally, the model rules were published in
the March, 31 2000, issue of the
Texas Register
(25 TexReg 2833). An interagency dispute resolution working group, co-sponsored
by the OAG and the Center for Public Policy Dispute Resolution at the University
of Texas School of Law and consisting of representatives of state agencies,
legislative offices, and institutions of higher education and representatives
of contractors and vendors who do business with the state, assisted the OAG
and SOAH with the development of both sets of rules.
The adopted rules provide a process sufficiently flexible to permit the
parties to structure a negotiation or mediation in a manner that is most appropriate
for a particular dispute regardless of such variables as the size or organization
of the contracting unit of state government, or the contract's complexity,
subject matter, dollar amount, or method and time of performance.
Adopted Chapter 68 is organized into Subchapter A, B, and C. Subchapter
A (General, §§68.1, 68.3, 68.5, and 68.7.) Section 68.1 states that
Chapter 68 governs the negotiation and mediation of claims of breach of contract
asserted by a contractor against a unit of state government. Section 68.3
defines terms as they relate to this chapter. Section 68.5 provides that the
procedures in Chapter 68 are prerequisites to filing suit under Civil Practice &
Remedies Code, Chapter 107 and Government Code, Chapter 2260. Section 68.7
advises that the state has not waived sovereign immunity to suit or to liability.
Subchapter B, (Negotiation of Contract Disputes, §§68.21, 68.23,
68.25, 68.27, 68.29, 68.31, 68.33, 68.35, and 68.37.) Section 68.21 sets out
the requirements and procedures of the notice of claim of breach of contract
that contractor must assert. Section 68.23 sets out the requirements and procedures
of the counterclaim that the unit of state government must assert. Section
68.25 announces that the parties must negotiate to settle the dispute. Section
68.27 provides a timetable as it relates the negotiations between the contractor
and the unit of state government. Section 68.29 describes how the parties
may conduct the negotiation. Section 68.31 addresses the parties's settlement
approval procedures. Section 68.33 announces the requirements of any resulting
settlement agreement. Section 68.35 states how the costs of negotiations shall
be handled by the parties. In the event, the breach of contract claim is not
resolved in its entirety, §68.37 specifies the process by which a contractor
may seek resolution of the dispute by SOAH.
Subchapter C, (Mediation of Contract Disputes §§68.47, 68.49,
68.51, 68.53, 68.55, 68.57, 68.59, and 68.61.) Section 68.47 sets the parameters
for mediation by a neutral third party of breach of contract claims and counterclaims.
Section 68.49 discusses the qualifications, immunities, and duties of a mediator.
Section 68.51 pertains to the confidentiality of a mediation and any resulting
final settlement agreement. Section 68.53 states how the costs of mediation
shall be handled by the parties. Section 68.55 addresses the parties settlement
approval procedures. Section 68.57 details the handling of any resulting settlement
agreement. Section 68.59 states that a final settlement agreement must comply
with the provisions of §68.33 of this chapter. Section 68.61 provides
that if mediation does not resolve the dispute the contractor may request
that the claim be referred to SOAH in accordance with §68.37 of this
chapter.
No comments were received regarding adoption of these new sections.
Subchapter A. GENERAL
1 TAC §§68.1, 68.3, 68.5, 68.7
The new Chapter 68 is adopted under Government Code, Chapter
2260, Resolution of Certain Contract Claims against the State, §2260.052,
which authorizes the OAG to adopt rules deemed necessary or advisable to effectuate
Chapter 2260 and which requires the OAG, through coordinated efforts with
the SOAH, to develop rules which shall govern each unit of state government
without rulemaking authority and to develop model rules for negotiation and
mediation under this chapter for voluntary adoption by the units of state
government with rulemaking authority.
The adopted new chapter affects Texas Government Code, Chapter 2260.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on May 11, 2000.
TRD-200003332
Elizabeth Robinson
Assistant Attorney General
Office of the Attorney General
Effective date: May 31, 2000
Proposal publication date: March 31, 2000
For further information, please contact A. G. Younger at (512) 463-2110
Subchapter B. NEGOTIATION OF CONTRACT DISPUTES