Adopted Rules Title 43

TITLE 43. TRANSPORTATION

Part 1. TEXAS DEPARTMENT OF TRANSPORTATION

Chapter 9. CONTRACT MANAGEMENT

The Texas Department of Transportation (department) adopts amendments to §9.2, concerning contract claim procedure and §9.38, concerning contract management. The amendments to §9.2 are adopted with changes to the proposed text as published in the May 11, 2007, issue of the Texas Register (32 TexReg 2631). The amendments to §9.38 are adopted without changes to the proposed text as published in the May 11, 2007, issue of the Texas Register (32 TexReg 2631) and will not be republished.

EXPLANATION OF ADOPTED AMENDMENTS

Contract claims for certain department contracts, including construction, maintenance, and professional service contracts, are governed by §9.2, Contract Claim Procedure.

The amendments to §9.2 distinguish the procedures for a contractor making a claim against the department, versus the department making a claim against the contractor. The department's authority to issue rules on the matter is Transportation Code, §201.112, which specifies that a "person with a claim" may make a contract claim using the procedures adopted by the department. These amendments are necessary to resolve confusion about where and when the department itself may file a claim.

Transportation Code, §201.112 does not explicitly limit to contractors the authority to file a claim. However, when the department has a claim against a contractor, the department may file suit in court. The amendments clarify that the department may, but is not required to, use the administrative proceeding to file a counter claim.

Subsections 9.2(a)(3) and (b) are amended to show that only a prime contractor may submit a claim to begin a claim proceeding under the section. The amendments also add that after a claim proceeding has begun the department may make a counter claim.

Subsection 9.2(b)(3) is added concerning the department's authority to file a claim in a court of competent jurisdiction. The departments ability to file suit in court is established by other law, and the section is not intended to affect such law.

Subsection 9.2(d) concerns definitions. Paragraph 9.2(d)(1) is amended to clarify an ambiguity in the existing language and to make the definition of "claim" consistent with the standard for filing a claim in paragraph 9.2(a)(2). The new language makes clear that a claim must relate to an actual request for relief. The definition of "claimant" is deleted because the term is no longer used in the section. The subsequent provisions are renumbered.

Subsection 9.2(g)(1) and (2)concerns the procedure for filing a claim. The amendments substitute "prime contractor" for "claimant" to clarify that only a prime contractor may file an original claim. A provision is added setting a deadline of 45 days for the department to file a counterclaim before the contract claim committee holds the informal meeting with the contractor.

Subsection 9.2(g)(3) and (5) adds that the prime contractor shall be given an opportunity to submit a responsive report and recommendation concerning the counterclaim. The provisions concerning the response to the recommendation by the contract claim committee substitute "prime contractor" for "claimant." The prime contractor files the original claim, and so the prime contractor is the proper entity that is responsible for responding to the committee's recommendation. The department may enforce in a court of competent jurisdiction a final department order issued under the section.

Subsection 9.38(f), Errors and omissions, is amended to show that the department will first give notice to a provider of errors and omissions, and will attempt to resolve a claim through informal resolution. The amendments also clarify that the department's authority to file suit in court is established by other law, and the section is not intended to affect such law. The amendment also clarifies that a contract claim under §9.2 must be initiated by a contractor.

COMMENTS

No comments on the proposed amendments were received.

Subparagraph (g)(2)(A) of §9.2 is revised to include the deadline for filing a claim resulting from the enforcement of a warranty. When a warranty period extends beyond when the department issues final acceptance of the project, the revised deadline will provide additional time for a prime contractor to file a claim that results from the enforcement of a warranty. Subparagraph (g)(2)(B) of §9.2 concerns the detailed report that must accompany a prime contractor's claim. The detailed report is more clearly defined as including relevant facts of the claim, cost or other data supporting the claim, a description of any additional compensation requested, and documents supporting the claim. Describing the contents in the rule will provide greater notice of the requirements to the prime contractor.

Subchapter A. GENERAL

43 TAC §9.2

STATUTORY AUTHORITY

The amendments are adopted under Transportation Code, §201.101, which provides the commission with the authority to establish rules for the conduct of the work of the department, and more specifically, Transportation Code, §201.112, which provides the department with the authority to create a contract claims procedure for certain contracts.

CROSS REFERENCE TO STATUTE

Transportation Code, §201.112.

§9.2.Contract Claim Procedure.

(a) Applicability. A claim shall satisfy the requirements in paragraphs (1) - (3) of this subsection.

(1) The claim is under a contract entered into and administered by the department, acting in its own capacity or as an agent of a local government, under one of the following statutes:

(A) Transportation Code, §22.018 (concerning the designation of the department as agent in contracting and supervising for aviation projects);

(B) Transportation Code, §391.091 (concerning erection and maintenance of specific information logo, major area shopping guide, and major agricultural interest signs);

(C) Transportation Code, Chapter 223 (concerning bids and contracts for highway improvement projects), subject to the provisions of subsection (c) of this section; or

(D) Government Code, Chapter 2254, Subchapters A and B (concerning professional or consulting services).

(2) The claim is for compensation, or for a time extension, or any other remedy.

(3) The claim is brought by a prime contractor.

(b) Pass-through claim; claim and counter claim.

(1) A prime contractor may make a claim on behalf of a subcontractor only if the prime contractor is liable to the subcontractor on the claim.

(2) Only a prime contractor may submit a claim to begin a claim proceeding under this section. After a claim proceeding has begun the department may make a counter claim.

(3) This section does not abrogate the department's authority to file a claim in a court of competent jurisdiction. The procedure for the department to file a claim in a court of competent jurisdiction, including the deadline to file a claim, is set by other law.

(c) Claim concerning comprehensive development agreement. A claim under a comprehensive development agreement (CDA) entered into under Transportation Code, Chapter 223, Subchapter E, may be processed under this section if the parties agree to do so in the CDA, or if the CDA does not specify otherwise. However, if the CDA specifies that a claim procedure authorized by §9.6 of this chapter (relating to Contract Claim Procedure for Comprehensive Development Agreement) applies, then any claim arising under the CDA shall be processed and resolved in accordance with the claim procedure authorized by §9.6 of this chapter and not by this section.

(d) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise, except that when used in subsection (c) of this section, the terms claim, comprehensive development agreement and CDA shall have the meanings given such terms stated in §9.6 of this chapter.

(1) Claim--A claim for compensation, for a time extension, or for any other remedy arising from a dispute, disagreement, or controversy concerning respective rights and obligations under the contract.

(2) Commission--The Texas Transportation Commission.

(3) Committee--The Contract Claim Committee.

(4) Department--The Texas Department of Transportation.

(5) Department office--The department district, division, or office responsible for the administration of the contract.

(6) Department office director--The chief administrative officer of the responsible department office; the officer shall be a district engineer, division director, or office director.

(7) District--One of the 25 districts of the department.

(8) Executive director--The executive director of the Texas Department of Transportation.

(9) Prime contractor--An individual, partnership, corporation, or other business entity that is a party to a written contract with the state of Texas which is entered into and administered by the department under Transportation Code, §22.018, §391.091, Chapter 223, or Government Code, Chapter 2254, Subchapters A and B.

(10) Project--The portion of a contract that can be separated into a distinct facility or work unit from the other work in the contract.

(e) Contract claim committee. The executive director shall name the members and chairman of a committee or committees to serve at the executive director's pleasure. The chairman may add members to the committee, including one or more district engineers who will be assigned to the committee on a rotating basis, with a preference, if possible, for district engineers of districts that do not have a current contractual relationship with the prime contractor involved in a contract claim.

(f) Negotiated resolution. To every extent possible, disputes between a prime contractor and the department's project engineer should be resolved during the course of the contract.

(g) Procedure.

(1) Exclusive procedure. Except as provided in subsection (c) of this section, a prime contractor shall file a claim under the procedure in this subsection. A claim filed by the prime contractor must be considered first by the committee before the claim is considered in a contested case hearing.

(2) Filing claim.

(A) The prime contractor shall file a claim after completion of the contract or when required for orderly performance of the contract. For a claim resulting from the enforcement of a warranty, a prime contractor shall file the claim no later than one year after expiration of the warranty period. For all other types of claims, a prime contractor shall file the claim no later than one year after the earlier of the following:

(i) the department issues notice to the contractor that it is in default, or the department terminates the contract; or

(ii) the department issues final acceptance of the project that is the subject of the contract.

(B) To file a claim, a prime contractor shall file a contract claim request and a detailed report that provides the basis for the claim. The detailed report shall include relevant facts of the claim, cost or other data supporting the claim, a description of any additional compensation requested, and documents supporting the claim. The prime contractor shall file the claim with the department's construction division, the department engineer under whose administration the contract was or is being performed, or the committee.

(C) A claim filed by a prime contractor shall include a certification as follows: I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the contractor believes the department is liable; and that I am duly authorized to certify the claim on behalf of the contractor.

(D) A defective certification shall not deprive the department of jurisdiction over the claim. Prior to the entry by the department of a final decision on the claim the department shall require a defective certification to be corrected.

(E) The construction division or department engineer shall forward the contract claim request and detailed report to the committee.

(F) The deadline for the department to file a counter claim is 45 days before the committee holds an informal meeting under paragraph (3) of this subsection.

(3) Evaluation of claim by the committee.

(A) The committee's responsibility is to gather information, study the relevant issues, and meet informally with the prime contractor if requested. The committee shall attempt to resolve the claim.

(B) The committee shall secure detailed reports and recommendations from the responsible department office, and may confer with any other department office deemed appropriate by the committee. The committee shall give the prime contractor the opportunity to submit a responsive report and recommendation concerning a counter claim filed by the department.

(C) The committee shall afford the prime contractor an opportunity for a meeting to informally discuss the disputed matters and to provide the prime contractor an opportunity to present relevant information and respond to information the committee has received from the department office. Proceedings before the committee are an attempt to mutually resolve a claim without litigation and are not admissible for any purpose in a formal administrative hearing provided in subparagraph (D)(ii) of this paragraph. All oral communications, reports, or other written documentation prepared by department staff in connection with the analysis of a claim are part of the attempt to mutually resolve a claim without litigation, and are also not admissible for any purpose in a formal administrative hearing provided in subparagraph (D)(ii) of this paragraph.

(D) The committee chairman shall give written notice of the committee's decision on the claim to the department and prime contractor. The department and prime contractor are presumed to receive the decision three days after it is sent by United States mail.

(i) If the prime contractor does not object to the committee's decision, the prime contractor shall file a written statement with the committee's chairman stating that the prime contractor does not object. The prime contractor shall file the statement no later than 20 days after receipt of the committee's decision. The chairman shall then prepare a document showing the settlement of the claim including, when required, payment to the prime contractor, and the prime contractor's release of all claims under the contract. The prime contractor shall sign it. The executive director may approve the settlement, or may request the commission to approve the settlement by issuance of an order. The executive director shall then implement the resolution of the claim. If contemplated in the committee's decision, the executive director shall expend funds as specified in the decision. If contemplated in the committee's decision, the executive director shall order the prime contractor to make payment to the department.

(ii) If the prime contractor objects to the committee's decision the prime contractor shall file a petition with the executive director no later than 20 days after receipt of the committee's decision requesting an administrative hearing to litigate the claim under the provisions of §§1.21 et seq. of this title (relating to Procedures in Contested Cases).

(iii) If the prime contractor fails to file a written petition under clause (ii) of this subparagraph within 20 days of receipt of the committee's decision, the prime contractor waives his right to a contested case hearing. All further litigation of claims on the project or contract by the prime contractor shall be barred by the doctrines of issue and claim preclusion. The chairman shall then prepare an order implementing the resolution of the claim under the committee's decision, and stating that further litigation on the claim is prohibited. The executive director shall then issue the order and implement the resolution of the claim. If contemplated in the committee's decision, the executive director shall expend funds as specified in the decision. If contemplated in the committee's decision, the executive director shall order the prime contractor to make payment to the department.

(4) Decision after contested case hearing. This paragraph applies if a contested case hearing has been held on a claim. The administrative law judge's proposal for decision shall be submitted to the executive director for adoption. The executive director may change a finding of fact or conclusion of law made by the administrative law judge or may vacate or modify an order issued by the administrative law judge. The executive director shall provide a written statement containing the reason and legal basis for any change.

(5) This section does not abrogate the department's authority to enforce in a court of competent jurisdiction a final department order issued under the section.

(h) Claim forfeiture. A claim against the department shall be forfeited to the department by any person who corruptly practices or attempts to practice any fraud against the department in the proof, statement, establishment, or allowance thereof. In such cases the department shall specifically find such fraud or attempt and render judgment of forfeiture. This subsection applies only if there is clear and convincing evidence that a person knowingly presented a false claim for the purpose of getting paid for the claim.

(i) Relation of contract claim proceeding and sanction proceeding.

(1) Except as provided in paragraphs (2) and (3) of this subsection, the processing of a contract claim under this section is a separate proceeding and shall not affect the executive director's assessment of a contract sanction under Subchapter G of this chapter (relating to Contractor Sanctions).

(2) If a contested issue arises that is relevant both to a contract claim proceeding and a sanction proceeding concerning the same contract, the issue shall be resolved in the proceeding that the executive director refers first for a contested case hearing under Chapter 1, Subchapter E of this title (relating to Procedures in Contested Cases). If the issue is decided in the first proceeding that decision shall apply to and be binding in all subsequent department proceedings.

(3) This paragraph applies to a contract under which the parties agreed to submit questions which may arise to the decision of a department engineer. If a dispute under the contract leads to a contract claim proceeding or sanction proceeding, the engineer's decision shall be upheld unless it was based on fraud, misconduct, or such gross mistake as would imply bad faith or failure to exercise an honest judgment.

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 June 29, 2007.

TRD-200702746

Bob Jackson

General Counsel

Texas Department of Transportation

Effective date: July 19, 2007

Proposal publication date: May 11, 2007

For further information, please call: (512) 463-8683

Subchapter C. CONTRACTING FOR ARCHITECTURAL, ENGINEERING, AND SURVEYING SERVICES

43 TAC §9.38