Part 1. TEXAS DEPARTMENT OF TRANSPORTATION

Chapter 27. TOLL PROJECTS

Subchapter A. COMPREHENSIVE DEVELOPMENT AGREEMENTS

The Texas Department of Transportation (department) adopts amendments to §27.2, definitions, §27.3, general rules for private involvement, §27.4, solicited proposals, §27.5, unsolicited proposals, and new §27.7, design-build contracts, §27.8, conflict of interest and ethics policies, and §27.9, sanctions, all concerning comprehensive development agreements. The amendments to §27.5, new §27.7, and new §27.8 are adopted with changes to the proposed text as published in the December 1, 2006, issue of the Texas Register (31 TexReg 9693). The amendments to §§27.2 - 27.4 and new §27.9 are adopted without changes to the proposed text as published in the December 1, 2006, issue of the Texas Register (31 TexReg 9693) and will not be republished.

EXPLANATION OF ADOPTED AMENDMENTS AND NEW SECTIONS

Under Transportation Code, §223.203(e)(1), the Texas Transportation Commission (commission) is required to adopt rules establishing criteria for the prequalification of a private entity to submit a detailed proposal to provide services under a design-build contract that include the precertification requirements applicable to providers of engineering services and the qualification requirements for bidders on highway construction contracts. Rules for design-build projects adopted pursuant to that subsection are also required to provide for an expedited selection process that includes design innovation as a selection criterion.

The amendments and new sections implement requirements to adopt an ethics policy applicable to comprehensive development agreement procurements. The ethics policy is required to include conflict of interest guidelines applicable to private entities interested in participating in the department's comprehensive development agreement program and provisions relating to the acceptance of gifts and benefits by department employees. The amendments and new sections also prescribe rules of contact that regulate communications between proposers or any of its team members and the commission, department, and third parties involved in a procurement. The commission has prescribed conflict of interest provisions and communications restrictions in order to provide a fair and unbiased comprehensive development agreement procurement process and to ensure high standards of ethics and fairness in the administration of the comprehensive development agreement program.

The amendments and new sections concerning sanctions are applicable to private entities participating in the department's comprehensive development agreement program. The new provisions are modeled after the department's existing rules pertaining to contractor sanctions. The purpose of these provisions is to ensure high standards of ethics and fairness in the administration of the comprehensive development agreement program and to provide the department the appropriate remedy should a private entity engage in prohibited conduct.

In order to ensure the efficient administration of the comprehensive development agreement program and to ensure the commission and department further evaluate only those proposals that provide for the most efficient use of department resources, the amendments and new sections also clarify that the department, rather than the commission, approves the short list of entities considered most qualified to submit detailed proposals for a project, and prescribe additional information that must be contained in an unsolicited proposal, as well as additional criteria the commission will consider in determining whether to authorize the issuance of a request for competing proposals and qualifications for a project described in an unsolicited proposal.

The amendments and new sections finally make revisions necessary to ensure consistency in the processing of solicited and unsolicited proposals, and to make other nonsubstantive changes.

Amended §27.2, Definitions, defines words and terms used in new §§27.7 - 27.9. The definition of conflict of interest is consistent with the Federal Highway Administration's organizational conflict of interest regulations contained in 23 CFR §636.116, and is intended to provide a fair and unbiased comprehensive development agreement procurement process. That definition, and other definitions used in new §27.8, Conflict of interest and ethics policies, are authorized by Transportation Code, §223.209, which provides that the commission shall adopt rules, procedures, and guidelines governing selection of a developer for a comprehensive development agreement and negotiations to promote fairness, obtain private participants in projects, and promote confidence among those participants. Other amendments to §27.2 make grammatical and other nonsubstantive changes and renumber existing provisions.

Amended §27.3(e) adds terminology used in comprehensive development agreement procurement documents, recognizes that procurement documents will include additional rules of contact required by §27.8(d), and makes grammatical changes. Amended §27.3(l) and (o) clarify that those provisions apply to projects eligible for development under a comprehensive development agreement. Amended §27.3(p) makes a grammatical change, and §27.3(q) is removed as a result of the proposal of conflict of interest and ethics policies in new §27.8.

In order to ensure the efficient administration of the comprehensive development agreement program, amended §27.4(d) clarifies that the department, rather than the commission, approves the short list of entities considered most qualified to submit detailed proposals for a project, and makes nonsubstantive changes. Other amendments in §27.4 clarify that certain provisions apply to projects eligible for development under a comprehensive development agreement, and clarify that project financing is an authorized part of a comprehensive development agreement.

In order to ensure the efficient administration of the comprehensive development agreement program and the selection and scheduling of projects developed under the program, and to ensure the commission and department further evaluate only those proposals that provide for the most efficient use of department resources, amended §27.5(b) prescribes additional information that must be contained in an unsolicited proposal for a comprehensive development agreement project. The additional information will better allow the commission and the department to assess any unsolicited proposals consistent with the department's goals and limited financial and personnel resources. Those goals include better control by the department over the development, delivery, and scheduling of projects, which should improve the nature and substance of unsolicited proposals received by the department.

Amended §27.5(c) prescribes additional criteria on which a recommendation to the commission to issue a request for competing proposals and qualifications will be based. These criteria, and the additional information required to be contained in a proposal under §27.5(b), are intended to ensure that the commission and department further evaluate only those proposals that best meet the department's transportation planning goals and policies and that provide for the most efficient use of limited department and proposer resources.

Amended §27.5, Unsolicited proposals, also makes revisions necessary to ensure consistency in the processing of solicited and unsolicited proposals, makes changes to ensure consistency in terminology used in this subchapter, and to make other nonsubstantive changes to better clarify the requirements of this section.

Under new §27.7, Design-build contracts, the department will be authorized to prequalify private entities to submit detailed proposals to provide services under a design-build contract. Those contracts may be procured, as determined by the department, using a one-step process where entities are prequalified to respond to a request for proposals, and the department may enter into a design-build contract based solely on an evaluation of detailed proposals submitted in response to a request for proposals. This is unlike other types of comprehensive development agreements where a two-step procurement process is used, first to short-list the most qualified proposers to submit detailed proposals, and then to select the proposer whose detailed proposal provides the best value. As the prequalification process authorized under new §27.7 is a substitute for the evaluation of qualification submittals pursuant to a request for qualifications, each entity that is part of a proposer team that intends to submit a detailed proposal must be prequalified or precertified in accordance with the requirements of §27.7.

New §27.7(a) sets out the applicability of the new rule to design-build contracts under the department's comprehensive development agreement program.

New §27.7(b) provides a process for the prequalification of providers of construction, maintenance, and operations services to propose on design-build contracts under the department's comprehensive development agreement program. Private entities that are prequalified will be eligible to propose on design-build contracts in response to a request for proposals.

New §27.7(c) provides a process for the precertification of providers of engineering, architectural, or surveying services to propose on design-build contracts under the department's comprehensive development agreement program. Private entities that are precertified will be eligible to propose on design-build contracts in response to a request for proposals.

New §27.7(d) provides a process for the administrative qualification of providers of engineering, architectural, or surveying services on design-build contracts as required by the department's audit office. Administrative qualification includes an examination of a private entity's accounting system, an audit of its indirect cost rate, salary rates, and direct costs.

New §27.7(e) sets out the evaluation process for design-build contract proposals submitted in response to a request for proposals, and includes design innovation as a required criterion. The evaluation process will be comprised of an evaluation of detailed proposals received from prequalified private entities only. The department will not issue a request for qualifications to qualify entities to submit detailed proposals.

New §27.8, Conflict of interest and ethics policies, prescribes ethical standards of conduct applicable to private entities, including consultants and subconsultants, participating in the department's comprehensive development agreement program. A private entity's failure to comply with these standards of conduct may result in the private entity's exclusion from participation in a project or sanctions being imposed under §27.9, Sanctions.

New §27.8(b) prohibits a proposer, developer, consultant, or subconsultant participating in the comprehensive development agreement program, or an affiliate of any of those entities, from offering, giving, or agreeing to give a gift or benefit to a member of the commission or to a department employee whose work for the department includes the performance of procurement services relating to a comprehensive development agreement project, or who participates in the administration of a comprehensive development agreement. Section 27.8(b) provides certain exceptions to this prohibition for department consultants and subconsultants that are not a member of a proposer or developer team that are consistent with state laws relating to gifts to public servants. No exceptions are made for proposers or developers because of the appearance of impropriety or competitive advantage that would result from the offer or acceptance of a gift or benefit.

New §27.8(c) prescribes department policy on conflicts of interest relating to consultants and subconsultants participating in the comprehensive development agreement program. This policy is necessary to protect the integrity and fairness of the program and all procurements carried out by the department as part of the program.

Section 27.8(c)(2) provides that this policy applies to all comprehensive development agreement projects undertaken by the department, and applies to consultants and subconsultants and their individual employees who participated in the performance of services for the department. The policy may by extension prohibit or restrict the ability of a proposer to have a consultant or subconsultant participate on the proposer team as an equity owner or team member, act as a consultant or subconsultant to the proposer, or have a financial interest in the proposer or an equity owner or team member of the proposer.

Section 27.8(c)(3) prescribes the period of time in which a conflict of interest will be deemed to exist, and the period of time the resulting prohibition or restriction provided in §27.8(c) will continue. Section 27.8(c)(4) provides that if a conflict of interest is determined to apply to an individual, it will not apply to the individual's new place of employment, other than an affiliate of its previous employer. The prohibition or restriction will continue to apply to the individual for the prescribed period of time. Section 27.8(c)(5) clarifies that the requirements of §27.8(c) do not limit, modify, or otherwise alter the applicability of the Federal Highway Administration's organizational conflict of interest regulations, which the department must comply with in the case of a federal-aid project.

Section 27.8(c)(6) prescribes general conflict of interest standards, which generally prohibit a consultant providing consultant services to the department with respect to a comprehensive development agreement project from being a proposer or participating as an equity owner, team member, consultant, or subconsultant of or to a proposer for that project, or having a financial interest in any of the foregoing entities with respect to that project. Except as provided in §27.8(c)(8) and (9), this prohibition would not apply to participation in a different comprehensive development agreement project.

Section 27.8(c)(7) contains exceptions to the prohibitions in §27.8(c)(6) for consultants providing preliminary engineering and architectural services, environmental services, and traffic and revenue services. Section 27.8(c)(8) prohibits consultants actively engaged and performing procurement services or financial services with respect to a comprehensive development agreement project from being a proposer or participating as an equity owner, team member, consultant, or subconsultant of or to a proposer for that project or any other comprehensive development agreement project, or having a financial interest in any of the foregoing entities with respect to any comprehensive development agreement project. Consultants providing those services have access to information that could provide a competitive advantage to a proposer.

Section 27.8(c)(9) prescribes conditions for consultants that have completed the performance of consultant services for the department to be a proposer or to participate as an equity owner, team member, consultant, or subconsultant of or to a proposer for a comprehensive development agreement project, or to have a financial interest in any of the foregoing entities with respect to a comprehensive development agreement project.

Section 27.8(c)(10) prescribes the process for a consultant, proposer, or developer to submit a request for a determination as to whether certain participation in a comprehensive development agreement project, or the performance of particular services with respect to a comprehensive development agreement project would constitute a conflict of interest, or to request approval of an exception to the applicability of the conflict of interest policies, including an appeal of a previous determination that a conflict of interest exists. Section 27.8(c)(10) also prescribes the criteria that will be considered by the executive director in reviewing a request.

Section 27.8(c)(11) concerns the applicability of the conflict of interest policies where a consultant is providing more than one category of consultant services to the department. Section 27.8(c)(12) concerns the eligibility of an entity participating with respect to a comprehensive development agreement project as a proposer or developer, or as an equity owner, team member, consultant, or subconsultant of or to a proposer or developer, or having a financial interest in any of the foregoing entities to provide consultant services (other than procurement services) to the department for another comprehensive development agreement project.

Section 27.8(c)(13) allows the department to restrict the scope of services a consultant or subconsultant may be eligible to perform for the department in order to further the intent and goals of §27.8(c), and to condition a determination that a conflict of interest does not exist or an exception to the applicability of the conflict of interest policies as appropriate to further the intent and goals of §27.8(c), including by requiring the consultant, subconsultant, proposer, or developer to execute confidentiality agreements, institute ethical walls, or segregate certain personnel from participation in a project or the performance of consultant services.

Section 27.8(c)(14) provides that the provisions in §27.8(c) do not address every situation that may arise in the context of the department's comprehensive development agreement program nor require a particular decision or determination by the executive director. The department retains the ultimate and sole discretion to determine on a case-by-case basis whether a conflict of interest exists and what actions may be appropriate to avoid, neutralize, or mitigate any actual or potential conflict, or the appearance of any conflict.

In order to provide a fair and unbiased procurement process, new §27.8(d) prescribes rules of contact regulating communications between proposers for a comprehensive development agreement project or any of its team members and the commission, the department, and third parties involved in the procurement. The prescribed rules must be contained in a request for qualifications, request for proposals, or request for competing proposals and qualifications. The rules of contact generally prohibit any ex parte communication regarding the project, request for qualifications, request for proposals, or request for competing proposals and qualifications or the procurement with any member of the commission or with any department staff, advisors, contractors, or consultants involved in the procurement until the earliest of the execution and delivery of the comprehensive development agreement, the rejection of all qualifications submittals or proposals by the department, or the cancellation of the procurement.

Certain communications may be allowed by the department in exceptional circumstances, and confidential communications may be made to a department employee not involved in the procurement. Section 27.8(d) allows the executive director to disqualify a proposer from the procurement and participation in the project at issue or to impose another sanction under §27.9 if it is determined that a proposer has engaged in any improper communications in violation of the rules of contact. Section 27.8(e) provides certain exceptions to the rules of contact.

New §27.9, Sanctions, is authorized by Transportation Code, §223.209, which provides that the commission shall adopt rules, procedures, and guidelines governing selection of a developer for a comprehensive development agreement and negotiations to promote fairness, obtain private participants in projects, and promote confidence among those participants.

Section 27.9(a) pertains to general sanction procedures. Subsection (a)(1) provides that a copy of the sanction rules will be included in certain procurement documents issued by the department. However, non-compliance with this provision will not affect the applicability of the sanction rules. Subsection (a)(2) references the criteria the department will consider when referring a private entity to the executive director for sanction action. Subsection (a)(3) sets forth the method by which a private entity will be notified of sanction action, the contents of such notice, as well as the effective date of the sanction. Subsection (a)(4) provides that the executive director and the private entity may modify the procedure for considering the sanction. Subsection (a)(5) specifies that sanction action does not affect the private entity's obligations under a comprehensive development agreement or any other agreement with the department nor does the action limit potential remedies available to the commission. Subsection (a)(6) provides that the term "private entity" also encompasses any affiliated entities and identifies what constitutes an affiliated entity. Subsection (a)(7) indicates that the private entity will be held responsible for the acts of individuals or other entities acting on behalf of the private entity.

Section 27.9(b) relates to the hearing process applicable to sanction actions. Subsection (b)(1) indicates that the private entity has the opportunity for a hearing as provided in §1.21 of the department's rules (pertaining to Procedures in Contested Cases). Subsection (b)(2) provides for a stay of sanctions (except for suspension action) pending the hearing process. Subsection (b)(3) specifies that the commission may reduce, eliminate or modify the sanction in the public interest. Subsection (b)(4) provides an exception to the hearing process if the private entity is sanctioned through the use of a reprimand.

Section 27.9(c) creates guidelines for the application of sanctions. Subsection (c)(1) indicates that the executive director will determine whether a private entity has committed a sanctionable act or omission. Subsection (c)(2) provides that the executive director will consider all facts and circumstances, including the seriousness of the act or omission and any mitigating circumstances, in determining whether or not a private entity will be sanctioned. Subsection (c)(3) sets forth a non-exclusive list of mitigating circumstances which may be considered by the executive director in deciding whether or not to impose sanctions. Subsection (c)(4) explains that the executive director will determine the level of sanction to be imposed on the private entity. Subsection (c)(5) sets forth the concept of progressive sanction action, whereby the executive director may use increasingly more severe sanctions to achieve compliance with the department's policies and procedures. Subsection (c)(6) indicates that multiple violations by a private entity may result in multiple sanctions which may be imposed consecutively or in any order. Subsection (c)(7) authorizes the imposition of a lesser sanction as opposed to the maximum sanction permitted by the rules. Subsection (c)(8) grants the executive director the discretion to reduce, eliminate, or modify a sanction in the best interest of the state or the comprehensive development agreement program.

Section 27.9(d) relates to suspension action. Subsection (d)(1) provides that the executive director may immediately suspend a private entity without a prior hearing if the private entity is notified of a debarment. Subsection (d)(2) indicates that a suspension terminates when a final order is entered after a hearing or when ordered by the executive director.

Section 27.9(e) details the grounds for sanction action, specific sanction levels and subsequent use of sanction information. Subsection (e)(1) enumerates the specific acts or omissions for which the executive director may sanction a private entity. Subsection (e)(2) provides that the executive director will determine the sanction level and sets forth the four levels of sanction action, ranging from reprimand to permanent debarment. Subsection (e)(3) indicates that a debarment may not be for more that the period of debarment established by the state or federal agency on whose actions the debarment is based. Subsection (e)(4) allows the department to consider any sanction imposed against a private entity during the evaluation of qualification submittals and other proposals submitted by the private entity during a procurement process.

COMMENTS

Comments on the proposed amendments and new sections were received from Zachry American Infrastructure (ZAI).

Comment: ZAI commented that the department is creating market disincentives by making the evaluation of unsolicited proposals consistent with solicited proposals. ZAI indicated that the intent of the unsolicited process is to encourage the private sector to use innovation and creativity to provide transportation solutions and this will not likely occur if the process is standardized.

Response: Transportation Code, §223.203 clearly contemplates that the evaluation of unsolicited proposals will be consistent with the evaluation of solicited proposals. For example, §223.203(c) requires the department to publish a notice advertising a request for competing proposals and qualifications that includes the criteria to be used to evaluate the proposals, the relative weight given to the criteria, and a deadline by which proposals must be received if the department decides to issue a request for qualifications for a proposed project or the department authorizes the further evaluation of an unsolicited proposal. No change has been made.

Comment: ZAI commented that the requirement in the proposed rules that the proposer provide more detailed technical information to the department will increase the cost of preparing and submitting an unsolicited proposal, and therefore reduce the attractiveness of doing so for the private sector.

Response: The additional information will better allow the commission and the department to assess any unsolicited proposals consistent with the department's goals and limited financial and personnel resources. Those goals include better control by the department over the development, delivery, and scheduling of projects, which should improve the nature and substance of unsolicited proposals received by the department. No change has been made.

Comment: ZAI commented that the preliminary evaluation criteria assume the department can evaluate whether meaningful competition can be generated if the unsolicited proposal moves forward. ZAI indicated that the market is well suited to determine if the concepts in a proposal are of interest to the market, and if so, competitors will come forth, and therefore this evaluation element should be deleted.

Response: One of the department's strategies for responding to the state's mobility needs is to increase competitive pressure to drive down the cost of transportation projects. The comprehensive development agreement project delivery method is being used to encourage cost effective solutions to long term transportation problems. The department is implementing processes to encourage more competition among companies that do business with the department. While, as ZAI notes, there are provisions in the rules that allow the department to proceed with a single proposer, it will not proceed with a procurement if there is no indication that meaningful competition can be generated. No change has been made.

Comment: ZAI commented that the proposed rule changes do not address any timetables for the department to evaluate, and if appropriate, go forward with the competitive process once an unsolicited proposal is submitted.

Response: While the department understands that timetables may help to reduce uncertainty regarding the process for the private sector, the length of time it takes to carry out the procurement process is dependent on the nature and scope of a project. The department has put forth a concerted effort to develop programmatic documents and other materials in order to streamline the procurement process. No change has been made.

Comment: ZAI stated that the proposed rule changes do not address how the scope, content, and other elements of an unsolicited proposal may or may not be altered or modified by the department prior to the competing proposal process. ZAI contends the intellectual integrity and proprietary nature of the proposer's concepts should be protected. ZAI states that any modification should be in consultation with the original proposer.

Response: In carrying out the unsolicited proposal procurement process, the department endeavors to protect a proposer's proprietary concepts as much as possible. However, the department has to describe the project opportunity in any request for qualifications or request for proposals. The department may reduce the scope of a project as proposed in an unsolicited proposal if the original proposer desires to keep aspects of their proposal confidential or as necessary to ensure compliance with the criteria for recommending the issuance of a request for competing proposals and qualifications under §27.5(c), such as the project's furtherance of state, regional, and local transportation plans and goals, and consistency with system planning objectives and priorities and projects under development. Project scope will be one of the issues discussed with proposers during the one-on-one meeting process. No change has been made.

Comment: ZAI commented that some of the specific information that would now be required in an unsolicited proposal under §27.5(b)(1) cannot be provided if a locally preferred alternative has not been identified through the NEPA process. ZAI suggests that this information be provided "where available."

Response: The change has been made.

Comment: ZAI indicated that it will be difficult to quantify the "potential impacts of competing facilities" on the proposed project at this early stage of the process.

Response: Section 27.5(b)(10) does not require an identification of specific impacts that are unknown or uncertain at the time a proposal is submitted. No change has been made.

Comment: ZAI noted that while other sections in this chapter mention the department's goal to foster design or other innovation, that is not one of the preliminary evaluation factors listed in §27.5(c), and ask whether this should be considered in the evaluation.

Response: The change has been made.

Comment: ZAI requested general clarification regarding the applicability of new §27.7 to concession contracts and whether the department intends to pre-qualify members of a concession team.

Response: The department does not intend to pre-qualify members of a concession team. Members of teams proposing on concession projects will be prequalified through the shortlisting process set forth in §27.4(d). Proposed new §27.7 only applies to design-build CDAs, it does not apply to concession CDAs, as set forth in proposed new §27.7(a). Therefore, a company that is not prequalified in accordance with new §27.7 is precluded from proposing on a design-build contract, but is not precluded from participating as a proposer on a concession contract. No change has been made.

Comment: ZAI said that the department has not provided a copy of the confidential questionnaire required to be submitted to the department as part of the prequalification application process and that the department should develop and provide the confidential questionnaire.

Response: The department disagrees with the comment. The confidential questionnaire is a standard form maintained by the department's construction division and currently used by the department in its prequalification program for let projects. Specifically, it is Form 2065 and available on the department's website at www.dot.state.tx.us/forms/txdotforms.htm#prequalification.

Comment: ZAI asked whether the department can protect the confidentiality of information submitted in the confidential questionnaire.

Response: The department will follow the procedures regarding requests for public information set forth in the Public Information Act (Act), Government Code, Chapter 552. If the department received a request for information contained in a confidential questionnaire, the department, in accordance with the Act, would request a ruling from the Office of the Attorney General (OAG) regarding the confidentiality of the information submitted in that questionnaire. In previous open records rulings, the OAG has ruled that information contained in confidential questionnaires submitted to the Construction Division as part of the department's prequalification program may be withheld from disclosure. No change has been made.

Comment: ZAI asked if the department would publicly identify those prequalification applicants for whom the department grants waiver from the audited financial qualification requirements of proposed new §27.7(b)(1)(A).

Response: While the department appreciates the commenter's interest in the design-build CDA program, this question does not pose a substantive comment on the operation of the proposed rule. However, the department notes that if a particular project satisfied the criteria for waiver, that fact would likely be noted in the request for proposals for the project. No change has been made.

Comment: ZAI commented that the five year bar in §27.8(c)(3)(B) on involvement in any project on which an individual worked for the department should be a two year bar.

Response: The primary reason for imposing a bar is because the performance of services for the department provides the individual with access to information which could provide a competitive advantage to the proposer or developer team that person joins. The five year period allows sufficient time for any effect on that project or the comprehensive development agreement program to be reduced to an acceptable level, while allowing that person to pursue his or her professional career. A change has been made to clarify that the bar in §27.8(c)(3)(A) and (B) runs for a one or five year period starting from when the performance of services ends.

Comment: ZAI stated that there is a discrepancy between §27.8(c)(3)(B) and §27.8(c)(6), and implies there is also a discrepancy with §27.8(c)(9). ZAI indicates that the varying rules for each type of consulting service make this section very difficult to decipher, interpret, and implement.

Response: The department does not believe there is a discrepancy between those paragraphs. Section 27.8(c)(3) prescribes the period in which a prohibition or restriction continues if the executive director determines that the performance of services by a consultant or subconsultant raises a conflict of interest. Section 27.8(c)(5) - (9) contains the provisions prescribing when a conflict of interest would be deemed to exist for various types of services unless an exception is granted by the executive director, or would not be deemed to exist. No change has been made.

Comment: ZAI commented that the provision in §27.8(c)(7)(E) is ambiguous, and asked how the department would determine that the consultant's prior traffic and revenue services would have no impact on the project's plan of finance.

Response: Section 27.8(c)(7) concerns a consultant that performed and completed traffic and revenue services for a comprehensive development agreement project that wishes to be a proposer or participate as an equity owner, team member, consultant, or subconsultant of or to a proposer for the same project, or have a financial interest in any of the foregoing entities with respect to that project. Lenders may require the firms providing those services for the department and a proposer to be different because of a perceived conflict if the same firm provided traffic and revenue services for both entities, and could decline to provide financing if the firms are not different. No change has been made.

Comment: ZAI indicated that the proposed rules of contact in §27.8(d) have a couple of unreasonable provisions.

First, ZAI views the prohibition against offerors and team members communicating with any other team as far too broad and counterproductive for the legitimate conduct of competitive procurements. ZAI asserted that federal procurements do not prohibit all communication between competitors, but rather require a certification that prices have been arrived at independently and there has been no communication between an offeror and any third party for the purpose of restricting competition by communications regarding (i) prices, (ii) the intention to submit an offer, or (iii) the methods or factors used to calculate prices.

ZAI stated that there are many good reasons for potential competitors to discuss the terms and conditions of a procurement and provide joint or industry comments on defective or unreasonable procurement provisions and suggest changes or clarifications that would be fair and reasonable to all involved. ZAI indicated that the department should consider changing the rules of contact to mirror the federal approach.

Response: The rules of contact, like the federal rules, are intended in part to prevent bid rigging, price fixing, or other forms of collusion. The commission believes that the better practice in controlling collusion is to prohibit a proposer or any of its team members from communicating with another proposer or its team members with regard to the project, request for qualifications, request for proposals, or request for competing proposals and qualifications, or either team's qualifications submittal or proposal, rather than requiring a certification after the fact that those communications did not occur. The department has and will continue to request, outside of a procurement, industry wide comments on procurement provisions, and will continue to hold one-on-one meetings with proposers to obtain comments and provide clarifications regarding project specific provisions. No change has been made.

Comment: ZAI commented that the use of an ombudsman to receive confidential communications about the procurement is unusual and could lead to miscommunication as the ombudsman tries to disguise the source of the comments or criticism. ZAI indicated that it may not be bad so long as an offeror may, if desired, communicate criticisms and comments on the procurement directly to the procurement representative.

Response: The ombudsman provisions in a request for qualifications or request for proposals would not prevent a proposer from submitting comments directly to the department's procurement representative. In practice, the department envisions requiring proposers to submit confidential communications in an attachment to a cover letter or email to the ombudsman. The attachment could not contain identifying information. That would allow the ombudsman to simply forward the attachment to the procurement representative. No change has been made.

The department is adopting §27.7 with changes by deleting proposed §27.7(d) and relettering the subsequent subsection accordingly. The department deletes this provision because it is inapplicable to a design-build CDA project. The provision is only applicable to contracts procured and negotiated under the Professional Services Procurement Act. Precertification of providers of professional services, including engineering services, for a design-build CDA project will not require submittal or negotiation of costs for those services. Rather, costs for those services will be a component of the ultimate cost proposal submitted by a prequalified team in response to a request for proposals for a design-build CDA project.

43 TAC §§27.2 - 27.5, 27.7, 27.9

STATUTORY AUTHORITY

The amendments and new sections 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, §223.203, which provides that the commission shall adopt rules establishing criteria for the prequalification of a private entity to submit a detailed proposal to provide services under a design-build contract, and Transportation Code, §223.209, which provides that the commission shall adopt rules, procedures, and guidelines governing selection of a developer for a comprehensive development agreement and negotiations to promote fairness, obtain private participants in projects, and promote confidence among those participants.

CROSS REFERENCE TO STATUTE

Transportation Code, Chapter 223, Subchapter E.

§27.5.Unsolicited Proposals.

(a) Applicability. Private entities may submit unsolicited proposals to the department requesting participation in an eligible project. Unsolicited proposals that comply with the requirements of this section shall be processed in accordance with the requirements of this section.

(b) Proposal contents. A proposal requesting department participation in a proposed project shall be filed with the department and must include the following information:

(1) the limits, scope, and location of the proposed project, including, where applicable and available, project length, project termini, number of lanes and lane miles, number and type of structures, and preliminary right-of-way requirements;

(2) all proposed interconnections with other transportation facilities and improvements to those facilities that will be necessary if the project is developed;

(3) if available, a conceptual project design and preliminary geotechnical information;

(4) information describing how the project will be consistent with the Statewide Transportation Plan and, if appropriate, with the metropolitan transportation plan developed by the metropolitan planning organization;

(5) the results expected from project implementation, including anticipated financial performance and improvement to mobility and capacity, and the critical factors for the project's success;

(6) all studies previously completed by the proposer concerning the project;

(7) information concerning the experience, expertise, technical competence, and qualifications of the proposer and of each member of the proposer's management team and of other key employees, consultants, and subcontractors, including the name, address, and professional designation of each member of the proposer's management team and of other key employees, consultants, and subcontractors, the capability of the proposer to undertake the proposed project, and information responsive to the evaluation criteria listed in §27.4(d) of this subchapter;

(8) a specific description of the level and nature of participation sought from the department, including technical support and financial participation, and the desired schedule for that participation;

(9) to the extent then available, information relevant to the department's performance of its environmental review responsibilities under §27.3(l) and (m) of this subchapter;

(10) a description of potential social, economic, and environmental impacts and potentially competing facilities, including the potential impacts of competing facilities on the proposed project;

(11) other information of probable interest to the department; and

(12) the proposal review fee required by §27.3(h) of this subchapter.

(c) Preliminary evaluation of unsolicited proposal. Any proposal properly filed with the department in accordance with subsection (b) of this section and accompanied by the proper proposal review fee will be reviewed by the department. The department may meet with the proposer as necessary to clarify the proposal, or may issue requests for clarification. Based on that review and any clarification, the department will determine whether to further evaluate its requested participation in the applicable project. If the department determines that further evaluation of the proposal is warranted, a recommendation will be made to the commission to issue a request for competing proposals and qualifications. That recommendation shall be based on whether the proposed project:

(1) enhances the state transportation network, based on the project's:

(A) compatibility with existing and planned transportation facilities;

(B) furtherance of state, regional, and local transportation plans, programs, policies, and goals; and

(C) consistency with system planning objectives and priorities and projects under development;

(2) is ready to proceed to procurement, based on project constraints and characteristics, financial resources designated or available for the proposed project, the status of environmental approvals, project acceptability, and whether meaningful competition can be generated;

(3) includes or is likely to foster design or other innovation; and

(4) such other criteria as the department deems relevant.

(d) Approval to request competing proposals and qualifications. If the recommendation is that the department further evaluate the proposal and its requested participation in the applicable project, and the commission approves that recommendation, the department will publish notice of that decision and provide an opportunity for the submission of competing proposals and qualifications as provided in this section. The department will publish a notice in the Texas Register and in one or more newspapers of general circulation in this state. The notice will state that the department has received an unsolicited proposal under these rules, that it intends to evaluate the proposal, that it may negotiate a comprehensive development agreement with the proposer based on the proposal, and that it will accept for simultaneous consideration any competing proposals and qualifications that the department receives in accordance with these rules within 45 days of the initial publication of the notice in the Texas Register, or such additional time as authorized by commission order. In determining whether to authorize additional time for submission of competing proposals and qualifications, the commission will consider the complexity of the proposed project. The notice will summarize the proposed project, and identify its proposed location and any proposed interconnections with other transportation facilities. The request for competing proposals and qualifications will specify the criteria that will be used to evaluate the proposals, and the relative weight given to the criteria. The department may provide traffic counts, forecasts, conceptual designs, and other available technical studies, reports, and data either in the request for competing proposals and qualifications or upon request of any entity responding to the request. The department may also elect to furnish the request for competing proposals and qualifications to businesses in the private sector that the department otherwise believes might be interested and qualified to participate in the project which is the subject of the request for competing proposals and qualifications.

(e) Submission of revised proposal by original proposer. The private entity submitting the original unsolicited proposal shall be required to submit a proposal and qualification submittal in response to the request for competing proposals and qualifications. A proposal and qualification submittal submitted by that entity and any other entity in response to a request must contain the information required by subsection (b) of this section and any other information required in the request for competing proposals and qualifications.

(f) Exclusive procedure to consider competing proposals and qualifications submittals. Failure by a prospective proposer to submit a competing proposal and qualification submittal within the 45-day period or such additional time as authorized by the commission, shall preclude the proposal and qualification submittal from consideration by the department unless and until the department terminates consideration of, or negotiations on, the original unsolicited proposal, as supplemented in response to the request for competing proposals and qualifications, and any and all competing proposals and qualification submittals received within that time period. The department shall not be obligated to grant requests to extend the time period to submit competing proposals and qualification submittals. The receipt of one or more competing unsolicited proposals during that period will not trigger the posting or publication of a new notice or the commencement of any new time period.

(g) Noncompeting proposals. If the department receives proposals that have certain characteristics in common with the original unsolicited proposal, yet differ in other material respects, the department reserves the right, in its sole discretion, to treat such a proposal as either a competing proposal and qualification submittal or a noncompeting proposal. Because of the consequences to a proposer of failing to submit a competing proposal and qualification submittal within the 45-day period, or such additional time as authorized by the commission, prospective proposers are strongly urged to monitor the department's notices of unsolicited proposals received, and be prepared to submit within that time period if they perceive that a proposal they are considering or are preparing bears certain similarities to, or has characteristics in common with, an unsolicited proposal which is the subject of a notice. A proposal that is deemed to be noncompeting will be evaluated as a new unsolicited proposal in accordance with this section.

(h) Evaluation of proposals - competing proposals and qualification submittals. Upon the expiration of the 45-day period, or such additional time as authorized by the commission, the department will subject the revised proposal submitted by the original proposer, together with any and all properly submitted competing proposals and qualification submittals, to the following evaluation process. If one or more properly submitted competing proposals and qualification submittals are received, the department shall review the proposals and qualification submittals utilizing the evaluation criteria set forth in §27.4(d) of this subchapter and the request for competing proposals and qualifications, and the information specified in subsection (b) of this section. The department will identify and approve a short-list that is composed of those proposers that are considered most qualified to submit detailed proposals for the proposed project, and the process will proceed in the manner described in §27.4(e) - (l) of this subchapter.

(i) Evaluation of proposals - no competing proposals and qualification submittals. If no properly submitted competing proposal and qualification submittal is received, the department will evaluate the revised proposal submitted by the original proposer, proceeding, to the extent applicable, in the manner described in §27.4(h) - (l) of this subchapter.

§27.7.Design-Build Contracts.

(a) Applicability. The department may prequalify a private entity to submit a detailed proposal to provide services under a design-build contract. The department is not required to publish a request for qualifications for a design-build contract, and may enter into a design-build contract based solely on an evaluation of detailed proposals submitted by prequalified private entities in response to a request for proposals. If the department develops a concept for private participation in an eligible design-build project, or proceeds with the further evaluation of an unsolicited proposal for an eligible design-build project, and chooses to prequalify private entities to submit a detailed proposal without publishing a request for qualifications, it will proceed in accordance with the requirements of this section. Each entity comprising a team that intends to submit a detailed proposal must be prequalified or precertified in accordance with the requirements of this section.

(b) Prequalification.

(1) Audited financial qualification of construction, maintenance, and operations providers. Unless waived under subparagraph (B) of this paragraph, to be eligible to propose on a design-build contract as a provider of construction services, maintenance services, or operations services, a potential proposer must be prequalified in accordance with subparagraph (A) of this paragraph.

(A) Requirements.

(i) To be prequalified to propose, either individually or as a member of the proposers' team, as a provider of construction, maintenance, or operations services on a design-build contract, a private entity must:

(I) submit a completed confidential questionnaire to the department's Construction Division in Austin at any time, but at least 120 days prior to the due date for a response to a request for proposals, in a form prescribed by the department, which shall include certain information concerning the proposer's equipment, experience, and financial condition;

(II) have its certified public accountant submit the audited and other financial information required by the current edition of the department's Bulletin Number 2, titled "Contractor's Financial Resources";

(III) demonstrate it has the financial capacity to complete, operate, and maintain, as applicable, a specific project. Factors that will be considered in assessing a proposer's financial capacity include:

(-a-) the proposer's current financial strength;

(-b-) the proposer's credit quality;

(-c-) any claims, litigation, or equivalent current or pending against the proposer;

(IV) demonstrate, if it will be the prime provider of construction services under a contract, that it is capable of obtaining payment and performance bonds in the amount of $250 million, or 100% of the construction cost of the project, whichever is less, from a surety rated in the top two categories by two nationally recognized rating agencies or at least A minus (A-) or better and Class VIII or better by A.M. Best and Company, or an alternative form of security in the amount of $250 million, or 100% of the construction cost of the project, whichever is less, in accordance with §27.3 of this subchapter (relating to General Rules for Private Involvement);

(V) satisfactorily comply with any technical qualification requirements determined by the department to be necessary for a specific project; and

(VI) for the purpose of proposing on federal-aid projects, properly complete the Certification of Eligibility Status form contained in the Confidential Questionnaire.

(ii) The department will make its examination and determination based on the information submitted, and advise the potential proposer of its approved design-build contract capacity. Information adverse to the potential proposer contained in the Certification of Eligibility Status form will be reviewed by the department and the Federal Highway Administration, and may result in the proposer being declared ineligible to submit proposals on federal-aid projects.

(iii) Satisfactory audited financial information and financial capacity will grant a 36-month period of prequalification from the date of the department's determination.

(iv) The department may require current audited information at any time if circumstances develop which are factors that could alter the firm's financial condition, ownership structure, affiliation status, or ability to operate as an on-going concern. The potential proposer must immediately notify the department in writing of any material changes in its financial condition that occur while the department is conducting its examination.

(v) The department may grant a 90 day grace period of prequalification, for the purpose of preparing and submitting current audited information prior to the expiration of the 90 day period of prequalification.

(B) Waiver.

(i) The department will waive the audited financial qualification requirements of subparagraph (A) of this paragraph if the department's estimate is $10,000,000 or less unless the executive director or the director's designee determines that audited financial qualification should be required due to:

(I) safety considerations;

(II) the complexity of the work; or

(III) the potential impact of the work on adjacent property owners.

(ii) To be eligible to propose on a design-build contract for which the audited financial qualification requirements have been waived under clause (i) of this subparagraph, a proposer must:

(I) submit a proposer's questionnaire, in a form prescribed by the department, which includes certain information concerning a proposer's equipment and experience;

(II) submit unaudited and other data as required in the instructions to the proposer's questionnaire;

(III) demonstrate it has the financial capacity to complete, operate, and maintain, as applicable, a specific project. Factors that will be considered in assessing a proposer's financial capacity include:

(-a-) the proposer's current financial strength;

(-b-) the proposer's credit quality;

(-c-) any claims, litigation, or equivalent current or pending against the proposer;

(IV) demonstrate, if it will be the prime provider of construction services under a contract, it is capable of obtaining payment and performance bonds from a surety rated in the top two categories by two nationally recognized rating agencies or at least A minus (A-) or better and Class VIII or better by A.M. Best and Company, in an amount that is sufficient to ensure the proper performance of any agreement and protects the department and payment bond beneficiaries supplying labor or materials to the proposer or a subcontractor of the proposer, or an alternative form of security in accordance with §27.3 of this subchapter;

(V) satisfactorily comply with any technical qualification requirements determined by the department to be necessary on a specific project; and

(VI) for a federal-aid project, properly complete the Certification of Eligibility Status form contained in the proposer's questionnaire. Information adverse to the potential proposer contained in the certification will be reviewed by the department and by the Federal Highway Administration, and may result in the proposer being declared ineligible to submit a proposal on a federal-aid project).

(iii) The department will make its examination and determination based on the information submitted, and advise the proposer of its approved design-build contract capacity.

(I) A proposer with no prior experience in construction, maintenance, or operations, or a negative working capital position (i.e., financial statements indicate that current liabilities exceed current assets), will receive a design-build contract capacity of not less than $1,000,000.

(II) An experienced proposer with sufficient working capital and financial capability, as determined by the department, will receive a design-build contract capacity of:

(-a-) not less than $10,000,000 for a proposer submitting compiled financial information if the proposer has at least one year experience in construction, maintenance, or operations and has satisfactorily completed at least two projects in these fields;

(-b-) not less than $25,000,000 for a proposer submitting compiled financial information if the proposer has at least two years experience in construction, maintenance, or operations and has satisfactorily completed at least four projects in these fields. Those contractors possessing more than two years experience but less than five years experience will be granted at least an additional $5,000,000 in design-build contract capacity for each additional year of experience in construction, maintenance, or operations; and

(-c-) over $50,000,000 for a proposer submitting reviewed financial information if the proposer has at least five years of experience in construction, maintenance, or operations and has satisfactorily completed at least four projects in these fields.

(2) Financial statements. For purposes of this section:

(A) An audited financial statement involves an examination of the accounting system, records, and financial statements by an independent certified public accountant in accordance with generally accepted auditing standards. Based on the examination, the auditor expresses an opinion concerning the fairness of the financial statements in conformity with generally accepted accounting principles.

(B) A reviewed financial statement is substantially less in scope than an audited financial statement, and consists primarily of inquiries of proposer personnel and analytical procedures applied to financial data by an independent certified public accountant. Only negative assurance is expressed by the auditor, meaning the auditor is not aware of any material modifications that should be made in order for the financial statements to conform to generally accepted accounting principles.

(C) A compiled financial statement is limited to presenting in the form of financial statements information that is the representation of management. No opinion or any other form of assurance is expressed on the statements by the auditor.

(c) Precertification.

(1) Contract Eligibility. To be eligible to perform work on a design-build contract in the categories approved according to §9.43 of this title (relating to Precertification Requirements), a prime provider and a subprovider must be precertified in accordance with this section unless:

(A) the anticipated work in an individual work category is less than 2.5% of the contract; or

(B) the department has waived the precertification requirements for a contract that is less than $10,000,000.

(2) Application.

(A) Registered architects, registered professional engineers, registered or licensed professional surveyors, and other technical staff who desire to be precertified by the department to perform engineering, architectural, or surveying work on design-build contracts, shall submit a completed precertification application to the department for review and determination of precertification status.

(B) An application form prescribed by the department may be obtained by contacting the Texas Department of Transportation, Design Division, 125 East 11th Street, Austin, Texas 78701-2483, or through the department's web site.

(C) The application form will request information concerning the experience of the individual.

(D) The precertification web site will include:

(i) a copy of the application form;

(ii) instructions concerning submittal of information for precertification, including format and length restrictions for data to be submitted; and

(iii) the requirements for precertification in each category.

(E) The submittal date for review deadlines as described in paragraph (3) of this subsection shall be the date the precertification application is received by the department.

(F) The precertification of a provider by the department does not guarantee that work will be awarded to that provider.

(3) Deadline. When precertification is required as described in paragraph (1) of this subsection, prime providers and subproviders must be precertified in the technical categories by the due date for responses to a request for proposals to be eligible to submit a response.

(4) Data management. The department will maintain the qualification information submitted in the precertification application by the firm for an employee.

(5) Firm and employee status.

(A) A firm may be precertified in a work category if the firm has a current employee precertified in the category.

(B) A firm employee may be precertified in a work category if the employee possesses the skills and experience to meet the requirements. An employee is not precertified based on the firm's experience.

(C) A precertification will transfer with the employee if the employee leaves the firm.

(D) The department may review a firm's information to evaluate whether the support, equipment, and other resources necessary to do the work are provided to the employee.

(E) A firm with one employee who is precertified in multiple work categories is precertified in those categories. When required, prime providers and subproviders must be precertified in the categories of work they will be performing; however, a provider or subprovider is not required to be precertified in every category of work involved in the contract, unless it will be performing in a lead capacity on all categories of work.

(6) Review process.

(A) An individual, and therefore the firm, will be precertified within 60 days of receipt of complete and accurate information for the submittal, or notified in writing within the same time period that they did not meet the requirements for precertification or that additional submittals will be required for review.

(B) If the submittal is incomplete, a firm will be requested to submit additional information for review. The firm shall submit such information within 30 days of receipt of the department's request for such information. If the information is not provided within 30 days after receipt of the request, the application for precertification will be processed with the information available. The department will make a determination on precertification status within 60 days of receipt of the additional information.

(C) The department will consider the following factors in reviewing the precertification applications:

(i) current license or registration;

(ii) personal experience and training; and

(iii) work category requirements as maintained on the department's web site.

(7) Updates. A firm must report any change in the information included in the original application no later than 45 days after the change occurs.

(8) Appeal. A firm may appeal denial of precertification by submitting additional information to the department within 30 days of receipt of written notification of denial. This information shall justify why the applicant meets the requirements for precertification. The department will review the information and make a determination regarding precertification. A firm may file a written complaint regarding precertification denial with the executive director or his or her designee.

(9) Precertification requirements.

(A) Eligible employees. A firm may be precertified in the technical work categories maintained on the department's web site by providing the listed requirements. A firm may only submit an application for an individual who is employed by that firm at the time of submittal for precertification.

(B) Experience. The experience used to meet requirements may be either prior to or after licensure unless otherwise stated in a specific category. For the purpose of experience for precertification, the employee may be licensed to practice in any state for which that experience is recognized by the:

(i) Texas Board of Professional Engineers for engineers;

(ii) Texas Board of Architectural Examiners for architects; or

(iii) Texas Board of Professional Land Surveying for land surveyors.

(10) Work categories. The approved precertification work category definitions and requirements will be maintained on the department's web site. The commission, by minute order, may add, revise, or delete a work category.

(d) Requests for proposals for design-build contracts.

(1) Requests for proposals. If authorized by the commission, the department will issue a request for proposals from all private entities prequalified in accordance with this section, and the process will proceed in the manner described in §27.4(e) - (l) of this subchapter.

(2) Additional evaluation criteria. In addition to the evaluation criteria set forth in §27.4(e) - (l), design innovation shall also be a criterion in evaluation of proposals submitted in response to a request for proposals for a design-build contract.

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 April 27, 2007.

TRD-200701593

Bob Jackson

General Counsel

Texas Department of Transportation

Effective date: May 17, 2007

Proposal publication date: December 1, 2006

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

43 TAC §27.8

STATUTORY AUTHORITY

The new section is 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, §223.203, which provides that the commission shall adopt rules establishing criteria for the prequalification of a private entity to submit a detailed proposal to provide services under a design-build contract, and Transportation Code, §223.209, which provides that the commission shall adopt rules, procedures, and guidelines governing selection of a developer for a comprehensive development agreement and negotiations to promote fairness, obtain private participants in projects, and promote confidence among those participants.

CROSS REFERENCE TO STATUTE

Transportation Code, Chapter 223, Subchapter E.

§27.8.Conflict of Interest and Ethics Policies.

(a) Purpose. This section prescribes ethical standards of conduct applicable to private entities, including consultants and subconsultants, participating in the department's comprehensive development agreement program. A private entity's failure to comply with these standards of conduct may result in the private entity's preclusion from participation in a project or sanctions being imposed under §27.9 of this subchapter (relating to Sanctions).

(b) Gifts and benefits. A proposer, developer, consultant, or subconsultant participating in the comprehensive development agreement program, or an affiliate of any of those entities, may not offer, give, or agree to give a gift or benefit to a member of the commission or to a department employee whose work for the department includes the performance of procurement services relating to a project under this subchapter, or who participates in the administration of a comprehensive development agreement. Notwithstanding this prohibition, a consultant or subconsultant (unless a member of a proposer or developer team, if authorized under subsection (c) of this section) may:

(1) pay for an ordinary business lunch; and

(2) offer, give, or agree to give a token item that does not exceed an estimated value of $25 (excluding cash, checks, stocks, bonds, or similar items), where the item is distributed generally as a normal means of advertising.

(c) Conflicts of interest.

(1) Purpose. This subsection prescribes department policy on conflicts of interest relating to consultants and subconsultants participating in the comprehensive development agreement program, and thereby:

(A) protects the integrity and fairness of the program and all procurements carried out by the department as part of the program;

(B) avoids circumstances where a consultant, proposer, or developer obtains, or appears to obtain, an unfair competitive advantage as a result of work performed by a consultant or subconsultant;

(C) provides guidance to private entities so they may assess, and make informed business decisions concerning their participation in the program; and

(D) protects the department's interests and confidential and sensitive project-specific and programmatic information.

(2) Applicability. This subsection applies to all comprehensive development agreement projects undertaken by the department. This subsection applies to consultants and subconsultants, and to individual employees of consultants and subconsultants who participated in the performance of services for the department. To the extent that the department has previously consented in writing to a consultant's or subconsultant's performance of services that are in conflict with this subsection, participation on a proposer team as an equity owner or team member, acting as a consultant or subconsultant to a proposer, or having a financial interest in a proposer or an equity owner or team member of a proposer, this subsection does not modify or alter the prior consent. The foregoing does not prevent, however, the application of this subsection to the consultant or subconsultant for other projects, including taking into account the performance of services on the project for which consent was obtained. This subsection may by extension prohibit or restrict the ability of a proposer to have a consultant or subconsultant participate on the proposer team as an equity owner or team member, act as a consultant or subconsultant to the proposer, or have a financial interest in the proposer or an equity owner or team member of the proposer.

(3) Period in which a conflict of interest applies. If the executive director determines that the performance of services by a consultant or subconsultant raises a conflict of interest, the resulting prohibition or restriction provided in this subsection continues:

(A) for the private entity until one year after the date the performance of services ends; and

(B) for an individual that is an employee of or was employed by the consultant or subconsultant and who participated in the performance of services for the department:

(i) until five years after the date the performance of services ends for those projects for which the individual was materially involved in providing services to the department; and

(ii) until one year from the date the performance of services ends for projects for which the individual was not materially involved in providing services to the department.

(4) Application to new firm. If a conflict of interest is determined to apply to an individual pursuant to paragraph (3)(B) of this subsection, the conflict of interest and prohibition with respect to the individual will not apply to the individual's new place of employment. If the new employer is otherwise eligible to perform consultant services, the new employer will remain eligible despite the employment of the individual. This paragraph does not apply to an individual employed by an affiliate of its previous employer, and the conflict of interest and prohibition with respect to the individual will apply to such affiliate.

(5) Federal requirements. For federal-aid projects, the department must comply with the Federal Highway Administration's organizational conflict of interest regulations (found in 23 CFR §636.116). The requirements of this subsection do not limit, modify, or otherwise alter the effect of those regulations, and will be applied consistent with those regulations.

(6) General conflict of interest standards. Except as provided in paragraph (7) of this subsection, no consultant providing consultant services to the department with respect to a comprehensive development agreement project may be a proposer or participate as an equity owner, team member, consultant, or subconsultant of or to a proposer for that project, or have a financial interest in any of the foregoing entities with respect to that project. Except as provided in paragraphs (8) and (9) of this subsection, a consultant performing consultant services for a comprehensive development agreement project will not be prohibited from participating on a different comprehensive development agreement project as a proposer or participating as an equity owner, team member, consultant, or subconsultant of or to a proposer for the different project, or having a financial interest in any of the foregoing entities with respect to the different project.

(7) Providing services for the same project. A consultant that is actively providing preliminary engineering and architectural services to the department with respect to a comprehensive development agreement project, or that performed and completed environmental or traffic and revenue services for a comprehensive development agreement project, may be a proposer or participate as an equity owner, team member, consultant, or subconsultant of or to a proposer for the same project, or have a financial interest in any of the foregoing entities with respect to that project, provided the executive director issues a written determination under paragraph (10) of this subsection that:

(A) the consultant will not, or in the case of the previous performance of consultant services did not, have access to or obtain knowledge of confidential or sensitive information, procedures, policies and processes that could provide an unfair competitive advantage with respect to the procurement for that project;

(B) the data and information provided to the consultant in the performance of the consultant services is either irrelevant to the procurement for that project or is available on an equal and timely basis to all proposers;

(C) the work products from the consultant incorporated into or relevant to the procurement for that project are generally available on an equal and timely basis to all proposers;

(D) with respect to environmental services, a record of decision or finding of no significant impact has been issued for the project; and

(E) with respect to traffic and revenue services, there will be no impact on the project's plan of finance, including the ability to obtain and close funding and potential sources of funding.

(8) Procurement and financial services. A consultant actively engaged and performing procurement services or financial services with respect to a comprehensive development agreement project may not be a proposer or participate as an equity owner, team member, consultant, or subconsultant of or to a proposer for that project or any other comprehensive development agreement project, or have a financial interest in any of the foregoing entities with respect to any comprehensive development agreement project.

(9) Completed services. A consultant that performed consultant services for a comprehensive development agreement project and completed the services may be a proposer or participate as an equity owner, team member, subconsultant or consultant of or to a proposer on a different comprehensive development agreement project, or have a financial interest in any of the foregoing entities with respect to a different project, provided that the executive director issues a written determination under paragraph (10) of this subsection that the conditions in paragraph (7)(A) - (C) of this subsection have been met.

(10) Requests for determinations or exceptions. A consultant, proposer, or developer may submit a request to the executive director for a determination whether participation in a comprehensive development agreement project or the performance of particular services with respect to a comprehensive development agreement project would constitute a conflict of interest, or to request approval of an exception to the applicability of this subsection to those services. A request for approval of an exception may be made if a consultant, proposer, or developer desires to appeal a previous determination by the executive director that a conflict of interest exists. The executive director will forward a request to the department's Office of General Counsel for analysis and recommendation prior to issuing a decision. In determining whether a conflict of interest exists, or whether to approve an exception, the executive director shall consider:

(A) the extent to which the firm or individual employee obtained access to or the ability to gain knowledge of confidential or sensitive information, procedures, policies, and processes concerning the comprehensive development agreement program or a particular project or procurement that could provide an unfair competitive advantage with respect to the procurement or project at issue;

(B) the type of consulting services at issue;

(C) the particular circumstances of each procurement;

(D) the specialized expertise needed by the department and proposers to implement the procurement;

(E) the past, current, or future working relationship between the consultant and the department;

(F) the period of time between the potential conflict situation and the project at issue; and

(G) the potential impact on the procurement and project at issue, including competition.

(11) Multiple services. If a consultant is providing more than one category of consultant services to the department and there are differences in the standards, restrictions, and limitations applicable to those categories, the standards, restrictions, and limitations applicable to a category that are more stringent will be applied.

(12) Participation on proposer or developer team. A consultant participating with respect to a comprehensive development agreement project as a proposer or developer, or as an equity owner, team member, consultant, or subconsultant of or to a proposer or developer, or having a financial interest in any of the foregoing entities, is eligible to provide consultant services (other than procurement services) to the department for another comprehensive development agreement project, provided that, once the consultant is retained to perform consultant services for the department, the restrictions in this subsection shall apply.

(13) Restriction of services and conditions to approvals and exceptions. In instances where the executive director has issued a written determination under paragraph (10) of this subsection that a conflict of interest does not exist (including, in particular, where the conditions prescribed in paragraphs (7) and (9) of this subsection have been met), or grants an exception to the application of this subsection under paragraph (10), the department may still, in its discretion:

(A) restrict the scope of services the consultant or subconsultant may be eligible to perform for the department in order to further the intent and goals of this subsection; and

(B) condition an approval, determination, or exception as the executive director determines appropriate to further the intent and goals of this subsection, including by requiring the consultant, subconsultant, proposer, or developer to execute confidentiality agreements, institute ethical walls, or segregate certain personnel from participation in a project or the performance of consultant services.

(14) Provisions are nonexclusive. The provisions in this subsection do not address every situation that may arise in the context of the department's comprehensive development agreement program nor require a particular decision or determination by the executive director when faced with facts similar to those described in this subsection. The department retains the ultimate and sole discretion to determine on a case-by-case basis whether a conflict of interest exists and what actions may be appropriate to avoid, neutralize, or mitigate any actual or potential conflict, or the appearance of any conflict. The provisions of this subsection shall not be construed to preclude or condone any conduct with regard to projects other than projects under a comprehensive development agreement. The department will continue to evaluate other projects based on its traditional conflict of interest standards.

(d) Rules of contact. In order to provide a fair and unbiased procurement process, a request for qualifications, request for proposals, or request for competing proposals and qualifications will contain rules of contact regulating communications between proposers or any of its team members and the commission, the department, and third parties involved in the procurement. Communication includes face-to-face, telephone, facsimile, electronic-mail (e-mail), or formal written communication. The rules of contact become effective upon the issuance of the request for qualifications, request for proposals, or request for competing proposals and qualifications. The rules of contact will include provisions:

(1) prohibiting a proposer or any of its team members from communicating with another proposer or its team members with regard to the project, request for qualifications, request for proposals, or request for competing proposals and qualifications, or either team's qualifications submittal or proposal;

(2) requiring each proposer to designate one or more representatives responsible for contact with the department, and requiring the proposer to correspond with the department regarding the project, request for qualifications, request for proposals, or request for competing proposals and qualifications only through the department's authorized representatives and the proposer's designated representatives;

(3) prohibiting any ex parte communication regarding the project, request for qualifications, request for proposals, or request for competing proposals and qualifications or the procurement with any member of the commission or with any department staff, advisors, contractors, or consultants involved in the procurement until the earliest of the execution and delivery of the comprehensive development agreement, the rejection of all qualifications submittals or proposals by the department, or the cancellation of the procurement;

(4) permitting communications in exceptional circumstances and designating department personnel authorized to approve such communications, and providing that the restrictions on communications shall not preclude or restrict communications with regard to matters unrelated to the request for qualifications, request for proposals, or request for competing proposals and qualifications, or participation in public meetings of the commission or any public or proposer workshop related to the project, request for qualifications, request for proposals, or request for competing proposals and qualifications;

(5) designating a department employee not involved in the procurement to act as an ombudsman who is authorized to receive confidential communications (including questions, comments, or complaints regarding the procurement) and who, after removing, to the extent practicable, any information identifying the proposer, forwards the communications to the employees designated as the department's authorized representatives; and

(6) authorizing the executive director to disqualify a proposer from the procurement and participation in the project at issue or to impose another sanction under §27.9 of this subchapter if it is determined that a proposer has engaged in any improper communications in violation of the rules of contact.

(e) Exceptions to rules of contact. Notwithstanding subsection (d)(1) of this section:

(1) subcontractors that are shared between two or more proposer teams may communicate with members of each of those teams so long as those proposers establish a protocol to ensure that the subcontractor will not act as a conduit of information between the teams; and

(2) the prohibition provided by that subsection does not apply to public discussions regarding the project, request for qualifications, request for proposals, or request for competing proposals and qualifications at any department sponsored informational meetings.

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 April 27, 2007.

TRD-200701594

Bob Jackson

General Counsel

Texas Department of Transportation

Effective date: June 1, 2007

Proposal publication date: December 1, 2006

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