16 TAC §§20.21, 20.23, 20.25, 20.27, 20.29, 20.31, 20.33, 20.35, 20.37, 20.39, 20.41, 20.43, 20.45, 20.47, 20.49, 20.51, 20.53, 20.55, 20.57, 20.59, 20.61, 20.63, 20.65, 20.67, 20.69, 20.71, 20.73, 20.75
The Railroad Commission of Texas adopts new §§20.21,
20.23, 20.25, 20.27, 20.29, 20.31, 20.33, 20.35, 20.37, 20.39, 20.41, 20.43,
20.45, 20.47, 20.49, 20.51, 20.53, 20.55, 20.57, 20.59, 20.61, 20.63, 20.65,
20.67, 20.69, 20.71, 20.73, and 20.75, relating to the resolution of contract
claims, in Chapter 20, Subchapter A, new Division 2, without changes to the
proposed versions published in the November 28, 2003, issue of the
Texas Register
(28 TexReg 10606). Subchapter A, Contracts and Purchases,
will be reorganized so that existing rules, §§20.1, 20.5, and 20.10
(relating to Procedures for Filing and Resolving Protests of a Contract Solicitation
or Award, Historically Underutilized Businesses, and Bid Opening and Tabulation)
will be in new Division 1, to be entitled Bid Protests, HUBs, and Bid Openings.
New §§20.21, 20.23, 20.25, 20.27, 20.29, 20.31, 20.33, 20.35, 20.37,
20.39, 20.41, 20.43, 20.45, 20.47, 20.49, 20.51, 20.53, 20.55, 20.57, 20.59,
20.61, 20.63, 20.65, 20.67, 20.69, 20.71, 20.73, and 20.75 will be in new
Division 2, to be entitled Resolution of Contract Claims.
The Commission adopts the new sections as required by Texas Government
Code, §2260.052(c), as added by Acts 1999, 76th Legislature, Chapter
1352, §9, effective August 30, 1999. The new sections are based on the
model rules promulgated by the Office of the Attorney General pursuant to
Texas Government Code, §2260.052(c), with minimal changes, including
adaptation to the Commission's administrative structure, the elimination of
subchapters, and the elimination of dates which are already past with regard
to the applicability of pending contracts.
New §20.21, relating to Informal Procedures Encouraged, provides that
the parties to a contract are encouraged to resolve any disagreement concerning
the contract in the ordinary course of contract administration using informal
procedures.
New §20.23, relating to Applicability, provides that new Division
2, Subchapter A, does not apply to an action of the Commission for which a
contractor is entitled to a specific remedy pursuant to state or federal constitution
or statute, and provides that new Division 2 does not apply to contracts:
(1) between the Commission and the federal government or its agencies, another
state or another nation; (2) between the Commission and a local governmental
body, or a political subdivision of another state; (3) between a subcontractor
and a contractor, when neither the contractor or the subcontractor is the
Commission; (4) within the exclusive jurisdiction of state or local regulatory
bodies other than the Commission; or (5) within the exclusive jurisdiction
of federal courts or regulatory bodies.
New §20.25, relating to Definitions, defines words and terms that
are used in the new Division 2. The word "Director" means the Executive Director
of the Commission. The word "division" means Division 2 of Title 16, Part
1, Chapter 20, Subchapter A, of the Texas Administrative Code. The term "SOAH"
means the State Office of Administrative Hearings.
New §20.27, relating to Prerequisites to Suit, provides that the procedures
contained in this division are exclusive and required prerequisites to suit
under Texas Civil Practice and Remedies Code, Chapter 107, and Texas Government
Code, Chapter 2260.
New §20.29, relating to Sovereign Immunity, provides that this division
does not waive the Commission's sovereign immunity to suit or liability.
New §20.31, relating to Notice of Claim of Breach of Contract, provides
that a contractor may not assert a claim of breach of contract by the Commission
under Texas Government Code, Chapter 2260, unless the contractor delivers
a written and signed notice of the claim to the Director by hand, certified
mail return receipt requested, or other verifiable delivery service; the notice
states in detail: (1) the nature of the alleged breach of contract, including
the date of the event that the contractor asserts as the basis of the claim
and each contractual provision allegedly breached; (2) a description of damages
that resulted from the alleged breach, including the amount and method used
to calculate those damages; and (3) the legal theory of recovery, i.e., breach
of contract, including the causal relationship between the alleged breach
and the damages claimed; and the contractor delivers the notice no later than
180 days after the date of the event the contractor asserts as the basis of
the claim. In addition, the contractor may submit supporting documentation
or other tangible evidence to facilitate the Commission's evaluation of the
contractor's claim.
New §20.33, relating to Commission Counterclaim, specifies the Commission's
duties when asserting a counterclaim under Texas Government Code, Chapter
2260, including notice of the counterclaim, form and contents of the counterclaim,
supporting documentation or other tangible evidence to facilitate the contractor's
evaluation of the Commission's counterclaim, and the deadline for the delivery
of the notice of counterclaim to the contractor. New subsection (e) states
that nothing in the adopted rules precludes the Commission from initiating
a lawsuit for damages against the contractor in a court of competent jurisdiction.
New §20.35, relating to Request for Voluntary Disclosure of Additional
Information, provides that the parties may request to review and copy information
in the possession or custody or subject to the control of the other party
that pertains to the contract claimed to have been breached. The rule applies
to all information in the parties' possession regardless of the manner in
which it is recorded, including, without limitation, paper and electronic
media. New subsection (c) provides that the contractor and the Commission
may seek additional information directly from third parties, including, without
limitation, the contractor's subcontractors; new subsection (d) provides that
nothing in new §20.35 requires any party to disclose the requested information
or any matter that is privileged under Texas law; and new subsection (e) provides
that material submitted pursuant to this section and claimed to be confidential
by the contractor or a third party must be handled pursuant to the requirements
of Texas Government Code, Chapter 552.
New §20.37, relating to Duty to Negotiate, requires the parties to
negotiate in accordance with the timetable set forth in new §20.39 (relating
to Timetable) to attempt to resolve all claims and counterclaims. No party
is obligated to settle with the other party as a result of the negotiation.
New §20.39, relating to Timetable, outlines the Commission's duties
following receipt of a contractor's notice of claim; requires the parties
to begin negotiations within a reasonable period of time; provides that the
Commission may delay negotiations until after the 180th day after the date
of the event giving rise to the claim of breach of contract in certain cases;
and provides that the parties may conduct negotiations according to an agreed
schedule as long as they begin negotiations no later than the deadlines set
forth in new §20.39(b) or new §20.39(c), whichever is applicable.
New subsection (e) states when the parties must complete the negotiations
that are required by this division as a prerequisite to a contractor's request
for a contested case hearing; new subsection (f) allows the parties to agree
in writing to extend the time for negotiations. The parties may enter into
a series of written extension agreements that comply with the requirements
of this section.
New §20.39(g) specifies how the contractor may request a contested
case hearing before SOAH, pursuant to new §20.49 (relating to Request
for Contested Case Hearing), and new subsection (h) provides that the parties
may agree to mediate the dispute at any time before the 270th day after the
Commission receives the contractor's notice of claim or before the expiration
of any extensions agreed to by the parties pursuant to new §20.39(f).
New §20.39(i) provides that nothing in the section is intended to
prevent the parties from agreeing to commence negotiations earlier than the
deadlines established in subsections (b) and (c), or from continuing or resuming
negotiations after the contractor requests a contested case hearing before
SOAH.
New §20.41, relating to Conduct of Negotiation, specifies the provisions
for conducting negotiations, including the assistance of one or more neutral
third parties, the exchange of relevant documents that support the respective
claims, defenses, counterclaims, or positions, and that the material submitted
pursuant to this subsection and claimed to be confidential by the contractor
must be handled pursuant to the requirements of Texas Government Code, Chapter
552.
New §20.43, relating to Settlement Approval Procedures, requires the
parties to disclose their settlement approval procedures prior to, or at the
beginning of, negotiations. The parties should select negotiators who are
knowledgeable about the subject matter of the dispute, who are in a position
to reach agreement, and who can credibly recommend approval of an agreement.
New §20.45, relating to Settlement Agreement, states the requirements
for a settlement agreement.
New §20.47, relating to Costs of Negotiation, provides that unless
the parties agree otherwise, each party is responsible for its own costs incurred
in connection with a negotiation, including, without limitation, the costs
of consultant's fees and expert's fees.
New §20.49, relating to Request for Contested Case Hearing, specifies
the provisions for a request for a contested case hearing. If a claim for
breach of contract is not resolved in accordance with the rules in this division
on or before the 270th day after the Commission receives the notice of claim,
and after the expiration of any extension agreed to by the parties pursuant
to new §20.39(f) (relating to Timetable), the contractor may file a request
with the Commission for a contested case hearing before SOAH. The request
must be in writing and state the legal and factual basis for the claim, and
be delivered to the Director within 30 days after the 270th day or the expiration
of any written extension agreed to pursuant to new §20.39(f) (relating
to Timetable). The Commission must forward the contractor's request for a
contested case hearing to SOAH within a reasonable period of time, not to
exceed 30 days, after receipt of the request. The parties may agree to submit
the case to SOAH before the 270th day after the notice of claim is received
by the Commission if they have achieved a partial resolution of the claim
or if they have reached an impasse in the negotiations and proceeding to a
contested case hearing would serve the interests of justice.
New §20.51, relating to Mediation Timetable, specifies a timetable
for mediation between the contractor and the Commission, including after the
case has been referred to SOAH. SOAH may also refer a contested case for mediation
pursuant to its own rules and guidelines, whether or not the parties have
previously attempted mediation.
New §20.53, relating to Conduct of Mediation, prohibits a mediator
from imposing his or her own judgment on the issues for that of the parties,
requires the mediator to be acceptable to both parties, and provides that
the mediation is subject to the provisions of Texas Government Code, Chapter
2009, the Governmental Dispute Resolution Act. The parties should select representatives
who are knowledgeable about the dispute, who are in a position to reach agreement,
or who can credibly recommend approval of an agreement.
New §20.55, relating to Agreement to Mediate, provides that the parties
may agree to use mediation as an option to resolve a breach of contract claim
at the time they enter into the contract and include a contractual provision
to do so, and requires that any agreement to mediate include consideration
of certain factors.
New §20.57, relating to Qualifications and Immunity of the Mediator,
lists the qualifications that the mediator must possess, and provides that
the parties must decide whether, and to what extent, knowledge of the subject
matter and experience in mediation would be advisable for the mediator. New
subsection (c) requires the parties to obtain from the prospective mediator
a written statement of the ethical standards that will govern the mediation.
New §20.59, relating to Confidentiality of Mediation and Final Settlement
Agreement, provides that mediation conducted under the new rules in this division
is confidential in accordance with Texas Government Code, §2009.054,
and that the confidentiality of a final settlement agreement to which the
Commission is a signatory that is reached as a result of the mediation is
governed by Texas Government Code, Chapter 552.
New §20.61, relating to Costs of Mediation, provides that unless the
contractor and Commission agree otherwise, each party is responsible for its
own costs incurred in connection with the mediation. The costs of the mediation
process itself must be divided equally between the parties. Each party is
responsible for its own attorney's fees.
New §20.63, relating to Settlement Approval Procedures, provides that
each party must disclose its settlement approval procedures to the other party
prior to the mediation. The parties should select representatives who are
knowledgeable about the subject matter of the dispute, who are in a position
to reach agreement, and who can credibly recommend approval of an agreement.
New §20.65, relating to Initial Settlement Agreement, provides that
the representatives of the parties must sign any settlement agreement reached
during the mediation and that the agreement must describe each party's required
procedures in connection with final approval of the agreement.
New §20.67, relating to Final Settlement Agreement, provides that
a final settlement agreement reached during, or as a result of mediation,
that resolves an entire claim or any designated and severable portion of a
claim must be in writing and signed by representatives of the contractor and
the Commission who have authority to bind each respective party; must identify
any issue not resolved; and specifies that a partial settlement does not waive
a party's rights under Texas Government Code, Chapter 2260.
New §20.69, relating to Referral to the State Office of Administrative
Hearings, provides that if mediation does not resolve all issues raised by
the claim, the contractor may request that the claim be referred to SOAH by
the Commission.
New §20.71, relating to Assisted Negotiation Processes, provides that
parties to a contract dispute under Texas Government Code, Chapter 2260 may
agree, either contractually or when a dispute arises, to use the assisted
negotiation (alternative dispute resolution) processes described in new §20.75
(relating to Assisted Negotiation Methods) in addition to negotiation and
mediation to resolve their dispute.
New §20.73, relating to Use of Assisted Negotiation Processes, lists
the factors that may help parties decide whether one or more assisted negotiation
processes could help resolve their dispute.
New §20.75, relating to Assisted Negotiation Methods, specifies the
assisted negotiation methods. If the parties agree to use an assisted negotiation
procedure, they shall agree in writing to a detailed description of the process
prior to engaging in the process.
The Commission received no comments on the proposed new rules.
The Commission adopts the new sections under Texas Government
Code, §2260.052(c), which requires the Commission to develop rules to
govern the negotiation and mediation of contract claims.
Statutory authority: Texas Government Code, §2260.052(c).
Cross reference to statute: Texas Government Code, §2260.052(c).
Issued in Austin, Texas, on January 23, 2004.
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 January 29, 2004.
TRD-200400476
Mary Ross McDonald
Managing Director
Railroad Commission of Texas
Effective date: February 12, 2004
Proposal publication date: November 28, 2003
For further information, please call: (512) 475-1295