Proposed Rules Title 43

TITLE 43. TRANSPORTATION

Part 1. TEXAS DEPARTMENT OF TRANSPORTATION

Chapter 9. CONTRACT MANAGEMENT

The Texas Department of Transportation (department) proposes amendments to §9.2, concerning contract claim procedure and §9.38, concerning contract management.

EXPLANATION OF PROPOSED AMENDMENTS

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

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

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

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

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

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

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

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

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

FISCAL NOTE

James Bass, Chief Financial Officer, has determined that for each of the first five years the amendments as proposed are in effect, there will be no fiscal implications for state or local governments as a result of enforcing or administering the amendments. The amendments in essence state that the department cannot file a claim initiating a proceeding under §9.2. The department believes this reflects the limits of the department's authority, whether or not it is reflected in the department's rules. The amendments would have no effect on local government. There are no anticipated economic costs for persons required to comply with the sections as proposed.

Mark Marek, Director, Design Division, has certified that there will be no significant impact on local economies or overall employment as a result of enforcing or administering the amendments.

PUBLIC BENEFIT

Mr. Marek has also determined that for each year of the first five years the sections are in effect, the public benefit anticipated as a result of enforcing or administering the amendments will be to clarify the handling of contract claims. There will be no adverse economic effect on small businesses.

SUBMITTAL OF COMMENTS

Written comments on the proposed amendments to §9.2 and §9.38 may be submitted to Mark Marek, Director, Design Division, Texas Department of Transportation, 125 East 11th Street, Austin, Texas 78701-2483. The deadline for receipt of comments is 5:00 p.m. on June 11, 2007.

Subchapter A. GENERAL

43 TAC §9.2

STATUTORY AUTHORITY

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

CROSS REFERENCE TO STATUTE

Transportation Code, §201.112.

§9.2.Contract Claim Procedure.

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

(1) - (2) (No change.)

(3) The claim is brought by a prime contractor [ ~~or by the department~~ ].

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

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

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

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

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

(1) Claim--A claim for compensation, for a time extension, or for any other remedy arising from a [ ~~or other~~ ] dispute, disagreement, or controversy concerning respective rights and obligations under the contract [ ~~including any alleged breach or failure to perform and for remedies~~ ].

~~[(2) Claimant--The department or prime contractor who submits a contract claim under this section.]~~

(2) [ ~~(3)~~ ] Commission--The Texas Transportation Commission.

(3) [ ~~(4)~~ ] Committee--The Contract Claim Committee.

(4) [ ~~(5)~~ ] Department--The Texas Department of Transportation.

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

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

(7) [ ~~(8)~~ ] District--One of the 25 districts of the department.

(8) [ ~~(9)~~ ] Executive director--The executive director of the Texas Department of Transportation.

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

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

(e) - (f) (No change.)

(g) Procedure.

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

(2) Filing claim.

(A) The prime contractor [ ~~claimant~~ ] shall file a [ ~~contract~~ ] claim after completion of the contract or when required for orderly performance of the contract. A prime contractor shall file a claim [ ~~shall be filed~~ ] no later than one year after the earlier of the following:

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

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

(B) The prime contractor [ ~~claimant~~ ] shall file a contract claim request and a detailed report with the department's construction division, the department engineer under whose administration the contract was or is being performed, or the committee.

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

(D) - (E) (No change.)

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

(3) Evaluation of claim by the committee.

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

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

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

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

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

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

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

(4) (No change.)

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

(h) - (i) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 27, 2007.

TRD-200701591

Bob Jackson

General Counsel

Texas Department of Transportation

Earliest possible date of adoption: June 10, 2007

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

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

43 TAC §9.38

STATUTORY AUTHORITY

CROSS REFERENCE TO STATUTE

Transportation Code, §201.112.

§9.38.Contract Management.

(a) - (e) (No change.)

(f) Errors and omissions , claims .

(1) Policy. It is the department's policy to require providers to correct errors or omissions in the providers' services which are required under the contract without undue delay and without additional cost to the department.

(2) Procedure.

(A) Claim by department [ ~~Notification~~ ].

(i) The department will notify the provider of [ ~~the~~ ] errors and omissions.

(ii) The department will offer the provider an opportunity for informal resolution, and will attempt to resolve a claim informally.

(iii) If informal resolution fails, the department may file a claim against a provider in a court of competent jurisdiction. The procedure for the department to file a claim in a court of competent jurisdiction, including the deadline to file a claim, is set by other law.

(B) Claim by prime provider [ ~~Resolution~~ ]. The procedure concerning a claim by a prime provider and counter claim by the department is set out in [ ~~A dispute involving errors and omissions shall be resolved in accordance with~~ ] §9.2 of this title (relating to Contract Claim Procedure).

(g) - (h) (No change.)