HBA-TYH, DMD, PDH H.B. 826 76(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 826
By: Greenberg
State Affairs
7/21/1999
Enrolled



BACKGROUND AND PURPOSE 

Prior to the 76th Legislature, the Texas Alternative Dispute Resolution
(ADR) Act governed courtordered use of ADR and the Government Dispute
Resolution (GDR) Act applied to state agency use of ADR.  The ability of
local governments to use ADR when it is not ordered remained unclear. H.B.
826 replaces all references to "state agencies" in the GDR Act with
"governmental bodies," making the GDR Act applicable to local governments
as well as state agencies.  The bill extends the confidentiality provisions
of the GDR Act to local governments, protecting communications relevant to
the dispute made by the parties during the dispute resolution procedure,
and subjecting all final written agreements involving local governments to
the Open Records Act.  This bill also specifies the resolution of certain
contract claims against the state. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the chief administrative law judge of
the State Office of Administrative Hearings in SECTION 9 (Section 2260.103,
Government Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 441.031, Government Code, as follows:

Sec.  441.031.  New title:  DEFINITION.  Includes in the definition of
"state record" a final written agreement described by Section 2009.054
(c)(Confidentiality of Certain Records and Communications). 

SECTION 2.  Amends Section 441.091, Government Code, as follows:

Sec.  441.091.  New title:  DEFINITION.  Includes in the definition of
"county record" a final written agreement described by Section 2009.054(c). 

SECTION 3.  Amends Section 201.003(8), Local Government Code, to include in
the definition of "local government record"  a final written agreement
described by Section 2009.054(c). 

SECTION 4.  Amends Subsection (c), Section 2008.057, Government Code, to
make Section 154.073 (e) rather than Section 154.073(d), Civil Practice and
Remedies Code, inapplicable to this subsection. 

SECTION 5.  Amends Chapter 2008, Government Code, to redesignate Chapter
2008 to Chapter 2009, Government Code, and amend, as follows: 

 CHAPTER 2009.  New Title: ALTERNATIVE DISPUTE RESOLUTION FOR USE BY
GOVERNMENTAL BODIES.  Deletes "at state agencies" from existing title. 

SUBCHAPTER A.  GENERAL PROVISIONS

Sec. 2009.001.  SHORT TITLE.  Makes a conforming change.

 Sec. 2009.002.  POLICY.  Makes conforming changes.

Sec. 2009.003.  DEFINITIONS.  Includes a definition for "governmental body"
in the list of definitions.  Redesignates Subsections (2)-(3) to
Subsections (3)-(4).  Makes a conforming change. 

Sec.  2009.004.  New title: CONTRACTS; BUDGETING FOR COSTS.  Deletes
"agency" from existing title.  Makes conforming and nonsubstantive changes. 

Sec. 2009.005.  SOVEREIGN IMMUNITY.  Makes a conforming change.

SUBCHAPTER B.  ALTERNATIVE DISPUTE RESOLUTION

Sec. 2009.051.  DEVELOPMENT AND USE OF PROCEDURES.  Provides that
alternative dispute resolution procedures developed and used by a state
agency must be consistent with Chapter 2001 (Administrative Procedure),
Government Code. Redesignates existing Subsection (b) to Subsection (c).
Makes conforming and nonsubstantive changes. 

Sec. 2009.052.  SUPPLEMENTAL NATURE OF PROCEDURES.  Includes a right
granted under a local charter, ordinance, or other similar provision among
the rights that may not be denied  by this chapter.  Makes conforming and
nonsubstantive changes. 

Sec. 2009.053.  IMPARTIAL THIRD PARTIES.  (a)  Makes conforming changes.  

(b)  Creates subsection from existing text.  Moves impartial third party
qualifications required under Section 154.052 (Qualifications of Impartial
Third Party), Civil Practice and Remedies Code, to Subsection (d).  Makes
conforming changes. 

(c)  Authorizes a state agency to obtain the services of a qualified third
party through an agreement with the State Office of Administrative
Hearings. 

(d)  Requires an impartial third party to possess the qualifications
required under Section 154.052, Civil Practice and Remedies Code. 

Sec. 2009.054. CONFIDENTIALITY OF CERTAIN RECORDS AND COMMUNICATIONS.
Makes information in a final written agreement confidential in accordance
with Chapter 552 (Public Information), Government Code.  Makes conforming
changes. 

Sec. 2009.055.  New Title:  SHARING OF INFORMATION; CONSISTENCY OF
PROCEDURES.  Deletes "interagency" from the existing title.  Makes
conforming changes. 

SECTION 6.  Amends Section 154.073, Civil Practice and Remedies Code, as
follows: 

Sec. 154.073. New Title: CONFIDENTIALITY OF CERTAIN RECORDS AND
COMMUNICATIONS. (a) Includes Subsection (e) as an exception to the
provision that a communication relating to the subject matter of any civil
or criminal dispute made by a participant in an alternative dispute
resolution procedure, is confidential, is not subject to disclosure, and is
prohibited from being used as evidence against the participant in any
judicial or administrative proceeding. 

(b)-(c)  Makes no change.

(d) Provides that a final written agreement to which a governmental body,
as defined by Section 552.003 (Definitions), Government Code, is a
signatory that is reached as a result of a dispute resolution procedure
conducted under this chapter is subject to or excepted from required
disclosure in accordance with Chapter 552, Government Code. 

(e) Includes conflicts with other legal requirements for disclosure of
records, which is  authorized to be presented to the court having
jurisdiction of the proceedings to determine whether the facts,
circumstances, and context of the communications or materials sought to be
disclosed warrant a protective order of the court or whether the
communications or materials are subject to disclosure. Redesignates from
Subsection (d). 

SECTION 7.  Amends Section 2003.001(2), Government Code, to make a
conforming change. 

SECTION 8.  Amends Section 2003.042(a), Government Code, to make conforming
changes with respect to section redesignations in this bill and to
redesignate Subdivision (6), as added by Acts of the 75th Legislature,
1997, Chapter 1167, Section 2, as Subdivision (7) and to renumber all
subsequent subdivisions accordingly. 

SECTION 9.  Amends Subtitle F, Title 10, Government Code, by adding Chapter
2260, as follows: 

CHAPTER 2260.  RESOLUTION OF CERTAIN CONTRACT CLAIMS
AGAINST THE STATE

SUBCHAPTER A.  GENERAL PROVISIONS

Sec. 2260.001.  DEFINITIONS.  Defines "contract," "contractor,"
"institution of higher education," and "unit of state government." 
  
Sec. 2260.002.  APPLICABILITY.  Provides that this chapter does not apply
to a claim for personal injury or wrongful death arising from the breach of
a contract.  

Sec. 2260.003.  DAMAGES.  (a)  Prohibits the total amount of money
recoverable on a claim for breach of contract under this chapter, after
deducting the amount specified in Subsection (b), from exceeding the
balance due and owing on the contract price, including orders for
additional work.   

(b)  Requires any amount owed the unit of state government for work not
performed under a contract or in substantial compliance with its terms to
be deducted from the amount in Subsection (a).  

(c)  Prohibits any award of damages under this chapter from including
consequential or similar damages, exemplary damages, any damages based on
an unjust enrichment theory, attorney's fees, or home office overhead.  
 
Sec. 2260.004.  REQUIRED CONTRACT PROVISION.  Requires each unit of state
government that enters into a contract to include as a term of the contract
a provision stating that the dispute resolution process used by the unit of
state government under this chapter must be used to attempt to resolve a
dispute arising under the contract. Requires the attorney general to
provide assistance to a unit of state government in developing the contract
provision required by this section.  
 
Sec. 2260.005.  EXCLUSIVE PROCEDURE.  Provides that the procedures
contained in this chapter are exclusive and required prerequisites to suit
in accordance with Chapter 107 (Permission to Sue the State), Civil
Practice and Remedies Code.  
 
Sec. 2260.006.  SOVEREIGN IMMUNITY.  Provides that this chapter does not
waive sovereign immunity to suit or liability.  

SUBCHAPTER B.  NEGOTIATION OF CLAIM

Sec. 2260.051.  CLAIM FOR BREACH OF CONTRACT; NOTICE.  (a) Authorizes a
contractor to make a claim against a unit of state government for breach of
a contract between the unit of state government and the contractor.
Authorizes the unit of state government to assert a counterclaim against
the contractor.  

 (b)  Provides that a contractor must provide written notice to the unit of
state government of a claim for breach of contract not later than the 180th
day after the date of the event giving rise to the claim.  
 
(c)  Provides that the notice must state with particularity the nature of
the alleged breach, the amount the contractor seeks as damages, and the
legal theory of recovery.  
 
(d)  Provides that a unit of state government must assert, in a writing
delivered to the contractor, any counterclaim not later than the 90th day
after the date of notice under Subsection (b).  Provides that a unit of
state government that does not comply with this subsection waives the right
to assert the counterclaim.  

Sec. 2260.052.  NEGOTIATION.  (a)  Requires the chief administrative
officer or, if designated in the contract, another officer of the unit of
state government to examine the claim and any counterclaim and negotiate
with the contractor in an effort to resolve them. Provides that except as
provided by Subsection (b), the negotiation must begin not later than the
60th day after the later of the date of termination of the contract, the
completion date in the original contract, or the date the claim is
received.  
 
(b)  Provides that a unit of state government against which a claim is
filed is entitled to delay the beginning of negotiation until after the
180th day after the date of the event giving rise to the claim.  
 
(c)  Requires each unit of state government with rulemaking authority to
develop rules to govern the negotiation and mediation of a claim under this
section.  Provides that if a unit of state government does not have
rulemaking authority, that unit is required to follow the rules adopted by
the attorney general.  Requires a model rule for negotiation and mediation
under this chapter to be provided for voluntary adoption by units of state
government through the coordinated efforts of the State Office of
Administrative Hearings and the office of the attorney general.  

Sec. 2260.053.  PARTIAL RESOLUTION OF CLAIM.  Provides that if the
negotiation under Section 2260.052 results in the resolution of some
disputed issues by agreement or in a settlement, the parties are required
to reduce the agreement or settlement to writing and each party is required
to sign the agreement or settlement. Provides that a partial settlement or
resolution of a claim does not waive a party's rights under this chapter as
to the parts of the claim that are not resolved.  

Sec. 2260.054.  PAYMENT OF CLAIM FROM APPROPRIATED FUNDS.  Authorizes a
unit of state government to pay a claim resolved in accordance with this
subchapter only from money appropriated to it for payment of contract
claims or for payment of the contract that is the subject of the claim.
Provides that if money previously appropriated for payment of contract
claims or payment of the contract is insufficient to pay the claim or
settlement, the balance of the claim is authorized to be paid only from
money appropriated by the legislature for payment of the claim.  
 
Sec. 2260.055.  INCOMPLETE RESOLUTION.  Provides that if a claim is not
entirely resolved under Section 2260.052 on or before the 270th day after
the date the claim is filed with the unit of state government, unless the
parties agree in writing to an extension of time, the contractor is
authorized to file a request for a hearing under Subchapter C.  

Sec. 2260.056.  MEDIATION.  Authorizes the parties, before the 270th day
after the date the claim is filed with the unit of state government and
before the expiration of any extension of time under Section 2260.055, to
agree to mediate a claim made under this chapter. Requires the mediation to
be conducted in accordance with rules adopted under Section 2260.052(c).  


SUBCHAPTER C.  CONTESTED CASE HEARING
  
Sec. 2260.101.  DEFINITION.  Defines "office." 

Sec. 2260.102.  REQUEST FOR HEARING.  (a)  Provides that if a contractor is
not satisfied with the results of negotiation with a unit of state
government under Section 2260.052, the contractor is authorized to file a
request for a hearing with the unit of state government.  
 
(b)  Provides that the request must state the factual and legal basis for
the claim and request that the claim be referred to the State Office of
Administrative Hearings (office) for a contested case hearing.  

(c)  Requires the unit of state government, on receipt of a request under
Subsection (a), to refer the claim to the office for a contested case
hearing under Chapter 2001 (Administrative Procedure), Government Code, as
to the issues raised in the request.  
 
Sec. 2260.103.  HEARING FEE.  Authorizes the chief administrative law judge
of the office to set a fee for a hearing before the office under this
subchapter.  Requires the chief administrative law judge of the office to
set the fee in an amount that is not less than $250 and allows the office
to recover all or a substantial part of its costs in holding hearings.
Authorizes the chief administrative law judge of the office by rule to
establish a graduated fee scale, increasing the fee in relation to the
amount in controversy. Authorizes the office to assess the fee against the
party who does not prevail in the hearing or apportion the fee against the
parties in an equitable manner.  
 
Sec. 2260.104.  HEARING.  (a)  Requires an administrative law judge of the
office to conduct a hearing in accordance with the procedures adopted by
the chief administrative law judge of the office.  
 
(b)  Requires the administrative law judge, within a reasonable time after
the conclusion of the hearing, to issue a written decision containing the
administrative law judge's findings and recommendations.  
 
(c)  Requires the administrative law judge to base the decision on the
pleadings filed with the office and the evidence received.  
 
(d)  Provides that the decision must include the findings of fact and
conclusions of law on which the administrative law judge's decision is
based,  and a summary of the evidence.  
 
(e)  Provides that in a contested case hearing under this subchapter the
decision is prohibited from being appealed and the state agency is
prohibited from changing the finding of fact or conclusion of law, nor
vacating or modifying an order as provided in Section 2001.058(e).  
 
(f)  Provides that Subchapter G (Contested Cases: Judicial Review), Chapter
2001, does not apply to a hearing under this section.  

Sec. 2260.105.  PAYMENT OF CLAIM.  (a)  Requires the unit of state
government to pay the amount of the claim or part of the claim if: 

_the administrative law judge finds, by a preponderance of the evidence,
that under the laws of this state the claim or part of the claim is valid;
and 

_the total amount of damages, after taking into account any counterclaim,
is less than $250,000.  

(b)  Requires a unit of state government to pay a claim under this
subchapter from money appropriated to it for payment of contract claims or
for payment of the contract that is the subject of the claim.  Provides
that if money previously appropriated for payment of  contract claims or
payment of the contract is insufficient to pay the claim, the balance of
the claim is authorized to be paid only from money appropriated by the
legislature for payment of the claim.  
 
Sec. 2260.1055.  REPORT AND RECOMMENDATION TO LEGISLATURE.  (a) Provides
that if, after a hearing, the administrative law judge determines that a
claim involves damages of $250,000 or more, the administrative law judge is
required to issue a written report containing the administrative law
judge's findings and recommendations to the legislature.  
 
(b)  Authorizes the administrative law judge to recommend that the
legislature: 

_appropriate money to pay the claim or part of the claim if the
administrative law judge finds, by a preponderance of the evidence, that
under the laws of this state the claim or part of the claim is valid; or 

_not appropriate money to pay the claim and that consent to suit under
Chapter 107, Civil Practice and Remedies Code, be denied.  

Sec. 2260.106.  PREJUDGMENT INTEREST.  Provides that Chapter 304 (Judgement
Interest), Finance Code, applies to a judgment awarded to a claimant under
this chapter, except that the applicable rate of interest is prohibited
from exceeding six percent.  
 
Sec. 2260.107.  EXECUTION ON STATE PROPERTY NOT AUTHORIZED.  Provides that
this chapter does not authorize execution on property owned by the state or
a unit of state government.   

Sec. 2260.108.  DEFENSE BY ATTORNEY GENERAL.  Requires the attorney general
to defend a unit of state government in a contested case hearing covered by
this chapter. Authorizes the attorney general to settle or compromise the
portion of a claim that may result in state liability under this chapter.  

SECTION 10.  Provides that Chapter 2009, Government Code, as amended by
this Act, does not require a party to a dispute to participate in an
alternative dispute resolution procedure, and does not preclude a party
from seeking another remedy, including litigation, that otherwise is
available.  
 
SECTION 11.  Makes application of Chapter 2009, Government Code, as amended
and redesignated by this Act, and Section 154.073, Civil Practice and
Remedies Code, as amended by this Act, prospective. 
 
SECTION 12.  Makes Chapter 2260, Government Code, as added by this Act,
prospective. Provides that notwithstanding Section 2260.051(b), Government
Code, as added by this Act, a claimant must provide written notice to the
unit of state government for a claim pending before the effective date of
this Act not later than the 180th day after that date.  
 
SECTION 13.  Provides that Chapter 2260, Government Code, as added by this
Act, does not apply to a claim or dispute with respect to which the 76th
Legislature or a previous legislature has enacted a concurrent resolution
granting permission to the contractor to bring a suit against the state or
a unit of state government.  
 
SECTION 14.  (a)  Provides that except as provided by Subsection (b) of
this section, this Act takes effect immediately.  
 
(b)  Provides that SECTIONS 1-8 of this Act take effect September 1, 1999. 

SECTION 15.Emergency clause.