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.