In my previous post on this issue, I discussed HB 586 that was making its way through the 83rd Regular Session of the Texas Legislature. As it turned out, the bill went through some significant revisions before it was ultimately passed and signed into law by the governor.
In outline form, this is what the bill does.
1) It waives sovereign immunity for claims against the State of Texas and its agencies, departments, boards, etc.
2) It applies only to state contracts for engineering, architectural or construction services brought by a contracting party.
3) It only applies to claims that equal or exceed $250,000.
4) It allows an award of a) unpaid contract balance, including amounts owed for increased cost due to owner caused delay, b) the amount owed for written change orders, c) reasonable attorney’s fees only if the contract expressly provides that recovery of such fees are available to all parties, and d) interest not to exceed 10%.
5) It excludes a) consequential damages, b) exemplary damages, and c) damages for unabsorbed home office overhead.
6) It provides that payment of any judgment obtained in the contractor’s favor cannot be paid from funds appropriated to the state agency from general revenue, unless the funds are specifically allocated for that purpose.
This bill will be codified in chapter 114 of the Texas Civil Practice and Remedies Code. Contractors should understand that this bill is not as comprehensive a waiver of immunity as what is found in chapter 271 of the Local Government Code. This bill has limitations not found elsewhere.
For example, for all claims valued under $250,000, it puts claimants into the administrative law hearings pursuant to chapter 2260 of the Government Code. Also, it does not apply to TxDOT, so any contracts with TxDOT for road and highway work must follow TxDOT’s claims procedure. The bill also does not guarantee a prevailing party will get paid. If previously allocated funds have been depleted for a project and a successful claim ensues, the prevailing contractor will have to petition the Legislature to specifically allocate funds to pay the award.
Overall, passing this bill is a good step forward to make contracting with the state more fair. However, there are ways to improve this law to make the process more equal between the state and the contractors who work for it.