PART 19. DEPARTMENT OF FAMILY AND PROTECTIVE SERVICES
CHAPTER 732. CONTRACTED SERVICES
SUBCHAPTER A. DISPUTE RESOLUTION
The Department of Family and Protective Services (DFPS), proposes new §§732.101, 732.103, 732.105, 732.107, 732.109, 732.111, 732.113, 732.115, 732.117, 732.119, 732.121, 732.123, 732.125, 732.127, 732.129, 732.131 and 732.133 in Title 40, Texas Administrative Code (TAC), new Chapter 732, relating to Contracted Services.
BACKGROUND AND PURPOSE
The purpose of this rulemaking is to re-implement repealed TAC rules related to contracting at DFPS. Health and Human Services Commission (HHSC) repealed DFPS Title 40 TAC Chapter 732 (procurement) on or around June 2015 when DFPS' procurement function and associated legal staff were consolidated under HHSC. HHSC procurement and contracting ethics rules are located at Title 1 TAC, Part 15, Chapters 391, relating to Purchase of Goods and Services by the Texas Health and Human Services Commission and 392, relating to Purchase of Good and Services for Specific health and Human Services Commission Programs.
With DFPS becoming a stand-alone agency in September 2017, DFPS needs to provide clarity for its procurement function by re-implementing statutorily required rules for contracting practices. In this case, the rule being proposed is required by Texas Government Code Chapter 2260 that explains how DFPS addresses contract disputes. It is determined that DFPS needs to implement this rule even though HHSC carries out some DFPS procurement process steps. If there is ever a dispute involving a contract, the final decision about performance under the contract will be DFPS' responsibility.
SECTION-BY-SECTION SUMMARY
Proposed new §732.101 explains the purpose and scope of the subchapter, which governs negotiation and mediation of a claim for breach of contract asserted by a Contractor against DFPS.
Proposed new §732.103 contains key definitions of terms frequently found in breach of contract claims.
Proposed new §732.105 outlines the statutes involved in contract claims, namely Texas Government Code Chapter 2260 and Chapter 107 of the Texas Civil Practice and Remedies Code.
Proposed new §732.107 clarifies that actions under this rule do not waive DFPS' sovereign immunity to suit or liability.
Proposed new §732.109 outlines the specific steps a Contractor asserting a claim needs to take under these rules. The steps are generally specified in Texas Government Code Chapter 2260.
Proposed new §732.111: (1) provides DFPS with the ability to file a counterclaim as allowed by Texas Government Code Chapter 2260; and (2) outlines the specific steps that DFPS must take in order to assert a counterclaim against the Contractor.
Proposed new §732.113: (1) requires the parties to negotiate according to a timetable established under §732.115 to attempt to resolve the claim(s); and (2) states that no party is required to settle with the other party as a result of negotiations.
Proposed new §732.115: (1) this section lays out timetable requirements and authority for the parties to mutually agree to a different timetable following receipt of a claim; and (2) provides option for parties to agree to mediate during negotiations being done under an agreed-upon timetable.
Proposed new §732.117: (1) provides that negotiations may be conducted by any method or procedure authorized under the contract or agreed to by the parties; and (2) parties may exchange relevant documents that support their respective claims, defenses, counterclaims or positions.
Proposed new §732.119: (1) requires that the parties' settlement approval procedures be disclosed prior to or no later than the beginning of negotiations; and (2) requires the parties to select experienced negotiators who can reach an agreement or who can credibly approve an agreement.
Proposed new §732.121: (1) allows a settlement agreement to resolve an entire claim or any portion of a claim; (2) for a settlement to be enforceable, it must be in writing and signed by authorized representatives of both parties who have authority to bind their party; and (3) a partial settlement does not waive a party's rights under Texas Government Code Chapter 2260.
Proposed new §732.123 allows that unless the parties agree otherwise, each party is responsible for its own costs for negotiations.
Proposed new §732.125 allows the Contractor to request a contested case hearing at State Office of Administrative Hearings (SOAH) if the claim is not resolved through negotiations.
Proposed new §732.127 allows the Contractor and DFPS to agree to mediate any claim or counterclaim at any time.
Proposed new §732.129: (1) outlines a mediation process; (2) requires that any mediator not impose his/her judgment on issues; (3) states that a mediator selected must be acceptable to both parties; (4) clarifies that mediation is subject to the Governmental Dispute Resolution Act found in Texas Government Code §2009; and (5) specifies both parties must put forth representatives who are knowledgeable about the claim and who are authorized to reach and/or accept an agreement during mediation.
Proposed new §732.131: (1) clarifies that the cost of mediation must be divided equally between the parties unless agreed otherwise; and (2) explains that each party is responsible for its own costs to prepare for and participate in the mediation including reproduction costs, attorney's fees, consultant fees, and expert's fees.
Proposed new §732.133: (1) states that any settlement agreement reached during mediation that resolves an entire claim or any designated and severable portion of a claim must be in writing and signed by authorized representatives of both parties; (2) specifies that if the settlement agreement does not resolve all issues raised in claims or counterclaims, the agreement must identify the issues that remain unresolved; and (3) clarifies that a partial settlement agreement resulting from mediation does not waive a Contractor's rights under Texas Government Code Chapter 2260 as to the parts of the claim that were not resolved nor does it waive DFPS' rights to any parts of a counterclaim that is not resolved.
FISCAL NOTE
David Kinsey, Chief Financial Officer of DFPS, has determined that for each year of the first five years that the sections will be in effect, there will not be fiscal implications to state or local governments.
GOVERNMENT GROWTH IMPACT STATEMENT
DFPS has determined that during the first five years that the proposed rules will be in effect:
(1) the proposed rules will not create a government program;
(2) implementation of the proposed rules will not affect the number of employee positions;
(3) implementation of the proposed rules will not require an increase or decrease in future legislative appropriations to the agency;
(4) the proposed rules will not affect fees paid to the agency;
(5) the proposed rule amendments will not create a new regulation;
(6) the proposed rule amendments will not expand, limit, or repeal an existing regulation;
(7) the proposed rule amendments will increase the number of individuals subject to the rule; and
(8) the proposed rule amendments will not affect the state's economy.
SMALL BUSINESS, MICRO-BUSINESS, AND RURAL COMMUNITY IMPACT ANALYSIS
Mr. Kinsey has also determined that there will be no adverse economic effect on small businesses, micro-businesses, or rural communities.
The proposed rules do not apply to small or micro-businesses, or rural communities.
ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT
The proposed rules will not affect a local economy.
COSTS TO REGULATED PERSONS
Pursuant to subsection (c)(7) of Texas Government Code §2001.0045, the statute does not apply to a rule that is adopted by the Department of Family and Protective Services.
PUBLIC BENEFIT
Audrey Carmical, General Counsel of DFPS, has determined that for each year of the first five years the rules are in effect, the public benefit anticipated as a result of enforcing the sections will be that Contractors will have clear direction on how to bring a claim for a dispute about a contract it has with DFPS and how DFPS will go about trying to resolve the dispute in an orderly, equitable manner.
REGULATORY ANALYSIS
The department has determined that this proposal is not a "major environmental rule" as defined by Government Code §2001.0225.
TAKINGS IMPACT ASSESSMENT
DFPS has determined that the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Government Code, §2007.043.
PUBLIC COMMENT
Comments and questions on this proposal must be submitted within 30 days of publication of the proposal in the Texas Register. Electronic comments and questions may be submitted to Deputy General Counsel of DFPS, Tiffany Roper at Tiffany.Roper@dfps.state.tx.us. Hard copy comments may be submitted to the DFPS Rules Coordinator, Legal Services 18R08, Department of Family and Protective Services E-611, P.O. Box 149030, Austin, Texas 78714-9030.
STATUTORY AUTHORITY
The sections are proposed under Human Resources Code (HRC) §40.027, which provides that the Department of Family and Protective Services commissioner shall adopt rules for the operation and provision of services by the department.
The proposed new sections implement requirements found in Texas Government Code Chapter 2260, regarding an agency's procedures for handling and resolving disputes about contracts.
No other statutes, articles, or codes are affected by the proposed rules.
§732.101.Purpose and Scope.
This subchapter governs the negotiation and mediation of a claim of breach of contract asserted by a Contractor against the Department, as well as a counterclaim asserted by the Department against the Contractor, pursuant to the requirements established under Chapter 2260 of the Texas Government Code. Chapter 2260 takes precedence to the extent of any conflict or inconsistency between these rules and the applicable requirements of Chapter 2260.
§732.103.Definitions.
The words and terms in this chapter have the following meanings, unless the context clearly indicates otherwise:
(1) Claim--a demand for damages by the Contractor based upon the Department's alleged breach of contract;
(2) Contractor--as defined by §2260.001(2), Texas Government Code;
(3) Commissioner--the chief administrative officer of the Department;
(4) Counterclaim--a claim by the Department against the Contractor based upon the same contract as that of the Contractor's claim;
(5) Day--a calendar day. If an act is required to occur on a date falling on a Saturday, Sunday, or holiday, the first working day following one of these days is the date to be counted as the required day for the act;
(6) Department--the Texas Department of Family and Protective Services;
(7) Event--an act or omission or a series of acts or omissions giving rise to a claim;
(8) Mediation--a consensual process in which an impartial third party, the mediator, facilitates communication between the parties to promote reconciliation, settlement, or understanding among them;
(9) Negotiation--a consensual bargaining process in which the parties attempt to resolve a claim and counterclaim;
(10) Parties--the Department and the Contractor that have entered into the contract that is the subject of the claim;
(11) SOAH--State Office of Administrative Hearings; and
(12) Subcontractor--an independent person or business hired by an independent Contractor to perform a specific task as part of an overall project and is paid for services to the project by the independent Contractor.
§732.105.Suits Against the Department for Contract Breach.
Subject to §2260.005 of the Texas Government Code, the procedures contained within Chapter 2260 of the Texas Government Code are exclusive and required prerequisites to suit in accordance with Chapter 107 of the Texas Civil Practice and Remedies Code. Chapter 2260 of the Texas Government Code does not prevent a contractor sued by a unit of state government from asserting a counterclaim or right of offset against the unit of state government in the court in which the unit of state government files the suit.
§732.107.Sovereign Immunity.
This subchapter does not waive the Department's sovereign immunity to suit or liability.
§732.109.Requirements for Notice of Claim of Breach of Contract.
(a) A Contractor asserting a claim of breach of contract under Chapter 2260 of the Texas Government Code must file notice of the claim as provided in this section.
(b) The notice of the claim must be:
(1) in writing and signed by the Contractor or the Contractor's authorized representative; and
(2) delivered by hand, certified mail return receipt requested, or other verifiable delivery service, to the:
(A) contract signatory for the Department of the region or state office division which signed the contract;
(B) The person designated in the contract as the appropriate receiver of legal notice; or
(C) the Commissioner of the Department.
(c) The notice must state 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 are recoverable under §2260.003 of the Texas Government Code that the Contractor asserts resulted from the alleged breach, including the amount and method used to calculate those damages; and
(3) the legal theory of recovery, including the relationship between the alleged breach and the damages claimed.
(d) The notice of claim must be delivered no later than the 180th calendar day after the date of the event that the Contractor asserts as the basis of the claim.
§732.111.Department Counterclaims.
(a) The Department may assert a counterclaim under Chapter 2260 of the Government Code, as provided in this section. The counterclaim must be:
(1) in writing; and
(2) delivered by hand, certified mail return receipt requested, or other verifiable delivery service to the Contractor or the representative of the Contractor who signed the notice of claim of breach of contract.
(b) The notice must state in detail:
(1) the nature of the counterclaim;
(2) a description of damages or offsets sought, including the amount and method used to calculate those damages or offsets; and
(3) the legal theory supporting the counterclaim.
(c) The notice of counterclaim must be delivered to the Contractor no later than the 60th calendar day after the Department's receipt of the Contractor's notice of claim.
(d) Nothing in this subchapter precludes the Department from initiating a lawsuit for damages against the Contractor in a court of competent jurisdiction.
§732.113.Duty to Negotiate.
The parties must negotiate in accordance with the timetable set forth in §732.115 of this title (relating to Negotiation Timetable) in an attempt to resolve all claims and counterclaims. No party is obligated to settle with the other party as a result of the negotiation.
§732.115.Negotiation Timetable.
(a) Following receipt of a Contractor's notice of claim, the Commissioner or another Department officer designated in the contract will review the Contractor's claim and the Department's counterclaim, if any, and initiate negotiations with the Contractor in an attempt to resolve the claim and counterclaim.
(b) The parties will begin negotiations within a reasonable period of time, not to exceed 120 calendar days following the date the Department receives the Contractor's notice of claim.
(c) The parties may conduct negotiations according to an agreed upon schedule as long as they complete the negotiations no later than the 270th calendar day after the Department receives the Contractor's notice of claim, subject to one or more extensions agreed upon by the parties.
(d) The parties may agree in writing on or before the 270th calendar day after the Department receives the Contractor's notice of claim to extend the time for negotiations. The agreement must be signed by representatives of the parties with authority to bind each respective party and must provide for the extension of the statutory negotiation period. The parties may enter into a series of written extension agreements that comply with the requirements of this section.
(e) The Contractor may request a contested case hearing before the State Office of Administrative Hearings on or before the 270th calendar day after the Department receives the Contractor's notice of claim, or the expiration of any extension agreed to by the parties.
(f) The parties may agree to mediate the dispute at any time before the 270th calendar day after the Department receives the Contractor's notice of claim or before the expiration of any extension agreed to by the parties.
§732.117.Negotiations.
(a) The negotiation may be conducted by any method, technique, or procedure authorized under the contract or agreed upon by the parties.
(b) To facilitate the meaningful evaluation and negotiation of the claim and any counterclaim, the parties may exchange relevant documents that support their respective claims, defenses, counterclaims, or positions.
(c) Material submitted pursuant to this section and claimed to be confidential by the Contractor will be handled pursuant to the requirements of the Public Information Act, Government Code, Chapter 552.
§732.119.Settlement Approval Procedures.
The parties' settlement approval procedures must be disclosed prior to, or at the beginning of, negotiations. To the extent possible, the parties must 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.
§732.121.Settlement Agreement.
(a) A settlement agreement may resolve an entire claim or any designated portion of a claim.
(b) To be enforceable, a settlement agreement must be in writing and signed by representatives of the Contractor and the Department who have authority to bind each respective party.
(c) A partial settlement does not waive a party's rights under the Government Code, Chapter 2260, as to the parts of the claim or counterclaim that are not resolved.
§732.123.Costs of Negotiations.
Unless the parties agree otherwise, each party will be responsible for its own costs incurred in connection with a negotiation, including, without limitation, the costs of attorney's fees, consultant's fees, and expert's fees.
§732.125.Contractor Contested Case Hearings.
(a) If a claim for breach of contract is not resolved in its entirety on or before the 270th day after the Department receives the notice of claim, or after the expiration of any extension, the Contractor may file a request with the Department for a contested case hearing before SOAH in accordance with §2260.102 of the Texas Government Code.
(b) A request for a contested case hearing must state the legal and factual basis for the claim, request that the claim be referred to SOAH for a contested case hearing and must be delivered within 30 days after the 270th day, or the expiration of any agreed extensions, to the Commissioner of the Department or the person designated in the contract to receive notice.
(c) If the parties reach an impasse in the negotiations and proceed to a contested case hearing because it would serve the interests of justice, the parties may agree to submit the case to SOAH before the 270th day after the notice of claim is received by the Department to the extent that the claim or counterclaim, if any, remain unsolved.
§732.127.Mediation of Contract Claims.
The Contractor and the Department may agree to mediate the claim and any counterclaim at any time.
§732.129.Mediation.
(a) A mediator may not impose his or her own judgment on the issues for that of the parties. The mediator must be acceptable to both parties.
(b) The mediation is subject to the provisions of the Governmental Dispute Resolution Act, Government Code, Chapter 2009.
(c) The term "mediation" is assigned the meaning set forth in the Civil Practice and Remedies Code §154.023.
(d) To facilitate a meaningful opportunity for settlement, the parties will, to the extent possible, 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.
§732.131.Costs of Mediation.
Unless the parties agree otherwise, the costs of the mediator must be divided equally between the parties. Each party must be responsible for its own costs incurred in connection with the mediation, including costs for reproduction of documents requested by such party, attorney's fees, consultant's fees, and expert's fees.
§732.133.Mediation Settlement Agreements.
(a) A 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 Department who have authority to bind each respective party.
(b) If the settlement agreement does not resolve all issues raised by the claim or counterclaim, if any, the agreement must identify the issues that are not resolved.
(c) A partial settlement does not waive a Contractor's rights under the Government Code, Chapter 2260, as to the parts of the claim that are not resolved, nor does it waive the Department's rights as to parts of the counterclaim that are not resolved.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on August 10, 2020.
TRD-202003295
Tiffany Roper
General Counsel
Department of Family and Protective Services
Earliest possible date of adoption: September 27, 2020
For further information, please call: (512) 438-3397