Construction legislation in the 2013 session was much different from 2011. In 2011 many new construction related laws were passed including governance of indemnities and mechanic’s liens. In 2013 many significant construction related bills were considered, but relatively few passed. Nevertheless, the few that did get signed into law are worthy of review.
Definitions and Scope
This new law, which will be codified as Tex. Civ. Prac. & Rem. Code 114.001 et seq., waives the sovereign immunity of state agencies for the breach of a written contract for engineering, architectural, or construction services or for materials related to such services if the amount in controversy exceeds $250,000. The amount in controversy excludes penalties, costs, expenses, prejudgment interest, and attorney fees. This new chapter, and its waiver of sovereign immunity, will not apply to many highway and Texas Department of Transportation contracts.
The waiver of sovereign immunity does not extend to causes of action for negligence, fraud, tortious interference with contract, or any other tort. It also does not apply to an employment contract between a state agency and its employee.
State agency means an agency, department, commission, bureau, board, office, council, court, or other entity, that is in any branch of state government and that is created by the constitution or a statute of Texas. The statutory definition explicitly includes a university and a system of higher education but excludes a county, municipality, court of a county or municipality, special purpose district, or other political subdivisions of the State of Texas.
Awards under this waiver of sovereign immunity are limited to: (1) the amount due under the contract including compensation for increased cost to perform the work as a direct result of owner-caused delays or acceleration if provided by contract; (2) change order amounts owed; (3) attorney fees based on an equitable and just hourly rate if the contract provides recovery of attorney’s fees is available to all parties to the contract; and (4) interest as provided in the contract or, in the absence of contractual interest rate, the statutory post-judgment interest rate (not to exceed 10 percent). An award may not include consequential damages, exemplary damages, or damages for unabsorbed home office overhead.
Claims under this chapter may be brought in: (1) a county in which the events or omissions giving rise to the claim occurred; or (2) a county in which the principal office of the state agency is located. The new chapter does not waive sovereign immunity for suits brought in federal court. However, the waiver does apply to alternative dispute resolution proceedings, which include mediation and arbitration, that are contractual or established by state agency rules and expressly incorporated into the contract.
Judgment Creditor Remedies
A judgment creditor granted under this waiver of sovereign immunity is limited as to how the judgment may be collected against the state agency. Satisfaction of such a judgment may not be appropriated from the state agency’s general revenues. The funds must be specifically appropriated. Moreover, property of the state or any agency, department, or office of the state is not subject to seizure, attachment, garnishment, or any other creditors’ remedy to satisfy a judgment under this new chapter.
Licensing and Regulation of Architects and Engineers (H.B. 1717 and S.B. 204)
H.B. 1717 extends the sunset date of the Texas Board of Architectural Examiners from September 1, 2013 to September 1, 2025. It also requires applicants to submit their fingerprints to allow the board to obtain applicants’ criminal history. It further requires the Board of Architectural Examiners to conduct a criminal history check for each applicant or renewal. The new legislation also clarifies how penalties for violations of Chapter 1051 of the Occupation Code are calculated: penalties up to $5,000 will be assessed for each violation, and each day a violation continues or occurs counts as a separate violation.
S.B. 204 provides similar amendments to the licensing and regulation of engineers in Chapter 1001 of the Texas Occupations Code. The sunset of the Texas Board of Professional Engineers is extended to 2025. S.B. 204 imposes fingerprint and criminal background requirements similar to those in H.B. 1717.
S.B. 204 also creates a mechanism, with some procedural similarities to the temporary restraining order and injunction process, to protect the public from one whose continued practice poses a continuing and imminent threat. This procedure allows the Texas Board of Professional Engineers to suspend the license, certificate, or registration of a person if the board or panel determines that continued practice by that person would pose a continuing and imminent threat to the public welfare. This suspension may be done without notice or hearing if: (1) action is taken to initiate proceedings for a hearing before the State office of Administrative Hearings simultaneously with the temporary suspension; and (2) a hearing is held as soon as practicable. The State Office of Administrative Hearings shall hold a hearing not later than 14 days after the temporary suspension to determine whether a continuing and imminent threat still exists. A final hearing on the matter shall be heard within sixty-one days of the temporary suspension.
S.B.204 also allows the board, after notice and an opportunity for a hearing, to issue a cease and desist order prohibiting someone who is not licensed, certified, or registered under Chapter 1001 from continuing to violate this chapter or other statutes or rules related to engineering.
Employees with Criminal Records (H.B. 1188)
H.B. 1188, Chapter 142 of the Texas Civil Practice and Remedies Code, limits liability for employers (The statute uses the terms “employer, general contractor, premises owner, or other third party.”), including general contractors and subcontractors, who hire employees with criminal records. It provides that a cause of action may not be brought against an employer solely for negligently hiring or failing to adequately supervise an employee, based on evidence the employee has been convicted of an offense.
There are, however, exceptions that significantly limit this general rule. Causes of action are not precluded if: (1) the employer knew or should have known of the conviction; and (2) the employee was convicted of:: (a) an offense committed while performing duties substantially similar to those reasonably expected to be performed in the employment or under substantially similar conditions to those the employee is reasonably expected to encounter in the employment, taking into account the factors listed in Section 53.022 and 53.023(a) of the Occupations Code, regardless of whether the occupation requires a license; (b) any offenses (violent crimes such as assault, murder, etc.) listed in Section 3g, Article 42.12 of the Code of Criminal Procedure; (c) a sexually violent offense as defined in 62.001 of the Code of Criminal Procedure.
In addition, the protections set forth in H.B. 1188 do not apply to a suit involving the misuse of funds or property of a person other than the employer if, on the date the employee was hired, the employee had been convicted of a crime that includes fraud or the misuse of funds or property as an element of the offense, and it was foreseeable that the position for which the employee was hired would involve discharging a fiduciary responsibility in the management of funds or property.
Modifications to Various Procurement Statutes (H.B. 1050)
H.B. 1050 modifies several statutes in the Government Code related to procurements for construction related contracts. The two primary changes were to Tex. Gov. Code §§ 791, 2267 and 2269.
Section 791.011 of the Government Code will be amended to provide a definition of “purchasing cooperative.” This term means a group purchasing organization that governmental entities join as members wherein the managing member receives fees from members or vendors. However, under the new amendment, a local government may not enter into a contract to purchase construction-related goods or services through a purchasing cooperative under this chapter in an amount greater than $50,000 unless someone designated by the local government certifies in writing: (1) the project for which such services are being procured does not require engineering or architecture plans and specifications under Chapters 1001 and 1051 of the Occupations Code; or (2) such plans have been prepared.
Chapters 2267 and 2269 of the Government Code will be amended to allow a governmental entity to require a design-build firm responding to an RFP to identify companies that will: (1) fill key project roles, including project management, lead design firm, quality control management, and quality assurance management; (2) serve as key task leaders for geotechnical, hydraulics and hydrology, structural, environmental, utility, and right-of-way issues. A design-build firm who has identified such companies may not change the identified companies unless an identified company: (1) is no longer in business, is unable to fulfill its legal, financial, or business obligations or can no longer meet the terms of the teaming agreement with the design-build firm; (2) voluntarily removes itself from the team; (3) fails to provide a sufficient number of qualified personnel to fulfill the duties identified during the proposal stage; or (4) fails to negotiate in good faith in a timely manner in accordance with provisions established in the teaming agreement proposed for the project. If the design-build firm makes team changes for some other reason not allowed by the foregoing exceptions, then any cost savings resulting from such a change accrue to the governmental entity and not to the design-build firm.
The session in 2015 promises to be more eventful. In the 2013 session, the Legislature considered, but did not pass, bills proposing modification of the Construction Trust Fund Act and the mechanic lien provisions in Chapter 53 of the Texas Property Code.
The Construction Trust Fund Act may be tweaked to require the creation of a trust fund account under certain circumstances as was proposed in 2013 in H.B. 3316. Texas mechanic liens could undergo more significant changes, perhaps even an overhaul. The complexity of the law of mechanic’s liens in Texas has been roundly criticized, so fundamental change in order to simplify these statutes may very well occur.
The above is based on an article co-written with Ben Aderholt.