Texas 2009 - 81st Regular

Texas House Bill HB3913 Compare Versions

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1	1	81R14530 TJS-F
2	2	By: Madden H.B. No. 3913
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to resolution of disputes arising under certain
8	8	construction contracts.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Title 7, Civil Practice and Remedies Code, is
11	11	amended by adding Chapter 161 to read as follows:
12	12	CHAPTER 161. DISPUTE BOARDS
13	13	UNDER CERTAIN CONSTRUCTION CONTRACTS
14	14	SUBCHAPTER A. GENERAL PROVISIONS
15	15	Sec. 161.001. DEFINITIONS. In this chapter:
16	16	(1) "Construction contract" means a contract between a
17	17	governmental entity or a private real property owner and a
18	18	contractor for the construction, repair, or improvement of real
19	19	property in this state the value of which is at least $1 million.
20	20	(2) "Contractor" means a person contracting with a
21	21	real property owner directly or through the owner's agent.
22	22	(3) "Dispute board" means a dispute resolution board,
23	23	dispute review board, dispute adjudication board, or combined
24	24	dispute board.
25	25	(4) "Governmental entity" means a governmental or
26	26	quasi-governmental authority authorized by state law to make a
27	27	public work contract, including:
28	28	(A) the state, a county, or a municipality;
29	29	(B) a department, board, or agency of the state,
30	30	a county, or a municipality; and
31	31	(C) a school district or a subdivision of a
32	32	school district.
33	33	(5) "Public work contract" means a contract for
34	34	constructing, altering, or repairing a public building or carrying
35	35	out or completing any public work.
36	36	Sec. 161.002. NONAPPLICABILITY TO CERTAIN RESIDENTIAL
37	37	CONSTRUCTION AND PUBLIC WORK CONTRACTS. This chapter does not
38	38	apply to:
39	39	(1) a contract for the improvement of residential real
40	40	property that consists of four or fewer dwelling units; or
41	41	(2) a construction manager-agent contract entered
42	42	into by a school district under Section 44.037, Education Code.
43	43	Sec. 161.003. METHOD OF ADOPTION. A dispute arising under a
44	44	construction contract may be submitted to a dispute board in
45	45	accordance with this chapter if the contract includes language that
46	46	reflects the intent of the parties to use one of the processes
47	47	provided by this chapter. The parties may modify any provision of
48	48	this chapter other than Sections 161.053 and 161.054.
49	49	Sec. 161.004. USE OF CHAPTER IN PUBLIC CONSTRUCTION
50	50	CONTRACTS. (a) Each construction contract entered into by a
51	51	governmental entity that does not provide for submission of
52	52	disputes arising under the contract to a dispute board under this
53	53	chapter must contain a provision stating that the use of dispute
54	54	resolution under this chapter was actively considered. A
55	55	governmental entity is not required to use this chapter.
56	56	(b) A public work contract may not provide for disputes to
57	57	be submitted to a dispute adjudication board under Section 161.157
58	58	or a combined dispute board under Section 161.158.
59	59	[Sections 161.005-161.050 reserved for expansion]
60	60	SUBCHAPTER B. DISPUTE BOARDS
61	61	Sec. 161.051. COMPOSITION AND SELECTION OF BOARD. (a) A
62	62	dispute board consists of one, three, or a greater odd number of
63	63	persons selected in accordance with this section.
64	64	(b) If the board is to be composed of a single member, that
65	65	member shall be selected by mutual agreement of the parties on or
66	66	before the 15th day after the date the contract is executed, unless
67	67	the deadline is extended by mutual agreement of the parties. If the
68	68	parties are unable to select a single dispute review board member in
69	69	the time allotted, the dispute review board shall consist of three
70	70	members, as provided by this section.
71	71	(c) On or before the 15th day after the date a construction
72	72	contract subject to this chapter is executed, each party to the
73	73	contract shall select one nominee qualified to serve as a board
74	74	member under this chapter and provide the name and qualifications
75	75	of the nominee to the other party for approval.
76	76	(d) A party may accept or reject the other party's
77	77	nomination on or before the seventh day after the date the party
78	78	receives notice of the nomination. If the nominee is not rejected
79	79	during that period, the nominee is considered accepted.
80	80	(e) Except as provided by Subsection (g), if a nominee is
81	81	rejected, the party who nominated the person shall nominate another
82	82	qualified person.
83	83	(f) Once two board members nominated by the parties are
84	84	accepted, those board members shall nominate a third qualified
85	85	person to be chairperson of the board. Each party may accept or
86	86	reject the nomination on or before the 15th day after the date the
87	87	party receives notice of the nomination. If the nominee for
88	88	chairperson is not rejected by one of the parties in the time
89	89	prescribed by this subsection, the nominee is considered accepted.
90	90	Except as provided by Subsection (g), if the nominee is rejected by
91	91	a party, the two approved board members shall make additional
92	92	nominations for chairperson until a nomination is accepted by the
93	93	parties.
94	94	(g) If a party does not nominate a board member in the time
95	95	prescribed by Subsection (c) or rejects two nominations for a board
96	96	member or three nominations for a chairperson, any party may apply
97	97	to the district court of the district in which the work under the
98	98	contract will be performed for the appointment by the court of a
99	99	qualified person as a board member or chairperson, as applicable.
100	100	Sec. 161.052. DISPUTE BOARD AGREEMENT. Not later than the
101	101	15th day after the date all parties have received notice of the
102	102	appointment of the chairperson, each party and each member of the
103	103	board shall execute and comply with the dispute board agreement.
104	104	Sec. 161.053. QUALIFICATIONS OF BOARD MEMBERS. (a) A board
105	105	member selected by a party to the construction contract must have:
106	106	(1) at least three years of professional, technical,
107	107	academic, or managerial experience in engineering, construction,
108	108	architecture, or law; and
109	109	(2) experience in:
110	110	(A) one or more of the general types of
111	111	construction involved in the contract;
112	112	(B) the interpretation of construction contract
113	113	documents; and
114	114	(C) the analysis and resolution of construction
115	115	issues.
116	116	(b) The chairperson of the board must have:
117	117	(1) at least five years of experience in the person's
118	118	profession;
119	119	(2) at least five years of experience in:
120	120	(A) construction dispute resolution;
121	121	(B) adjudication;
122	122	(C) arbitration;
123	123	(D) service as a judge;
124	124	(E) service as an executive officer of a
125	125	contractor, design professional, or project owner;
126	126	(F) service as a faculty member in an institution
127	127	of higher education in architecture, engineering, or construction
128	128	science; or
129	129	(G) work as a construction manager-agent; and
130	130	(3) competence in the interpretation of construction
131	131	contract documents and the analysis and resolution of construction
132	132	claims.
133	133	(c) Each person who serves on a board must have:
134	134	(1) experience serving on a dispute board or as a
135	135	construction arbitrator, adjudicator, construction mediator,
136	136	judge, or construction manager-agent; or
137	137	(2) 40 hours of classroom training in the mechanisms
138	138	of dispute boards, construction adjudication, construction
139	139	arbitration, or construction mediation in courses conducted by an
140	140	alternative dispute resolution training organization accepted by
141	141	the parties or by the court that appoints the board member, as
142	142	applicable.
143	143	(d) The qualifications prescribed by this section may not be
144	144	waived for a board member or board chairperson who serves on a board
145	145	under a public work contract.
146	146	Sec. 161.054. CONFLICTS OF INTEREST; NEUTRALITY. (a) A
147	147	member of a dispute board may not have any current or prior
148	148	involvement in the contract that creates the board or a
149	149	construction project that is the subject of the contract that could
150	150	compromise the person's ability to review a dispute under the
151	151	contract impartially. The board member shall comply with the
152	152	American Bar Association Code of Ethics for Arbitrators in
153	153	Commercial Disputes standards regarding board member neutrality,
154	154	independence, and impartiality.
155	155	(b) Except for providing services as a dispute board member,
156	156	dispute resolution advisor, arbitrator, or mediator on a matter
157	157	involving the owner or contractor, a board member may not, at the
158	158	time of service on the board or during the two years before the
159	159	person begins serving on the board, without disclosure to, and
160	160	consent by, all parties, have:
161	161	(1) employment with, an ownership interest in, or an
162	162	existing business or financial relationship, including the
163	163	provision of fee-based consulting services, with:
164	164	(A) a party to the contract under which the board
165	165	is created;
166	166	(B) a third-party construction manager for the
167	167	contractor;
168	168	(C) any subcontractor or subconsultant to the
169	169	contractor; or
170	170	(D) another contractor or construction manager
171	171	for the owner;
172	172	(2) a financial interest in the contract;
173	173	(3) direct involvement in the preparation of the
174	174	successful bid documents for the contract or a successful bid by any
175	175	bidder for the invitation to bid for the contract; or
176	176	(4) involvement in the management or administration of
177	177	the contract.
178	178	(c) Except for participation in the board's activities as
179	179	provided by the construction contract and the board's contract
180	180	entered into under Section 161.055, the owner or contractor may not
181	181	solicit advice from or consult with the board or individual board
182	182	members on matters related to the conduct of the work under the
183	183	construction contract or resolution of problems under the
184	184	construction contract that might compromise the board's integrity.
185	185	(d) A board member may not advocate for a party to the
186	186	construction contract.
187	187	(e) A board member has a duty to the public and the parties
188	188	to be fair, impartial, independent, and neutral. Each board member
189	189	or potential board member shall disclose to the parties and the
190	190	other board members any business, professional, social, or
191	191	financial relationship that may give rise to an appearance of
192	192	impropriety or a suspicion of partiality. A board member has a
193	193	continuing duty to avoid conflicts of interest and shall promptly
194	194	disclose to the parties and the other board members any matter that
195	195	could reasonably give rise to a perception of partiality or the lack
196	196	of neutrality. A board member should refrain from acquiring or
197	197	entering into any interest or relationship that might reasonably
198	198	create the appearance that the person was influenced by the
199	199	anticipation or expectation of the interest or relationship.
200	200	(f) After an otherwise qualified board member or potential
201	201	board member discloses all matters that could reasonably give rise
202	202	to a perception of partiality or of possible conflict of interest,
203	203	the parties may waive objection to the matter disclosed and permit
204	204	the person to serve as a board member.
205	205	Sec. 161.055. CONTRACT WITH BOARD. (a) On or before the
206	206	15th day after the date the board chairperson is selected, the board
207	207	members and the parties to the construction contract shall execute
208	208	a standard three-party agreement in which the board members agree
209	209	to:
210	210	(1) assist the parties in preventing and resolving
211	211	disputes during the term of the construction contract;
212	212	(2) read and become familiar with all the contract
213	213	documents, including the specifications, plans, addenda, progress
214	214	schedule and updates, weekly progress reports, minutes of progress
215	215	meetings, change orders, and other documents relevant to the
216	216	performance of the contract and necessary to the board's work;
217	217	(3) visit the construction site as soon as practicable
218	218	after selection of the board;
219	219	(4) reserve at least one day each month for project
220	220	site visits and visit the site at least bimonthly, or more
221	221	frequently if beneficial, or at such other interval as the parties
222	222	may agree on; and
223	223	(5) keep informed regarding the construction
224	224	activities and the work in progress.
225	225	(b) The frequency, time, and duration of visits required
226	226	under the board's contract must be mutually agreed on by the board,
227	227	owner, and contractor, or if the parties and the board do not agree,
228	228	scheduled by the board.
229	229	(c) The board shall also agree to:
230	230	(1) consider, fairly and impartially, each dispute
231	231	referred to the board by a party to the construction contract; and
232	232	(2) provide written recommendations or decisions to
233	233	the owner and contractor based on:
234	234	(A) the relevant provisions of the construction
235	235	contract;
236	236	(B) any applicable law; and
237	237	(C) the facts and circumstances involved in the
238	238	dispute.
239	239	(d) The board's recommendations or decisions provided under
240	240	Subsection (c) shall express, clearly and completely, the logic and
241	241	reasoning leading the board to the recommendations or decisions in
242	242	a manner that enables the parties to fully understand and use the
243	243	recommendations or decisions to assist the negotiation of a
244	244	resolution of the dispute. The board's recommendations or decisions
245	245	may address issues of entitlement, quantum, or unjust enrichment.
246	246	[Sections 161.056-161.100 reserved for expansion]
247	247	SUBCHAPTER C. DUTIES OF PARTIES TO CONSTRUCTION CONTRACT
248	248	Sec. 161.101. OWNER DUTIES. The owner shall:
249	249	(1) provide each board member with a copy of all
250	250	contract documents, including the specifications, plans, addenda,
251	251	progress schedule and updates, weekly progress reports, minutes of
252	252	progress meetings, change orders, and any other documents relevant
253	253	to the performance of the contract and necessary to the board's
254	254	work; and
255	255	(2) provide the board with:
256	256	(A) conference facilities at or near the
257	257	construction site; and
258	258	(B) administrative and copying services.
259	259	Sec. 161.102. CONTRACTOR DUTIES. The contractor shall
260	260	provide each board member with relevant documents prepared by the
261	261	contractor, including progress schedules, to supplement the
262	262	documents provided by the owner.
263	263	[Sections 161.103-161.150 reserved for expansion]
264	264	SUBCHAPTER D. OPERATION OF BOARD
265	265	Sec. 161.151. BOARD ACTIVITY AND EXPENSES. (a) The board
266	266	shall be active and available throughout the term of the
267	267	construction contract. The cost of the board's activity must be
268	268	included as a capital expense of the project.
269	269	(b) The total cost of a qualified minority or historically
270	270	underutilized dispute board administrative organization, including
271	271	the expense of the board members, is included in meeting all
272	272	minority set-aside goals or provisions required by law.
273	273	(c) The board shall begin operation on the written
274	274	authorization of the owner received after the board's contract
275	275	under Section 161.055 is executed and may end operation at the end
276	276	of the term of the construction contract after the final payment due
277	277	under the construction contract has been made, unless a party to the
278	278	contract requests that the board continue to operate.
279	279	Sec. 161.152. IMMUNITY. (a) Each board member, in the
280	280	performance of the member's duties on the board, acts in the
281	281	capacity of an independent agent intended to facilitate the
282	282	resolution of disputes and not as an employee of the owner or the
283	283	contractor.
284	284	(b) To the fullest extent permitted by law, each board
285	285	member is entitled to judicial immunity for an action, decision, or
286	286	recommendation associated with the resolution of a dispute referred
287	287	to the board. Each board member shall be held harmless for any
288	288	personal or professional liability arising from or related to board
289	289	activities.
290	290	(c) To the fullest extent permitted by law, the owner and
291	291	contractor shall indemnify each board member for claims, losses,
292	292	demands, costs, and damages, including reasonable attorney's fees,
293	293	for bodily injury, property damage, or economic loss arising out of
294	294	or related to the member's carrying out of board functions.
295	295	Indemnification provided under this subsection is a joint and
296	296	several obligation of the owner and the contractor.
297	297	Sec. 161.153. INFORMAL PROCEEDINGS AND RECOMMENDATIONS.
298	298	(a) The owner and contractor may agree, with respect to any issue,
299	299	claim, or dispute, to request that the board act in an advisory
300	300	capacity to assist in resolving the issue, claim, or dispute at an
301	301	informal hearing before the board.
302	302	(b) For the purposes of an informal proceeding under this
303	303	section, each party shall provide a written submission not longer
304	304	than two written pages to the board. To the extent possible, the
305	305	parties shall also provide to the board written questions for the
306	306	board agreed to by the parties.
307	307	(c) On submission of an issue, claim, or dispute to an
308	308	informal proceeding under this section, either party may request an
309	309	opportunity to give an oral presentation to the board, and the board
310	310	may request an oral presentation by the parties. An oral
311	311	presentation under this subsection must occur during a regularly
312	312	scheduled meeting of the board. Unless a time limit for oral
313	313	presentations is agreed to by the parties, the board shall
314	314	establish a time limit for oral presentations.
315	315	(d) The board shall present its advisory recommendation to
316	316	the parties orally not later than four hours after the conclusion of
317	317	any oral presentation by the parties.
318	318	(e) The parties and the board are not bound by the advisory
319	319	recommendation, and the same matter may be heard again in a formal
320	320	hearing before the board.
321	321	(f) The parties shall agree that an advisory recommendation
322	322	is not admissible in any administrative, arbitral, or judicial
323	323	proceeding for any reason and may not offer or move for admission of
324	324	an advisory recommendation.
325	325	Sec. 161.154. FORMAL FINDINGS AND RECOMMENDATIONS. (a) On
326	326	the request of either party, the board shall conduct a formal
327	327	hearing in accordance with this section.
328	328	(b) The hearing shall be conducted:
329	329	(1) by the board chairperson;
330	330	(2) in accordance with any dispute board rules and
331	331	hearing procedures established by the board; and
332	332	(3) with all members of the board present and
333	333	participating.
334	334	(c) The board shall allow each party to present the party's
335	335	position on the dispute, with the contractor presenting first.
336	336	(d) The board may ask any questions of the parties that the
337	337	board considers appropriate.
338	338	(e) The board may schedule a continuation of the hearing
339	339	from time to time. The board may not accept any further submissions
340	340	or evidence from a party after the conclusion of the hearing unless
341	341	the submission or evidence is expressly requested by the board.
342	342	(f) After the hearing concludes, the board shall meet to
343	343	formulate its findings and recommendations for resolution of the
344	344	dispute. The board's deliberations shall be conducted in private
345	345	and are confidential.
346	346	(g) The board shall base its findings and recommendations on
347	347	the contract provisions and the facts and circumstances of the
348	348	dispute.
349	349	(h) The board shall make a concerted effort to reach a
350	350	unanimous decision but may issue its findings and recommendations
351	351	with the agreement of a majority of the members. The findings and
352	352	recommendations must be signed by all board members.
353	353	(i) A dissenting member shall clearly indicate the member's
354	354	dissent on the findings and recommendations and provide clearly
355	355	identified separate dissenting findings and recommendations. The
356	356	separate dissenting findings and recommendations must be included
357	357	as part of the board's findings and recommendations.
358	358	Sec. 161.155. TIME FOR ISSUING FORMAL FINDINGS AND
359	359	RECOMMENDATIONS. The board shall issue its findings and
360	360	recommendations to the owner and the contractor on or before the
361	361	21st day after the date the hearing concludes or as otherwise
362	362	determined by the board and agreed to by the parties.
363	363	Sec. 161.156. EFFECT OF FINDINGS AND RECOMMENDATIONS. (a)
364	364	Although the purpose of the board findings and recommendations is
365	365	to assist the parties in negotiating a resolution of the dispute,
366	366	the written findings and recommendations shall be admitted into
367	367	evidence in any subsequent judicial, arbitral, or administrative
368	368	proceeding, unless otherwise agreed by the parties.
369	369	(b) A board member or other participant in a board hearing
370	370	may not be required to testify regarding oral testimony or
371	371	presentations made at a board meeting or any hearing, conference,
372	372	or other proceeding of the board.
373	373	Sec. 161.157. OPERATION AS DISPUTE ADJUDICATION BOARD. (a)
374	374	A dispute adjudication board issues decisions.
375	375	(b) A dispute board shall act as a dispute adjudication
376	376	board only if the construction contract that creates the board:
377	377	(1) specifically states that the board is a dispute
378	378	adjudication board;
379	379	(2) adopts an International Chamber of Commerce
380	380	Dispute Adjudication Board Clause under which the parties to the
381	381	contract agree to the administration of the board by the
382	382	International Chamber of Commerce; or
383	383	(3) provides that the board has the authority to issue
384	384	a decision or determination that the parties are required to comply
385	385	with on receipt.
386	386	(c) In making and issuing a decision, the board shall follow
387	387	the procedures in Section 161.154 for formal findings and
388	388	recommendations.
389	389	(d) After receiving the determination, the parties must
390	390	comply with the board's decision without delay, unless on or before
391	391	the 30th day after the date a party receives the decision, the party
392	392	notifies the board and the other party in writing of the reasons for
393	393	the party's dissatisfaction with the decision. If a notice of
394	394	dissatisfaction is not submitted during that time, the parties are
395	395	bound by the decision, waive any right of recourse they may have
396	396	against the decision, and consent to the summary enforcement of the
397	397	decision by a court as if the decision is a partial final
398	398	arbitration award.
399	399	(e) Unless otherwise agreed, if a party submits a written
400	400	notice of dissatisfaction that complies with Subsection (d), or if
401	401	the board does not issue the board's decision on or before the 30th
402	402	day after the date the hearing on the dispute concludes, the dispute
403	403	shall be finally settled by arbitration, if the parties agree, or by
404	404	a court. Until the dispute is finally settled, the parties are
405	405	bound to comply with the decision.
406	406	Sec. 161.158. OPERATION AS COMBINED DISPUTE BOARD. (a) A
407	407	combined dispute board issues a recommendation under Sections
408	408	161.154-161.156, unless, for a particular dispute:
409	409	(1) the parties jointly request a decision under
410	410	Section 161.157; and
411	411	(2) except as provided by Subsection (d), the combined
412	412	dispute board decides to issue a decision under this section.
413	413	(b) A dispute board shall act as a combined dispute board
414	414	only if the construction contract that creates the board:
415	415	(1) specifically states that the board is a combined
416	416	dispute board;
417	417	(2) adopts an International Chamber of Commerce
418	418	Combined Dispute Board Clause under which the parties to the
419	419	contract agree to the administration of the board by the
420	420	International Chamber of Commerce; or
421	421	(3) provides that the board has the authority to issue
422	422	either a recommendation or a decision.
423	423	(c) In making a recommendation or decision, the combined
424	424	dispute board shall follow the procedures in Section 161.154 for
425	425	making and issuing formal findings and recommendations.
426	426	(d) If a party requests a decision with respect to a given
427	427	dispute and no other party objects, the combined dispute board
428	428	shall issue a decision.
429	429	(e) If a party requests a decision and one or more parties
430	430	objects to the request, the combined dispute board shall determine
431	431	whether the board will issue a recommendation or decision. In
432	432	making that determination, the board shall consider whether, due to
433	433	the urgency of the situation or other relevant considerations, a
434	434	decision would facilitate the performance of the contract or
435	435	prevent irreparable loss or damage to any party, whether a decision
436	436	would prevent disruption of the contract, whether a decision is
437	437	necessary to preserve evidence, and any other factors the board
438	438	considers relevant.
439	439	(f) A party referring a dispute to the board may request a
440	440	decision by the board only if the request is made in writing in the
441	441	notice to the other parties and the board referring the dispute.
442	442	Another party may request a decision by the board only if the
443	443	request is made in writing before or at the same time the party
444	444	submits a written response to the request for board action.
445	445	Sec. 161.159. DISCLOSURE OF RECORDS. The records of a
446	446	dispute board are not records of any government agency, and any
447	447	records, notes, or drafts taken or made by a board member are not
448	448	subject to disclosure under any freedom of information law.
449	449	SECTION 2. This Act takes effect September 1, 2009.