88R614 MP-D
By: Hinojosa S.B. No. 1828
A BILL TO BE ENTITLED
AN ACT
relating to the procurement by local governments of energy savings
performance contracts for certain conservation measures; creating
criminal offenses; authorizing a fee.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 9, Local Government Code, is
amended by adding Chapter 302A to read as follows:
CHAPTER 302A. ENERGY SAVINGS PERFORMANCE CONTRACTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 302A.001. DEFINITIONS. In this chapter:
(1) "Capital cost avoidance savings" means money spent
by a local government to pay for a conservation measure:
(A) that has been identified as a permanent
equipment replacement or repair by an investment grade audit of a
performance contract under Section 302A.108; and
(B) the cost of which has been documented and
discounted by any additional utility cost savings or any operation
and maintenance cost savings generated from another conservation
measure identified in the performance contract when compared with
an established baseline.
(2) "Conservation measure" means the installation or
implementation of an item, equipment, modification, alteration,
improvement, or system for, or any employee training program or
architectural or engineering consulting service related to the
operation of, a conservation technique in a new or existing
facility, other than a conservation technique for the design or new
construction of a water supply project, water plant, wastewater
plant, water and wastewater distribution or conveyance facility, or
drainage project.
(3) "Conservation technique" means:
(A) the insulation of a building structure or a
system within the building;
(B) a storm window or door, any caulking or
weather stripping, a multiglazed window or door, a heat-absorbing
or heat-reflective glazed and coated window or door system, or
another window or door system modification that reduces energy
consumption;
(C) an automatic energy control system,
including computer software and technical data licenses;
(D) a heating, ventilating, or air-conditioning
system modification or replacement that reduces energy or water
consumption;
(E) the replacement or retrofitting of a lighting
fixture that increases energy efficiency;
(F) an energy recovery system;
(G) an electric system improvement;
(H) a water-conserving fixture, appliance, or
equipment or the substitution of a non-water-using fixture,
appliance, or equipment;
(I) a water-conserving landscape irrigation
equipment;
(J) a landscaping measure that reduces watering
demands and captures and holds applied water and rainfall,
including:
(i) landscape contouring, including the use
of a berm, swale, and terrace; and
(ii) use of a soil amendment that increases
the water-holding capacity of the soil, including compost;
(K) any rainwater harvesting equipment or
equipment to make use of water collected as part of a storm-water
system installed for water quality control;
(L) any equipment for recycling or reusing water
originating on the premises or from other sources, including
treated municipal effluent;
(M) any equipment needed to capture water from
nonconventional, alternate sources, including air-conditioning
condensate or graywater, for nonpotable uses;
(N) any metering or related equipment or systems
that:
(i) reduces utility costs;
(ii) increases operation and maintenance
cost savings; or
(iii) increases in billable revenues
resulting from increased accuracy of water measurement by
identifying utility errors, optimizing rate schedules, or
increasing meter accuracy;
(O) an alternative fuel program resulting in
energy cost savings and reduced emissions for local government
vehicles, including fleet vehicles;
(P) a program resulting in utility cost savings
by reducing utility errors and optimizing existing rate schedules
under which service is provided; or
(Q) another energy or water conservation-related
improvement or equipment, including an improvement or equipment
relating to renewable energy or nonconventional water sources or
water reuse that produces cost savings or increases in billable
revenues for their appointed function.
(4) "Debt service" means the total amount spent or to
be spent by a local government from property tax revenues to pay:
(A) the principal of and interest on debts;
(B) another payment required by contract to
secure debts; and
(C) if the local government is created under
Section 52, Article III, or Section 59, Article XVI, Texas
Constitution, a payment on debts that the local government
anticipates incurring in the next calendar year.
(5) "Increase in billable revenues" means a projected
increase in billable revenues when compared with an established
baseline of billable revenues.
(6) "Increase in meter accuracy" means a guaranteed
increase in efficiency or accuracy of utility metering or related
equipment or systems that is calculated or determined in accordance
with procedures established by the International Performance
Measurement and Verification Protocol or succeeding standards of
the United States Department of Energy.
(7) "Local government" means a county, municipality,
school district, or other political subdivision of this state.
(8) "Measurement and verification" means a method of
confirming whether a guaranteed savings increase in billable
revenues or an increase in meter accuracy resulting from a
conservation measure is being met as specified under a performance
contract and this chapter.
(9) "Meter guarantee" means a stipulated or agreed to
increase in billable revenues to result from the guaranteed
increase in meter accuracy, based on stipulated or agreed to
components of a billable revenues calculation for a conservation
measure.
(10) "Operation and maintenance cost savings" means a
measurable reduction in operating or maintenance costs on a
long-term basis that is a direct result of the installation of new
equipment or the implementation of a new service in connection with
one or more conservation measures when compared with an established
baseline. The term does not include any savings that are realized
solely because of a shift in the cost of personnel or other similar
short-term cost savings related to or generated by outsourcing or
using contract workers to perform tasks previously performed by
employees.
(11) "Performance contract" means a contract between a
local government and a qualified provider for the evaluation,
recommendation, or implementation of a conservation measure in a
new or existing facility that is identified by an investment grade
audit performed in accordance with Section 302A.108 and that is
designed to result in annual savings, an increase in billable
revenues, or an increase in meter accuracy guaranteed by the
provider in accordance with Section 302A.052(a) over a specified
period prescribed by Section 302A.051(a)(1), which includes both
the construction and repayment phases. The term includes a
contract related to the pilot program.
(12) "Pilot program" means a pilot program operated by
the Energy Systems Laboratory at the Texas A&M Engineering
Experiment Station, in consultation with the Texas Facilities
Commission and the State Energy Conservation Office, that:
(A) establishes and implements energy efficiency
improvements to state-owned buildings maintained by the
commission;
(B) generates savings in utility costs resulting
from the improvements described by Paragraph (A) resulting in at
least a 30 percent annual return on the costs of the improvements;
(C) provides for the participation of not fewer
than two companies selected by the commission; and
(D) provides for any money attributable to
utility cost savings resulting from the pilot program to be
appropriated only to the commission.
(13) "Provider" means an entity or an affiliate of the
entity that:
(A) has experience in the design, acquisition,
implementation, installation, and where appropriate, construction,
engineering, operation, maintenance, and repair of a conservation
measure;
(B) has the technical capability to verify that
such conservation measure generates savings, an increase in
billable revenues, or an increase in meter accuracy; and
(C) has the ability to secure or arrange the
financing necessary to satisfy the guarantee required by a
performance contract entered into by the provider.
(14) "Request for qualifications" means a competitive
selection process achieved by a multistep negotiated procurement
process that involves sequential steps for the evaluation of
submissions by prospective providers.
(15) "Savings" means the reduction in expenditures,
resulting from the implementation of one or more conservation
measures under a performance contract that are:
(A) generated from the date the conservation
measures become fully operational;
(B) calculated in accordance with the terms of
the performance contract and the requirements of this chapter;
(C) guaranteed by the provider; and
(D) measured and verified in accordance with
Sections 302A.055, 302A.301, and 302A.302 for each of the following
categories:
(i) utility cost savings;
(ii) operation and maintenance cost
savings; and
(iii) capital cost avoidance savings.
(16) "Subcontractor" means a person, other than an
employee of a provider, who contracts with the provider to furnish
labor or materials to fulfill an obligation to the provider who is
acting as a general contractor or prime contractor for any of the
authorized work, including installation, required by a performance
contract. The term includes a subcontractor of any tier, supplier,
vendor, fabricator, or manufacturer.
(17) "Third-party engineer" means a professional
engineer who is selected or designated by a local government under
Section 302A.004.
(18) "Total cost" includes the sum of the costs of a
conservation measure, investment grade audit, construction,
financing and debt services, measurement and verification
services, and maintenance and training during the term of the
performance contract. The term does not include any obligations
that have not been fulfilled on termination of the contract before
the end of the contract term, provided that those obligations are
disclosed when the performance contract is executed.
(19) "Utility cost savings" means a measured and
verified reduction in net fuel costs, energy costs, water costs,
stormwater fees, or other utility costs, on a long-term basis
resulting from the implementation of one or more conservation
measures when compared with an established baseline of usage of
those previous costs. The term does not include an estimated
reduction due to a decrease in energy rates that is not derived from
increased conservation or reduced usage.
Sec. 302A.002. INAPPLICABILITY OF LAW GOVERNING CONTRACT
PROCEDURES FOR CONSTRUCTION PROJECTS. Except as provided by
Section 302A.106(a)(1), Chapter 2269, Government Code, does not
apply to this chapter.
Sec. 302A.003. CONTRACTS VOIDABLE. A contract entered into
or an arrangement made in violation of this chapter is voidable as
against public policy.
Sec. 302A.004. THIRD-PARTY ENGINEER. (a) A local
government shall select or designate a third-party engineer to:
(1) act as the local government's representative, and
serve as the local government's consultant, throughout the
performance contract procurement process and the duration of the
measurement and verification services;
(2) assist the local government in evaluating the
qualifications, proposals, and change orders of, and related
presentations by, a provider;
(3) provide to the local government written reports
under Section 302A.103(c) and written opinions under Section
302A.110 and submit the written reports and written opinions to the
appropriate state agencies as specified under Section 302A.111;
(4) perform the measurement and verification review of
the meter guarantee under Section 302A.055;
(5) monitor the performance of the provider's
measurement and verification services required under Section
302A.301; and
(6) review measurement and verification reports and
the provider's annual reconciliation statement under Sections
302A.301 and 302A.302.
(b) The third-party engineer must be a professional
engineer licensed under Chapter 1001, Occupations Code, and must:
(1) have a minimum of three years of specialized
experience with performance contracts;
(2) have demonstrated technical competence in
relation to, and working knowledge of, the procurement process of
performance contracts;
(3) not be an officer or employee of:
(A) a provider for the performance contract; or
(B) a wholly owned subsidiary, majority-owned
subsidiary, parent company, or affiliate of the provider for the
contract; and
(4) not be otherwise associated with the performance
contract.
(c) A local government:
(1) if the third-party engineer is not a full-time
employee of the local government, shall procure the third-party
engineer's services in accordance with the procedures prescribed
for procuring the professional services of an engineer under
Section 2254.004, Government Code; and
(2) shall pay a third-party engineer described by
Subdivision (1) a pre-negotiated fee based on the work completed if
the local government does not enter into a performance contract
that was reviewed by the third-party engineer under Section
302A.110.
(d) A provider selected to perform an investment grade audit
and propose a performance contract is prohibited from suggesting,
recommending, or arranging a third-party engineer.
(e) Before the local government selects or designates a
third-party engineer, the third-party engineer shall certify in
writing to the local government that the engineer meets the
qualifications required under Subsection (b) and that there is no
conflict of interest with regard to the local government and the
proposals the third-party engineer is to evaluate that result from
the request for qualifications.
(f) A third-party engineer who reviews a performance
contract shall maintain the confidentiality of any proprietary
information the third-party engineer acquires while reviewing the
contract.
(g) A local government may require a provider to include in
the calculation of the cost of a proposal for a performance contract
any fees payable by the local government for use of a third-party
engineer who is not a full-time employee of the local government. A
fee charged by a third-party engineer described by this subsection
may not exceed 2.5 percent of the total value of the performance
contract at the time that a contract is executed by that provider.
SUBCHAPTER B. ENERGY SAVINGS PERFORMANCE CONTRACT
Sec. 302A.051. PERFORMANCE CONTRACT. (a) The governing
body of a local government may enter into a multiyear performance
contract, structured as an installment payment contract or
lease-purchase contract, for the implementation of one or more
conservation measures in accordance with this chapter if:
(1) the term of the contract, beginning on the final
date on which all the conservation measures become fully
operational, does not exceed the lesser of:
(A) 20 years;
(B) the average useful life of the conservation
measures; or
(C) the term of financing;
(2) after review of the investment grade audit report
prepared in accordance with Section 302A.108, the local government
determines that the savings, increase in billable revenues, or
both, that result from the conservation measures which are
identified by the audit report and guaranteed by the provider will
equal or exceed the total cost of the contract;
(3) the contract includes the provisions required by
Sections 302A.052(a), (c), and (d); and
(4) the local government receives approval for the
contract from the appropriate state agency under Section 302A.111.
(b) Each conservation measure to be installed or
implemented under the performance contract must comply with current
local, state, and federal construction, plumbing, and
environmental codes and regulations.
(c) A performance contract may not include an improvement or
equipment that allows or causes water from any condensing, cooling,
or industrial process or any system of nonpotable usage over which
public water supply system officials do not have sanitary control
to be returned to the potable water supply.
Sec. 302A.052. REQUIRED PERFORMANCE CONTRACT PROVISIONS.
(a) A performance contract must include a provision that requires
the provider to:
(1) provide a written guarantee or meter guarantee,
or, if applicable, both, that:
(A) the savings, increase in billable revenues,
or increase in meter accuracy resulting from the conservation
measures implemented or installed under the performance contract
will at least equal the cost of the contract during the term of the
contract, including both the construction and repayment phases; and
(B) the guaranteed annual savings and increase in
billable revenues will at least equal the local government's annual
contractual obligations, including annual measurement and
verification costs, costs for third-party engineer services,
annual maintenance costs, repair costs, costs of design and
engineering services, installation costs, and costs for debt
service, and any financing charges incurred by the local government
in any one year period during the term of the contract beginning
after the final date of installation of all the conservation
measures; and
(2) provide to the local government an annual
reconciliation statement of the written guarantee under Section
302A.302.
(b) The written guarantee described by Subsection (a)(1)
must require the provider to pay the local government for any
shortfall amounts based on the results of the measurement and
verification review required under Section 302A.055. If the
savings, increase in billable revenues, or both, resulting from a
performance contract fall short of the savings and increase in
billable revenues projected under the contract and all required
shortfall payments to the local government have not been made, the
local government may terminate the contract without incurring any
additional obligation to the provider.
(c) A performance contract and any other contract entered
into by the local government with a provider under this chapter must
contain a prohibition against contingent fees as follows: "The
provider warrants that he or she has not employed or retained any
company or person, other than a bona fide employee working solely
for the provider to solicit or secure this agreement and that he or
she has not paid or agreed to pay any person, company, corporation,
individual, or firm, other than a bona fide employee working solely
for the provider any fee, commission, percentage, gift, or other
consideration contingent upon or resulting from the award or making
of this agreement."
(d) A performance contract and any other contract entered
into by the local government with a provider must contain the
following provision: "The provider agrees that through the term of
the performance contract and contract amendment thereafter the
provider will maintain a compliance program and internal controls
designed to detect and deter fraudulent and corrupt conduct
through, among other things: policies and procedures to create
redundancy in the subcontractor bid review, bid normalization, bid
revision, subcontractor selection, and savings and cost review
processes."
(e) The provision required by Subsection (c) cannot be
waived in a contract.
(f) The performance contract must contain a provision
stating that the contract is not executory until approval is
obtained under Section 302A.111.
Sec. 302A.053. CONTINGENCY CLAUSE FOR RELATED CONTRACT
REQUIRING SAME PROVIDER TO PERFORM CERTAIN SERVICES. (a) This
section applies to a multiyear contract that requires a local
government to retain the same provider subject to the written
guarantee to perform annual measurement and verification review
services under Section 302A.301.
(b) A multiyear contract to which this section applies must
contain the following contingency clause: "The continuation of this
contract is contingent upon the annual budget and appropriation of
funds by the local government to fulfill the requirements of the
contract. If the local government fails to appropriate sufficient
money for payments to be continued under the contract, the contract
shall terminate on the last day of the fiscal year for which funds
have been allocated. Such termination shall be without penalty or
expense to the local government except for payments which have been
earned prior to the termination date."
(c) If a local government fails to allocate sufficient money
for payments to be continued under a multiyear contract to which
this section applies, the contract terminates on the last day of the
fiscal year for which funds have been allocated. The local
government may not incur a penalty or be charged an expense as a
result of a termination of the contract described by this
subsection except for payments that have been earned before the
date on which the contract is terminated.
Sec. 302A.054. BASELINE CALCULATION. (a) A provider shall
calculate the baseline in a performance contract based on:
(1) historical costs, revenues, accuracy, or related
components for the preceding three years for:
(A) an existing facility before the installation
or implementation of the conservation measures; or
(B) a new facility using a comparative existing
facility with a similar floor plan and identical uses; or
(2) documentation of avoided anticipated costs of a
capital improvement or an item of equipment the local government
is:
(A) currently spending at the time of the
calculation; or
(B) has budgeted to spend in the future.
(b) The baseline calculations of a provider may be used for
determining:
(1) the costs for energy or water usage and related net
operation and maintenance costs;
(2) the billable revenues from providing energy,
water, or other utilities to users; or
(3) the efficiency or accuracy of metering or related
equipment or systems.
(c) The provider's baseline calculations:
(1) must identify the specific dollar amount and units
or percentages of consumption that the provider projects will be
eliminated or avoided on a long-term basis as a result of the
conservation measures that the local government is implementing;
and
(2) if the calculation is for savings, must use and
reference as a benchmark the actual demand and energy components of
the utility rate applicable to the local government in effect at the
time of an investment grade audit, and may not use and reference a
blended rate that aggregates, combines, or restates in any manner
the distinct demand and energy components of the utility rate into a
single combined or restated utility rate.
(d) The local government and provider may agree to make
modifications to the calculation of utility cost savings based only
on a subsequent material change to:
(1) the baseline consumption of energy or water
identified at the beginning of the term of the performance
contract;
(2) the utility rates;
(3) the number of days in the utility billing cycle;
(4) the square footage of the facility;
(5) the operational schedule, and any corresponding
change in the occupancy and indoor temperature, of the facility;
(6) the facility temperature;
(7) the weather;
(8) the amount of equipment or lighting used in the
facility; or
(9) the nature or intensity of energy use such as the
change of classroom space to laboratory space.
(e) Predetermined escalation rates may not be used in a
baseline calculation.
Sec. 302A.055. MEASUREMENT AND VERIFICATION OF GUARANTEE.
(a) Any guaranteed savings, increase in billable revenues, and, if
applicable, efficiency or accuracy of metering equipment must:
(1) be consistent with the investment grade audit
report under Section 302A.108; and
(2) be determined using one of the measurement and
verification methodologies listed in:
(A) the United States Department of Energy's
Measurement and Verification Guidelines for Energy Savings
Performance Contracts;
(B) the International Performance Measurement
and Verification Protocol maintained by the Efficiency Valuation
Organization; or
(C) Guideline 14-2022 of the American Society of
Heating, Refrigerating, and Air-Conditioning Engineers.
(b) If none of the methodologies described by Subsection
(a)(2) are sufficient for measuring guaranteed savings due to the
existence of data limitations or the nonconformance of specific
project characteristics, the provider shall develop an alternate
method that is compatible with one of the methodologies described
by Subsection (a)(2) and mutually agreeable to the local
government. The alternate method must be:
(1) subject to approval under Section 302A.111; and
(2) thoroughly documented and substantiated through
records showing that the expenses claimed are real.
Sec. 302A.056. PAYMENT AND PERFORMANCE BOND. (a)
Notwithstanding any other law, before entering into a performance
contract, the governing body of the local government shall require
the provider of the conservation measures to file with the
governing body a payment and performance bond relating to the
installation of the conservation measures in accordance with
Chapter 2253, Government Code.
(b) In addition to the bond required by Subsection (a), the
governing body may require the provider to file a separate bond to
cover the value of the guarantee.
Sec. 302A.057. METER GUARANTEES. (a) This section applies
to any performance contract that:
(1) provides for any metering or related equipment or
systems; and
(2) includes a meter guarantee by the provider,
regardless of whether the meter guarantee is a part of a broader
guarantee applicable to other conservation measures.
(b) Not later than the fifth anniversary of the effective
date of a performance contract, the third-party engineer under
Section 302A.004 shall test a statistically relevant sample of the
meters installed or implemented under the contract to determine or
calculate the actual average accuracy and shall compare the actual
average accuracy to the baseline average accuracy of those tested
meters.
(c) A meter guarantee applies if the third-party engineer
reports to the local government and the provider that the average
accuracy of the tested meters as of the testing date is less than
the baseline average accuracy of the tested meters as of the testing
date.
(d) The amount payable under the meter guarantee, based on
the results of the third-party engineer's measurement and
verification report under Section 302A.301, must be determined for
each year subject to the provider's annual reconciliation statement
under Section 302A.302 and is equal to the difference between:
(1) the agreed increase in billable revenues based on
the projected accuracy of all of the meters for each year, according
to the performance contract; and
(2) the actual revenues for the same year that would
result from applying the third-party engineer's reported actual
average accuracy of the tested meters to all of the meters subject
to the performance contract, using the same contract components
that were used to calculate the agreed increase in billable
revenues for that year, assuming the annual decrease in actual
average accuracy of all the meters was a pro rata percentage of the
reported total decrease in actual average accuracy.
(e) Notwithstanding Subsection (d), if the meter guarantee
in the contract is part of a broader guarantee applicable to other
conservation measures that is greater in value under the contract,
the amount payable under the meter guarantee for any year during the
measurement and verification period is subtracted from the
difference between:
(1) the actual sum of the savings and the increase in
billable revenues resulting from the other conservation measures
for that year during the measurement and verification period; and
(2) the guaranteed amount of the savings and the
increase in billable revenues from the other conservation measures
for that year during the measurement and verification period.
(f) A test conducted under this section must be performed in
accordance with the procedures established by the International
Performance Measurement and Verification Protocol or succeeding
standards of the United States Department of Energy.
(g) A third-party engineer conducting a test under this
section shall:
(1) verify that the tested meters have been properly
maintained and are operating properly; and
(2) comply with Sections 302A.110(b) and 302A.004(d).
(h) A provider shall select both old and new meters to test
when performing an investment grade audit and developing baseline
average accuracy of existing meters to include in the investment
grade audit report. In developing the baseline average accuracy,
the provider may not include within its guarantee calculation
meters that were inactive or out of service at the time of the
investment grade audit. The meter guarantee may not include an
escalation factor that assumes water will increase by a certain
percentage each year.
Sec. 302A.058. MAINTENANCE SERVICES. (a) Subject to
Subsection (c), a local government may solicit and negotiate
maintenance services for proposed conservation measures as a
component of a request for qualifications.
(b) Additional maintenance services:
(1) are subject to budget appropriations of the local
government on an annual basis; and
(2) may be discontinued at any time over the
guaranteed period with no negative impact to the performance
contract.
(c) The local government may not be required under the terms
of a performance contract to purchase a maintenance contract or
other maintenance agreement from the provider if the local
government takes appropriate action to budget for its own forces or
another provider to maintain new systems installed pursuant to and
existing systems affected by the performance contract. The
provider shall provide proper training and a sufficient number of
operation and maintenance manuals for all equipment replacements or
upgrades at each facility location.
(d) A provider shall provide to the local government the
full capabilities to operate, maintain, repair, update,
reconfigure, and engineer changes necessary to accommodate
facility or operational changes or to incorporate new energy
savings control strategies for any system, including a facility
automation and control system, proposed under this chapter. A
provider is not required under this subsection to provide the local
government with access to the operating system of the provider, but
the user interface software must provide for all capabilities
described by this subsection.
Sec. 302A.059. USEFUL LIFE OF CERTAIN EQUIPMENT OR SYSTEM.
(a) The useful life of an equipment or system that is to be
installed as part of a conservation measure and is acquired through
a performance contract may not exceed the useful life of the
equipment or system as determined by the maximum asset depreciation
range guidelines in effect for the Class Life Asset Depreciation
Range System established by the Internal Revenue Service under the
United States Internal Revenue Code.
(b) If an equipment or system described by Subsection (a) is
not covered by the asset depreciation range guidelines described by
that subsection, the useful life of the equipment or system may not
exceed the useful life according to the equipment or system
manufacturer's standards.
Sec. 302A.060. CERTAIN SAVINGS TO OFFSET COSTS OF
CONSERVATION MEASURE. Operation and maintenance cost savings
realized as the result of a performance contract may be used to
offset the costs of a conservation measure under a performance
contract, provided that the savings indicate a direct reduction
within a local government's operating and maintenance budget. Any
projected operation and maintenance cost savings must be limited to
only those that can be thoroughly documented and substantiated
through invoices showing that the expenses claimed are real.
Sec. 302A.061. PERFORMANCE CONTRACT CONCURRENT WITH
CONSTRUCTION CONTRACT. If a performance contract is to be executed
concurrently with one or more conventional construction contracts,
the performance contract must be separate and distinct from the
other contracts.
Sec. 302A.062. REQUIRED PROVISION FOR CHANGE ORDER OR
CONTRACT ADDENDUM. The change order or contract addendum must
contain a provision that the change order or contract addendum, as
applicable, is not executory until approval is obtained under
Section 302A.111.
SUBCHAPTER C. PROCUREMENT PROCEDURES FOR PERFORMANCE CONTRACTS
Sec. 302A.101. PROCUREMENT OF PERFORMANCE CONTRACT. A
local government must procure a performance contract under this
chapter in accordance with the procedures prescribed by this
subchapter.
Sec. 302A.102. REQUEST FOR QUALIFICATIONS. (a) A local
government shall issue a request for qualifications when selecting
a provider to perform any work related to a performance contract or
perform a service in connection with a performance contract. The
request for qualifications must be open to all providers before the
local government enters into an agreement for an investment grade
audit under Section 302A.108 or a performance contract.
(b) Before issuing a request for qualifications, a local
government shall select or designate a third-party engineer to
serve as the representative and consultant in accordance with
Section 302A.004.
(c) A person that assists the local government in preparing
a request for qualifications may not submit a response to the
request.
(d) A prospective respondent or a prospective respondent's
representative may not communicate with a member of the governing
body or an employee of a local government who has influence in the
evaluation or selection process regarding the request for
qualifications from the time the request is published until the
request has been acted on by the governing body, except for
contacting the person identified in the request as the designated
point-of-contact. The occurrence of an act prohibited by this
subsection will result in the prospective respondent's
disqualification from consideration.
(e) In submitting a response to the request for
qualifications, a responding provider shall certify in writing to
the local government that neither the provider nor any of the
provider's affiliates or subcontractors or the employees of the
provider or of any of the provider's affiliates or subcontractors
have:
(1) bribed or attempted to bribe an officer or
employee of the local government in connection with the performance
contract; and
(2) not participated in the creation of the request
for qualifications.
(f) A local government shall publish notice of the request
for qualifications in the same manner the local government would
publish notice of the request for a competitive bid under the law
applicable to the local government for the procurement of
contracts. In addition, the local government may send notice of the
request for qualifications by the means most likely to reach
providers interested in responding to the request, including by
direct mail solicitation or electronic mail, or posting notice of
the request on a government Internet website.
(g) A local government shall review, evaluate, and rank all
properly submitted responses to the request for qualifications
based on the provider's:
(1) business qualifications;
(2) personnel qualifications, including a list of any
subcontractors to be used by the provider;
(3) financial qualifications, including information
that documents the sources of proposed financing and specific
projects that have used those proposed financing sources;
(4) construction management qualifications for all
project phases;
(5) project track record, including references from
past clients similar to the local government with respect to
project size and the project's scope; and
(6) demonstrated ability to accomplish a performance
contract.
Sec. 302A.103. REQUEST FOR PROPOSALS. (a) To ensure only
qualified and capable providers are invited to submit proposals,
the local government shall create a short list of not more than five
providers who submitted responses to the request for
qualifications, ranked on the basis of demonstrated competence and
qualifications. If, after the request for qualifications is
published, fewer than two providers have responded, the local
government may select the one respondent to conduct a preliminary
utility audit and negotiate an agreement for an investment grade
audit report.
(b) After selecting the qualified providers from the short
list as described by Subsection (a), the local government shall
require each of the selected providers to perform a preliminary
utility audit under Section 302A.104 and to submit a written
proposal and make a presentation based on the audit. If a provider
submits a proposal that does not calculate projected savings in the
manner required by Section 302A.054, the local government shall
reject the proposal.
(c) During the procurement process, the third-party
engineer selected or designated under Section 302A.004 shall
provide to the local government a written report containing both a
qualitative and quantitative evaluation of a provider's
qualifications and proposal. The written report must include a
recommendation for selecting a provider, but the local government
is not obligated to follow the recommendation.
Sec. 302A.104. PRELIMINARY UTILITY AUDIT. (a) As provided
under Section 302A.103, each qualified provider selected from the
short list must complete a preliminary utility audit in accordance
with this section and submit a written report and proposal based on
the audit. The preliminary audit proposal shall form the basis for
a qualified provider's investment grade audit proposal under
Section 302A.108.
(b) The preliminary utility audit must show for each
proposed conservation measure, at a minimum, a comparison of the
estimated costs and estimated project savings, increase in billable
revenues, and, if applicable, efficiency or accuracy of metering
equipment to support justification for each proposed conservation
measure.
(c) To prepare a preliminary utility audit report, each
qualified provider selected under Section 302A.103 must be given an
equal opportunity to conduct an on-site survey of the facilities
identified in the published request for qualifications. A site
visit must be scheduled after the date on which a request for
qualifications is issued, but not before the date the responses are
due. During this period, the local government:
(1) shall assist the selected qualified providers in
support of their responses through the collection of necessary
facility technical information, including by providing to each
qualified provider:
(A) at least three years of utility bills;
(B) floor plans as needed; and
(C) maintenance records as needed; and
(2) may require that each selected qualified provider
attend a pre-proposal conference, conducted for the purpose of
discussing contract requirements and answering questions from
prospective providers.
(d) A preliminary utility audit:
(1) must be performed on a representative sample of
existing facilities; or
(2) if the local government is considering
constructing a new facility, must be completed using comparative
existing facilities with similar floor plans and identical uses.
(e) The preliminary utility audit must be provided at no
cost to the local government and with no obligation to select the
qualified provider to perform an investment grade audit.
(f) For a preliminary utility audit required under this
section and before an agreement for an investment grade audit under
Section 302A.108 is executed, a local government may not require a
provider to submit:
(1) a full engineering evaluation of the facilities;
(2) a detailed scope of construction; or
(3) any architectural or engineering designs.
Sec. 302A.105. EVALUATION AND RANKING OF WRITTEN PROPOSALS.
(a) The local government shall evaluate and rank each written
proposal submitted under Section 302A.103(b) and select the
qualified provider that submits the written proposal that offers
the best value for the local government based on the published
selection criteria and on its ranking evaluation.
(b) Not later than the seventh business day after the date
the performance contract that is the subject of the proposal is
awarded under Section 302A.112, the local government shall make the
evaluations, including any scores, public and provide them to all
providers that were not selected.
Sec. 302A.106. REQUIRED EVALUATION BY CERTAIN LOCAL
GOVERNMENTS BEFORE ENTERING INTO INVESTMENT GRADE AUDIT AGREEMENT.
(a) Before entering into an agreement for an investment grade
audit:
(1) a school district shall evaluate and determine
whether the audit or any other work reasonably required or
contemplated under a performance contract would be in compliance
with:
(A) Section 44.031, Education Code;
(B) Section 2269.056, Government Code;
(C) Section 271.004; and
(D) Subchapter B, Chapter 271;
(2) a municipality shall evaluate and determine
whether the audit or any other work reasonably required or
contemplated under a performance contract would be in compliance
with Chapter 252; and
(3) a county shall evaluate and determine whether the
audit or any other work reasonably required or contemplated under a
performance contract would be in compliance with Subchapter C,
Chapter 262, and Subchapter B, Chapter 271.
(b) A school district, municipality, or county shall make
the appropriate determination required by Subsection (a) before
proceeding with the procurement process under this subchapter.
Sec. 302A.107. NEGOTIATIONS FOR INVESTMENT GRADE AUDIT
AGREEMENT. (a) The local government shall first attempt to
negotiate the scope of work and price for an investment grade audit
agreement with the highest ranked qualified provider under Section
302A.105.
(b) If the local government and the highest ranked qualified
provider cannot enter into an agreement for an investment grade
audit, the local government shall, formally and in writing, end all
negotiations with that provider and proceed to negotiate with the
qualified provider in the order of the selection ranking until an
agreement is reached or negotiations with all ranked qualified
providers ends.
(c) During the negotiation of an investment grade audit
agreement, the local government shall request the selected
qualified provider to submit to the local government the provider's
costing methodology, which:
(1) means the provider's:
(A) policy on subcontractor markup;
(B) definition of general conditions;
(C) range of costs for general conditions;
(D) policy on retainage;
(E) policy on contingencies;
(F) discount for prompt payment; and
(G) expected staffing for administrative duties;
and
(2) does not include a guaranteed maximum price or bid
for overall design or construction.
(d) An agreement for the performance of an investment grade
audit under Section 302A.108 is the first of two contracts with the
selected qualified provider. The subsequent contract is described
by Section 302A.108(a).
Sec. 302A.108. INVESTMENT GRADE AUDIT; REPORT. (a)
Following successful negotiations of an investment grade audit
agreement under Section 302A.107, the selected qualified provider
shall perform an investment grade audit to establish the exact
scope of work to be performed under a proposed performance
contract. The results of the audit will form the basis for
negotiating the performance contract with the local government
after presenting the audit report to the local government.
(b) The scope of work for an investment grade audit must
include:
(1) collecting facility information, such as data and
background information on:
(A) facilities;
(B) equipment;
(C) operations; and
(D) utility use and costs;
(2) conducting an inventory of existing systems and
equipment, which requires a physical inspection of the facility and
an interview with a facility manager to log information on major
energy and water-using equipment;
(3) establishing the current baseline and base year
consumption and reconciling those with end-use consumption
projections;
(4) identifying and assessing a list of potential
conservation measures with a detailed projection of savings,
increase in billable revenues, or accuracy of metering equipment to
be obtained at the facilities as a result of the implementation of
the recommended conservation measures; and
(5) preparing a detailed investment grade audit report
that includes:
(A) a proposed measurement and verification
plan;
(B) a sample periodic utility savings report; and
(C) the items described by Subsection (c).
(c) The investment grade audit report under Subsection
(b)(5) must:
(1) specify the total and itemization cost of each
recommended conservation measure that will comprise a proposed
performance contract, including projected costs associated with:
(A) the investment grade audit;
(B) the design of the measure;
(C) any engineering services;
(D) any financing and debt services;
(E) the third-party engineer services;
(F) annual measurement and verification
services;
(G) annual maintenance services;
(H) training of employees; and
(I) repairs;
(2) identify the methods for measurement and
verification, in accordance with Section 302A.055, of the savings
or increase in billable revenues, or both, for each recommended
conservation measure;
(3) identify all design and compliance issues that
require the professional services of an architect or engineer, and
identify the architect or engineer who will provide those services;
(4) include a schedule of all costs, showing a
calculation of each cost of implementing the proposed conservation
measures and the projected savings, increase in billable revenues,
or increase in meter accuracy that could be realized and maximized;
(5) list the subcontractors and vendors to be used by
the qualified provider with respect to the proposed performance
contract; and
(6) identify maintenance requirements necessary to
ensure continued savings, an increase in billable revenues, or an
increase in meter accuracy that could be realized and maximized,
and describe how those requirements will be fulfilled.
(d) The outcome of an investment grade audit cannot be
predetermined. The provider may not make up losses or
inefficiencies to make the cost of the performance contract project
appear budget neutral.
(e) The cost for an investment grade audit must be based on
the cost per square footage actually audited and is intended to be
the market rate for a technical energy audit. The cost may then be
adjusted by mutual written agreement of the parties in the event
that the audited square footage is changed by either party.
(f) If the investment grade audit report prepared by a
provider offers a guaranteed savings or increase in billable
revenues that is not materially less than the savings or revenues
estimated in the preliminary audit, the investment grade audit
report becomes, on execution of the performance contract, part of
the final performance contract, and the costs incurred by the
provider in preparing the investment grade audit report are
considered to be part of the performance contract.
(g) If a local government decides not to enter into a
performance contract after an investment grade audit report is
prepared and the results of the audit are within 10 percent of both
the guaranteed savings and increase in billable revenues contained
in the preliminary utility audit proposal and the total proposal
amount, the local government shall reimburse the provider that
prepared the investment grade audit report the reasonable
documented costs incurred by the provider in preparing the
investment grade audit report if the local government has
specifically appropriated money for that purpose.
(h) The results of an investment grade audit become the
property of the local government.
(i) On completion of the investment grade audit, the
qualified provider shall submit the investment grade audit report
prepared under this section to the local government.
Sec. 302A.109. SUBMISSION OF PROPOSAL FOR PERFORMANCE
CONTRACT; NEGOTIATIONS. (a) After acceptance by the local
government of an investment grade audit report submitted by the
qualified provider under Section 302A.108, the qualified provider
may submit a proposal for a performance contract to the local
government. The local government may then negotiate a performance
contract with the qualified provider.
(b) On successful negotiation of a performance contract,
the local government shall require the third-party engineer to
review the investment grade audit report and supporting
documentation in accordance with Section 302A.110.
(c) Prior to the award of any performance contract, the
local government shall submit the required documents and obtain
approval in accordance with Section 302A.111.
Sec. 302A.110. REVIEW BY THIRD-PARTY ENGINEER; REPORT. (a)
Before obtaining approval of a proposed performance contract as
required by Section 302A.111, the local government shall require
the third-party engineer selected or designated under Section
302A.004 to review the investment grade audit report and supporting
documentation as well as any subsequent change order, contract
addendum, or other amendment to the proposed contract. The
third-party engineer must verify that the proposed performance
contract, the investment grade audit report, and the measurement
and verification plan present a cohesive package that fully
describes the intended scope of services.
(b) In conducting the review under Subsection (a), the
third-party engineer shall provide the local government with a
written opinion evaluating and validating the methodology and
calculations related to cost savings, increase in billable
revenues, and, if applicable, efficiency or accuracy of metering
equipment associated with each proposed conservation measure
identified in the investment grade audit report that will become
part of the final performance contract. The third-party engineer
may recommend that the local government not enter into the
contract.
(c) In identifying and developing potential utility cost
reduction projects, the third-party engineer must certify that the
documents described by Subsection (a) have been reviewed and are
complete.
Sec. 302A.111. REVIEW BY STATE AGENCY. (a) Before awarding
a performance contract, a contract for third-party financing, or a
combination of both, a local government shall submit the proposed
contract to the Texas Water Development Board and the State Energy
Conservation Office for review and approval in accordance with this
section. The Texas Water Development Board and the State Energy
Conservation Office shall review the documents submitted and
evaluate the economic assumptions that purportedly support the
implementation of each conservation measure.
(b) The Texas Water Development Board shall evaluate the
technical and economic feasibility of each proposed water-related
conservation measure in the proposed performance contract,
including any metering or related equipment, system, or process or
procedure, and either approve or disapprove each of those proposed
conservation measures.
(c) The State Energy Conservation Office shall evaluate the
technical and economic feasibility of each conservation measure in
the proposed contract that is not water related and either approve
or disapprove each of those proposed conservation measures.
(d) In addition to the submission of a final proposed
performance contract under Subsection (a), the local government
must submit:
(1) the final investment grade audit report under
Section 302A.108;
(2) a proposed measurement and verification plan;
(3) a sample periodic utility savings report;
(4) the written certifications listed under
Subsection (f); and
(5) any other relevant documents determined necessary
by the Texas Water Development Board or the State Energy
Conservation Office, as applicable, to streamline the review.
(e) In conducting an evaluation under this section, the
Texas Water Development Board and the State Energy Conservation
Office shall make their determination on the basis of a review of:
(1) the project's scope and whether it is appropriate
for a performance contract, including a conservation measure's use
of capital cost avoidance savings in accordance with state law;
(2) the project's compliance with applicable
provisions of this chapter;
(3) the written certifications of the following that
are required under Subsection (f) and other provisions of this
chapter:
(A) members of the governing body of the local
government;
(B) the provider;
(C) any subcontractors of the provider; and
(D) the third-party engineer;
(4) the methodology and calculations related to cost
savings, increase in billable revenues, and, if applicable,
efficiency or accuracy of metering equipment; and
(5) the financing mechanism and proper financing
documentation, and the availability of local funds to pay for
conservation measures that will use capital cost avoidance savings.
(f) To obtain approval for the proposed performance
contract, the local government shall submit the following written
certifications for review as provided by this section:
(1) each member of the governing body shall certify
that in lieu of competitive bidding or competitive sealed proposals
for construction services under a public work contract, the
performance contract was procured under a request for
qualifications process in accordance with this subchapter;
(2) the provider shall certify that neither the
provider nor any of the provider's affiliates or subcontractors,
employees of the provider or the provider's affiliates, or
subcontractors has bribed, or attempted to bribe, an official or
employee of the local government in connection with the performance
contract and has not participated in the creation of the request for
qualifications for the performance contract;
(3) the provider or any third-party engineer
contracted to perform a measurement and verification review shall
certify that the methodologies for determining savings, increase in
billable revenues, and, if applicable, efficiency or accuracy of
metering equipment will be performed in accordance with Section
302A.055; and
(4) the third-party engineer shall certify that the
engineer is free from financial interest in the provider of the
performance contract that conflicts with the proper completion of
work associated with the performance contract.
(g) The Texas Water Development Board and the State Energy
Conservation Office shall complete their review and provide their
approval or disapproval not later than the 30th business day after
the date of receiving a complete proposed performance contract.
Submission of an incomplete contract may result in delayed review
and approval.
(h) The Texas Water Development Board and the State Energy
Conservation Office may charge a reasonable fee for conducting a
review under this section, and the payment of the fee may be
included in the financing for the performance contract.
(i) A local government that fails to provide documentation
required by the State Energy Conservation Office or the Texas Water
Development Board in accordance with this section may not engage in
further performance contracts until the documentation has been
provided.
(j) The Texas Water Development Board and the State Energy
Conservation Office may adopt rules necessary to implement this
section.
Sec. 302A.112. AWARDING OF PERFORMANCE CONTRACT. (a) On
receiving notice of approval from the state under Section 302A.111
and subject to Section 302A.113, a local government shall enter
into the performance contract with the qualified provider for the
work, including any construction work, identified in the investment
grade audit report.
(b) The local government shall provide a copy of the
executed performance contract and corresponding addendums to the
State Energy Conservation Office not later than the 30th day after
the effective date of the contract.
Sec. 302A.113. MEETING TO ANNOUNCE AWARD OF PERFORMANCE
CONTRACT; NOTICE. A local government shall hold a meeting to
announce the awarding of a performance contract. Public notice of
the meeting must be provided before the design and implementation
of the conservation measures begin. The notice must include:
(1) the names of all potential parties to the proposed
performance contract;
(2) a description of the conservation measures
included in the performance contract; and
(3) an explanation of how the conservation measures
will:
(A) be financed; and
(B) generate savings or increase billable
revenues sufficient to pay for the cost of the conservation
measures.
Sec. 302A.114. CHANGE ORDER AND CONTRACT ADDENDUM SUBJECT
TO SAME REVIEW PROCESS. Each change order or contract addendum to a
performance contract is subject to the same review and approval
requirements of the performance contract under Sections 302A.110
and 302A.111.
Sec. 302A.115. PROCUREMENT OF SUPPLIES, EQUIPMENT, AND
MATERIAL. (a) This subsection does not apply to the purchase of
construction-related goods in an amount greater than $50,000, which
must comply with Section 791.011(j), Government Code.
(b) A local government may contract for the purchase of
supplies, materials, or equipment by using contracts that are
available through the state's cooperative purchasing program under
Subchapter D, Chapter 271.
Sec. 302A.116. PROCUREMENT OF CERTAIN CONSTRUCTION-RELATED
SERVICES. (a) This section applies to the purchase of a
construction-related service from a provider under a performance
contract in an amount that exceeds $50,000.
(b) A local government may not use a purchasing cooperative
under Chapter 791, Government Code, or a local cooperative
organization under Subchapter F, Chapter 271, of this code for the
purchase of a preliminary utility audit, investment grade audit,
architectural services, design services, or engineering services
from a provider under a performance contract.
SUBCHAPTER D. METHOD OF FINANCING; PAYMENTS; USE OF FUNDS
Sec. 302A.151. METHOD OF FINANCING. (a) The financing of a
performance contract may be provided by the provider or an
independent third-party. The contract for third-party financing
may be separate from the performance contract.
(b) A performance contract may be financed:
(1) under a lease-purchase contract that has a term
not to exceed 20 years from the final date of installation of the
conservation measures and that meets federal tax requirements for
tax-free municipal leasing or long-term financing;
(2) with the proceeds of bonds; or
(3) under a contract with the provider of the
conservation measures that has a term not to exceed the lesser of 20
years from the final date of installation of the conservation
measures or the average useful life of the conservation measures.
Sec. 302A.152. REQUIRED PROVISION FOR SEPARATE CONTRACT FOR
THIRD-PARTY FINANCING. A separate contract for third-party
financing must include a provision that the third-party financier
may not be granted rights or privileges that exceed the rights and
privileges available to the provider of the performance contract.
Sec. 302A.153. PAYMENTS TO PROVIDERS. (a) Subject to
Subsection (b), the governing body of a local government may pay the
provider of a conservation measure, including payment of finance
charges, solely out of the savings or increase in billable revenues
realized by the local government under the performance contract.
(b) A payment to the provider must be based on the
percentage of project completion, and not on a pre-established
schedule.
Sec. 302A.154. ANNUAL BUDGET AND APPROPRIATIONS; USE OF
FUNDS DESIGNATED FOR CERTAIN EXPENDITURES. The governing body of a
local government may:
(1) include in its annual budget and appropriations
the amounts payable under a performance contract, including the
amount payable under an installment payment contract or
lease-purchase contract financing the contract; and
(2) use funds designated for utilities expenditures,
operation and maintenance expenditures, and capital expenditures
for purchases on an installment payment or lease purchase basis,
provided that the use is consistent with the purpose of the
appropriation.
Sec. 302A.155. USE OF FUNDS RESULTING FROM EXCESS
GUARANTEED SAVINGS OR INCREASE IN BILLABLE REVENUES. A local
government may use excess actual guaranteed savings or increase in
billable revenues revealed by an annual reconciliation statement
under Section 302A.302 throughout the term of a performance
contract to reinvest in other conservation measures within the
scope of the performance contract through a change order or
contract addendum as authorized under this chapter.
Sec. 302A.156. CAPITAL COST AVOIDANCE SAVINGS. (a) The use
of capital cost avoidance savings are subject to the limitations
specified by Subsection (b).
(b) The amount of expenditures to be paid from capital cost
avoidance savings under a performance contract:
(1) may not exceed 50 percent of the total project
cost; and
(2) are limited to payment for permanent equipment or
retrofits for:
(A) storm windows or doors, multiglazed windows
or doors, heat-absorbing or heat-reflective glazed and coated
window or door systems, or other window or door system
modifications;
(B) heating, ventilating, or air-conditioning
major components or system modifications or replacements;
(C) new lighting fixtures that are required to
achieve standards published by the Illuminating Engineering
Society of North America, provided the existing light fixtures have
been determined to be obsolete and incapable of achieving these
standards that increase energy efficiency;
(D) life safety system replacements or upgrades
that have been determined to be necessary to conform with existing
state and local codes and standards; or
(E) roof retrofits that are part of a larger
conservation measure, including solar, where the replacement is
necessary for the installation of the conservation measure and the
local government determines that replacement of more than 20
percent of the roof is necessary for the installation of the
conservation measure.
SUBCHAPTER E. WORK PERFORMED UNDER PERFORMANCE CONTRACT
Sec. 302A.201. SUBCONTRACTORS FOR AUTHORIZED WORK UNDER
PERFORMANCE CONTRACT. (a) A provider may be designated as the
general contractor or prime contractor for the installation or
implementation of any authorized work under a performance contract,
including any improvements to be made pursuant to the performance
contract, provided that a subcontractor contracting with the
provider for that purpose:
(1) is experienced in the design, installation, or
implementation of the conservation measures agreed to between the
provider and local government; and
(2) submits to the local government all written
certifications required under this chapter.
(b) During the negotiation of a performance contract, the
provider shall submit to the local government a list of
subcontractors the provider intends to use and disclose whether a
subcontractor on the list is a subsidiary or wholly owned or
partially owned affiliate of the provider. The provider shall
update the disclosure during the term of the performance contract.
(c) A subsidiary or wholly owned or partially owned
affiliate of a provider may not be an eligible contractor or
subcontractor under a performance contract unless:
(1) an analysis provided to the local government
demonstrates that there is an economic advantage to the local
government in having such contractor or subcontractor perform work
as part of the performance contract; and
(2) the local government determines that having such
contractor or subcontractor perform work as part of the performance
contract provides the best value for the local government.
Sec. 302A.202. WORK RELATED OR ANCILLARY TO CONSERVATION
MEASURES. (a) The governing body of the local government may
contract with a provider to perform work that is related to,
connected with, or otherwise ancillary to the conservation measures
resulting in utility cost savings and in operation and maintenance
cost savings as identified in the scope of a performance contract.
(b) Additional work authorized under this section may not
increase the square footage of a facility unless the increase is
necessary to make a mechanical, electrical, or plumbing improvement
to achieve a reduction in energy consumption or to conserve water
resources.
(c) A change order, contract addendum, or other amendment
for any additional conservation measures described by Subsection
(a) must be reasonably required or contemplated under the
investment grade audit under Section 302A.108 used to propose the
original performance contract.
Sec. 302A.203. LIMITATION ON MODIFICATION TO SCOPE OF
PERFORMANCE CONTRACT. The scope of a performance contract may not
be modified by change order, contract addendum, or other method of
contract:
(1) to perform work that is not related to, connected
with, or otherwise ancillary to the conservation measures described
by Section 302A.202;
(2) in a way that increases the price of the original
awarded contract by more than 25 percent of the original contract
value; or
(3) to perform work that would cause the annual
savings and increase in billable revenues resulting from the
performance contract to be less than the total annual contract
payments made by the local government, including any financing
charges or debt service to be incurred by the local government over
the term of the contract.
Sec. 302A.204. LAW APPLICABLE TO ENGINEERING SERVICES
PERFORMED UNDER PERFORMANCE CONTRACT. Sections 1001.053 and
1001.407, Occupations Code, apply to work performed under a
performance contract.
SUBCHAPTER F. FRAUD DETERRENCE PROGRAM
Sec. 302A.251. COMPLIANCE PROGRAM AND INTERNAL CONTROL TO
DETECT AND DETER FRAUD. (a) A provider that enters into a
performance contract under this chapter shall maintain a compliance
program and internal controls designed to detect and deter
fraudulent and corrupt conduct, including:
(1) policies and procedures to create redundancy in
the subcontractor bid review, bid normalization, bid revision, and
selection process; and
(2) savings and cost review processes.
(b) The policies and procedures described by Subsection
(a)(1) must specifically correct or prevent the circumstances that
would allow a single employee to control the subcontractor
selection process and obtain kickbacks or bribes either directly
from subcontractors and vendors or indirectly through
intermediaries in connection with the performance contract.
(c) If necessary and appropriate, a provider shall modify an
existing compliance contract to ensure that the provider maintains
a rigorous compliance program that incorporates relevant internal
controls, policies, and procedures designed to effectively detect
and deter violation of fraud, anti-corruption, procurement
integrity, and anti-kickback laws.
SUBCHAPTER G. ANNUAL REPORTS AND STATEMENTS
Sec. 302A.301. ANNUAL MEASUREMENT AND VERIFICATION REVIEW;
REPORT. (a) During the term of a performance contract and at the
discretion of the local government, a local government shall retain
the provider or an independent third-party to perform an annual
measurement and verification review of, and prepare a report on,
savings, increase in billable revenues, and, if applicable,
efficiency or accuracy of metering equipment resulting from the
conservation measures when compared with the established baseline
set forth in the performance contract.
(b) The measurement and verification review and report must
comply with the measurement and verification methodologies
described by Section 302A.055(a)(2) that were published or listed
on the date the performance contract was entered into between the
local government and provider. An independent third-party retained
under this section must:
(1) have the qualifications of a third-party engineer
as described by Section 302A.004(b); and
(2) be retained under a separate contract from the
third-party engineer selected under Section 302A.004.
Sec. 302A.302. ANNUAL RECONCILIATION STATEMENT. (a)
Pursuant to Section 302A.052(a)(2), the provider shall provide an
annual reconciliation statement of the guaranteed savings or
increase in billable revenues based on the results of the
measurement and verification review under Section 302A.301. The
statement must disclose any shortfall or surplus between guaranteed
savings or increase in billable revenues specified in the
performance contract and actual, not stipulated, savings incurred
during a given guarantee year as described by Subsection (b). If
the annual reconciliation statement reveals an excess actual
guaranteed savings or excess increase in billable revenues in a
given year, the surplus may not be used to cover any shortfalls in
subsequent contract years.
(b) A guarantee year consists of a 12-month term beginning
on the date all the conservation measures become fully operational.
(c) A provider shall pay the local government any shortfall
amount not later than the 30th day after the date the total year
savings have been determined.
SUBCHAPTER H. ENFORCEMENT
Sec. 302A.351. VIOLATION OF PERFORMANCE CONTRACT PROVISION
CONTAINING PROHIBITION AGAINST CONTINGENCY FEES. If a provider
violates the provision of a performance contract described by
Section 302A.052(c), the local government may:
(1) terminate the contract without liability; and
(2) at the local government's discretion, deduct from
the contract price, including any finance charges subject to the
contract, or otherwise recover, the full amount of the fee,
commission, percentage, gift, or consideration.
Sec. 302A.352. CRIMINAL OFFENSES. (a) In this section,
"person" means an individual, corporation, association,
partnership, firm, or company.
(b) A person, including an employee working for the
provider, commits an offense if the person offers, agrees, or
contracts to solicit or secure a performance contract or
subcontract related to the performance contract for any other
person and the person is paid or to be paid any fee, commission,
percentage, gift, or other consideration contingent on, or
resulting from, the awarding or making of a performance contract.
(c) A person commits an offense if the person offers to pay,
or pays, any fee, commission, percentage, gift, or other
consideration contingent on, or resulting from, the awarding or
making of a performance contract.
(d) A local government official commits an offense if the
official offers to solicit or secure, or solicits or secures, a
performance contract between the local government and a person and
the official is to be paid, or is paid, any fee, commission,
percentage, gift, or other consideration contingent on the awarding
or making of the performance contract.
(e) A person who is a local government employee or
contractor with any influence on the awarding or making of a
performance contract commits an offense if the person offers to
solicit or secure, or solicits or secures, a performance contract
and the person is to be paid, or is paid, any fee, commission,
percentage, gift, or other consideration contingent on the awarding
or making of a performance contract between the local government
and another person.
(f) An offense under this section is a felony of the second
degree.
(g) If conduct that constitutes an offense under this
section also constitutes an offense under another law, including
money laundering under Chapter 34, Penal Code, the actor may be
prosecuted under this section, the other law, or both.
Sec. 302A.353. ENFORCEMENT BY ATTORNEY GENERAL AND LOCAL
PROSECUTORS. With the consent of the appropriate local county or
district attorney, the attorney general has concurrent
jurisdiction with that consenting local prosecutor to prosecute an
offense under Section 302A.352.
Sec. 302A.354. DECLARATORY OR INJUNCTIVE RELIEF. This
chapter may be enforced through an action for declaratory or
injunctive relief filed not later than the 10th day after the date
on which the contract is awarded.
SECTION 2. Article 59.01(2), Code of Criminal Procedure, is
amended to read as follows:
(2) "Contraband" means property of any nature,
including real, personal, tangible, or intangible, that is:
(A) used in the commission of:
(i) any first or second degree felony under
the Penal Code;
(ii) any felony under Section 15.031(b),
21.11, or 38.04 or Chapter 29, 30, 31, 32, 33, 33A, or 35, Penal
Code;
(iii) any felony under Chapter 43, Penal
Code, except as provided by Paragraph (B);
(iv) any felony under The Securities Act
(Title 12, Government Code); or
(v) any offense under Chapter 49, Penal
Code, that is punishable as a felony of the third degree or state
jail felony, if the defendant has been previously convicted three
times of an offense under that chapter;
(B) used or intended to be used in the commission
of:
(i) any felony under Chapter 481, Health
and Safety Code (Texas Controlled Substances Act);
(ii) any felony under Chapter 483, Health
and Safety Code;
(iii) a felony under Chapter 151, Finance
Code;
(iv) any felony under Chapter 20A or 34,
Penal Code;
(v) a Class A misdemeanor under Subchapter
B, Chapter 365, Health and Safety Code, if the defendant has been
previously convicted twice of an offense under that subchapter;
(vi) any felony under Chapter 32, Human
Resources Code, or Chapter 31, 32, 35A, or 37, Penal Code, that
involves a health care program, as defined by Section 35A.01, Penal
Code;
(vii) a Class B misdemeanor under Chapter
522, Business & Commerce Code;
(viii) a Class A misdemeanor under Section
306.051, Business & Commerce Code;
(ix) any offense under Section 42.10, Penal
Code;
(x) any offense under Section 46.06(a)(1)
or 46.14, Penal Code;
(xi) any offense under Chapter 71, Penal
Code;
(xii) any offense under Section 20.05,
20.06, 20.07, 43.04, or 43.05, Penal Code;
(xiii) an offense under Section 326.002,
Business & Commerce Code; or
(xiv) a Class A misdemeanor or any felony
under Section 545.420, Transportation Code, other than a Class A
misdemeanor that is classified as a Class A misdemeanor based
solely on conduct constituting a violation of Subsection (e)(2)(B)
of that section;
(C) the proceeds gained from the commission of a
felony listed in Paragraph (A) or (B) of this subdivision, a
misdemeanor listed in Paragraph (B)(vii), (ix), (x), (xi), or (xii)
of this subdivision, or a crime of violence;
(D) acquired with proceeds gained from the
commission of a felony listed in Paragraph (A) or (B) of this
subdivision, a misdemeanor listed in Paragraph (B)(vii), (ix), (x),
(xi), or (xii) of this subdivision, or a crime of violence;
(E) used to facilitate or intended to be used to
facilitate the commission of a felony under Section 15.031 or
Chapter 43, Penal Code; [or]
(F) used to facilitate or intended to be used to
facilitate the commission of an offense under Section 20.05, 20.06,
or 20.07 or Chapter 20A, Penal Code; or
(G) the proceeds gained from the commission of an
offense under Section 302A.352(b), (c), (d), or (e), Local
Government Code.
SECTION 3. The following laws are repealed:
(1) Section 44.901, Education Code; and
(2) Chapter 302, Local Government Code.
SECTION 4. The changes in law made by this Act apply to a
contract entered into or amended or modified on or after the
effective date of this Act. A contract entered into or amended or
modified before the effective date of this Act is governed by the
law in effect on the date the contract was entered into or amended
or modified, and the former law is continued in effect for that
purpose.
SECTION 5. This Act takes effect September 1, 2023.