Bill Text: TX HB1426 | 2015-2016 | 84th Legislature | Introduced

---

Bill Title: Relating to certain requirements applicable to contracts entered into by, and the contract management process of, state agencies.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2015-04-29 - Reported favorably as substituted [HB1426 Detail]

Download: Texas-2015-HB1426-Introduced.html

---

84R2676 MTB-F
By: Elkins H.B. No. 1426

A BILL TO BE ENTITLED
AN ACT
relating to certain requirements applicable to contracts entered
into by, and the contract management process of, state agencies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2113.102(a), Government Code, is amended
to read as follows:
(a) A state agency may not use appropriated money to
contract with a person to audit [the financial records or accounts
of] the agency except:
(1) as provided by[:
[(1)] Subsections (b), (c), and (d); and
(2) in accordance with Section 321.020 [Chapter 466,
pertaining to the state lottery;
[(3) Chapter 2306, pertaining to the Texas Department
of Housing and Community Affairs; and
[(4) Chapter 361, Transportation Code, pertaining to
the Texas Turnpike Authority division of the Texas Department of
Transportation].
SECTION 2. Section 2155.086(a), Government Code, is amended
to read as follows:
(a) In this section [and in Section 2155.087], "chief clerk"
means the chief clerk of the comptroller or the chief clerk's
designee.
SECTION 3. Section 2162.103(a), Government Code, is amended
to read as follows:
(a) In comparing the cost of providing a service, the
council shall consider the:
(1) cost of supervising the work of a private
contractor; [and]
(2) cost of a state agency's performance of the
service, including:
(A) the costs of the comptroller, attorney
general, and other support agencies; and
(B) other indirect costs related to the agency's
performance of the service;
(3) installation costs and any other initial costs
associated with a contract with a private contractor;
(4) other costs associated with the transition to
using a private contractor's goods or services; and
(5) cost savings to the state if a private contractor
were awarded the contract.
SECTION 4. Section 2261.002, Government Code, is amended to
read as follows:
Sec. 2261.002. DEFINITIONS. In this chapter:
(1) "Contract" includes an agreement or other written
expression of terms of agreement, including an amendment, a
modification, a renewal, or an extension, for the purchase or sale
of goods or services that is entered into or paid for, wholly or
partly, by a state agency during a fiscal year and a grant, other
than a grant made to a school district or a grant made for other
academic purposes, under which the recipient of the grant is
required to perform a specific act or service, supply a specific
type of product, or both.
(2) "Contract deliverable" means a unit or increment
of work required by a contract, including goods, services, reports,
or documents.
(3) "Contract manager" means a person who:
(A) is employed by a state agency; and
(B) has significant contract management duties
for the state agency.
(4) "Executive director" means the administrative
head of a state agency.
(5) "General counsel" means the general counsel of a
state agency.
(6) "Major contract" means a contract, including a
renewal of a contract, that has a value of at least $1 million. The
term includes a service contract.
(7) "State agency" has the meaning assigned by Section
2151.002.
SECTION 5. Subchapter A, Chapter 2261, Government Code, is
amended by adding Sections 2261.004, 2261.005, 2261.006, and
2261.007 to read as follows:
Sec. 2261.004. STATE AGENCY REPOSITORY AND RECORDS.
(a) Each state agency shall maintain in a central location all
contracts for that agency.
(b) Each state agency shall maintain a comprehensive list of
all contracts for that agency.
(c) In this subsection, "contract" includes a sole-source
contract. Each state agency shall maintain accurate records of all
essential information relating to agency contracts, including
information on:
(1) a contract delay or changes to a contract in which
total expenditures under the contract increase by more than 35
percent from the original contract amount; and
(2) cost overruns, including a written explanation of
why expenditures have increased under a contract.
Sec. 2261.005. CONTRACT REPORTING. (a) In this section,
"contract" includes a construction contract.
(b) The following sections prescribe reporting requirements
for certain contracts:
(1) Section 322.020;
(2) Section 2054.008;
(3) Section 2166.2551;
(4) Section 2254.006; and
(5) Section 2254.0301.
Sec. 2261.006. PROFESSIONAL SERVICES. A state agency shall
procure professional services in accordance with Subchapter A,
Chapter 2254.
Sec. 2261.007. CONTRACT GUIDELINES AND PROCEDURES. Each
state agency shall establish formal guidelines and procedures for
all employees involved in the contracting process:
(1) regarding who may approve a contract for the
agency;
(2) for contract planning and solicitation;
(3) for contract negotiations;
(4) for contract management; and
(5) for contract oversight.
SECTION 6. Subchapter B, Chapter 2261, Government Code, is
amended by adding Section 2261.054 to read as follows:
Sec. 2261.054. BEST VALUE STANDARD FOR CONTRACTING FOR
GOODS AND SERVICES. In determining the best value for the state,
the purchase price and whether the goods or services meet
specifications are the most important considerations. A state
agency may consider, subject to Sections 2155.074(c) and 2155.075,
other relevant factors, including:
(1) installation costs;
(2) life cycle costs;
(3) the quality and reliability of the goods and
services;
(4) the delivery terms;
(5) indicators of probable vendor performance under
the contract such as past vendor performance, the vendor's
financial resources and ability to perform, the vendor's experience
or demonstrated capability and responsibility, and the vendor's
ability to provide reliable maintenance agreements and support;
(6) the cost of any employee training associated with
a purchase;
(7) the effect of a purchase on agency productivity;
(8) the vendor's anticipated economic impact on the
state or a subdivision of the state, including potential tax
revenue and employment; and
(9) other factors relevant to determining the best
value for the state in the context of a particular purchase.
SECTION 7. The heading to Subchapter C, Chapter 2261,
Government Code, is amended to read as follows:
SUBCHAPTER C. CONTRACT FORMATION AND PROVISIONS
SECTION 8. Subchapter C, Chapter 2261, Government Code, is
amended by adding Sections 2261.103, 2261.104, 2261.105, and
2261.106 to read as follows:
Sec. 2261.103. USE OF UNIFORM FORMS. A state agency may use
any forms developed by the comptroller as templates, guides, or
samples for contracts entered into by the agency.
Sec. 2261.104. ESSENTIAL CONTRACT PROVISIONS. The
following are required provisions in each contract to which the
provisions are applicable, other than a grant:
(1) legal authority;
(2) statement of work;
(3) indemnification or damage claims;
(4) consideration;
(5) specifications;
(6) funding out clause;
(7) antitrust;
(8) payment;
(9) dispute resolution;
(10) term of contract;
(11) confidential information;
(12) abandonment or default;
(13) right to audit;
(14) force majeure;
(15) independent contractor; and
(16) termination.
Sec. 2261.105. CONTRACT PROVISIONS REQUIRED BY STATE LAW.
In any contract for the acquisition of goods or services to which a
state agency is a party, a provision required by applicable law to
be included in the contract is considered to be a part of the
executed contract without regard to whether:
(1) the provision appears on the face of the contract;
or
(2) the contract includes any provision to the
contrary.
Sec. 2261.106. CONTRACT RENEWAL. A state agency shall
establish a standardized process for renewing all contracts of the
agency.
SECTION 9. Subchapter D, Chapter 2261, Government Code, is
amended by adding Section 2261.152 to read as follows:
Sec. 2261.152. CONTRACT PAYMENT. (a) For each contract for
goods or services that is subject to this chapter, a state agency
shall require that payment under the contract be linked to clear and
measurable achievements, such as length of time of work or contract
deliverables.
(b) A state agency may not make a final payment on a contract
for goods or services that is subject to this chapter unless the
agency verifies that all contract deliverables have been received.
SECTION 10. The heading to Subchapter E, Chapter 2261,
Government Code, is amended to read as follows:
SUBCHAPTER E. CONTRACT MONITORING AND [CONTRACTOR] OVERSIGHT
SECTION 11. Section 2261.202, Government Code, is amended
to read as follows:
Sec. 2261.202. CONTRACT MONITORING RESPONSIBILITIES. (a)
As one of its contract management policies, each state agency that
makes procurements to which this chapter applies shall establish
and adopt by rule a policy that clearly defines the contract
monitoring roles and responsibilities, if any, of agency staff,
including internal audit staff and other inspection,
investigative, or audit staff.
(b) The policy must establish clear lines of
accountability, staff roles and responsibilities, and
decision-making authority for program staff, contract management
staff, and executive management staff.
SECTION 12. Subchapter E, Chapter 2261, Government Code, is
amended by adding Sections 2261.204, 2261.205, 2261.206, 2261.207,
2261.208, 2261.209, 2261.210, 2261.211, 2261.212, 2261.213, and
2261.214 to read as follows:
Sec. 2261.204. INFORMATION ON CONTRACTOR PERFORMANCE.
(a) After a contract is completed or otherwise terminated, each
state agency shall review the contractor's performance under the
contract.
(b) Using forms made available to the state agency, a state
agency shall report to the comptroller on the results of the review
regarding a contractor's performance under a major contract.
(c) A state agency may use any vendor performance tracking
system available to state agencies to determine whether to award a
contract to a person reviewed in the database.
Sec. 2261.205. EXCLUDING CONTRACTOR FROM SOLICITATION
PROCESS. Based on its own contractor performance reviews and on
information in any vendor performance tracking system available to
state agencies, a state agency may exclude a contractor from the
solicitation process for a contract if the agency determines the
contractor has performed poorly on a previous state contract
without regard to whether the contractor has been barred under
Section 2155.077.
Sec. 2261.206. CONTRACTING STAFF. (a) Each state agency
that enters into contracts other than interagency contracts shall
establish a career ladder program for contract management in the
agency.
(b) An employee hired as a contract manager may participate
in procurement planning, contract solicitation, contract
formation, price establishment, and other contract activities.
(c) Each state agency shall determine, in consultation with
the state auditor, the amount and significance of contract
management duties sufficient for an employee to be considered a
contract manager, program staff, or a contract specialist.
Sec. 2261.207. APPROVAL OF CONTRACTS. (a) Each state
agency shall adopt a policy to establish a monetary threshold above
which agency contracts and amendments to or extensions of agency
contracts require written authorization by the agency executive
director.
(b) For state agency contracts valued in excess of $1
million, the agency executive director must authorize a contract
amendment in writing.
(c) Each state agency shall annually report to the
comptroller a list of persons authorized to approve contracts at
the agency. The list must include each person's name, position, and
supervisory responsibility, if any.
Sec. 2261.208. NEGOTIATION OF MAJOR CONTRACT BY SINGLE
EMPLOYEE PROHIBITED. A state agency may not negotiate a major
contract with only one employee engaging in the negotiation.
Sec. 2261.209. CONTRACT REVIEW; REPORTING. (a) A
contractor's performance must be periodically reviewed throughout
the term of a contract.
(b) A state agency shall ensure ongoing communication
between executive management staff, contract management staff, and
program staff of the results of the reviews performed under
Subsection (a) with specific attention to contracts that are:
(1) anticipated to be completed later than originally
estimated; or
(2) expected to cost more than the amount that was
originally budgeted.
(c) To implement this section, a state agency shall create a
system for agency-wide reporting on the status of, activity on, and
contractor performance for each contract.
Sec. 2261.210. CONTRACT ADMINISTRATION TEAM. (a) This
section applies to a state agency:
(1) that has a contract with a value of $5 million or
more; or
(2) for which 60 percent or more of the agency's budget
is spent on contracts.
(b) A state agency to which this section applies shall
create a contract administration team to:
(1) ensure and verify the performance of all agency
contracts; and
(2) maintain within the agency contract oversight
expertise to effectively manage contractors.
Sec. 2261.211. CONTRACT MONITORING PROCESS. A state agency
shall establish and implement a monitoring process for agency
contracts that includes:
(1) identifying the appropriate criteria for use in
measuring contract performance;
(2) creating a schedule for monitoring contract
performance;
(3) comparing work accomplished to work planned to be
accomplished;
(4) analyzing contract performance variances; and
(5) addressing contracting performance problems with
corrective action.
Sec. 2261.212. RISK MANAGEMENT PROCESS. (a) A state agency
shall establish and implement a:
(1) process for evaluating risk to the state, such as
product risk, process risk, financial risk, and schedule risk, if
contract implementation or performance problems occur, including a
process for:
(A) risk identification;
(B) risk analysis;
(C) risk evaluation;
(D) risk treatment and contingency planning; and
(E) risk monitoring; and
(2) mitigation procedure for use when contract
implementation or performance problems occur.
(b) In creating the process required by Subsection (a)(1),
the state agency shall consider:
(1) the complexity and subject matter of agency
contracts;
(2) the dollar value of agency contracts and whether
the procurement will result in a major contract;
(3) the anticipated payment methodology;
(4) the experience of agency staff with the type of
procurement;
(5) whether the results of the procurement will impact
the public or only impact the agency;
(6) time constraints or the expected duration of the
procurement; and
(7) the type, availability, and experience of staff
resources required to implement the objectives of the procurement.
Sec. 2261.213. CONTRACT COMMUNICATION. (a) A state agency
shall maintain effective communication procedures regarding
contract performance.
(b) The chief financial officer of a state agency, or an
individual designated by the executive director with similar duties
and skills as a chief financial officer, shall report at least
monthly to the executive director on the status of agency
contracts. The report must include a clear indication of:
(1) any contract cost overruns or contracts that are
performing poorly; and
(2) contracts that may cause the state to delay or
default on service delivery.
Sec. 2261.214. REPORT ON CERTAIN PURCHASES. (a) Not later
than August 1 of each year, the comptroller shall publish a report
on the number and dollar value of sole source and emergency
purchases made in the previous calendar year. The report must
compare the total dollar value of all sole source and emergency
purchases made with the total dollar value of all competitively
awarded contracts.
(b) Each state agency shall timely provide to the
comptroller the information the comptroller requires for the
purpose of creating the report under Subsection (a).
(c) The comptroller shall establish requirements for the
provision of information under Subsection (b) in consultation with
the Contract Advisory Team created under Subchapter C, Chapter
2262, the Health and Human Services Commission, and the Texas
Department of Transportation.
(d) The comptroller may not require a state agency to
provide information under Subsection (b) on a contract related to
health and human services if:
(1) the value of the contract cannot be determined at
the time of execution of the contract; and
(2) any qualified vendor is eligible for the contract.
SECTION 13. Chapter 2261, Government Code, is amended by
adding Subchapters F, G, H, and I to read as follows:
SUBCHAPTER F. CHANGES TO CONTRACTS
Sec. 2261.251. CONTRACT AMENDMENTS, EXTENSIONS, AND CHANGE
ORDERS. (a) An extension of or amendment to a state agency
contract, including a change order, is subject to the same agency
approval processes as the original contract.
(b) A state agency may not extend or amend a contract unless
the agency complies with the same agency approval processes for the
extension or amendment as required for the original contract and
the agency states in writing why the extension or amendment is
necessary or advantageous to the state.
(c) This section does not affect whether a state agency is
required to undertake a new solicitation process in the manner
required for a new contract in order to extend or amend a contract.
Sec. 2261.252. LARGE CHANGE IN CONTRACT VALUE; COST
OVERRUNS. (a) If a proposed contract amendment or extension
changes the monetary value of a major contract by at least 35
percent or $1 million, the state agency must submit the amendment or
extension for review to the Contract Advisory Team created under
Subchapter C, Chapter 2262, and the agency's executive director
before the agency amends or extends the contract.
(b) Subsection (a) does not apply to a proposed contract
amendment required by a state or federal statute.
(c) The executive director shall be timely notified of any
unanticipated contract cost overrun.
Sec. 2261.253. CERTAIN CONTRACT EXTENSIONS. This
subchapter does not apply to contract extensions that are
specifically established as a component of the original
procurement.
SUBCHAPTER G. TRAINING
Sec. 2261.301. TRAINING FOR CONTRACT MANAGERS. (a) A
state agency shall require a contract manager to be trained under
Section 2262.053.
(b) A state agency shall maintain a list of contract
managers who have completed the contract management training.
(c) A state agency may develop qualified contract manager
training to supplement the training required under this section.
Sec. 2261.302. TRAINING FOR GOVERNING BODIES. All members
of the governing body of a state agency shall complete at least one
course of abbreviated training provided under Section 2262.053.
This section does not apply to a state agency that does not enter
into any contracts.
SUBCHAPTER H. CONTRACT PLANNING AND SOLICITATION
Sec. 2261.351. CONTRACT PLANNING. Before a state agency
solicits a contract, the agency must:
(1) identify, justify, and document the need for the
good or service;
(2) identify general contracting objectives,
assumptions, and constraints;
(3) consider alternatives to soliciting the contract;
and
(4) determine the preferred method of delivery for the
good or service.
Sec. 2261.352. SOLICITATION OF CONTRACT. (a) A
solicitation for a contract must include the following:
(1) a description of the work;
(2) a specific and measurable standard of performance;
(3) a list of the test conditions, method, or
procedure for verifying that the contract deliverable meets the
standard;
(4) a method or process to monitor and ensure quality
in the contract deliverable;
(5) an acceptance process for each contract
deliverable that is expected to be delivered;
(6) a compensation structure that is consistent with
the type and value of work performed; and
(7) a remedy, if appropriate, for failure to meet
contract deliverables.
(b) In preparing a contract solicitation, a state agency
must include in the requirements for the contract deliverables:
(1) the quality level of the good or service;
(2) the amount of completion that is required;
(3) the suitability of the good or service for the work
to be done for the agency; and
(4) a defined and documented method of evaluation to
be used in making the award and in determining the best value bid
for the procurement.
SUBCHAPTER I. CONTRACT CLOSING
Sec. 2261.401. CLOSING PROCEDURE. A state agency shall
create and follow a procedure for contract closing that includes
procedures for:
(1) verification that all:
(A) required goods or services have been
delivered or performed, inspected, and accepted; and
(B) existing options have been exercised or have
expired;
(2) issuance of a contract completion notice by one of
the parties;
(3) acquisition of all required forms, reports, and
clearances;
(4) verification that other applicable terms have been
met;
(5) verification that there are no outstanding claims
or disputes; and
(6) final payment.
SECTION 14. Section 2262.001(2), Government Code, is
amended to read as follows:
(2) "Contract management manual [guide]" means the
manual [guide] developed under Section 2262.051.
SECTION 15. Section 2262.051, Government Code, is amended
to read as follows:
Sec. 2262.051. CONTRACT MANAGEMENT MANUAL [GUIDE]; RULES.
(a) In consultation with the attorney general, the Department of
Information Resources, [the comptroller,] and the state auditor,
the comptroller [commission] shall develop or periodically update a
contract management manual [guide] for use by state
agencies. Participation by the state auditor under this
subsection is subject to approval by the legislative audit
committee for inclusion in the audit plan under Section 321.013(c).
(b) The comptroller [commission] may adopt rules necessary
to develop or update the manual [guide].
(c) The manual [guide] must provide information regarding
the primary duties of a contract manager, including how to:
(1) develop and negotiate a contract;
(2) select a contractor; and
(3) monitor contractor and subcontractor performance
under a contract.
(d) The manual [guide] must include model provisions for
state agency contracts. The manual [guide] must:
(1) distinguish between essential provisions that a
state agency must include in a contract to protect the interests of
this state and recommended provisions that a state agency may
include in a contract;
(2) recognize the unique contracting needs of an
individual state agency or program and provide sufficient
flexibility to accommodate those needs, consistent with protecting
the interests of this state;
(3) include maximum contract periods under which a new
competitive solicitation is not necessary; and
(4) include the model contract management process
developed under Section 2262.104 and recommendations on the
appropriate use of the model.
(e) The manual [guide] must recommend time frames under
which a state agency may issue a competitive solicitation for a
major contract in relation to the date on which the contract is to
be executed.
(g) The manual [guide] must establish procedures under
which a state agency is required to solicit explanations from
qualified potential respondents who did not respond to a
competitive solicitation for a contract on which fewer than two
qualified bids were received by the agency.
(h) The manual [guide] must establish procedures for major
contracts that outsource a state function or process to a
contractor, including when applicable the use of documents required
under Subchapter J, Chapter 2054.
SECTION 16. The heading to Section 2262.052, Government
Code, is amended to read as follows:
Sec. 2262.052. COMPLIANCE WITH MANUAL [GUIDE].
SECTION 17. Section 2262.052(a), Government Code, is
amended to read as follows:
(a) Each state agency shall comply with the contract
management manual [guide].
SECTION 18. Section 2262.053(b), Government Code, is
amended to read as follows:
(b) The training must provide the contract manager with
information regarding how to:
(1) fairly and objectively select and negotiate with
the most qualified contractor;
(2) establish prices that are cost-effective and that
reflect the cost of providing the service;
(3) include provisions in a contract that hold the
contractor accountable for results;
(4) monitor and enforce a contract;
(5) make payments consistent with the contract;
(6) comply with any requirements or goals contained in
the contract management manual [guide]; and
(7) use and apply advanced sourcing strategies,
techniques, and tools.
SECTION 19. Section 2262.054, Government Code, is amended
to read as follows:
Sec. 2262.054. PUBLIC COMMENT. The commission by rule may
establish procedures by which each state agency is required to
invite public comment by publishing the proposed technical
specifications for major contracts on the Internet through the
information service known as the Texas Marketplace or through a
suitable successor information service. The contract management
manual [guide] must define "technical specifications."
SECTION 20. Section 2262.101, Government Code, as amended
by Chapters 676 (H.B. 1965) and 1227 (S.B. 1681), Acts of the 83rd
Legislature, Regular Session, 2013, is reenacted and amended to
read as follows:
Sec. 2262.101. CREATION; DUTIES. (a) The Contract
Advisory Team is created to assist state agencies in improving
contract management practices by:
(1) reviewing and making recommendations on the
solicitation documents and contract documents for contracts of
state agencies that have a value of at least $10 million;
(2) reviewing any findings or recommendations made by
the state auditor, including those made under Section 2262.052(b),
regarding a state agency's compliance with the contract management
manual [guide];
(3) providing recommendations to the comptroller
regarding:
(A) the development of the contract management
manual [guide]; and
(B) the training under Section 2262.053;
(4) providing recommendations and assistance to state
agency personnel throughout the contract management process;
(5) coordinating and consulting with the quality
assurance team established under Section 2054.158 on all contracts
relating to a major information resources project; [and]
(6) [(4)] developing and recommending policies and
procedures to improve state agency contract management practices;
(7) [(5)] developing and recommending procedures to
improve state agency contracting practices by including
consideration for best value; and
(8) [(6)] creating and periodically performing a risk
assessment to determine the appropriate level of management and
oversight of contracts by state agencies.
(b) The risk assessment created and performed [reviewed]
under Subsection (a)(8) [(a)(6)] must include[, but is not limited
to] the following criteria:
(1) the amount of appropriations to the agency;
(2) total contract value as a percentage of
appropriations to the agency; or
(3) the impact of the functions and duties of the state
agency on the health, safety, and well-being of residents
[citizens].
(c) The comptroller shall oversee the activities of the
team, including ensuring that the team carries out its duties under
Subsections [Subsection] (a)(5) and (a)(7).
(d) A state agency shall:
(1) comply with a recommendation made under Subsection
(a)(1); or
(2) submit a written explanation regarding why the
recommendation is not applicable to the contract under review.
(e) The team may review documents under Subsection (a)(1)
only for compliance with contract management and best practices
principles and may not make a recommendation regarding the purpose
or subject of the contract.
(f) The team may develop an expedited process for reviewing
solicitations under Subsection (a)(1) for contracts:
(1) that the team identifies as posing a low risk of
loss to the state; or
(2) for which templates will be used more than once by
a state agency.
SECTION 21. The following provisions of the Government Code
are repealed:
(1) Section 2155.080;
(2) Section 2155.081;
(3) Section 2155.087; and
(4) Section 2155.138.
SECTION 22. Sections 2261.104, 2261.105, 2261.208,
2261.351, and 2261.352, Government Code, as added by this Act,
apply only to a contract for which a state agency first advertises
or otherwise solicits bids, proposals, offers, or qualifications on
or after the effective date of this Act.
SECTION 23. A contract manager is not required to complete
the training required under Section 2261.301, Government Code, as
added by this Act, until September 1, 2017.
SECTION 24. A member of a governing body of a state agency
is not required to complete the training required under Section
2261.302, Government Code, as added by this Act, until September 1,
2017.
SECTION 25. A state agency is not required to comply with
Section 2261.202, Government Code, as amended by this Act, and
Section 2261.004 and Sections 2261.204 through 2261.213,
Government Code, as added by this Act, until September 1, 2017.
SECTION 26. To the extent of any conflict, this Act prevails
over another Act of the 84th Legislature, Regular Session, 2015,
relating to nonsubstantive additions to and corrections in enacted
codes.
SECTION 27. This Act takes effect November 1, 2015.