Update on the 79th Legislative Session

By William Coats

As of May 31, the 79th Legislative Session came to an end. There were more than 9,300 pieces of legislation filed in the regular session. Below is a brief summary of some of the more significant bills affecting the construction industry that passed in the regular session. With one exception, all bills were effective as of September 1.

William Coats is director, member of the executive committee and the head of the construction/surety section of Houston-based Coats/Rose.

Perhaps the most significant law passed deals with sovereign immunity.

HB 2039 may eliminate the old adage "the King can do no wrong" and allow a local government entity to sue and be sued. Most people believe it restores the interpretation of the law that a local governmental entity can be sued or by precluding local governmental entities from asserting the defense of sovereign immunity when a dispute arises over a construction contract with these entities. The law defines local governmental entities to include cities, schools, community colleges and other special local districts but not counties or units of state government and it permits the enforcement of contractually agreed upon arbitration proceedings, permits award of attorneys' fees if expressly authorized in the written agreement, prohibits consequential and exemplary damages and damages for unabsorbed home office overhead, permits recovery for owner directed change order work arid increased costs for owner caused accelerations or delays, and permits recovery for interest as allowed by law. This is the first step in allowing contractors to sue governmental entities and expands the rights of contractors. This law was effective September 1, but applies to claims arising under contracts executed before the effective date if sovereign immunity has been asserted as a defense by the local governmental entity.

HB 1940 made several changes to the law involving claims before the State Office of Administrative Hearings and expands contractors' rights. The law allows damages to the contractor for delay or labor-related acceleration costs caused by the acts of the State but prohibits recovery for other consequential damages. It also shortens the deadlines for the state to assert a counterclaim against a contractor and for deciding to mediate a claim. It increases the time, however, for the state to begin negotiating and reviewing a claim from 60 days to 120 days from the date the claim is received, clarifies that a contractor may assert a counterclaim or right of setoff against the government unit in the court where government brings suit against the contractor. As well, it clarifies that the unit of state government found to be owing by the Hearing Officer must pay that part of the claim that is under $250,000 with the balance being forwarded for legislative appropriation action.

HB 26 establishes a central, accessible database for major state contracts that are being bid. It requires each state agency to provide contract documents, requests for proposals and invitations to bid for inclusion in the information posted on the electronic procurement marketplace. It also permits public access to said information except for certain information that is not subject to disclosure pursuant to chapter 552 of the Texas Government Code. Once established, this should make it somewhat easier for potential bidders to keep up with jobs that are available for bid.

HB 266 helps expedite the issuance of county building permits. It requires the county to grant or deny a permit request and provide written notice for denial or come to agreement for date of permit within 45 days of an application. However, it only applies to permits required by counties with a population of at least 3.3 million and does not apply to permits for on-site sewage disposal systems. This law should help expedite county building permits and impose a duty for a county to act promptly.

HB 1826 prohibits school districts from providing construction materials, services or resources to improve real property owned or leased by the district. It does effectively permit the district to engage in the construction business for itself or with other entities when there will be joint use between the entities of the project so long as the project is owned or leased by the school district.