Texas Administrative Code Title 40

Social Services and Assistance: As effective August 6, 2010

Chapter 732

Subchapter A

§732.101: What is the purpose of this chapter?

This chapter provides procedures and criteria to govern the purchase of goods and services and the management of contracts by this Department that are efficient, economical, and achieve the objectives of the Department.

Comments

Source Note: The provisions of this §732.101 adopted to be effective July 12, 2001, 26 TexReg 5074

§732.103: How are the terms in this chapter defined?

The words and terms in this chapter have the following meanings, unless the context clearly indicates otherwise:

(1) Claim--A demand for damages by the contractor based upon the Department's alleged breach of contract.

(2) Contractor--An independent contractor who has entered into a contract directly with the Department. The term does not include:

(A) a contractor's subcontractor, officer, employee, agent, or other person furnishing goods or services to a contractor; or

(B) an employee of the Department.

(3) Counterclaim--A claim by the Department against the contractor based upon the same contract as that of the contractor's claim.

(4) Day--A calendar day. If an act is required to occur on a date falling on a Saturday, Sunday, or holiday, the first working day following one of these days is the date to be counted as the required day for the act.

(5) Department--The Texas Department of Protective and Regulatory Services.

(6) Event--An act or omission or a series of acts or omissions giving rise to a claim.

(7) Executive Director--The director of the Department.

(8) Mediation--A consensual process in which an impartial third party, the mediator, facilitates communication between the parties to promote reconciliation, settlement, or understanding among them.

(9) Negotiation--A consensual bargaining process in which the parties attempt to resolve a claim and counterclaim.

(10) Parties--The Department and the contractor that have entered into the contract that is the subject of the claim.

(11) SOAH--State Office of Administrative Hearings.

Comments

Source Note: The provisions of this §732.103 adopted to be effective July 12, 2001, 26 TexReg 5074; amended to be effective February 13, 2003, 28 TexReg 1229

§732.105: Are all contracting procedures and criteria contained in this chapter?

(a) Federal and State statutes and regulations control many aspects of purchasing and contract management. The Department and all other parties must comply with them when they are applicable.

(b) The Health and Human Services Commission has adopted rules at 1 TAC Chapter 391 (relating to Purchase of Goods and Services by Health and Human Services Agencies). Those rules apply to the purchase of goods and services by this Department, whether for administrative or client use or benefit. The rules in 1 TAC Chapter 391 (relating to Purchase of Goods and Services by Health and Human Services Agencies) govern to the extent of any conflict with a procedure or requirement prescribed by another state agency other than a rule relating to:

(1) historically underutilized businesses; or

(2) the purchase of goods or services from persons with disabilities.

(c) The determination of allowable and unallowable costs for residential child-care contracts is governed by 1 TAC Chapter 355 (relating to Reimbursement Rates).

(d) The rules of the Health and Human Services Commission do not apply to the following transactions:

(1) the lease, purchase, or lease-purchase of real property;

(2) the award of grants; or

(3) interstate or international agreements executed in accordance with applicable law.

(e) Other rules of this Department provide additional procedures, criteria, and requirements concerning specific types of contracts or specific stages of the contract process. For example, Chapter 700 of this title (relating to Child Protective Services) contains additional procedures, criteria, and requirements concerning contracts for residential child care, and Chapter 730 of this title (relating to Legal Services) contains procedures, criteria, and requirements concerning hearings.

(f) The commissioner or designee may adopt policies to guide the Department concerning contracting. The policies may interpret statutes, rules, or contract provisions; however, they do not create any new rights or responsibilities for any client or contractor unless the person agrees in writing. The Department may enforce the policies against employees and any person who has agreed to implement the policies. The commissioner or designee may waive policies but may not waive rules.

Comments

Source Note: The provisions of this §732.105 adopted to be effective July 12, 2001, 26 TexReg 5074; amended to be effective December 1, 2007, 32 TexReg 7933

§732.107: May the Department use all procedures, criteria, and exceptions contained in the rules of the Health and Human Services Commission?

(a) The Department may use all procedures, criteria, and exceptions contained in 1 TAC Chapter 391 (relating to Purchase of Goods and Services by Health and Human Services Agencies), concerning the purchase of goods and services unless limited by:

(1) federal statute, rule, or agreement;

(2) state statute;

(3) funding agreement;

(4) other rule or order of the Health and Human Services Commission;

(5) the rules of the Department; or

(6) policies of the Department that have not been waived.

(b) When required by 1 TAC Chapter 391 (relating to Purchase of Goods and Services by Health and Human Services Agencies), the Department must use the procedures, criteria, and exceptions in that chapter.

Comments

Source Note: The provisions of this §732.107 adopted to be effective July 12, 2001, 26 TexReg 5074

§732.109: How does the Department apply exceptions to its contracting rules?

Within this chapter and within other applicable statutes and rules, possible exceptions are listed. The Executive Director or designee, applying the criteria in the statute or rule, may determine whether the exception applies. Some exceptions require specific procedures and documentation. Policies may require additional procedures and documentation.

Comments

Source Note: The provisions of this §732.109 adopted to be effective July 12, 2001, 26 TexReg 5074

§732.111: What rules apply relating to historically underutilized businesses?

The Department will comply with the rules of the General Services Commission found at 1 TAC Chapter 111, Subchapter B (relating to the Historically Underutilized Business Program).

Comments

Source Note: The provisions of this §732.111 adopted to be effective July 12, 2001, 26 TexReg 5074

§732.113: What rules apply to emergency purchases?

(a) If a purchase of goods or services is required as a direct result of a bona fide emergency that constitutes an immediate threat to public or client health or safety or which creates an imminent risk of loss to the Department that is documented and justified in the procurement record, the Department may use noncompetitive procurement methods.

(b) Notwithstanding any other rule in this chapter, if the Executive Director or designee approves the designation as an emergency purchase, and if the purchase violates no other applicable statute or rule, no rule in this chapter shall prohibit the purchase.

(c) Despite the existence of a bona fide emergency, the Department will use its best efforts to conduct the procurement with as much competition as is practical under the circumstances and in as much compliance with the rules of this chapter as is practical.

Comments

Source Note: The provisions of this §732.113 adopted to be effective July 12, 2001, 26 TexReg 5074

§732.115: Are the rules for purchasing with federal funds different?

Generally, the Department purchases goods and services with federal funds using the same procedures, criteria, and exceptions as the Department uses with state funds. If the federal statute, regulation, or funding agreement requires different procedures, criteria, or exceptions, the Department will comply.

Comments

Source Note: The provisions of this §732.115 adopted to be effective July 12, 2001, 26 TexReg 5074

Subchapter L

§732.201: What is the purpose of contract administration?

(a) Contract administration deals with the purchase and administration of goods and services based on federal regulations and state law. The Department may implement additional requirements to meet the particular needs of certain program areas if those requirements do not conflict with the provisions of this chapter. The Department purchases goods and services on the basis of the best value to the State and the Department, in accordance with the Health and Human Services Commission purchasing rules.

(b) Sections 732.271-732.273 and §§732.275-732.277 of this title (relating to Settlement of Subcontract Claims, Notice to Contractor of Determination, Submission of Evidence, Abeyance and Removal of Current or Potential Contractual Rights, Causes and Conditions for Removal of Contractual Rights and for Abeyance, and Notice Requirements for Removal of Contractual Rights and for Abeyance) do not apply to Title XIX funds.

Comments

Source Note: The provisions of this §732.201 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.202: How does the Department purchase goods and services?

(a) The Department may purchase goods and services through competitive and noncompetitive procurement methods found in the Health and Human Services Commission purchasing rules at 1 TAC §391.101 (relating to Competitive Procurement Methods) and 1 TAC §391.103 (relating to Noncompetitive Procurements).

(b) When the Department procures subrecipient contracts or grants using competitive methods, the Department does not provide a protest procedure for awards or tentative awards, but on request the Department will provide a debriefing to an unsuccessful applicant.

Comments

Source Note: The provisions of this §732.202 adopted to be effective September 13, 2001, 26 TexReg 6968; amended to be effective December 12, 2002, 27 TexReg 11622

§732.203: How long may a contract period last and when may the contract be renewed?

(a) At the Department's option, a contract procured through competitive methods may be renewed annually as along as the total period of the contract does not exceed 54 months without being subject to a new procurement.

(b) The Department may renew annually for an indefinite number of years a contract procured by noncompetitive methods; however, a periodic review, not less often than every four years or the time specified in the waiver authorizing noncompetitive procurement, whichever is less, must be made and documented to determine if competition is necessary or possible.

(c) Renewal of a contract is not automatic; the contract may be renewed at the Department's option, when authorized, and when it is in the Department's best interests.

(d) For outsourcing the delivery of substitute care, case management services, and the evaluation of the provision of these services, the Department may competitively procure contracts containing:

(1) an initial contract period not to exceed 60 months; and

(2) two renewal options with each option not exceeding 24 months.

Comments

Source Note: The provisions of this §732.203 adopted to be effective September 13, 2001, 26 TexReg 6968; amended to be effective September 1, 2006, 31 TexReg 6241

§732.204: When may the Department purchase goods and services through competitive bidding?

The Department may purchase goods and services through competitive bidding when the conditions contained in the Health and Human Services Commission purchasing rule at 1 TAC §391.141 (relating to Competitive Bidding Standards) exist.

Comments

Source Note: The provisions of this §732.204 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.205: When may the Department purchase goods and services through competitive negotiation?

The Department may purchase goods and services through competitive negotiation when the conditions contained in the Health and Human Services Commission purchasing rule at 1 TAC §391.151 (relating to Negotiated Procurement Standards) exist.

Comments

Source Note: The provisions of this §732.205 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.206: When may the Department purchase goods and services through noncompetitive negotiation?

The Department may purchase goods and services through noncompetitive negotiation when the conditions contained in the Health and Human Services Commission (HHSC) purchasing rule at 1 TAC §391.161 (relating to Noncompetitive Negotiation Standards) and the exception in HHSC purchasing rule 1 TAC §391.109 (relating to Exceptions to Competitive Procurement Methods) exist. Additionally, noncompetitive negotiation may be used for the purchase of highly perishable material or medical supplies, services for which the prices are established by law, and for experimental, developmental, or research work.

Comments

Source Note: The provisions of this §732.206 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.207: When may the Department cancel or suspend a solicitation?

(a) Cancellation of solicitation. The Department has the right to reject all bids/offers submitted in response to a solicitation. The Department may cancel a solicitation for any of the following reasons:

(1) the specifications and costs given in the solicitation instrument were inadequate, ambiguous, or otherwise deficient.

(2) the supplies or services are no longer required.

(3) the vendor responses received indicated that the goods and services requested can be purchased by a different, less expensive method.

(4) all otherwise acceptable vendor responses received are for unacceptable prices.

(5) the Department has good reason to believe during the course of the solicitation that the vendor responses are collusive or were submitted in bad faith.

(6) none of the vendors responding to the solicitation is considered responsive.

(7) it is determined that cancellation is in the Department's best interest.

(b) Suspension of solicitation. A suspended solicitation is one in which offers are not processed because of uncertainty in federal regulations, Departmental policy, or similar requirements; however, the offers will be considered for award and will be processed if the solicitation is still in the Department's best interest and uncertainties about the purchase are resolved to the satisfaction of the Department.

Comments

Source Note: The provisions of this §732.207 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.208: How does the Department develop a solicitation instrument?

The Department develops a solicitation instrument based on the factors contained in the Health and Human Services Commission purchasing rule for competitive bidding at 1 TAC §391.141 (relating to Competitive Bidding Standards) or negotiated procurement at 1 TAC §391.151 (relating to Negotiated Procurement Standards).

Comments

Source Note: The provisions of this §732.208 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.209: How does the Department advertise solicitations?

The Department may advertise a solicitation for competitive procurement using any of the methods described in the Health and Human Services Commission purchasing rule 1 TAC §391.401 (relating to Methods of Solicitation).

Comments

Source Note: The provisions of this §732.209 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.210: How can answers be obtained to clarify questions about a solicitation instrument?

Persons who have questions about a solicitation instrument must request the information according to the instructions in the package. Oral answers to questions about a solicitation instrument are non-binding. They are not official until released in writing by the person designated in the solicitation instrument.

Comments

Source Note: The provisions of this §732.210 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.211: Can the information submitted by a vendor be held confidential?

Unless otherwise deemed to be confidential under the Texas Public Information Act, all information submitted by a vendor in response to a solicitation is public record and may be withheld by the Department from the general public only until a vendor is selected and a contract is negotiated.

Comments

Source Note: The provisions of this §732.211 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.212: What does the Department do when an inadequate number of responses are submitted for a solicitation?

If the Department receives fewer than two offers, staff should determine whether competition was inadequate and the reasons. The Department may cancel the solicitation and begin a new solicitation. The Department, however, may still award the contract. If the number of responses are equal to or less than the number of contracts sought by the Department, the Department may proceed to negotiations with any vendor whose response to the solicitation was responsive. In addition, the Department may establish a waiver process to allow non-competitive negotiations with any vendor if an insufficient number of contracts have been successfully negotiated.

Comments

Source Note: The provisions of this §732.212 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.213: How does the Department handle modifications or withdrawals of offers before the closing date of the solicitation?

(a) A vendor who wishes to modify or withdraw his offer before the established closing date may do so by mail or by coming to the office designated in the solicitation instrument.

(b) For modifications, the vendor must submit an original of the modified page(s) and the appropriate number of copies to be substituted in the previously submitted offer. The modifications are submitted with a letter documenting the changes and the specific pages for substitution. The signature(s) on the letter must be the same as the signature(s) on the offer. Modifications are accepted by the Department no later than the established closing date, except for modifications to the proposal that result from negotiations.

(c) To withdrawal an offer, the vendor must submit a letter requesting withdrawal of the offer no later than the closing date established in the solicitation instrument for contract award. The signature(s) on the letter must be the same as the signature on the offer.

Comments

Source Note: The provisions of this §732.213 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.214: Is the Department required to conduct a debriefing?

Upon request, unsuccessful vendors are entitled to receive information from the Department concerning the strengths and weaknesses of their offers compared to the evaluation criteria stated in the solicitation instrument. Although they may request an oral debriefing, the Department's written debriefing is the official response.

Comments

Source Note: The provisions of this §732.214 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.215: May clerical mistakes in an offer be corrected?

If the Department and the vendor agree, the Department may correct any clerical mistakes, apparent from the context, before the award. The Department first obtains from the vendor verification of what was actually intended.

Comments

Source Note: The provisions of this §732.215 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.216: May minor irregularities in an offer be corrected?

Before the contract award, the vendor may be given an opportunity to correct any deficiency in an offer resulting from a minor irregularity. The Department may disregard the mistake rather than request correction if disregarding it is advantageous to the Department and does not affect the competitiveness of other offers.

Comments

Source Note: The provisions of this §732.216 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.217: May mistakes other than clerical mistakes or minor irregularities in an offer be corrected?

After submission, but before the contract award, a vendor may request permission to correct an offer with mistakes other than clerical mistakes or minor irregularities if the correction does not have a positive or negative effect on the competitiveness of other vendors, the offer is otherwise responsive to the request, and the offer is in the Department's best interests. Staff must consult with Department legal staff before granting the request.

Comments

Source Note: The provisions of this §732.217 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.218: May an offer be withdrawn after the closing date of the solicitation?

After the closing date for a solicitation, a vendor may withdraw rather than correct his offer only if the Department determines it is in the Department's best interest.

Comments

Source Note: The provisions of this §732.218 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.219: How does the Department establish the mechanisms to be used when evaluating offers?

The Department must establish mechanisms beforehand for evaluating the offers including ways of determining responsive vendors, providing information for debriefings, and selecting successful vendors for contract awards.

Comments

Source Note: The provisions of this §732.219 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.220: How does the Department screen vendors?

(a) A vendor must meet all screening requirements in the solicitation instrument; otherwise, the offer is eliminated from further consideration.

(b) Before a corporation's offer or contract renewal can be considered, the corporation must give the Department franchise tax certification or a certificate from the Texas Comptroller of Public Accounts. Making a false certification is a material breach of contract and, at the Department's option, grounds for contract termination.

(c) The Department must notify, in a timely fashion and in writing, each vendor whose offer does not meet screening requirements. The written notice specifies why the offer has been eliminated from further consideration. The notice also includes a statement of willingness to provide a debriefing.

Comments

Source Note: The provisions of this §732.220 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.221: How does the Department review vendor responses?

(a) To be considered by the Department, the vendor must meet the Department's requirements, demonstrate its ability to perform successfully and responsibly under the terms of the prospective contract, including its financial ability to perform, and submit the completed offer according to the time frames, procedures, and format stipulated by the Department in the solicitation. The best value factors found in the Health and Human Services Commission purchasing rules 1 TAC §391.121 (relating to Best Value Factors) and 1 TAC §391.131 (relating to Selection and Publication of Best Value Criteria) may be considered in the evaluation of offers.

(b) Entities currently ineligible for, held in abeyance from, or barred from the award of a federal or state contract may not contract or subcontract with the Texas Department of Protective and Regulatory Services. Contractors must have processes to check subcontractors and maintain documentation.

Comments

Source Note: The provisions of this §732.221 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.222: May the Department validate information submitted in an offer by a vendor?

The Department may validate any information in an offer by using outside sources or materials. The validation process is optional; however, if the Department validates the information in one offer, it must apply the process without providing unfair advantage to any offer or range of offers.

Comments

Source Note: The provisions of this §732.222 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.223: May the Department decide in a competitive procurement to discuss a contract with more than one vendor?

When conducting a competitive negotiation procurement, the Department may make competitive field determinations and conduct discussions with vendors in the competitive field in accordance with the Health and Human Services Commission purchasing rule at 1 TAC §391.151 (relating to Negotiated Procurement Standards).

Comments

Source Note: The provisions of this §732.223 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.224: Must the Department notify unsuccessful vendors?

Each vendor whose offer meets the screening requirements, but is not selected for a contract, is entitled to timely notification in writing that his offer is no longer being considered. The Department must include in the notice a statement of willingness to provide a debriefing.

Comments

Source Note: The provisions of this §732.224 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.225: May a vendor revise the offer during a negotiation?

The vendor must clearly identify all changes in or revisions to the offer.

Comments

Source Note: The provisions of this §732.225 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.226: May subcontracts be used to provide goods and services?

(a) Subcontracts, for the purposes of this rule, are contracts for providing a part or all of the program components. Such contracts are between the party contracting with the Department and the subcontractor. Subcontractors for ancillary or support services, such as janitorial services, are not covered by this rule.

(b) Contractors must obtain the Department's approval of program subcontracts. No subcontract will be approved unless it contains a clause that the subcontractor agrees to accept and abide by all terms and conditions imposed on subcontractors under the primary contract between the Department and the contractor.

(c) The contractor must agree to require its program subcontractor(s), if any, to accept and abide by each of the provisions of the contract with the Department.

(d) The contractor must agree to refrain from entering into any program subcontract(s) for services without prior approval or waiver of the right of approval in writing by the Department of the subcontractor's qualifications to perform and meet the standards fixed by the contract and its attached plans of operation.

Comments

Source Note: The provisions of this §732.226 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.227: What does the Department do when there are equal low bids submitted by two or more vendors?

When two or more low bids are equal in all respects, the Department gives priority to the bid that best meets the best value factors which were prioritized in the solicitation instrument.

Comments

Source Note: The provisions of this §732.227 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.228: Who may inspect competitive bids after they are opened?

After the public opening of the competitive bids, anyone present may examine the bids in the presence of the Department's representative. Individuals may not inspect the original bids if copies of the bids are available for public inspection. If copies are unavailable, the original bids may be examined only under the supervision of a Department official and under conditions which preclude the possibility of a substitution, addition, deletion, or alteration of the bids.

Comments

Source Note: The provisions of this §732.228 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.229: Is there a procurement protest or appeal procedure available?

(a) The Department does not provide a protest procedure for awards or tentative awards of grants or of subrecipient contracts. On request, the Department will provide a debriefing to an unsuccessful applicant.

(b) The Department provides other applicants an opportunity to request a formal or informal review of an award or tentative award under the following circumstances:

(1) The purchase award was made under a competitive procurement method and the applicant was not selected for the award;

(2) The purchase award was made under a formal provider enrollment solicitation and the applicant was not selected for an award; or

(3) The purchase or award was a sole source or emergency procurement.

(c) The protest must be limited to matters relating to the protestor's qualifications, the suitability of the goods or services offered by the protestor, or alleged irregularities in the Department's procurement process.

(d) Any applicant who is aggrieved in connection with the Department's award or tentative award of a contract as specified in subsections (a)-(c) of this section may formally protest to the director of the region or state office division that conducted the procurement (the contracting director). Protests must be in writing and received by the contracting director or procurement officer no later than 10 working days after such applicant knows, or should have known, of the occurrence of the action that is protested. Copies of the protest must be mailed or delivered by the protestor to all other parties involved if the protestor alleges that the contract should not have been awarded to such other parties.

(e) If a protest is received within the 10-day time frame as required in subsection (d) of this section and the contract has not been awarded, the contracting director will not proceed with the contract award unless a written determination is made that delaying the award would cause substantial harm to the Department.

(f) A protest must be sworn and notarized, and it must contain:

(1) a specific identification of the statutory or regulatory provision(s) that the action complained of is alleged to have violated;

(2) a specific description of each act alleged to have violated the statutory or regulatory provision(s) identified in paragraph (1) of this subsection;

(3) a precise statement of the relevant facts;

(4) an identification of the issue(s) to be resolved;

(5) a statement of the basis for the protest and any authority that supports the protest; and

(6) a statement that copies of the protest have been mailed or delivered to all respondents involved.

(g) If the protest is resolved by mutual agreement, then the protestor and the contracting director or designee, other than the procurement officer, shall sign an agreement acknowledging resolution of the protest.

(h) If the protest is not resolved by mutual agreement, then the contracting director shall consider all relevant information contained in the protest and issue a written determination on the protest.

(1) If the contracting director determines that no violation of rules or statutes has occurred, the director shall so inform the protestor and all respondents involved by letter, which sets forth the reasons for the determination and of the appeal process requirements.

(2) If the contract director determines that a violation of the rules or statutes has occurred, the director shall so inform the protestor and all respondents involved by letter, which sets forth the reasons for the determination (including the provisions that were violated) and the corrective action that will be taken. If a contract has been awarded, the corrective action may include voiding the contract.

(i) The contracting director's determination on a protest may be appealed by the protestor, or by a respondent, to the director's supervisor. The appeal must be in writing and received by the contracting director or supervisor no later than 10 working days after the date of the director's determination. The appeal is limited to review of the director's determination. Copies of the appeal must be mailed or delivered by the appellant to all respondents involved and must contain a statement that such copies have been provided.

(j) The supervisor or designee, other than the contracting director, shall review the director's determination and issue a written determination on the appeal. The supervisor's written determination is final and shall be sent to the appellant, all respondents involved, and the director.

(k) A protestor's or appellant's failure to meet the requirements of this section invalidates the protest or appeal.

Comments

Source Note: The provisions of this §732.229 adopted to be effective December 12, 2002, 27 TexReg 11622

§732.237: Certified Local Resources

(a) All service contracts requiring local resources for funding must state the amount directly supporting the service being purchased. Local resources recognized by the department are limited to the following:

(1) allowable cash expenditures by the contractor directly related to providing service to eligible clients under the terms of the contract;

(2) noncash expenditures limited to depreciation and use charges subject to the terms of the contract;

(3) the difference between the contracted unit rate and the rate paid by the department.

(b) On each request for payment that contractors submit to the department for reimbursement, the contractors must certify the amount of local resources for the period covered by the payment request.

Comments

Source Note: The provisions of this §732.237 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.238: Advance Payment for Contracted Social Services

The department may make advance payments to contractors for contracted social services subject to the following limitations:

(1) The contractor must be a private, nonprofit legal entity.

(2) Funds designated for advance payments must be available for the department to make advance payments to contractors.

(3) The contractor must use the advance payments for operating expenses allowed under an existing social services contract for services to eligible clients. The contractor must not use advance payments for needs assessments, planning, or construction.

(4) A contract must be in effect before the department makes an advance payment.

(5) The contractor must post bond acceptable to the department before or at the time the contract is executed. The amount of the bond may not be less than the total amount of the advance payment. All bonds must contain a Texas loss payable rider payable to the department.

(A) If the contractor offers a blanket employee dishonesty bond, it must cover all positions including those of subcontractors; or

(B) The contractor must certify that only those people named in the bond have access to funds; or

(C) The subcontractor may have a separate bond.

(6) The advance payment for each specific contract is based on need and must not be more than the contractors' allowable reimbursable expenditure for 45 days.

(7) The department may adjust the advance payment amount based on the contractor's cash outflow and service level variations.

(8) The contractor must liquidate the advance payment either at the end of each contract period consistent with the terms of each specific contract or at other times determined necessary by the department. The contract period begins with the contract's effective date and ends with its termination date.

(9) The department stops making advance payments to a contractor if the contractor has not liquidated the advance payment for the previously contracted period according to the terms of the contract.

(10) The department may impose additional limitations if the limitations do not conflict with this section.

Comments

Source Note: The provisions of this §732.238 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.239: Budget Changes

Shifts between budgets and between line items in a cost reimbursement contract's budget may be allowed with the contract manager's prior written approval if such transfers:

(1) do not result in a significant change in the character or scope of the plan(s) of operation; and/or

(2) are not gratuitous.

Comments

Source Note: The provisions of this §732.239 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.240: What are the general principles of allowable and unallowable costs?

(a) In cost reimbursement contracts, the Department reimburses its contractors only for costs (both direct and indirect) which are allowable, reasonable, necessary, and properly allocated to the specific contract. The cost guidelines, principles, and definitions for allowable and unallowable costs (both direct and indirect) for purposes of preparing budgets, for expenditure purposes, and for cost-reporting purposes are the same. Those guidelines are published in federal and state regulations. Contractors receiving Title IV-E funding on a cost reimbursement basis are required to be in compliance with 45 Code of Federal Regulations (CFR) Part 74 and 48 CFR Part 31 regarding the use and expenditure of Title IV-E funds. Contractors receiving Title IV-B funding on a cost reimbursement basis are required to be in compliance with 45 CFR Part 92 regarding the use and expenditure of Title IV-B funds. All purchased client services contractors (both for-profits and nonprofits) who have cost reimbursement contracts are required to be in compliance with Office of Management and Budget (OMB) Circular A-110 (Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations) and this section and §§732.242 - 732.255 of this title (relating to Contract Administration) regarding the guidelines for use and expenditure of funds received from the Department, which consist of federal and/or state revenues. If the contractor is a governmental entity, the contractor shall remain in compliance with OMB Circular A-87 (Cost Principles for State and Local Governments). If the contractor is either a for-profit entity or a nonprofit entity, the contractor is required to be in compliance with OMB Circular A-122 (Cost Principles for Nonprofit Organizations). In the event of any conflict or contradiction between or among the regulations referenced in this subsection, the regulations shall control in the following order of precedence:

(1) federal regulations - for Title IV-E funding, 45 CFR Part 74 and 48 CFR Part 81; for Title IV-B funding, 45 CFR Part 92;

(2) federal OMB circulars - OMB Circular A-110 and either OMB Circular A-87 or OMB Circular A-122, as applicable;

(3) state regulations - this section, §732.241 of this title (relating to What happens if a cost is not allowable?) and §§732.242 - 732.255 of this title (relating to Contract Administration); and

(4) any other applicable departmental regulations.

(b) Only those items that represent an actual cash outlay, or the compensation for the use of buildings, other capital improvements, and equipment on hand through a use allowance or depreciation are allowable. The value of donated goods or services (in-kind) are unallowable. However, depreciation or a use allowance on a donated building, donated capital improvements, or donated equipment subject to ownership requirements and/or donor-imposed conditions is allowable. Contractors shall not use revenues from the Department to finance activities other than those activities specifically allowable under their contract with the Department. Unallowable uses of contract revenues from the Department include, but are not limited to, inter-fund loans/transfers, interdepartmental loans/transfers, inter-company loans/transfers, and employee loans not considered salary advances.

(c) Costs budgeted, expended, used, and/or reported by a contractor and/or paid by the Department must be consistent with generally accepted accounting principles (GAAP), which are those principles approved by the American Institute of Certified Public Accountants (AICPA). Internal Revenue Services (IRS) laws and regulations do not necessarily apply in the preparation of budgets, the expenditure, and/or use of funds received from the Department, and/or the reporting of costs to the Department. In cases where there are differences between the Department's rules, GAAP, IRS, or other authorities, the Department's rules take precedence.

(d) The contractor's accounting system must include an accurate and consistent method for gathering statistical information that properly relates the costs incurred to the units of service rendered.

(e) The contractor is responsible for designing and implementing fiscal policies and ensuring that financial data are collected, recorded, and analyzed as part of the delivery of service under a contract with the Department.

(f) Costs incurred under less-than-arms-length (related-party) transactions are allowable only up to the cost to the related party (see OMB Circulars A-87 and A-122). However, the cost must not exceed the price of comparable services, equipment, facilities, or supplies that could be purchased or leased elsewhere. The purpose of this principle is twofold: to avoid the payment of a profit factor to the contractor through the related organization (whether related by common ownership or control), and to avoid payment of artificially-inflated costs which may be generated from less-than-arms-length bargaining. The related organization's costs include all reasonable costs, direct and indirect, incurred in the furnishing of services, equipment, facilities, and supplies to the contractor. The intent is to treat the costs incurred by the related organization as if they were incurred by the contractor itself. An exception is provided to the general rule applicable to related organizations and applies if the contractor demonstrates by convincing evidence to the satisfaction of the Department that certain criteria have been met. Those criteria are:

(1) The related organization is a bona fide separate corporation and not merely an operating division of the contractor's organization;

(2) A majority of the related organization's business activity of the type carried on with the contractor is transacted with other organizations not related to the contractor or the related organization by common ownership or control and there is an open, competitive market for the type of services, equipment, facilities, or supplies furnished by the related organization. In determining whether the business activities are of a similar type, it is important also to consider the scope of the business activity. The requirement that there be an open, competitive market is intended to assure that the item supplied has a readily discernible price that is established through arms-length bargaining by well-informed buyers and sellers; and

(3) The charge to the contractor is in line with the charge for such services, equipment, facilities, or supplies in the open, competitive market and no more than the charge made under comparable circumstances to others by the related organization for such services, equipment, facilities, or supplies.

(g) In determining whether a contractor is related to a supplying organization, the tests of common ownership and control are to be applied separately. Related to a contractor means that the contractor to a significant extent is associated or affiliated with, has control of, or is controlled by the organization furnishing the services, equipment, facilities, or supplies. Common ownership exists if an individual or individuals posses any ownership or equity in the contractor and the supplying organization. Control exists if an individual or an organization has the power, directly or indirectly, to significantly influence or direct the actions or policies of an organization or institution. If the elements of common ownership or control are not present in both organizations (i.e., the contractor and the supplying organization), then the organizations are deemed not to be related to each other. The existence of an immediate family relationship will create a conclusive presumption of relatedness through control or attribution of ownership or equity interests where the significance tests are met. The following persons are considered immediate family: husband and wife; natural parent, child, and sibling; adopted child and adoptive parent; stepparent, stepchild, stepsister, and stepbrother; father-in-law, mother-in-law, sister-in-law, brother-in-law, son-in-law, and daughter-in-law; grandparent and grandchild; uncles and aunts by blood or marriage; nephews and nieces by blood or marriage; and first cousins by blood or marriage.

(1) A determination as to whether an individual (or individuals) or organization possesses ownership or equity in the contractor and the supplying organization, so as to consider the organizations related by common ownership, will be made on the basis of the facts and circumstances in each case. This rule applies whether the contractor or supplying organization is a sole proprietorship, partnership, corporation, trust or estate, or any other form of business organization, proprietary or nonprofit. In the case of a nonprofit organization, ownership or equity interest will be determined by reference to control of the organization or to an interest in the assets of the organization; for example, a reversionary interest provided for in the articles of incorporation of a nonprofit organization.

(2) The term control includes any kind of control, whether or not it is legally enforceable and however it is exercisable or exercised. It is the reality of the control which is decisive, not its form or the mode of its exercise. The facts and circumstances in each case must be examined to ascertain whether legal or effective control exists. Since a determination made in a specific case represents a conclusion based on the entire body of facts and circumstances, such determination should not be used as a precedent in other cases unless the facts and circumstances are substantially the same. Organizations, whether proprietary or nonprofit, are considered to be related through control of their directors or officers in common.

(h) Disclosure of all less-than-arms-length (related-party) transactions is required for all costs budgeted, expended, used, and/or reported by the contractor, including related-party transactions occurring at any level in the contractor's organization. The contractor must make available, upon request, adequate documentation to support the costs incurred by the related party. Such documentation could include an identification of the related organization's total costs, the basis of allocation of direct and indirect costs to the contractor, and other business entities served. If a contractor fails to provide adequate documentation to substantiate the cost to the related organization, then the cost is unallowable.

(i) Direct costing must be used whenever reasonably possible. Direct costing means that costs, direct or indirect, incurred for the benefit of, or directly attributable to, a specific business component must be directly charged to that particular business component. For direct costs as defined in OMB Circulars A-122 and A-87, direct costing is required. For indirect costs as defined in OMB Circulars A-122 and A-87, it is necessary to allocate these costs either directly or as a pool of costs across those business components sharing in the benefits of those costs. If cost allocation is necessary, contractors must use reasonable methods of allocation and must be consistent in their use of allocation methods across all program areas and business entities in which the contractor has an interest (see OMB Circulars A-87 and A-122).

(1) Each employee is required (see OMB Circulars A-122 and A-87) to have time or activity sheets. Time or activity sheets must be prepared at least monthly and must coincide with one or more pay periods. The sheets must account for the total activity for which the employee is compensated and which is required to fulfill the employee's obligation to the contractor. If an employee performs only one function and only performs that one function for one contract/program area, then that employee's time or activity sheet can include the minimum information: name, date, beginning time, ending time, total time worked, appropriate signature(s), and accounting for paid and unpaid leave time.

(2) Direct care staff must be directly costed between program areas (business components) based upon their time or activity sheets (not a time study). If a direct care employee performs more than one function, performs one function for more than one contract/program area, and/or performs more than one function for more than one contract/program area, the sheets must account for those different functions and/or contracts/program areas. These sheets should be the documentation for the percentages of salaries budgeted to the various contracts. In other words, if a counselor works on a contractor's nonresidential contract and for one or more of the contractor's residential contracts, the percentage of that counselor's salary in the nonresidential budget should be based upon the results of sheets for a recent historical period prior to the submission of the budget. The actual amounts charged to the nonresidential contract for that counselor should be based upon the counselor's sheets during the contract period, with a reconciliation to the contract's budget. If the counselor's actual time is less than that budgeted, the contractor is reimbursed based upon the actual time. If the counselor's actual time is more than that budgeted, the contractor is reimbursed based upon the budgeted amount. The counselor's sheets for that contract period then become the basis for the estimates used for the next year's contract budget.

(3) Any cost allocation method should be a reasonable reflection of the actual business operations. Allocation methods that do not reasonably reflect the actual business operations and resources expended toward each unique business entity are not acceptable. An indirect allocation method approved by some other department, program, or governmental entity is not automatically approved by the Department. The purpose of cost allocation of shared indirect costs is to ensure that those costs are properly and accurately recorded within each program area, so that each program receives its fair share of those shared indirect costs which benefit that program and so that each program's costs are properly identified (direct and indirect). There are three basic methods for allocating shared (pooled) indirect costs: units of service, cost-to-cost, and functional.

(A) To use the units-of-service cost allocation method, each of your program areas would have to deliver the same type of services (i.e., equivalent services) and would have to be measured with the same units of service (i.e., equivalent units). If your program areas (business components) do not have equivalent units of equivalent services, you must use a cost-to-cost or functional allocation method for shared indirect costs that are not directly chargeable to a specific program area (business component).

(B) Cost-to-cost allocation methods merely calculate a program's percentage of a specified cost basis and use that percentage to then calculate that program's share of indirect costs. Shared indirect costs are always allocated first to each program area, then any unallowable shared indirect costs are removed from (or separately reported for) each program area for purposes of contracting with the Department. In this manner, it is ensured that 100% (and only 100%) of the total shared indirect costs have been allocated across the various program areas. The specific cost bases for a cost-to-cost allocation methodology include: salaries; salaries, payroll taxes and employee benefits; salaries and contract labor; salaries, payroll taxes, employee benefits, and contract labor; all direct program costs; and all direct program costs minus building costs. These shared indirect costs must be allocated across all the program areas which benefit from these shared indirect costs. If there are some shared indirect costs that benefit only a portion of the corporation's program areas, then an allocation method must be used to properly allocate that subset of the total shared indirect costs to those program areas benefiting from those shared indirect costs. In such complex financial systems, these subsets of shared indirect costs become part of the basis for allocating the shared administration costs benefiting all program areas. For example, if a contractor has a subset of shared indirect costs that only benefit the contractor's residential programs, that subset could be allocated based upon units of service. When allocating on a cost-to-cost basis those shared indirect costs benefiting all program areas (business components) for the contractor, the cost basis for each of the contractor's residential programs would include the residential program's direct care costs and its allocated share of the subset of shared indirect costs.

(C) Functional cost allocation for an administrative staff person can be based upon a time study. Time studies can only be used to allocate administrative time and cannot be used to allocate direct care time. In other words, if an administrative employee also performs direct care duties, that employee must have time sheets (not a time study) to document his/her direct care time.

(i) The baseline for allocation using a time study can be calculated upon time sheets recording daily time/effort for an entire month.

(ii) Daily time sheets are then completed for a randomly-selected period throughout the remainder of the fiscal year. That "randomly-selected period" could be a randomly-selected week each quarter, randomly-selected two days per month, or other time period which would result in time sheets representing at least 20 days per year, in addition to the baseline.

(iii) A contractor can use the results of the baseline time study for allocating the employee's salary for the remainder of the year and make any necessary adjustments required from the results of the randomly-selected periods during the last month of the year or a contractor can allocate the employee's salary each month based upon the results of that month's time study.

(iv) A contractor must have its time study methodology and procedures in writing.

(D) Other shared indirect costs may be more accurately allocated based upon a functional methodology rather than a cost-to-cost allocation method.

(i) Maintenance staff costs could be functionally allocated, based upon the percentage (or dollar amounts) of work orders performed for the various program areas.

(ii) If one program pays its employees weekly and another program pays its employees monthly, payroll costs could be functionally allocated based upon each program's pro rata share of the number of payroll checks issued.

(4) Each cost allocation method will be reviewed on a case-by-case basis to ensure that the allocated costs fairly and reasonably represent the operations of the contractor. If in the course of an audit it is determined that the cost allocation method does not fairly and reasonably represent the operations of the contractor, then an adjustment to the allocation method will be made.

(5) Cost allocation methods must be clearly and completely documented in the contractor's work papers, with details as to how pooled costs are allocated to each segment (component) of the business entity, for both contracted and non-contracted programs.

(j) This rule section does not apply to residential child-care contracts because the principles of allowable and unallowable costs for residential child-care contracts are governed by 1 TAC Chapter 355 (relating to Reimbursement Rates).

§732.241: What happens if a cost is not allowable?

The Department regularly reviews bills and monitors or audits contracts. If, at any time, it appears to the Department that a cost claimed for reimbursement pursuant to a cost reimbursement contract is unallowable for any reason (unreasonable, unnecessary, not properly allocated, not in the approved budget, or specifically unallowable), the cost may be questioned and possibly disallowed as provided in other rules in this chapter. If the contractor incurred other legitimate costs pursuant to the contract and budget, or pursuant to the contract and the Department agrees to allow a minor amendment to the budget, the contract amount or payment to the contractor does not need to be decreased. The contractor must provide convincing evidence of these other legitimate costs during the process of the costs being questioned or disallowed. However, the Department may, in its sole discretion, consider such additional costs after the costs have been disallowed and before collection of excess payments.

Comments

Source Note: The provisions of this §732.241 adopted to be effective November 15, 2001, 26 TexReg 9222; amended to be effective December 1, 2007, 32 TexReg 7933

§732.242: Start-up Costs

(a) Start-up costs (or pre-award costs) and policies are discussed in Office of Management and Budget (OMB) Circulars A-110, A-87, and A-122. Start-up costs are those reasonable and necessary preparation costs incurred by a contractor in the period of developing the contractor's ability to deliver services. Start-up costs can be incurred prior to the beginning of a newly-formed business and/or prior to the beginning of a new contract or program for an existing business. Allowable start-up costs include, but are not limited to, employee salaries, utilities, rent, insurance, employee training costs, and any other allowable costs incident to the start-up period. Start-up costs do not include capital purchases, which are purchased assets meeting the criteria for depreciation. Any costs properly identifiable as organization costs or capitalizable as construction costs must be appropriately classified as such and excluded from start-up costs. If a business or corporation never commences actual operations or if the new contract/program never delivers services, the start-up costs are unallowable.

(b) Contractors with cost reimbursement contracts that are expanding into a new service area or are just beginning to provide services may, if allowed by program-specific policy and with appropriate Texas Department of Protective and Regulatory Services (TDPRS) approvals, budget and bill for start-up costs. Hiring and orienting staff, purchasing equipment and supplies, and recruiting eligible clients are included.

(c) If a contractor who requires start-up costs does not receive required licensure and/or certification to provide contracted services within 30 days after the effective date of the contract, no start-up costs are allowed.

(d) Every effort should be made to contract with contractors that will not require TDPRS to provide start-up costs.

(e) Start-up costs are to be amortized using the straight-line method over a period of not less than 60 months.

Comments

Source Note: The provisions of this §732.242 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.243: Employee Compensation

(a) Employee compensation costs (or compensation for personal services) must be calculated in compliance with Office of Management and Budget (OMB) Circulars A-87 and A-122.

(b) A contractor must:

(1) compensate employees according to policy, program, and procedures that effectively relate individual compensation to the person's contribution to performance of the contract work; result in internally consistent, equitable treatment of employees; and effectively relate compensation paid within the organization to that paid for similar services outside the organization.

(2) review and approve salaries by position or function.

(3) not provide retroactive salary increases or future increases unless the contract specifically allows for increases.

(4) keep time sheets on part-time employees or employees who devote a portion of their time to the contract.

(5) provide job descriptions when required by the Texas Department of Family and Protective Services (DFPS) and only hire or promote people who meet job qualifications.

(c) A contractor must not bill and receive reimbursement from funding sources for more than 100% of an employee's total salary or work time.

(d) Contractors substantially engaged in activities other than the services for which DFPS is contracting must provide compensation for employees engaged in contract services that is comparable to compensation for other comparable contractor activities. The contractor also must provide compensation to employees that is considered reasonable and comparable to the compensation paid for similar work in the labor market in which the contractor competes for the kind of employees involved.

(e) Overtime is allowable as a cost to DFPS only under the following conditions:

(1) When necessary to cope with emergencies, such as those resulting from accidents, natural disasters, or temporary, unavoidable situations.

(2) When periodically paying overtime to current staff will cost the department less than hiring temporary or additional staff.

(3) When services are required to meet client needs and no substitute direct service staff are available.

(f) Overtime is reimbursable subject to allowability and budget limitations of the contract.

(g) Merit raises or other additional compensation reimbursed by DFPS and instituted by a contractor must meet the following requirements:

(1) Incentive compensation must be reasonable.

(2) Payment is made according to an agreement entered into in good faith between the contractor and its employees before the services are rendered or according to an established plan that the contractor follows.

(h) A contractor must determine its responsibilities and comply with applicable state and federal laws and regulations to include the following:

(1) Workers' compensation--questions may be addressed to a qualified local insurance agency, the State Board of Insurance, or the State Industrial Accident Board.

(2) F.I.C.A.--questions may be addressed to IRS.

(3) Federal unemployment taxes--questions may be addressed to IRS.

(4) State unemployment taxes--questions may be addressed to the Texas Workforce Commission.

(i) A contractor may be reimbursed for budget costs incurred by its employees (who are providing services under the contract) for travel including mileage, food, and lodging costs and travel-related expenses in a cost reimbursement contract. However, the budget for the cost reimbursement contract must follow the requirements in §732.239 of this title (relating to Budget Changes), §732.240 of this title (relating to General Principles of Allowable and Unallowable Costs), and §§732.242 - 732.255 of this title (relating to Contract Administration).

(1) Certification of travel. The contractor must certify that travel expenses were incurred by staff while performing official contract business. The purpose for the trip, points of departure and arrival, and times of departure and arrival must be specified.

(2) Mileage. Allowable reimbursement for mileage is computed on a per mile rate, not exceeding the current mileage reimbursement rate set by the Texas Legislature for state employee travel. For audit purposes, contractors must keep copies of travel forms that DFPS approved in writing. Contractors may reimburse staff at rates in excess of those currently in effect for state employees if the contractor pays the difference. DFPS will not pay for the difference in mileage rate.

(3) Food and lodging. Costs for staff food may be reimbursed either on a per-diem rate or an actual cost basis, with the results of either method not exceeding the current per-diem rate set by the Texas Legislature for state employee travel. Costs for staff lodging must not exceed the per-night rate set by the Texas Legislature for state employee travel. Reimbursement must be substantiated by adequate documentation.

(4) Other travel-related expenses. All other travel-related expenses, such as air fare and taxi fare, may be budgeted and are allowed on a cost-incurred basis if these costs are reasonable, necessary, and substantiated by adequate documentation.

(5) Volunteer travel. Travel for volunteers may be paid, if appropriate. Travel to and from home is not included, but travel on agency business is.

(6) Out-of-state travel. Out-of-state travel may be budgeted. The purpose and destination must be stated and the contract manager's previous approval is required for all contracts with the exception of residential child care contracts. The determination of allowability of out-of-state travel is based upon a comparison of total costs for similar or comparable travel purposes available within the state.

Comments

Source Note: The provisions of this §732.243 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421; amended to be effective December 1, 2007, 32 TexReg 7933

§732.244: Consumable Supplies

(a) The contractor must follow Office of Management and Budget (OMB) Circulars A-110, A-87, and A-122, as applicable, in calculating the costs of consumable supplies (or materials and supplies).

(b) A consumable supply is defined as any article costing less than $50 per unit and having a useful life of less than one year. Items meeting the cost standard but having a greater useful life expectancy are not considered consumable supplies as long as the cost of control and recordkeeping required on such items is reasonable in relationship to their value.

(c) Consumable supplies charged by a contractor as a direct cost must include only the materials and supplies actually used to carry out the contract, and due credit must be given for any excess materials or supplies retained or returned to vendors.

Comments

Source Note: The provisions of this §732.244 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.245: Food Expenses

(a) Food costs for clients are considered direct costs. Contractors must follow Office of Management and Budget (OMB) Circulars A-87 and A-122, as applicable, in calculating food costs for clients.

(b) Food expenses for clients may be budgeted in the contract. Staff meals may be reimbursed through the contract, if eating at a facility with the clients is a condition of employment. Food costs paid for by any other source, federal or state, are included in the total budget but are not reimbursable under the contract. This section does not apply to the food services program.

(c) Contractors that charge staff for their meals may reimburse these staff members on a fringe benefit basis, and this reimbursement may be budgeted as such. When staff must pay on a meal-by-meal basis, the staff may continue to pay in this manner and submit a bill similar to travel reimbursement. In either instance, the Texas Department of Protective and Regulatory Services reimburses the contractor for reasonable costs incurred. Accountability by the contractor must be maintained for each meal.

Comments

Source Note: The provisions of this §732.245 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.246: Equipment

(a) Equipment is defined in 45 Code of Federal Regulations (CFR) Part 74 and the Office of Federal Financial Management, Office of Management and Budget (OMB) Circulars.

(b) The contract manager with program budget consultants decides whether an object is equipment.

(c) Equipment included in a budget should be of adequate quality and of reasonable cost in relation to the service to be purchased. Reasonable cost should be a joint agreement between the contractor and the contract manager.

(d) Contractors must bill equipment according to federal regulations found in 45 CFR Part 74 and the Office of Federal Financial Management, OMB Circulars.

(e) If equipment (tangible personal property) has been paid for through a cost reimbursement contract or through other federal or state funding sources, the contractor may not bill additional depreciation or use charge to the contract.

(f) Equipment purchased through the contract is subject to an equitable claim by the state and the federal government. Contractors are accountable for that equipment purchased through the contract. The disposition of equipment is made according to appropriate regulations and departmental policies.

(g) For equipment purchased through a cost reimbursement contract, the contractor must return to the department at the end of the contract the value of the equitable claim on the equipment vested in the state and the federal government. The department's share of the equipment may be returned to the department or (if the sale of equipment option is used), the department's share of the sale proceeds after deducting the cost of the sale must be submitted to the department.

(h) If equipment purchased through a cost reimbursement contract is stolen, lost, vandalized, or misused, the contractor must immediately notify the department in writing. The department may require the contractor to repair or replace the equipment at its expense or to reimburse the department for the state and federal share of the residual value of the equipment.

(i) A contractor may include equipment rental or lease if:

(1) the principle of agreed-upon reasonable costs is applied;

(2) the cost of leasing (over the life of the contract) does not equal or exceed the purchase price;

(3) Costs are consistent with the parameters in §732.250 of this title (relating to Rental Costs).

Comments

Source Note: The provisions of this §732.246 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective December 13, 1996, 21 TexReg 11823; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.247: How may depreciation and use allowances be calculated?

(a) Contractors must follow Office of Management and Budget (OMB) Circulars A-110, A-87, and A-122, as applicable, in calculating depreciation and use allowances.

(b) Contractors may be compensated for certain costs related to the use of buildings, capital improvements, and usable equipment through depreciation or use allowance. Contractors may not use allowance or depreciation for the cost of land. Depreciation or use allowance on assets donated by third parties is allowable, subject to ownership requirements and donor conditions. However, any limitations on the amount of depreciation that would be applicable to the donor also apply to the recipient organization.

(c) A contractor must not combine or change depreciation and use allowance methodologies unless the department approves in advance. The contract manager decides on the appropriateness of the combination of a use allowance and depreciation applicable to a single asset. The decision considers the amount of depreciation previously charged, the estimated useful life remaining, the effect of any increased maintenance charges or decreased efficiency due to age, and any other factors pertinent to the use of the asset.

(d) A contractor electing to depreciate a particular class of assets is not allowed depreciation, rental, or a use charge on any assets that have been fully depreciated.

(e) A contractor must exclude from the computation of use allowance and/or depreciation the cost or any portion of the cost of buildings and equipment borne by or donated by the federal government, no matter where the title was originally vested or where it presently resides.

(f) "Acquisition cost" means the net invoice unit price of an item of equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Ancillary charges, such as taxes, duty, protective in-transit insurance, freight, and installation, must be included in or excluded from the acquisition cost according to the contractor's regular written accounting practices. If the property is acquired with a trade-in the acquisition cost of the new property is the amount expended for the property plus the acquisition cost of the property traded in less the amount of depreciation-to-date of trade-in for the property. Fully depreciated property has a book value of zero when traded in.

(g) Charges for use allowances or depreciation must be supported by adequate contractor property records, and physical inventories must be taken at least once every two years (a statistical sampling basis is acceptable) to ensure that assets exist and are usable and needed. When the depreciation method is followed, adequate depreciation records indicating the amount of depreciation taken each period must also be maintained. Records must be kept in the contractor's books of account.

(h) The following methods are used to compute use allowances:

(1) For buildings and improvements, an annual rate of no more than 2% of acquisition cost is computed. The entire building must be treated as a single asset; the building's components (plumbing, heating, air conditioning, and so on) cannot be segregated from the building's shell.

(2) In those cases where the institution maintains current records on usable equipment on hand, an annual rate of not more than 6-2/3% of acquisition cost is computed.

(3) When no equipment records are maintained, the contractor must justify a reasonable estimate of the acquisition cost of usable equipment which may be used to compute the use allowance at an annual rate of no more than 6-2/3% of the estimate.

(i) The method of depreciation a contractor uses to assign the cost of an asset (or group of assets) to accounting periods must reflect the pattern of consumption of the asset during its useful life. Depreciation expense for any time period is the portion of the acquisition/depreciable basis of the property assigned to that time period. The acquisition cost/depreciable basis of the property is divided by the number of years of estimated useful-service life of the property to compute the depreciation expense per year (straight line method). The minimum useful lives to be assigned to depreciable property are as follows:

(1) buildings: 30 years, with a minimum salvage value of 10%;

(2) transportation equipment: a minimum of three years for passenger automobiles (including minivans), with a minimum salvage value of 10%; five years for light trucks and vans, with a minimum salvage value of 10%; and seven years for buses and airplanes, with a minimum salvage value of 10%. The estimated life of a previously owned (used) vehicle is the longer of the number of years remaining in the vehicle's depreciable life or three years.

(A) Luxury automobiles are defined as passenger automobiles (which include automobiles and minivans) and light trucks and vans (up to 15-passenger vans), with an historical cost at the time of purchase or a market value at execution of the lease exceeding $30,000 when purchased or leased prior to January 1, 1997. Buses are excluded from the definition of luxury vehicles. For vehicles leased or purchased on or after January 1, 1997, luxury vehicles are defined as a base value of $30,000 with 2% being added (using the compound method) to the base value each January 1 beginning January 1, 1998. Any amount above the definition of a luxury vehicle stated above is an unallowable cost. When a passenger vehicle's cost exceeds the definition of a luxury vehicle stated above, the historical cost is reduced to the amount determined by the definition of a luxury vehicle. When a passenger vehicle's market value at the execution of the lease exceeds the amount determined by the definition of a luxury vehicle stated above, the allowable lease payment is limited to the lease amount for a vehicle with a base value as determined above, with adequate supporting documentation maintained by the contractor.

(B) Specialized equipment added to a vehicle to assist a client should be depreciated separately from the vehicle. Wheelchair lifts have an estimated useful life of four years; and

(3) all other depreciable assets, either based upon policies on depreciation for tax purposes of the Department of Treasury, Internal Revenue Service, or minimum schedules consistent with Estimated Useful Lives of Depreciable Hospital Assets, published by the American Hospital Association.

(j) Effective with the corporate fiscal year ending in 2001, a residential child care contractor must depreciate purchases made during its corporate fiscal year 2002 and thereafter of any single asset having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of:

(1) the capitalization level established by the organization for the financial statement purposes; or

(2) $5,000.

(k) The contractor must maintain adequate property records. The straight line method of computing depreciation must be used and must be consistently applied for any specific asset or class of assets and result in equitable charges.

Comments

Source Note: The provisions of this §732.247 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421; amended to be effective December 12, 2002, 27 TexReg 11622

§732.248: Transportation of Clients

A contractor must follow Office of Management and Budget (OMB) Circulars A-87 and A-122, as applicable, in calculating transportation costs. A contractor may use one of the following options to place client transportation costs in the contract budget:

(1) The cost can be budgeted at a specified rate per mile, the same as or less than the state rate per mile. Documentation is the same as that required for staff travel.

(2) The cost can be budgeted on a cost reimbursement basis, that is depreciation or use charge for the vehicle plus the actual operating expenses, which may include fuel, oil, repairs, and insurance.

(3) The cost can be budgeted as a subcontract with a transportation company if the department approves the subcontract. The subcontract must be submitted to the contract representative for prior approval.

Comments

Source Note: The provisions of this §732.248 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.249: Insurance

A contractor must follow Office of Management and Budget (OMB) Circulars A-110, A-87, and A-122, as applicable, in calculating insurance costs. The contractor must adhere to the following:

(1) the budget must identify who or what is covered and what type of coverage is included, such as bonding, fire and theft, building and contents, and liability on clients at a specific amount per client; or

(2) if the contractor elects not to budget insurance, a plan for self-insurance must be submitted. If insurance is not available, documentation of rejection must be included in the contract package;

(3) if the contractor is not insured, the contract agency must bear the cost of any loss. The loss cannot be charged to the contact;

(4) if the insurance coverage has a deductible clause, the deductible amount may be budgeted and billed after the contractor has paid that amount;

(5) if the contractor expects to receive advance payments, a bond must be obtained as shown in the budget.

Comments

Source Note: The provisions of this §732.249 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.250: Rental Costs

Rental costs are discussed in Office of Management and Budget (OMB) Circulars A-110, A-87, and A-122. Rental costs may be charged against the contract budget, but must be reasonable in light of rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased. The only limitations are as follows:

(1) Rental costs under sale and lease-back arrangements are allowed only up to the amount of depreciation or the change that would be allowed had the contract agency continued to own the property.

(2) Rental costs under less-than-arms-length leases are allowed only up to the amount that would be allowed if the contractor held the title to the property.

(3) Rental costs under leases that create a material equity in the leased property are allowed only up to the amount that would be allowed had the organization purchased the property on the date the lease agreement was executed (that is, depreciation, use allowances, taxes, insurance, but not interest expense and other unallowable costs). For this purpose, a material equity in the property exists if the lease is noncancellable or is cancelable only if some remote contingency occurs and has one or more of the following characteristics:

(A) The organization has the right to purchase the property for a price which at the beginning of the lease appears to be substantially less than the probable fair market value at the time it is permitted to purchase the property (commonly called a lease with a bargain purchase option).

(B) Title to the property passes to the organization at some time during or after the lease period.

(C) The term of the lease (initial term plus periods covered by bargain renewal options, if any) is equal to 75% or more of the economic life of the leased property (that is, the period of the property is expected to be economically usable by one or more users).

(D) The present value of the minimum lease payments at the beginning of the lease is at least 90% of the fair market value of the leased asset at that time.

Comments

Source Note: The provisions of this §732.250 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.251: Space Rental

(a) A contractor must follow Office of Management and Budget (OMB) Circulars A-110, A-87, and A-122, as applicable in calculating rental costs.

(b) The contractor must specify the number of square feet and the cost per square foot of its rental space. The total area must be reasonable for the number of staff and clients served. A copy of the lease agreement must be made available to the department's contract manager.

(c) When a contracted program shares a facility with other programs, the contractor must allocate the cost on the basis of square footage used in each program. This allocation applies to rent, utilities, maintenance services and supplies (including custodian's salary), repairs, insurance, and other related costs. Under certain circumstances, other allocation bases may be used, but only if square footage is inappropriate.

Comments

Source Note: The provisions of this §732.251 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.252: Renovations and Remodeling

A contractor may not be reimbursed by the Texas Department of Protective and Regulatory Services for renovations and remodeling costs unless the department specifically approves. A contractor must follow Office of Management and Budget (OMB) Circulars A-87 and A-122, as applicable, in calculating the costs of renovations and remodeling.

Comments

Source Note: The provisions of this §732.252 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.253: Janitorial Services

A contractor may budget janitorial service costs instead of salaried janitorial or housekeeping staff.

Comments

Source Note: The provisions of this §732.253 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.254: Telephone

The contractor must specify the number of lines, monthly base rate, and estimated monthly long distance charges in its budget. For billing purposes, all long distance charges must be fully documented to show applicability to the contract.

Comments

Source Note: The provisions of this §732.254 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.255: Professional Fees

Contractors must follow Office of Management and Budget (OMB) Circulars A-87 and A-122, as applicable, in calculating professional service fees. Contractors may budget the following:

(1) usual, customary fees and allowable costs for medical and dental examinations, psychological assessments, and speech and hearing tests if these examinations are not available without cost and the program area requires the examinations, assessments, and/or tests;

(2) usual, customary fees for medical examinations for staff if these examinations are job requirements;

(3) costs for staff training, parent workshops, consumer education workshops, and similar services if these services cannot be provided without cost and the services are specifically approved as part of the contract and are not the responsibility of the contractor's staff;

(4) costs for accounting services, including data processing if these services are usual, customary, and allowable costs and if the functions associated with these costs are not the responsibility of the contractor's staff;

Comments

Source Note: The provisions of this §732.255 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279; amended to be effective October 1, 1998, 23 TexReg 9421.

§732.257: Unit Rates

(a) Establishing a unit rate, whether or not it is a result of a statewide cost study or an individual budget, requires consideration of factors that include the following:

(1) expected cost must be reasonable and necessary for the service;

(2) cost must be allowable according to federal, state, and departmental regulations, laws, and policies;

(3) cost must be properly allocated and consistent with generally accepted accounting principles as published by the Accounting Principles Board, American Institute of Certified Public Accountants;

(4) cost must be comparable to the going rate in the community or geographical area for the same or similar service.

(b) The contract manager should periodically review the negotiated unit rate to propose operational adjustments within the contracted rate, if necessary, and to review the contractor's financial ability to comply with the terms of the contract. Adjustments to the rate may be made by mutual agreement between Texas Department of Protective and Regulatory Services and the contractor, subject to applicable limitations.

Comments

Source Note: The provisions of this §732.257 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.258: Financial Interest by Officer/Employee of the Texas Deparatment of Protective and Regulatory Services

(a) A department officer or staff who has a financial interest in a firm or corporation acting as a private consultant must report the financial interest to the executive director within 10 days after the consultant submits an offer to the department.

(b) The same requirement applies if the officer or employee is related within the second degree of consanguinity or affinity to a person having the financial interest.

(c) Failure to provide the information will result in a voided contract.

Comments

Source Note: The provisions of this §732.258 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.259: Previous State Employment

(a) A person who offers to perform a consulting service for the department and who has been employed by the department or another state agency at any time during the 2 preceding years must disclose in the offer the following information:

(1) the nature of the previous employment within the department or the other state agency;

(2) the date of the employment ended; and

(3) the annual rate of compensation for the employment at the time the employment ended.

(b) Failure to provide this information will result in a voided contract.

Comments

Source Note: The provisions of this §732.259 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.260: Consultant Contracts Amendments

(a) Existing contracts for $10,000 or less.

(1) The contract may be extended if both Texas Department of Protective and Regulatory Services and the contractor agree and the department does not incur additional costs from the contractor; or

(2) the contract may be amended if the cost (including any additional contract costs the contractor may have with the department) does not exceed $10,000.

(b) Existing contracts for more than $10,000. The contract may be extended or otherwise amended without rebidding if both PRS and the contractor agree and the department does not incur additional costs from the contractor.

Comments

Source Note: The provisions of this §732.260 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.261: Application for Enrollment

Potential contractors (providers) must request an application for enrollment from the Texas Department of Protective and Regulatory Services through means established by the respective department program area.

(1) Identifying information. At minimum, the applicant for provider enrollment must give the following identifying information:

(A) the provider's business name;

(B) the nature of the business entity (sole proprietorship, general partnership, limited partnership, corporation, or governmental entity;

(C) if the provider is a sole proprietorship, his residence address, date of birth, and Social Security number;

(D) if the provider is a partnership, a copy of the partnership agreement;

(E) if the provider is a limited partnership, a copy of the certificate of limited partnership as filed with the Texas secretary of state;

(F) if the provider is a corporation, a certificate of incorporation and a corporate board of directors resolution.

(2) Ownership or control information. If the provider fails to disclose ownership or control information as required by the department, he is not eligible to contract with the department to provide services.

(3) Information on business transactions. A provider must agree to give the department, upon request, the following information related to business transactions:

(A) the ownership of any entity with which the provider has had both a subcontract and business transactions totaling more than $25,000 during the 12-month period ending on the date of the request; and

(B) any significant business transactions between the provider and any wholly owned supplier, or between the provider and any subcontractor, during the five-year period ending on the date of the request.

(4) Information on persons convicted of crimes. Before the department enters into or renews a contract, or at any time upon written request by the department, the provider must disclose to the department the identity of any person who:

(A) has ownership or controlling interest in the provider agency, or is an agent or managing employee of the provider; and

(B) has been convicted of a criminal offense related to his involvement in any program under Medicare, Medicaid, or the Title XX block grant since the inception of those programs. The department may refuse to enter into or may terminate a provider agreement if it determines that the provider did not fully and accurately disclose the required information concerning persons convicted of crimes.

(5) Denial/termination of provider participation. The department may refuse to enter into or renew an agreement with a provider if any person who has an ownership or controlling interest in the provider agency, or who is an agent or managing employee of the provider, has been convicted of a criminal offense related to his involvement in any program established under Medicare, Medicaid, or the Title XX block grant.

(6) State certification/licensure. Before the department enrolls a provider, the provider must prove his capability to provide services of a capability to provide services of a quality acceptable to the department. The provider must be state licensed and/or certified and provide documentation of his licensure and/or certification upon application for enrollment.

Comments

Source Note: The provisions of this §732.261 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.262: What records must a contractor keep and supply to the Department?

(a) A contractor must allow the department and all appropriate federal and state agencies or their representatives to inspect, monitor, or evaluate client and financial records, books, and supporting documents pertaining to services provided. The contractor and the subcontractor must make these documents available at reasonable times, reasonable places and for reasonable periods. In addition, each contractor receiving block grant funds must send the contract manager a copy of the contractor's annual audit or notify the contract manager in writing that the audit is available for review.

(b) The contractor must keep financial and supporting documents, statistical records, and any other records pertinent to the services for which a claim or cost report was submitted to the department or its agent. The records and documents must be kept for a minimum of 3 years and 90 days after the end of the contract period or for 3 years after the end of the federal fiscal year in which services were provided (if a provider agreement/contract has no specific termination date in effect). If any litigation, claim, or audit involving these records begins before the 3 year period expires, the provider must keep the records and documents for not less than 3 years and 90 days or until all litigation, claims, or audit finds are resolved. The case is considered resolved when a final order is issued in litigation, or the department and contractor enter into a written agreement. The contractor must keep records of nonexpendable property acquired under the contract for 3 years after the final disposition of the property. In this section, contract period means the beginning date through the ending date specified in the original agreement/contract; extensions are considered separate contract periods.

(c) After medical services end, the contractor must keep the recipient's medical records for five years as stated in the provider agreement/contract.

(d) If a contractor is terminating business operations, the contractor must ensure that his records are stored and accessible and that someone is responsible for adequately maintaining the appropriate records.

Comments

Source Note: The provisions of this §732.262 adopted to be effective September 13, 2001, 26 TexReg 6968

§732.263: Response to Inquiries

If department staff receive a written inquiry from a contractor, they must respond in writing no later than 14 days after the date on which they received the inquiry.

Comments

Source Note: The provisions of this §732.263 adopted to be effective March 1, 1988, 13 TexReg 305; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.265: Contract Modifications

A contract modification is made within the scope of the existing contract. Changes outside the scope of the existing contract must be conducted as a separate procurement action.

Comments

Source Note: The provisions of this §732.265 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.266: Reduction or Nonrenewal of Block Grant Contracts

The department may reduce or not renew a contract funded by the block grant if:

(1) sufficient block grant funds are not available to continue the contract at the current level;

(2) the contractor has violated the terms of the contract;

(3) priorities and need for services change;

(4) state laws or federal regulations change, resulting in reductions;

(5) the contractor does not provide the department with a copy of the agency's annual audit or does not notify the contract manager in writing that the audit is available for review;

(6) competitive procurement is required or authorized under department rules.

Comments

Source Note: The provisions of this §732.266 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.267: Status of Payments to Contractor During Disputes

The department may exercise the option to withhold payment (vendor payment hold) on all or a portion of a contract pending a dispute decision or an appeal decision.

Comments

Source Note: The provisions of this §732.267 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.268: Notice of Termination

(a) The department may immediately terminate contract if the department determines it is in its best interest. The notice at minimum must include the effective date of the termination and a notice of the contractor's right to appeal the adverse action.

(b) The department may immediately terminate a contract for cause if it is not disallowed by law.

(c) Either party, unless stated differently in the contract, may terminate the contract at will if the other party is given a notice of termination at least 31 days before the termination date.

Comments

Source Note: The provisions of this §732.268 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.269: Contract Terminations

Terminations of contracts occur when the term of the contract expires, both parties mutually agree to end the contract, and/or when either party terminates a contract because of unreconcilable differences.

Comments

Source Note: The provisions of this §732.269 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.270: Fiscal and Financial Settlement Review

When a contract is terminated, a fiscal audit is conducted to determine any over or underpayment. Disposition of equipment purchased under the contract will be subject to disposition according to departmental determinations.

Comments

Source Note: The provisions of this §732.270 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.271: Settlement of Subcontract Claims

Upon termination of a prime contract, the contractor and each subcontractor are responsible for the prompt settlement of the termination claims, including claims from employee, vendors, and subcontractors.

Comments

Source Note: The provisions of this §732.271 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.272: Notice to Contractor of Determination

The department's contract manager must give the contractor no less than 15 days notice by certified mail (return receipt requested) to submit on or before a stated date written evidence substantiating the claim amount before issuing a determination of the settlement amount.

Comments

Source Note: The provisions of this §732.272 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.273: Submission of Evidence

The contractor is responsible for establishing proof of the amount claimed to be due for settlement of a terminated contract to the contract manager's satisfaction by submitting sufficient proof.

Comments

Source Note: The provisions of this §732.273 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.274: Termination for Cause

(a) Termination for cause is the department's contractual right to terminate, in whole or in part, the contractor's right to proceed with the contract by reason of the contractor's failure, actual or anticipatory, to perform obligations under the contract. Included are failure to:

(1) deliver supplies or perform services within the time specified in the contract;

(2) perform any other provision of the contract;

(3) progress, thus endangering the performance of the contract.

(b) The department may terminate a contract for default if the contractor submits falsified documents or fraudulent billings or makes false statements.

(c) Under a termination for cause, the department is not liable for the contractor's costs on undelivered work and is entitled to the repayment of any advance payments and of any progress payments for such work. The department may elect to require the contractor to transfer title and deliver to the department completed supplies and materials in the manner and to the extent directed by the contract manager.

Comments

Source Note: The provisions of this §732.274 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.275: Abeyance and Removal of Current or Potential Contractual Rights

(a) Requirements in this section and §732.276 and §732.277 of this title (relating to Causes and Conditions for Removal of Contractual Rights and for Abeyance; and Notice Requirements for Removal of Contractual Rights and for Abeyance) do not apply to Title XIX.

(b) In this section and §732.276 and §732.277 of this title (relating to Causes and Conditions for Removal of Contractual Rights and for Abeyance; and Notice Requirements for Removal of Contractual Rights and for Abeyance), contractor refers to both contractor and subcontractor and potential contractor refers to an entity or individual who attempts or wishes to attempt to obtain a department contract or subcontract.

(c) The department may impose additional program-specific requirements if the requirements do not conflict with the abeyance and removal of contractual rights requirements in this section and §732.276 and §732.277 of this title (relating to Causes and Conditions for Removal of Contractual Rights and for Abeyance; and Notice Requirements for Removal of Contractual Rights and for Abeyance).

(d) Abeyance is a pending status. It may be imposed immediately, as appropriate, by the department upon a contractor's right to conduct a contract or a potential contractor's rights to make an offer, bid, or application for a department contract until an investigation, hearing, or trial result is concluded and the department can make a determination about the contractor's or potential contractor's right to contract or subcontract. The department may withhold payments to a contractor during the abeyance. If the final determination is favorable to the contractor, the department must, if applicable:

(1) pay the withheld payments for any services that may have been provided during the abeyance; and

(2) resume contract payments.

(e) Removal of contractual rights by the department is the abrogation of rights to conduct a contract or to make an offer, bid, or application for a department contract. The removal is for a reasonable and specified time and commensurate with the seriousness of the cause for removing contractual rights. Removal of rights may, but does not have to, be limited to those components of the contractor or potential contractor involved in the conduct leading to removal of rights.

(f) For purposes of both abeyance and removal of contractual rights, the department may attribute an individual's conduct to the contractor, potential contractor, or the responsible component of the contractor or potential contractor with whom the individual is employed or otherwise associated. The department does this if the conduct occurred within the scope of authority or employment and under circumstances in which the contractor's or potential contractor's responsible officials knew or should have known of the conduct. Remedial actions taken by the responsible officials of the contractor or potential contractor must be considered in determining whether either abeyance or removal of rights is warranted.

(g) Individuals who have their contractual rights removed or held in abeyance by the department may not serve or participate under any department contract or subcontract.

Comments

Source Note: The provisions of this §732.275 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.276: Causes and Conditions for Removal of Contractual Rights and for Abeyance

(a) Causes for removal of contractual rights. The department is authorized to remove contractual rights from an agency or individual for causes including, but not limited to, the following:

(1) pleading guilty or nolo contendere, receiving a deferred adjudication, or being a defendant in a court judgment of guilt for a violation relation to:

(A) obtaining, attempting to obtain, or performing a public or private contract or subcontract;

(B) the Organized Crime Control Act of 1970, embezzlement, theft, forgery, bribery, falsification or destruction of records, other forms of fraud, receipt of stolen property, moral turpitude, or any other offense indicating a lack of business integrity or honesty that seriously and directly affects the question of responsibility as a department contractor;

(C) dangerous drugs, controlled substances, or other drug-related offense;

(D) federal antitrust statutes arising from the submission of bids or proposals;

(2) violating department contract provisions including:

(A) failing to perform according to the terms, conditions, and specifications or within the time limits(s) specified in the department contract, including, but not limited to the following:

(i) failing to abide by applicable federal and state statutes, such as those regarding handicapped persons and civil rights;

(ii) failing to meet standards that are required for licensure or certification or that are required by state or federal law, department rule, or department policy concerning department contractors;

(iii) failing to execute amendments, if required in the contract;

(iv) billing for services or merchandise not provided to the client or patient;

(v) submitting cost reports containing costs not associated with and/or not covered by the contract;

(vi) submitting a false statement or misrepresentation which, if used, may increase individual or statewide rates or fees;

(vii) charging client or patient fees contrary to department rules or policy;

(viii) failing to notify and reimburse the department or its agents for services the department paid for when the contractor received reimbursement from a liable third party;

(ix) failing to disclose or make available, upon demand, to the department or its representatives (including appropriate federal and state agencies) any records the contractor is required to maintain;

(x) failing to provide and maintain services within standards required by statute, regulation, or contract;

(xi) violating the Human Resources Code provisions applicable to the contract or any rule or regulation issued under the Code;

(B) having a record of failure to perform or of unsatisfactory performances according to the terms of one or more contracts or subcontracts if that failure or unsatisfactory performances has occurred within five years or two contracting periods (preceding the determination to remove contractual rights) for long-term contracts. Failure to perform or unsatisfactory performance caused by acts beyond the contracting agency's or person's control is not considered a basis for removal of contractual rights. Failure to perform and unsatisfactory performance includes, but is not limited to, the following:

(i) failing to correct contract performance deficiencies after receiving written notice about them from the department or its authorized agents; and

(ii) failing to repay or make and follow through with arrangements satisfactory to the department to repay identified overpayments or other erroneous payments;

(C) rebating or accepting a fee or part of a fee in violation of contractual provisions;

(3) submitting an offer, bid, or application that contains a false statement or misrepresentation or omits pertinent facts or documents material to the procurement;

(4) any other cause affecting the contractor's or potential contractor's responsibility of such a serious nature that the executive director or his designee determines it to warrant removal of contractual rights. Grounds include, but are not limited to, engaging in any abusive or neglectful practice that results in or could result in death or injury to the contractor's clients;

(5) removal of contractual rights by some other state or federal agency.

(b) Causes for abeyance. The department may place a contractor's or potential contractor's contractual rights in abeyance whenever the department finds that there is a reasonable basis to believe that grounds for removal of contractual rights exists. In addition, abeyance may be imposed on a potential contractor or subcontractor if he has an outstanding indictment for an offense that is grounds for removal of contractual rights.

(c) Conditions for removal of contractual rights.

(1) Violations of department contract provisions do not necessarily cause abeyance and/or removal of contractual rights. Depending upon circumstances, the department's options range from a notice to the contractor explaining the violation or cause and requiring corrective actions to the removal of contractual rights.

(A) Causes in subsection (a)(1) of this section are established by proof of pleading guilty or nolo contendere, receiving a deferred adjudication of guilt, or being a defendant in a court judgment of guilt. If an appeal results in a reversal, contractual rights must be restored upon written request, unless another cause for their removal exists.

(B) The existence of causes for removal of contractual rights in subsections (a) (2)-(4) of this section must be established by a preponderance of the evidence.

(2) Removal of contractual rights because another state or federal agency has removed contractual rights is based entirely upon the initial agency's official notice that the rights have been removed.

Comments

Source Note: The provisions of this §732.276 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.277: Notice Requirements for Removal of Contractual Rights and for Abeyance

(a) Contractors' right of notice and appeal. Contractors who have been placed in abeyance or who have had their contractual rights removed have all the notice and appeal rights in those sections of Chapter 730 of this title (relating to Legal Services), governing fair hearing rights.

(b) Potential contractors' rights of notice and appeal. As with other offerors, bidders, and applicants found ineligible for a contract, potential contractors who are replaced in abeyance or who have their contractual rights removed do not have a right to an appeal hearing.

(c) Required content for notices of abeyance and removal of contractual rights. In addition to information required in the notice of adverse actions, if applicable, notices must include the following:

(1) the grounds for the action (if an indictment filed by the department is underway, the nature of the irregularities is described in general terms without disclosing evidences):

(2) the length of the abeyance or removal of contractual rights;

(3) a statement that responses to RFPs, IFBs, and other proposals and applications will not be accepted or approved; and

(4) a statement of whether the abeyance or removal of contractual rights is in effect throughout the department.

Comments

Source Note: The provisions of this §732.277 adopted to be effective May 1, 1987, 12 TexReg 350; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.280: Audit Identification Number

Contractors must cite the audit identification (DIG) number in all audit-related correspondence. Audit-related correspondence includes submitting payments for audit exceptions and requesting appeals of audit findings.

Comments

Source Note: The provisions of this §732.280 adopted to be effective September 1, 1988, 13 TexReg 3992; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.282: Sanctions for Administrative Errors

(a) Administrative errors are audit findings of violations of contract requirements, federal regulations, state laws, and department policies not defined as financial errors and in situations when it is established that the services described in the contract have been delivered to eligible clients.

(b) The department imposes a monetary exception sanction based on the administrative costs in the unit rate/contract.

(c) Each program area establishes specific rules governing the percentage sanction for administrative errors based on the administrative costs associated with the service.

(d) For services without an established specific administrative error sanction, the department assesses a 15% sanction.

(e) The administrative error sanction amount must be collected by management staff.

Comments

Source Note: The provisions of this §732.282 adopted to be effective September 1, 1988, 13 TexReg 3992; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.284: Time Limit and Options for Responding to the Texas Department of Protective and Regulatory Services

(a) Contractors must respond to the negotiated settlement within 30 days of receiving the department's demand letter, subject to the limits on filing a request for an appeal in §732.288 of this chapter (relating to the Audit Appeals Process). If the contractor does not respond within this time, the department will begin involuntary collection procedures.

(b) Options for responding to the settlement offer include:

(1) accepting it and paying the actual liability due in a lump sum;

(2) accepting it and requesting an installment payment plan; or

(3) refusing it and requesting an appeal.

Comments

Source Note: The provisions of this §732.284 adopted to be effective September 1, 1988, 13 TexReg 3992; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.286: Computing Interest on Unpaid Audit Charges

(a) The department charges interest on all unpaid debts related to audits. Interest is computed pursuant to Texas Revised Civil Statutes, Article 5069-1.05, on the unpaid balance due on a simple interest basis.

(b) If the recoupment amount is not paid in full within 30 days of receiving the demand letter, interest begins to accrue on the thirty-first day and continues to accrue during any appeal process.

(c) Interest accrues during any administrative appeal process that extends beyond the thirty-first day of receiving the demand letter. If the appeal is found in the appellant's favor, the interest that accrued against the portion of the exception found in his favor is dismissed. The department collects the interest on any other exception still owed.

(d) The department charges and collects interest on installment payments.

Comments

Source Note: The provisions of this §732.286 adopted to be effective September 1, 1988, 13 TexReg 3992; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.288: Audit Appeals Process

(a) To request an audit appeal, the contractor must file written request for a hearing according to §730.1605 of this title (relating to Request for a Hearing).

(b) If the contractor rejects a settlement offer from the department, the department may demand the entire amount of the exception.

Comments

Source Note: The provisions of this §732.288 adopted to be effective September 1, 1988, 13 TexReg 3992; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.290: Criteria for Installment Payments

Debts owed the state as a result of audit exception may be paid in installments based on a written installment payment agreement between the department and the contractor, subject to the criteria in paragraphs (1)-(3) of this section. The agreement must be signed by the contractor's legally authorized representative and the administrator. To pay installments, the contractor must be:

(1) financially unable to pay in a lump sum, or if required to do so, would be unable to provide a priority service;

(2) a current provider of a priority service; and

(3) able to repay the amount in 24 or fewer installments over a period of two years or less.

Comments

Source Note: The provisions of this §732.290 adopted to be effective September 1, 1988, 13 TexReg 3992; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

Subchapter M

§732.301: Methods for Auditing Contracts

(a) All services for which the department is charged are subject to review and audit. During a review or audit, the contractor must give the department or its authorized representative information about his claims for payment. The contractor is responsible for proving he is entitled to payments. If a review or audit reveals that improper payments were made or that the contractor's records do not support the payments according to federal, state, and local laws and rules, department procedures, and the contract provisions, the contractor must make restitution.

(b) Department procedures for contract reviews or audits may include the use of sampling and extrapolation. In this procedure, the department selects a representative sample of the cases or claims for which the contractor received payment for the time under review and examines records for those cases or claims. All improper payments or units of service in the sample are then totalled and extrapolated to all of the cases or claims for which the contractor has been paid during the audit period. After being notified and given the opportunity for a hearing according to the requirements in §730.1602 of this title (relating to Right to a Hearing), the contractor is required to pay the department 93% of the total extrapolated amount of the improper payments.

Comments

Source Note: The provisions of this §732.301 adopted to be effective November 1, 1988, 13 TexReg 3993; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.302: Contract Compliance Audit Costs

Costs of compliance audits purchased by for-profit contractors are not reimbursable and are not considered for cost report purposes.

Comments

Source Note: The provisions of this §732.302 adopted to be effective September 1, 1988, 13 TexReg 3993; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.303: Recoupment of Improper Payments

(a) The department recovers improper payments when it is verified that contractors have been overpaid because of improper billing or accounting practices or failure to comply with the contract terms. The determination of impropriety is based on federal, state, and local laws and rules; department procedures; contract provisions; or statistical data on program use compiled from paid claims.

(b) The contractor is notified in writing of the types of discrepancies, the method of computing the reasonable dollar amount to be refunded, and any other actions the department may take.

(c) The contractor may request that the department conduct an audit of 100% of the records or conduct an additional audit of the records by sampling. The contractor may also request a presentation of the audit results at an appeal hearing with the department. When a contractor requests additional audit work, he must agree to pay the cost of performing the work at current department costs. The department absorbs the cost for additional audit work if the work reduces the exception by more than 15%.

Comments

Source Note: The provisions of this §732.303 adopted to be effective September 1, 1988, 13 TexReg 3993; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.304: Secondary Documentation

An audit is considered complete when the official audit report is received by the contractor. The department considers additional, or secondary, documentation presented during the audit.

Comments

Source Note: The provisions of this §732.304 adopted to be effective September 1, 1988, 13 TexReg 3993; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

§732.305: Prior Approval

Contractors are required to obtain the Texas Department of Protective and Regulatory Services' (PRS') approval before procuring an audit performed according to the Single Audit Act of 1984, if PRS is expected to participate in the cost of the audit.

Comments

Source Note: The provisions of this §732.305 adopted to be effective September 1, 1988, 13 TexReg 3993; duplicated effective September 1, 1992, as published in the Texas Register September 11, 1992, 17 TexReg 6279.

Subchapter N

§732.401: What are the purpose and scope of this subchapter?

This subchapter governs the negotiation and mediation of a claim of breach of contract asserted by a contractor against the Department, as well as a counterclaim asserted by the Department against the contractor, under the Government Code, Chapter 2260.

Comments

Source Note: The provisions of this §732.401 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.403: What are the prerequisites to suit against the Department for contract breach?

The procedures contained within this subchapter are exclusive and required prerequisites to suit under the Government Code, Chapter 2260.

Comments

Source Note: The provisions of this §732.403 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.405: Is sovereign immunity waived?

This subchapter does not waive the Department's sovereign immunity to suit or liability.

Comments

Source Note: The provisions of this §732.405 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.407: What are the requirements for notice of claim of breach of contract?

(a) A contractor asserting a claim of breach of contract under the Government Code, Chapter 2260, shall file notice of the claim as provided in this section.

(b) The notice of the claim shall be:

(1) in writing and signed by the contractor or the contractor's authorized representative; and

(2) delivered by hand, certified mail return receipt requested, or other verifiable delivery service, to the:

(A) director of the region or state office division which signed the contract; or

(B) Executive Director.

(c) The notice shall state in detail:

(1) the nature of the alleged breach of contract, including the date of the event that the contractor asserts as the basis of the claim and each contractual provision allegedly breached;

(2) a description of damages that resulted from the alleged breach, including the amount and method used to calculate those damages; and

(3) the legal theory of recovery, including the relationship between the alleged breach and the damages claimed.

(d) The notice of claim shall be delivered no later than 180 calendar days after the date of the event that the contractor asserts as the basis of the claim.

Comments

Source Note: The provisions of this §732.407 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.409: May the Department counterclaim?

(a) The Department may assert a counterclaim under the Government Code, Chapter 2260, as provided in this section. The counterclaim will be:

(1) in writing; and

(2) delivered by hand, certified mail return receipt requested, or other verifiable delivery service to the contractor or the representative of the contractor who signed the notice of claim of breach of contract.

(b) The notice shall state in detail:

(1) the nature of the counterclaim;

(2) a description of damages or offsets sought, including the amount and method used to calculate those damages or offsets; and

(3) the legal theory supporting the counterclaim.

(c) The notice of counterclaim shall be delivered to the contractor no later than 90 calendar days after the Department's receipt of the contractor's notice of claim.

(d) Nothing herein precludes the Department from initiating a lawsuit for damages against the contractor in a court of competent jurisdiction.

Comments

Source Note: The provisions of this §732.409 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.411: Is there a duty to negotiate?

The parties shall negotiate in accordance with the timetable set forth in §732.413 of this title (relating to What is the negotiation timetable?) to attempt to resolve all claims and counterclaims. No party is obligated to settle with the other party as a result of the negotiation.

Comments

Source Note: The provisions of this §732.411 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.413: What is the negotiation timetable?

(a) Following receipt of a contractor's notice of claim, the Executive Director or designee shall review the contractor's claim and the Department's counterclaim, if any, and initiate negotiations with the contractor to attempt to resolve the claim and counterclaim.

(b) Subject to subsection (c) of this section, the parties shall begin negotiations within a reasonable period of time, not to exceed 60 calendar days following the later of the:

(1) date of termination of the contract;

(2) completion date in the original contract; or

(3) date the Department receives the contractor's notice of claim.

(c) The Department may delay negotiations until after the 180th day from the date of the event giving rise to the claim of breach of contract by delivering written notice to the contractor that the commencement of negotiations will be delayed and notice of when the Department will be ready to begin negotiations.

(d) The parties may conduct negotiations according to an agreed schedule as long as they complete the negotiations no later than 270 days after the Department receives the contractor's notice of claim, subject to one or more extensions agreed upon by the parties.

(e) The parties may agree in writing on or before the 270th day after the Department receives the contractor's notice of claim to extend the time for negotiations. The agreement shall be signed by representatives of the parties with authority to bind each respective party and shall provide for the extension of the statutory negotiation period until a date certain. The parties may enter into a series of written extension agreements that comply with the requirements of this section.

(f) The contractor may request a contested case hearing before the State Office of Administrative Hearings on or before the 270th day after the Department receives the contractor's notice of claim, or the expiration of any extension agreed to by the parties.

(g) The parties may agree to mediate the dispute at any time before the 270th day after the Department receives the contractor's notice of claim or before the expiration of any extension agreed to by the parties pursuant to subsection (e) of this section.

Comments

Source Note: The provisions of this §732.413 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.415: How are negotiations conducted?

(a) The negotiation may be conducted by any method, technique, or procedure authorized under the contract or agreed upon by the parties.

(b) To facilitate the meaningful evaluation and negotiation of the claim and any counterclaim, the parties may exchange relevant documents that support their respective claims, defenses, counterclaims, or positions.

(c) Material submitted pursuant to this section and claimed to be confidential by the contractor shall be handled pursuant to the requirements of the Public Information Act, Government Code, Chapter 552.

Comments

Source Note: The provisions of this §732.415 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.417: What are the settlement approval procedures?

The parties' settlement approval procedures shall be disclosed prior to, or at the beginning of, negotiations. To the extent possible, the parties shall select negotiators who are knowledgeable about the subject matter of the dispute, who are in a position to reach agreement, and who can credibly recommend approval of an agreement.

Comments

Source Note: The provisions of this §732.417 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.419: What are the requirements for the settlement agreement?

(a) A settlement agreement may resolve an entire claim or any designated portion of a claim.

(b) To be enforceable, a settlement agreement must be in writing and signed by representatives of the contractor and the Department who have authority to bind each respective party. Typically, the representatives who signed the original contract may sign a binding settlement agreement.

(c) A partial settlement does not waive a party's rights under the Government Code, Chapter 2260, as to the parts of the claim or counterclaim that are not resolved.

Comments

Source Note: The provisions of this §732.419 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.421: Who bears the costs of negotiations?

Unless the parties agree otherwise, each party shall be responsible for its own costs incurred in connection with a negotiation, including, without limitation, the costs of attorney's fees, consultant's fees, and expert's fees.

Comments

Source Note: The provisions of this §732.421 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.423: May a contractor request a contested case hearing?

(a) If a claim for breach of contract is not resolved in its entirety on or before the 270th day after the Department receives the notice of claim, or after the expiration of any extension, the contractor may file a request with the Department for a contested case hearing before the State Office of Administrative Hearings (SOAH).

(b) A request for a contested case hearing shall state the legal and factual basis for the claim and shall be delivered to the Executive Director or designee, or the person designated in the contract to receive notice, within 30 days after the 270th day or the expiration of any agreed extensions, as described in §732.413 of this title (relating to What is the negotiation timetable?).

(c) The Department shall forward the contractor's request for a contested case hearing to SOAH within 30 days after receipt of the request.

(d) The parties may agree to submit the case to SOAH before the 270th day after the notice of claim is received by the Department if they have achieved a partial resolution of the claim and counterclaim, if any, or if an impasse has been reached in the negotiations and proceeding to a contested case hearing would serve the interests of justice.

Comments

Source Note: The provisions of this §732.423 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.425: Is mediation of contract claims available?

The contractor and the Department may agree to mediate the claim and any counterclaim at any time.

Comments

Source Note: The provisions of this §732.425 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.427: How should mediations be conducted?

(a) A mediator may not impose his or her own judgment on the issues for that of the parties. The mediator must be acceptable to both parties.

(b) The mediation is subject to the provisions of the Governmental Dispute Resolution Act, Government Code, Chapter 2009.

(c) To facilitate a meaningful opportunity for settlement, the parties shall, to the extent possible, select representatives to participate in the mediation who are knowledgeable about the dispute, who are in a position to reach agreement, or who can credibly recommend approval of an agreement.

Comments

Source Note: The provisions of this §732.427 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.429: Who bears the costs of mediation?

The costs of the mediator shall be divided equally between the parties. Unless the contractor and the Department agree otherwise, each party shall be responsible for its own costs incurred in connection with the mediation, including costs of document reproduction for documents requested by such party, attorney's fees, consultant's fees, and expert's fees.

Comments

Source Note: The provisions of this §732.429 adopted to be effective February 13, 2003, 28 TexReg 1229

§732.431: What are the requirements regarding a settlement agreement as a result of mediation?

(a) A settlement agreement reached during, or as a result of mediation, that resolves an entire claim or any designated and severable portion of a claim shall be in writing and signed by representatives of the contractor and the Department who have authority to bind each respective party.

(b) If the settlement agreement does not resolve all issues raised by the claim and counterclaim, if any, the agreement shall identify the issues that are not resolved.

(c) A partial settlement does not waive a contractor's rights under the Government Code, Chapter 2260, as to the parts of the claim that are not resolved. Nor does it waive the Department's rights as to parts of the counterclaim that are not resolved.

Comments

Source Note: The provisions of this §732.431 adopted to be effective February 13, 2003, 28 TexReg 1229