Two bills significant to the construction industry were passed by the Legislature during the closing days of the session. House Bill 2397, authored by Rep. Frank Corte in the House and sponsored by Sen. Tommy Williams in the Senate, allows subcontractors and general contractors to suspend work on public projects when they have not been paid in accordance with the prompt pay statute. SB 1017 authored by Sen. Jeff Wentworth in the Senate and sponsored by Rep. Joe Nixon in the House restores the right of subcontractors and general contractors to sue a county when it breaches a contract.

HB 2397 provides substantially the same rights on public projects that are currently provided on private projects. When a subcontractor or general contractor has not been paid an undisputed pay request in accordance with the prompt pay statute, notice can be given to the owner that work will be suspended in 10 days unless payment is made. After the ten days the general or subcontractor is not required to provide labor or materials and is not responsible for damages for suspending work. The owner may give notice within the 10 days that there is a bona fide dispute that is the reason for nonpayment. This notice must include a list of the specific reasons for nonpayment and the contractor or subcontractor is to be given an opportunity to cure.

For highway-related contracts entered into with the Texas Department of Transportation for the construction or maintenance of a highway or related facility, the notice period after the prompt pay noncompliance is 20 days instead of 10 days.

SB 1017 nullified a Texas State Supreme Court decision from last summer that held that counties had the protection of sovereign immunity and could not be sued for breach of a construction contract. This bill restored that right. Presentment of the claim would first have to be made to the Commissioner's Court and the Commissioner's Court must neglect or refuse to pay the bill within 60 days of presentment.

Damages recoverable are: 1) the balance due and owed under the contract, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration; 2) the amount allowed for change orders or additional work required to carry out the contract; 3) attorneys' fees; and 4) interest on the amount owed. However, recovery cannot include consequential or exemplary damages against the county.

This legislation started with little opposition. But once the bill reached the House, the county organizations were mounting a substantial fight to stop it. To pass the legislation, the members and staff of the Texas Construction Association and the Associated General Contractors-Texas Building Branch worked together in down-to-the-wire negotiations and revisions with the various organizations representing the Texas counties.

For the text of the bills, go to the Legislation button of the TCA Web site: www.texcon.org or contact TCA at (512) 473-3773.