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Section 2: Contract Standards

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An agency may not enter into an agreement or contract that requires or permits the agency to exceed its duties and responsibilities or the limitations of its appropriated funds. Tex. Gov’t Code § 771.010.

An agency may agree or contract with another agency for the provision of necessary and authorized services or resources. An agency may not provide services or resources to another agency that are required by Article XVI, Section 21, of the Texas Constitution to be provided under a contract awarded to the lowest responsible bidder. Tex. Gov’t Code § 771.003.

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Contract Documents

Although a Letter of Agreement is authorized by statute, it is TxDOT policy to use the IAC template available on the Contract Services intranet site.

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Signed Contract in Place

A written agreement or contract must be fully executed before a state agency may provide or receive a service or resource.

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Memorandum of Understanding

A Memorandum of Understanding is a term that is often used, but has no established legal meaning. Therefore, for all transactions that are intended to be legally binding, the IAC template must be used.

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Any subcontracting approval will be included in the IAC. All subcontracting must comply with TxDOT policy as well as state and federal requirements.

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Administration Approval

Administration approval is required in advance on all IACs in which TxDOT is expending funds regardless of the maximum amount payable.

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A state agency that receives services or resources shall reimburse another state agency providing the services or resources the actual cost of providing the services or resources or the nearest practicable estimate of that cost.

A state agency that receives services or resources may advance federal funds to an agency providing the services or resources if the agency receiving the services or resources determines that the advance would facilitate the implementation of a federally funded program.

A state agency that receives services or resources may advance funds to the agency providing the services or resources if an advance is necessary to enable the providing agency to provide the services or resources. If an advance is made, the agencies shall ensure after the services or resources are provided that the providing agency has received only sufficient funds to reimburse its total costs. An advance of funds is a reimbursement for the purposes of Tex. Gov’t Code § 771.008.

See generally Tex. Gov’t Code § 771.007

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Contract Services is the office of record for all IACs and amendments, including those under $50,000. The performing District/Division maintains the file of record for all other documentation relating to the contract. The file of record is maintained the entire life of the contract and for the ensuing seven years or longer if audit issues or litigation occurs. This file is subject to audit and will be used in resolving contractual issues.


Within 30 days of the end of each fiscal year, the department is required to make annual reports available on its website containing information for all IACs that exceed $10 million in value or those that may reasonably be expected to exceed $10 million. Information in the report must identify each state agency that is a party to an IAC, whether TxDOT is receiving money or disbursing money under the contract, the amount spent by the disbursing agency for the contact and the method of finance; and the agency programs for which the agencies entered the contract and the appropriation line items from which funds were spent by the agencies to perform the contract.

The Office of Primary Responsibility for IACs that exceed $10 million or may be reasonably expected to exceed $10 million must identify the method of finance, agency programs, and the appropriation line item when submitting those IACs for reporting to Contract Services.

See Article IX, §17.12 of the 2022-2023 General Appropriations Act.

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