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Section 2: Contracting Requirements

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Requirements of a Contract

Contract terms and conditions may vary depending on the type of service procured. However, every contract, regardless of the service it procures, must adhere to the following contractual requirements:

Offer and Acceptance: One party must offer to enter into a legal agreement, and the other party must accept the terms of the offer,

Consideration: Any promises made by parties must be supported by legally sufficient and bargained for consideration (promise of payment), which is the cause, motive, benefit or price that induces parties to enter the contract,

Contractual Capacity: Both parties entering into the contract must have the legal capacity to do so. They must be recognized by law to possess characteristics qualifying them as competent parties,

Legality: The contract must be made to accomplish some goal that is legal and not against public policy,

Consent: Apparent consent of both parties must be genuine, and

Form: The contract must be in writing.

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Commission Approval

New transportation projects that will initiate contracting activities require approval from the Texas Transportation Commission, TxDOT's five-member governing board appointed by the Governor. A Commission Meeting Minute Order must be obtained for proposed transportation projects that require the Commission's approval.

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Prohibition on Contracts with Companies Boycotting Israel

TxDOT may not enter into a contract with a company for goods or services unless the contract contains a certification that the company does not boycott Israel and will not boycott Israel during the term of the contract.

Tex. Gov’t Code ch. 2270

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Iran, Sudan, or Designated Terrorist Organizations

TxDOT may not enter into a contract with a company that is identified on the Texas Comptroller of Public Accounts’ list of companies that do business with Iran, Sudan, or designated foreign terrorist organizations.

Tex. Gov’t Code ch. 2252

Discrimination Against Firearm or Ammunition Industries

TxDOT may not enter into a contract with a company for the purchase of goods or services unless the contract contains a certification that the company:

  • Does not have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association; and
  • Will not discriminate during the term of the contract against a firearm entity or firearm trade association.

This certification applies only to contracts between TxDOT and a company with at least 10 full-time employees, where the contract value is at least $100,000 and is paid wholly or partly from public funds.

The certification is not required if the contract is with a sole-source provider or if the solicitation did not result in at least one bid from a company that is able to provide this written certification.

Tex. Gov't Code ch. 2274

Energy Company Boycott

TxDOT may not enter into a contract with a company for the purchase of goods or services unless the contract contains a certification that the company:

  • Does not have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association; and
  • Will not discriminate during the term of the contract against a firearm entity or firearm trade association.

This certification applies only to contracts between TxDOT and a company with at least 10 full-time employees, where the contract value is at least $100,000 and is paid wholly or partly from public funds.

The certification is not required if the contract is with a sole-source provider or if the solicitation did not result in at least one bid from a company that is able to provide this written certification.

Tex. Gov't Code ch. 2274

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Non-disclosure Form

All TxDOT personnel participating on a competitive selection and award team for a TxDOT contract must sign a non-disclosure form, regardless of the method of procurement for the contract.

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Best Value Analysis

Best value procurement incorporates factors other than price into the selection process to improve performance or achieve other specific project goals. Best value contracts do not include engineering, architecture, or surveying contracts. Considerations for best value procurement can include items such as risks in procurement, a firm’s past experience and performance, current project workload, a subcontractor evaluation plan, and life cycle costs.

For each purchase of goods or services or contract awarded using the best value standard, the Contract Services Director or Procurement Director must approve each purchase or contract, ensure that the best value standard used is documented, and acknowledge in writing that TxDOT complied with the Negotiated Contracts Procedure Manual and the Texas Comptroller of Public Account’s Procurement and Contract Management Guide.

Contracts for Professional Services of Physicians, Optometrists, and Registered Nurses

TxDOT may select and award a contract for the purchase of professional services of physicians, optometrists, or registered nurses on the basis of:

  • the provider's agreement to payment of a set fee, as a range or lump-sum amount; and
  • the provider's affirmation and the governmental entity's verification that the provider has the necessary occupational licenses and experience.

Procurements that utilize this selection method are not subject to competitive advertising and proposal evaluation requirements. Tex. Gov't Code § 2254.008.

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Risk Analysis

Under state laws effective September 1, 2015, all state agencies are required to “develop and comply with a purchasing accountability and risk analysis procedure.” Acts 2015, 84th Leg., R.S., S.B. 20, § 18 (codified at Tex. Gov’t Code § 2261.256(a)).

As part of the procurement process, the procuring District or Division (D/D) must perform a risk analysis for each contract to be procured having an expected maximum amount payable exceeding $25,000. A formal risk analysis is not required for contracts that are inherently low risk, such as those having an expected maximum amount payable of $25,000 or less or low bid construction and maintenance contracts.

At a minimum, the risk analysis must assess the risk of fraud, waste, or abuse in the contractor selection process, contract provisions, and payment methods, and any contract procurement identified as high risk must receive enhanced contract monitoring. In addition, the procuring D/D must notify Contract Services of the high-risk contract, either in conjunction with Contract Services’ review of the contract, or through an email to Contract Services’ risk analysis email box.

The managing D/D must update the risk analysis throughout the life of the contract whenever factors outlined in the Risk Assessment change or new risks are identified. The timing of updates may be periodic or based on specific events (e.g., selecting a contractor, preparing a work authorization, assigning a work authorization, amending the contract, completing a milestone, receiving a deliverable, or starting a new phase of a project). The managing D/D must immediately notify Contract Services if an updated risk analysis raises a contract’s risk level to high risk. Contract Services will notify TxDOT administration, as appropriate, of any issue or risk that is identified.

The D/D should use the risk analysis to manage the risks associated with the contract, which places TxDOT in a position to best avoid or minimize threats and to benefit from opportunities. Risk management includes identifying, prioritizing, and controlling risks; planning and implementing risk responses; and developing and updating project plans in response to changes in risks and their impacts. To control risks, the D/D should implement risk response plans, track previously identified risks, and continuously look for new risks.

Risk management necessarily involves the judgment of experts with relevant experience in the type of work being performed. The managing D/D must use the risk form developed by Contract Services to evaluate the risk for each contract and underlying work authorization, with input from experts where appropriate. This risk form will provide an initial risk rating of high, medium, or low. This risk rating may be increased by the project manager, district or division leadership, or the district’s or division’s Chief. The original risk analysis, along with each subsequent version, must be maintained in the File of Record.

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Comptroller’s Procurement and Contract Management Guide

TxDOT shall comply with the Texas Comptroller of Public Accounts’ (Comptroller) Procurement and Contract Management Guide (CMG) to the extent TxDOT enters into best value contracts for goods and services. TxDOT’s contracts relating to highway construction or highway engineering, as well as contracts subject to Texas Transportation Code Section 201.112, are exempt from the Contract Advisory Team review and will be handled in accordance with the Texas Transportation Code, and consistent with the CMG whenever possible.

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DBE/HUB Requirements

Federal and state governments have established the Disadvantaged Business Enterprise (DBE) and the Historically Underutilized Business (HUB) programs to create a more level playing field on which minority-owned and women-owned businesses can compete fairly for federal and state-funded contracts.

The HUB program is a state program for state-funded projects. The Comptroller of Public Accounts certifies providers as HUBs. Contracts over $100,000 with subcontracting opportunities require a HUB Subcontracting Plan.

The DBE program is a federal program for contracts that expend federal funds. Under this program, TxDOT must make a good faith effort to meet or exceed the assigned DBE contract goal. TxDOT certifies providers interested in becoming DBEs. Individual federal contracts have DBE assigned goals. Only providers certified as DBEs will satisfy DBE goals.

State HUB requirements are described in Tex. Gov't Code ch. 2161; Federal DBE requirements are described in 49 CFR Part 26.

The performing entity (the prime provider) is required to document that efforts have been made to secure sub-providers that are certified as either a DBE if federal dollars are used to fund the project or a HUB if the project is funded entirely by state dollars.

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Negotiated Purchases of Services

For policy regarding negotiated purchases of services, refer to the Procurement Division's Purchasing Manual.

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Required Insurance

Professional and scientific services providers are required to maintain three insurance policies during the life of the contract:

This requirement does not apply to alternative delivery agreements, such as design-build and comprehensive development agreements, which have specific insurance obligations set forth within each contract.

A completed Form 1560-CS Certificate of Insurance is the only approved proof of insurance. The provider must have a current Form 1560-CS Certificate of Insurance on file with Contract Services before the contract is executed. Subcontractors are not required to maintain separate insurance.

A new certificate must be submitted each time a provider’s insurance policies are changed or renewed during the contract period. The insurance policies must remain current during the entire period.

Contract Services monitors certificates of insurance and will notify the managing district or division of any lapses in coverage. The managing district or division is responsible for ensuring that providers cease work during a lapse in coverage or proof of coverage until Contract Services receives a current Form 1560-CS Certificate of Insurance.

Providers of non-professional or non-scientific services, such as those contracted through a purchase order, use Form 1950 Certificate of Insurance for Services. Low-bid construction or maintenance contractors use Form 1560-RFC Certificate of Insurance, and routine facilities contractors use Form 1560-RFC Certificate of Insurance - Routine Facilities Contract. Form 1950, 1560, and 1560-RFC are managed and maintained by the Office of Record or the relevant contract.

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Modification of Contract Forms

Any modification to a contract form that is created and maintained by Contract Services requires the approval of Contract Services. Changes of this nature warrant legal counsel because they may alter the way the contract performs legally.

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Contracts Valued at $1 Million or More

Contract Services must review all negotiated contracts valued at one million dollars or more, all amendments to those agreements, and all contracts and amendments (without regard to dollar value) involving toll equity agreements, pass through tolls, state infrastructure bank loans, and comprehensive development agreements.

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Disclosure of Interested Parties

In accordance with Tex. Gov’t Code §2252.908, TxDOT may not enter into certain contracts with a business entity unless the business entity submits a Disclosure of Interested Parties to TxDOT at the time the business entity submits the signed contract to TxDOT. The law applies only to a contract that either (1) requires an action or vote by the governing body of the entity or agency before the contract may be signed or (2) has a value of at least $1 million. The disclosure requirement applies to a contract entered into on or after January 1, 2016.

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Signature Authority

Contract Services maintains on its internal website lists of persons authorized to sign various contractual documents on behalf of TxDOT. All D/Ds have a duty to update these lists and send them to Contract Services as often as changes occur in their signature authority delegations.

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Contract Execution

Executing the contract requires TxDOT's signature authority and the performing entity's designated representative to sign the contract in the signature block. The signatures signify mutual acceptance of the agreement and must be followed by a typed or printed name, title, and date of signature. A contract is fully executed when all parties to the contract have signed and dated the signature block. TxDOT contracts contain a provision that states that, the performing entity cannot begin work or incur costs until notified in writing by TxDOT, or until it accepts and signs a work authorization issued by TxDOT. Should a contract contain different language, the performing entity must follow the procedure set out in that contract.

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$5 Million Certification

For each contract for the purchase of goods or services that has a value exceeding $5 million, the Contract Services Director or Procurement Director must issue a written certification verifying that the solicitation and purchasing methods and contract selection process utilized in the procurement of the contract complies with state law and agency policy. This certification must be kept with the contract file. Tex. Gov’t Code §2261.255

In the event there are potential issues that may arise in the solicitation, purchasing, or contractor selection process, the certification must identify such issues and must be submitted to the Texas Transportation Commission.

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LBB Reporting Under Senate Bill 1

In accordance with the General Appropriations Act (GAA), TxDOT must report to the Legislative Budget Board (LBB), within 30 days of execution, all contracts for goods and services valued over $50,000, using the LBB Contracts Database. This includes new contracts, grants, purchase orders, interagency contracts, interlocal contracts, federal contracts, and amendments.

For each contract valued over $10 million, as well as each contract valued over $1 million that is procured using an emergency process issued without competition, TxDOT must include a certification letter signed by the executive director of the agency or a designee.

Additionally, in response to the LBB’s request, TxDOT must review a list of all amendments that increased a contract’s overall value by 10% or more and respond according to the LBB’s instructions.

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Contracts Posting to TxDOT Internet

TxDOT must post to its internet website each contract with a private vendor that TxDOT enters into for the purchase of goods or services. The office of record for the contract documents is responsible for ensuring the contract is posted. TxDOT must keep the contract posted until it expires or is terminated. This posting requirement does not apply to contracts for which there is no cost.

Each posting must include:

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  • if not competitively bid, authority under which the contract is entered into without competitive bidding, or
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  • if competitively bid, the request for proposal.

The managing office must redact from the contract to be posted:

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  • information that is confidential under law, including information that relates to computer network security,
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  • information excepted from public disclosure by the attorney general, and
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  • social security numbers.

Tex. Gov’t Code §2261.253, see also Tex. Gov’t Code §552.139(d).

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During the course of managing a contract, the contract may need to be amended. For example:

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  • extending time to the contract,
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  • adding to or deleting from the contract's scope of work, which may require increasing or decreasing the contract's maximum amount payable,
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  • changing the contract's method of payment,
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  • amending the contract to use work authorizations, or
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  • adding or removing sub-providers that the performing entity has selected to work on the project.

An amendment must be executed before the contract expires and must be executed before the additional services are provided.

If it is amending a contract of a type that requires a competitive procurement, the amendment must be in support of the original service and cannot add a totally new project or type of service.

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Reasons for Contract Termination

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  • Termination for Cause happens as a result of a performing entity's non-performance or non-compliance with the contract;
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  • Termination for Convenience is a convenience termination when a party, for a reason of its own, terminates the contract unilaterally. TxDOT contracts allow only for TxDOT to terminate for convenience; or
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  • Termination for Department Reasons is done without the agreement of the provider.

When both parties agree, a contract amendment is used to terminate an agreement.

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Contract Services as the Office of Record

Contract Services is the office of record for:


Revolving Door

State law contains “revolving door” provisions which may prohibit some TxDOT employees from accepting employment with private entities with which TxDOT has entered into contracts. Prior to accepting employment with a private vendor, TxDOT employees have a duty to verify that they are not barred by a revolving door provision and other reasons including, but not limited to as a result of their involvement in the contractor selection process, contract negotiations, or as having worked on a contract.

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