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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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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 Contract Management Guide (CMG).

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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, abuse, or waste in the contractor selection process, contract provisions, and payment methods. Any contract procurement identified as high risk must receive enhanced contract monitoring and, therefore, the procuring D/D must notify Contract Services of the high risk contract procurement. For contracts valued at $1,000,000 or greater, other than low bid construction and maintenance contracts, Contract Services would normally review these agreements under existing policy and notification can be achieved through the normal contract review process. Other agreements not normally subject to Contract Services review that are high risk are required to be communicated to Contract Services at the earliest opportunity.

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 risk 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 serious issue or risk that is identified.

The D/D should use the risk analysis to prioritize risk, plan risk responses, control risk, and develop (and update) project plans. To control risks, the D/D should implement risk response plans, track previously identified risk, and continuously look for new risks. The purpose of this activity is to position TxDOT to be best avoid or minimize threats and increase TxDOT’s ability to benefit from opportunities.

Risk management, which includes identifying risk, planning risk responses, and controlling risk, necessarily involves the judgment of experts with relevant experience in the type of work being procured. Contract Services can assist the D/D as the subject matter expert on risks related to contracting but ultimately the D/D must perform risk management by using its subject matter experts to identify risk, plan risk responses, and control risk.

The D/D must retain a copy of all risk assessments, both original and updated, performed for a particular contract in that contract’s file.

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Comptroller’s Contract Management Guide

TxDOT shall comply with the Texas Comptroller of Public Accounts’ (Comptroller) 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 contract 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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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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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.
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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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