HBA-DMD C.S.H.B. 2717 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2717 By: Brimer Business & Industry 4/8/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Current law does not specify how frequently a contractor must submit invoices in order to be paid promptly. Materials that are fabricated especially for a project are not necessarily something for which a contractor must be paid promptly. Currently, a contractor who enters into a written contract to improve a residential homestead for an amount over $5,000 must deposit funds in a construction account in a financial institution, but there is no similar requirement for written purchase orders. Current law defines a construction contract as one obligating a party to provide labor or labor and materials, but it does not cover a contract obligating a party to provide materials or equipment. Under current law, the General Services Commission (commission) is not obligated to provide for pollution liability coverage for public works projects. In addition, the commission requires a review of uniform general conditions of state building construction contracts not less than once every five years. C.S.H.B. 2717 addresses the above-referenced concerns, as follows. This bill provides that a written purchase order entered into by a contractor with a property owner to construct improvements to a residential homestead for an amount exceeding $5,000 requires the contractor to deposit the funds in a construction account in a financial institution. It includes providing materials or equipment as a principal obligation to a party for the construction or repair of improvements to real property located in this state when defining a construction contract. C.S.H.B. 2717 requires the commission to provide for the centralized purchasing of pollution liability. This bill requires the commission to require a review of the uniform general conditions of state building construction contracts whenever the commission considers review worthwhile, but not less frequently than once every three years. This bill also authorizes a contractor who has a contract that requires workers' compensation insurance coverage to provide the coverage through a self-insurance plan. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 162.006(a), Property Code, to include a written purchase order entered into by a contractor with a property owner to construct improvements to a residential homestead for an amount exceeding $5,000, that requires the contractor to deposit the trust funds in a construction account in a financial institution. SECTION 2. Amends Sections 35.52(b) and (c), Business & Commerce Code, and adds Subsection (e), to include providing materials or equipment, rather than labor and materials, as a principal obligation to a party for the construction or repair of improvements to real property located in this state when defining a construction contract. Provides that a judgment rendered by a court or a decision issued by an arbitrator that is inconsistent with this section is not enforceable in this state. Makes a nonsubstantive change. SECTION 3. Amends Section 130.001, Civil Practice and Remedies Code, to modify the definition for "construction contract." SECTION 4. Amends Section 2166.259(c), Government Code, to include pollution liability coverage in a list of the General Service Commission's (commission) requirements to provide centralized purchasing. Makes nonsubstantive and conforming changes. SECTION 5. Amends Section 2166.305(a), Government Code, to require the commission to require a review of the uniform general conditions of state building construction contracts whenever the commission considers review worthwhile, but not less frequently than once every three, rather than five, years. SECTION 6. Amends Section 406.096(c), Labor Code, to include a self-insurance plan certified under Chapter 407 (Self Insurance Regulation), Labor Code, as coverage that a contractor who has a contract that requires workers' compensation insurance coverage is authorized to provide. SECTION 7.Effective date: September 1, 1999. Makes application of this Act prospective, as it applies to a contract or agreement involving the construction or repair of improvements to private or public real property. SECTION 8.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2717 differs from the original bill by deleting the original SECTIONS 1 and 2, which amended Sections 28.002 and 28.006, Property Code to require a contractor to submit invoices at least monthly to the owner for goods or services provided for the owner and requires a subcontractor to submit invoices at least monthly to the contractor for goods or services provided for the contractor. This substitute redesignates SECTIONS 3-10 from the original bill to SECTIONS 1-8 of the substitute. C.S.H.B. 2717 differs from the original bill in SECTION 1 (Section 162.006, Property Code), by including a written purchase order, rather than an oral contract, entered into by a contractor with a property owner to construct improvements to a residential homestead for an amount exceeding $5,000, that requires the contractor to deposit the trust funds in a construction account in a financial institution. C.S.H.B. 2717 differs from the original bill in SECTION 2 (Section 35.52, Business & Commerce Code), by including providing materials or equipment, rather than labor, materials or both labor and materials, as a principal obligation to a party for the construction or repair of improvements to real property located in this state when defining a construction contract. This substitute also adds Subsection (e) which provides that a judgment rendered by a court or a decision issued by an arbitrator that is inconsistent with this section is not enforceable in this state. This substitute also makes a nonsubstantive change. C.S.H.B. 2717 differs from the original bill in SECTION 4 (Section 2166.259, Government Code), by making a nonsubstantive change. C.S.H.B. 2717 differs from the original bill in SECTION 6 (Section 406.096, Labor Code), by including a self-insurance plan certified under Chapter 407 (Self Insurance Regulation), Labor Code, rather than a qualified self-insurance plan, as coverage that a contractor who has a contract that requires workers' compensation insurance coverage is authorized to provide. C.S.H.B. 2717 differs from the original bill in SECTION 7 by adding a prospective clause.