HBA-EVB, NIK S.B. 514 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 514 By: Ogden Transportation 5/20/1999 Engrossed BACKGROUND AND PURPOSE Currently, the Texas Department of Transportation (department) may establish an electronic bidding system which eliminates the need for contractors to manually deliver their bids. Electronic bidding is expected to reduce errors in the bids, thereby reducing the number of disqualified bids, and increasing the choices the department is able to consider. The required submission of an actual bid guaranty check before the bid deadline is a hindrance to the successful initiation of an electronic bidding system. S.B. 514 creates rules and provisions for the deposit and investment of bid guaranties. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Transportation Commission in SECTION 1 (Section 223.014, Transportation Code) in this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter A, Chapter 223, Transportation Code, by adding Sections 223.014 and 223.015, as follows: Sec. 223.014. BID GUARANTY. (a) Requires the Texas Transportation Commission (commission), by rule, to provide a method by which a bidder may submit a bid guaranty. Authorizes the rules to authorize the use of electronic funds transfer, checks, including electronic checks, money orders, escrow accounts, including the bidder's retainage escrow account, trust accounts, including the bidder's retainage trust account, and credit cards issued by a financial institution chartered by a state or the United States or by a nationally recognized credit organization approved by the Texas Department of Transportation (department). Authorizes the department to require the payment of a discount of service charge for the use of a credit card. (b) Authorizes the department to establish one or more escrow accounts in the state highway fund for the prepayment of bid guaranties. Requires the bid guaranties and any fees the department establishes to administer this subsection to be administered in accordance with an agreement approved by the department. Requires the department to deposit each administrative fee to the credit of the state highway fund. Authorizes money credited to the state highway fund from fees collected under this subsection to be appropriated only to the department to administer this subsection. Sec. 223.015. DEPOSIT AND INVESTMENT OF BID GUARANTY. (a) Authorizes the department to authorize the use of a trust account for the purpose of providing a required bid guaranty. (b) Requires the guaranty to be deposited in accordance with a trust agreement with a state or nationally chartered financial institution domiciled in this state and selected by the bidder. (c) Requires the department to prescribe a trust agreement that protects the interests of this state. (d) Requires interest earned under the trust agreement to be paid to the bidder unless specified otherwise in the trust agreement. (e) Provides that the applicable financial institution is responsible for all amounts resulting from the deposit of the guaranty until released from that responsibility in accordance with the trust agreement. (f) Requires the bidder to pay all expenses incident to the deposit and all charges imposed by the financial institution for custody of the guaranties and forwarding of interest on a bid guaranty. Prohibits the expenses from being included in the bid and are not otherwise the responsibility of the state. (g) Authorizes the financial institution, on the request of a bidder, to reinvest the guaranty amounts in a certificate of deposit or another similar instrument prescribed by the trust agreement. Provides that the certificate of deposit or other instrument must be issued by a state or nationally chartered financial institution domiciled in this state. (h) Requires the financial institution, on the request of a bidder, to certify and verify to the department the amount on deposit. Provides that the trust agreement must specify the method for providing the required information. SECTION 2. Emergency clause. Effective date: upon passage.