HBA-DMD, EVB, NIK C.S.S.B. 514 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 514 By: Ogden Transportation 5/22/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, the Texas Department of Transportation (TxDOT) 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 TxDOT 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. C.S.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) of 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) to adopt rules on the 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 (TxDOT). Authorizes TxDOT to require the payment of a discount of service charge for the use of a credit card. (b) Authorizes TxDOT 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 TxDOT establishes to administer this subsection to be administered in accordance with an agreement approved by TxDOT. (c) Requires TxDOT to deposit each administrative fee and discount or service charge collected under this section in the state treasury to the credit of the state highway fund. (d) Prohibits the bidder, in the commission adopted rules, from being precluded from submitting a bid guaranty to TxDOT payable by cashier's check, money order, or teller's check. Sec. 223.015. DEPOSIT AND INVESTMENT OF BID GUARANTY. (a) Authorizes TxDOT 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 that has its main office or a branch office in this state and that is selected by the bidder. (c) Requires TxDOT 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 being 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 that has its main office or a branch office in this state. (h) Requires the financial institution, on the request of a bidder, to certify and verify to TxDOT 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. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 514 modifies proposed Section 223.014, Transportation Code, in SECTION 1, to require the Texas Transportation Commission (commission) to adopt rules on the, rather than require the commission by rule to provide a, method by which a bidder may submit a bid guaranty. This substitute redesignates text from proposed Subsection (b) to new Subsection (c) and adds new text to require the Texas Department of Transportation (TxDOT) to deposit each discount or service charge, in addition to administrative fee collected under this section, in the state treasury to the credit of the state highway fund. This substitute deletes text from proposed Subsection (b) in the original which authorized money credited to the state highway fund from fees collected to be appropriated only to TxDOT in order to administer this subsection. This substitute adds new Subsection (d) to prohibit the bidder, in the commission adopted rules, from being precluded from submitting a bid guaranty to TxDOT payable by cashier's check, money order, or teller's check. This substitute modifies proposed Section 223.015, Transportation Code, in SECTION 1, to require a guaranty to be deposited in accordance with a trust agreement with a state or nationally charted financial institution that has its main office or a branch office, rather than a state or nationally charted financial institution domiciled, in this state and that is selected by the bidder. Makes a conforming change in Subsection (g).