TX Dot Claims and Procedures

1. Introduction
2. Contract Claim procedure
1. Statutes Governing Claims Against TxDOT
2. Resolution of Claim at District Level
3. TxDOT Contract Claims Committee
4. Effect of Contract Claims Committee Proceedings on SOAH Hearing
5. Hearing at the State Office of Administrative Hearings
1. Petition TxDOT’s Executive Director for SOAH Hearing
2. Contested Case at SOAH-Standard of Review of the Executive Director’s Proposed Disposition and Burden of Proof
3. The Administrative Law Judge’s Decision Is Not Final
4. SOAH Rules of Procedure
6. Appeal of the Executive Director’s Final Opinion To the District Court
1. Prerequisites to Appeal
2. Scope of Review and Authority of the District Court
3. Standard of Review
4. Burden of Proof
3. Noteworthy Standard Contract Provisions
1. TxDOT Contracts in General
2. Responsibility for Errors in the Plans
3. Beginning the Work
4. Changes in the Work
5. Differing Site Conditions
6. Requirements for Additional Compensation
7. Engineer Decision Provision
8. Contractor Responsibility for Code and Regulation Compliance
9. Indemnification of TxDOT
10. Utilities
11. TxDOT has Right to Suspend Work
12. Defaults
13. Termination
4. Damages
1. Consequential Damages
2. Attorneys’ Fees
5. Case Studies
6. Conclusion

The amount of construction work generated through the Texas Department of Transportation ("TxDOT") each year is astounding. TxDOT will let at least $5.2 billion of projects in its 2006 fiscal year, up from approximately $4.5 billion in 2005. The magnitude of this number becomes clearer when viewing the Engineering News Report magazine’s May 17, 2004 ranking of the top twenty transportation construction firms in the country, who together reported a total of $17.8 billion in construction contract revenues.

The consistent growth of cities and commerce throughout this state has led to plans for a steady increase in transportation infrastructure construction, including a mammoth "Trans-Texas Corridor" that includes separate truck lanes, as well as freight and passenger rail. All of this virtually guarantees that TxDOT projects will continue to be in high gear for the foreseeable future.

However, judging by the relatively miniscule number of claims heard at the State Office of Administrative Hearings (SOAH), the TxDOT contract dispute claims process would appear to be either incredibly efficient or heavily biased. The spreadsheet attached as Exhibit "A" is a redacted version of a document the authors received from TxDOT in response to an open records request that tracks claims against TxDOT that were argued at the SOAH level in recent years. As can be seen from the spreadsheet, despite the billions in allocated construction dollars, only two to twelve contractor disputes proceeded to the SOAH level each year. Most who have a familiarity with construction litigation will probably agree that this is atypical for the industry.

The construction-industry Golden Rule - the party with the gold makes the rules - certainly applies in its own way to TxDOT construction contracts and disputes arising out of them. In 1997, the Texas Legislature enacted Transportation Code § 201.112, which gives TxDOT the authority to adopt rules and procedures for the informal resolution of contract claims against TxDOT, provides for the right to a contested hearing if TxDOT and the contractor do not resolve the claim informally, and provides the right to judicial review of TxDOT’s final order following the contested case proceeding. The comments in section 201.112 state that it provides the exclusive legal remedy for resolution of contract disputes with TxDOT.

This paper will outline the claims procedure for disputes with TxDOT and focus on noteworthy contract provisions in TxDOT’s standard specifications, as well as several case studies, all in an effort to illustrate the potential net effect of the claims procedure, the consistently onerous contract terms, and the limited appeals process on the success and viability of claims against TxDOT. In particular, the paper will highlight the significant hurdles facing a contractor who seeks recovery from TxDOT, including:

(1) the difficult burden of proof (and procedural surprises) at the SOAH level;

(2) the lack of authority of the administrative law judge to render a final and binding opinion (the ALJ issues a “Proposal for Decision” that is submitted to TxDOT’s Executive Director for adoption or rejection);

(3) the exceedingly limited review of the Executive Director’s adoption or rejection of the ALJ’s Proposal for Decision;

(4) the inability of the state district court to reverse and render (its only options are to reverse and remand or adopt the Executive Director’s decision);

and (5) the thoroughly burdensome onerous contract provisions frequently seen in TxDOT contracts.

Despite these obstacles, there are certainly many contractors who have received fair treatment in and emerged successfully from the contested case process with TxDOT. However, understanding the rules of the game from the outset is essential to shaping realistic expectations and a productive approach to the claims process.

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