1. (a) Notice of Claim of Breach of Contract.

   1. (1) A contractor asserting a claim of breach of contract under the Government Code, Chapter 2260, shall file notice of the claim as provided by this section.

   2. (2) The notice of claim shall:

      1. (A) be in writing and signed by the contractor or the contractor's authorized representative;
      2. (B) be delivered by hand, certified mail return receipt requested, or other verifiable delivery service, to the officer of the Board designated in the contract to receive a notice of claim of breach of contract under the Government Code, Chapter 2260; if no person is designated in the contract, the notice shall be delivered to the Assistant Commissioner for Administration, and

      3. (C) state in detail:

         1. (i) the nature of the alleged breach of contract, including the date of the event that the contractor asserts as the basis of the claim and each contractual provision allegedly breached;
         2. (ii) a description of damages that resulted from the alleged breach, including the amount and method used to calculate those damages; and
         3. (iii) the legal theory of recovery, i.e., breach of contract, including the causal relationship between the alleged breach and the damages claimed.
   3. (3) In addition to the mandatory contents of the notice of claim as required by paragraph (2)(C) of this subsection, the contractor may submit supporting documentation or other tangible evidence to facilitate the unit's evaluation of the contractor's claim.
   4. (4) The notice of claim shall be delivered no later than 180 days after the date of the event that the contractor asserts as the basis of the claim.

2. (b) Board Counterclaim.

   1. (1) If the Board asserts a counterclaim under the Government Code, Chapter 2260, notice of the counterclaim shall be filed as provided by this section.

   2. (2) The notice of counterclaim shall:

      1. (A) be in writing;
      2. (B) be delivered by hand, certified mail return receipt requested or other verifiable delivery service to the contractor or representative of the contractor who signed the notice of claim of breach of contract; and

      3. (C) state in detail:

         1. (i) the nature of the counterclaim;
         2. (ii) a description of damages or offsets sought, including the amount and method used to calculate those damages or offsets; and
         3. (iii) the legal theory supporting the counterclaim.
   3. (3) In addition to the mandatory contents of the notice of counterclaim required by paragraph (2)(C) of this subsection, the Board may submit supporting documentation or other tangible evidence to facilitate the contractor's evaluation of the Board's counterclaim.
   4. (4) The notice of counterclaim shall be delivered to the contractor no later than 90 days after the Board's receipt of the contractor's notice of claim.
   5. (5) Nothing herein precludes the Board from initiating a lawsuit for damages against the contractor in a court of competent jurisdiction.

3. (c) Request for Voluntary Disclosure of Additional Information.

   1. (1) Upon the filing of a claim or counterclaim, the parties may request to review and copy information in the possession or custody or subject to the control of the other party that pertains to the contract claimed to have been breached, including, without limitation:

      1. (A) accounting records;
      2. (B) correspondence, including, without limitation, correspondence between the Board and outside consultants it utilized in preparing its bid solicitation or any part thereof or in administering the contract, and correspondence between the contractor and its subcontractors, materialmen, and vendors;
      3. (C) schedules;
      4. (D) the parties' internal memoranda; and
      5. (E) documents created by the contractor in preparing its offer to the Board and documents created by the Board in analyzing the offers it received in response to a solicitation.
   2. (2) Paragraph (1) of this subsection applies to all information in the parties' possession regardless of the manner in which it is recorded, including, without limitation, paper and electronic media.
   3. (3) The contractor and the Board may seek additional information directly from third parties, including, without limitation, the unit's third-party consultants and the contractor's subcontractors.
   4. (4) Nothing in this section requires any party to disclose the requested information or any matter that is privileged under Texas law.
   5. (5) Material submitted pursuant to this subsection and claimed to be confidential by the contractor shall be handled pursuant to the requirements of the Public Information Act.
4. (d) Duty to Negotiate. The parties shall negotiate in accordance with the timetable set forth in subsection (e) of this section, to attempt to resolve all claims and counterclaims. No party is obligated to settle with the other party as a result of the negotiation.

5. (e) Timetable.

   1. (1) Following receipt of a contractor's notice of claim, the Commissioner's representative designated in the contract shall review the contractor's claim(s) and the Board's counterclaim(s), if any, and initiate negotiations with the contractor to attempt to resolve the claim(s) and counterclaim(s).

   2. (2) Subject to paragraph (3) of this subsection, the parties shall begin negotiations within a reasonable period of time, not to exceed 60 days following the later of:

      1. (A) the date of termination of the contract;
      2. (B) the completion date, or substantial completion date in the case of construction projects, in the original contract; or
      3. (C) the date the unit of state government receives the contractor's notice of claim.

   3. (3) The Board may delay negotiations until after the 180th day after the date of the event giving rise to the claim of breach of contract by:

      1. (A) delivering written notice to the contractor that the commencement of negotiations will be delayed; and
      2. (B) delivering written notice to the contractor when the Board is ready to begin negotiations.
   4. (4) The parties may conduct negotiations according to an agreed schedule as long as they begin negotiations no later than the deadlines set forth in paragraph (2) or (3) of this subsection, whichever is applicable.
   5. (5) Subject to paragraph (6) of this subsection, the parties shall complete the negotiations that are required by this section as a prerequisite to a contractor's request for contested case hearing no later than 270 days after the Board receives the contractor's notice of claim.
   6. (6) The parties may agree in writing to extend the time for negotiations on or before the 270th day after the Board receives the contractor's notice of claim. The agreement shall be signed by representatives of the parties with authority to bind each respective party and shall provide for the extension of the statutory negotiation period until a date certain. The parties may enter into a series of written extension agreements that comply with the requirements of this section.
   7. (7) The contractor may request a contested case hearing before the State Office of Administrative Hearings ("SOAH") pursuant to subsection (j) of this section after the 270th day after the unit receives the contractor's notice of claim, or the expiration of any extension agreed to under paragraph (6) of this subsection.
   8. (8) The parties may agree to mediate the dispute at any time before the 270th day after the Board receives the contractor's notice of claim or before the expiration of any extension agreed to by the parties pursuant to paragraph (6) of this subsection. The mediation shall be governed by §1.46 of this title (relating to Mediation of Contract Disputes).
   9. (9) Nothing in this subsection is intended to prevent the parties from agreeing to commence negotiations earlier than the deadlines established in paragraph (2) and (3) of this subsection, or from continuing or resuming negotiations after the contractor requests a contested case hearing before SOAH.

6. (f) Conduct of Negotiation.

   1. (1) Negotiation is a consensual bargaining process in which the parties attempt to resolve a claim and counterclaim. A negotiation under this subchapter may be conducted by any method, technique, or procedure authorized under the contract or agreed upon by the parties, including, without limitation, negotiation in person, by telephone, by correspondence, by video conference, or by any other method that permits the parties to identify their respective positions, discuss their respective differences, confer with their respective advisers, exchange offers of settlement, and settle.
   2. (2) The parties may conduct negotiations with the assistance of one or more neutral third parties. If the parties choose to mediate their dispute, the mediation shall be conducted in accordance with §1.46 of this title. Parties may choose an assisted negotiation process other than mediation, including without limitation, processes such as those described in §1.47 of this title (relating to Assisted Negotiation Process).
   3. (3) To facilitate the meaningful evaluation and negotiation of the claim(s) and any counterclaim(s), the parties may exchange relevant documents that support their respective claims, defenses, counterclaims or positions.
   4. (4) Material submitted pursuant to this subsection and claimed to be confidential by the contractor shall be handled pursuant to the requirements of the Public Information Act.
7. (g) Settlement Approval Procedures. The parties' settlement approval procedures shall be disclosed prior to, or at the beginning of, negotiations. To the extent possible, the parties shall select negotiators who are knowledgeable about the subject matter of the dispute, who are in a position to reach agreement, and who can credibly recommend approval of an agreement.

8. (h) Settlement Agreement.

   1. (1) A settlement agreement may resolve an entire claim or any designated and severable portion of a claim.
   2. (2) To be enforceable, a settlement agreement must be in writing and signed by representatives of the contractor and the unit of state government who have authority to bind each respective party.
   3. (3) Partial settlement does not waive a party's rights under the Government Code, Chapter 2260, as to the parts of the claims or counterclaims that are not resolved.
9. (i) Costs of Negotiation. Unless the parties agree otherwise, each party shall be responsible for its own costs incurred in connection with a negotiation, including, without limitation, the costs of attorney's fees, consultant's fees and expert's fees.

10. (j) Request for Contested Case Hearing.

    1. (1) If a claim for breach of contract is not resolved in its entirety through negotiation, mediation or other assisted negotiation process in accordance with this subchapter on or before the 270th day after the Board receives the notice of claim, or after the expiration of any extension agreed to by the parties pursuant to subsection (e)(6) of this section, the contractor may file a request with the unit of state government for a contested case hearing before SOAH.
    2. (2) A request for a contested case hearing shall state the legal and factual basis for the claim, and shall be delivered to the Commissioner or other officer designated in the contract to receive notice within a reasonable time after the 270th day or the expiration of any written extension agreed to pursuant to subsection (e)(6) of this section.
    3. (3) The Board shall forward the contractor's request for contested case hearing to SOAH within a reasonable period of time, not to exceed thirty days, after receipt of the request.
    4. (4) The parties may agree to submit the case to SOAH before the 270th day after the notice of claim is received by the Board if they have achieved a partial resolution of the claim or if an impasse has been reached in the negotiations and proceeding to a contested case hearing would serve the interests of justice.

Source Note:The provisions of this §1.45 adopted to be effective November 23, 2000, 25 TexReg 11382.