JUSTIFICATION FOR ADMINISTRATIVE RULE ADOPTION

Rules for Administrative Services
16 TAC Chapter 55, amendments Subchapter A, §55.1 and §55.10; new Subchapter F, §55.100 and §55.101

The Texas Commission of Licensing and Regulation (Commission) adopts amendments at 16 Texas Administrative Code (TAC), Chapter 55, Subchapter A, §55.1 and §55.10; and adopts new rules Subchapter F, §55.100 and §55.101, regarding the Rules for Administrative Services, without changes to the proposed text as published in the November 4, 2016, issue of the Texas Register (41 TexReg 8705). The rules will not be republished.

The Texas Legislature enacted Senate Bill 20 (S.B. 20), 84th Legislature, Regular Session (2015), which made comprehensive changes to state agency contracting, purchasing, and accounting procedures. In addition, Chapter 2261 of the Texas Government Code requires certain state agencies to establish and adopt by rule a policy that clearly defines the contract monitoring roles and responsibilities, if any, of internal staff and other inspection, investigative, or audit staff. The adopted amendments and new rules are necessary to implement S.B. 20 and bring the Texas Department of Licensing and Regulation (Department) into compliance with Texas Government Code, Chapter 2261.

The adopted amendment to §55.1 adds Texas Government Code, Chapters 2156, 2161, 2260, and 2261 as statutory authority for the rule chapter.

The adopted amendments to §55.10 add definitions for the Department’s “Financial Services Division” and “Financial Services Division Director.”

The adopted new §55.100 will bring the Department into compliance with §2261.202 of the Government Code, which requires state agencies that make procurements under Chapter 2261 to “establish and adopt by rule a policy that clearly defines the contract monitoring roles and responsibilities, if any, of internal audit staff and other inspection, investigative, or audit staff.”

The adopted new §55.101 will bring the Department into compliance with §2261.253(c) of the Government Code, which requires state agencies to adopt procedures to identify contracts requiring enhanced monitoring, report information on those contracts to the agency’s governing body, and provide a mechanism for reporting of serious risk to the agency’s governing body.

The Department drafted and distributed the proposed rules to persons internal and external to the agency. The proposed rules were published in the November 4, 2016, issue of the Texas Register (41 TexReg 8705). The deadline for public comments was December 5, 2016. The Department received three comments on the proposed rules during the 30-day public comment period.

Comment--One commenter inquired about how the proposed rules would affect Barber and Cosmetology schools.

Department Response--The proposed rules affect the duties of the Department’s financial services division and should not directly impact the Barber or Cosmetology program or any other Department-administered program. The Department did not make any changes to the proposed rules based on this comment.

Comment--One commenter inquired about if the proposed rules applied to assisted living facilities and requested additional information.

Department Response--The Department does not have the statutory authority to regulate assisted living facilities; therefore this comment is outside the scope of the proposed rules. The Department did not make any changes to the proposed rules based on this comment.

Comment--One commenter expressed concerns over the difficulty of the Barber test and the lack of formal primary education for some test takers.

Department Response--This comment is outside the scope of the proposed rules. The Department did not make any changes to the proposed rules based on this comment.

At its meeting on January 27, 2017, the Commission adopted the proposed rules without changes.

The amendments are adopted under Texas Occupations Code, Chapter 51, which authorizes the Commission, the Department’s governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department. In addition, the amendments are adopted under Texas Government Code, Chapter 2156, which requires state agencies making purchases to adopt the Texas Comptroller of Public Accounts rules related to bid opening and tabulation; Texas Government Code, Chapter 2161, which requires a state agency to adopt the Texas Comptroller of Public Accounts’ rules as the agency’s own rules for construction projects and purchases of goods and services; Texas Government Code, Chapter 2260, which requires each state agency to develop rules to address contract disputes with vendors and to resolve those disputes through negotiation and/or mediation; and Texas Government Code, Chapter 2261, which sets forth statewide standards for contracting and oversight of agency contracts.

The statutory provisions affected by the adoption are those set forth in Texas Occupations Code, Chapter 51. In addition, the following statutes may be affected: Texas Agriculture Code, Chapters 301 and 302 (Weather Modification and Control); Texas Education Code, Chapter 1001 (Driver Education and Safety); Texas Health and Safety Code, Chapters 754 (Elevators, Escalators, and Related Equipment) and 755 (Boilers); Texas Government Code, Chapter 469 (Elimination of Architectural Barriers); Texas Labor Code, Chapters 91 (Professional Employer Organizations) and 92 (Temporary Common Worker Employers); and Texas Occupations Code Chapters 203 (Midwives); 401 (Speech-Language Pathologists and Audiologists); 402 (Hearing Instrument Fitters and Dispensers); 403 (Licensed Dyslexia Practitioners and Therapists); 451 (Athletic Trainers); 605 (Orthotists and Prosthetists); and 701 (Dietitians); 802 (Dog or Cat Breeders); 953 (For-Profit Legal Service Contract Companies); 1151 (Property Tax Professionals); 1152 (Property Tax Consultants); 1202 (Industrialized Housing and Buildings); 1302 (Air Conditioning and Refrigeration Contractors); 1304 (Service Contract Providers and Administrators); 1305 (Electricians); 1601 (Barbers); 1602 (Cosmetologists); 1603 (Regulation of Barbering and Cosmetology); 1703 (Polygraph Examiners); 1802 (Auctioneers); 1901 (Water Well Drillers); 1902 (Water Well Pump Installers); 2052 (Combative Sports); 2303 (Vehicle Storage Facilities); 2306 (Vehicle Protection Product Warrantors); 2308 (Vehicle Towing and Booting); and 2309 (Used Automotive Parts Recyclers). No other statutes, articles, or codes are affected by the adoption.
Subchapter A. General Provisions.

§55.1. Authority.

This chapter is promulgated under the authority of Texas Occupations Code, Chapter 51 and Texas Government Code, Chapters 2156, 2161, 2260, and 2261. This chapter applies except in the event of a conflict with other statutory provisions related to specific programs regulated by the Commission and the Department.

§55.10. Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.

(1) ALJ--Administrative law judge employed by the State Office of Administrative Hearings.

(2) Alternative Dispute Resolution (ADR) Administrator--The trained coordinator designated by the Commission:

(A) to coordinate and oversee the negotiated rulemaking and ADR procedures used by the Department;

(B) to serve as a resource for any training needed to implement the negotiated rulemaking and ADR procedures; and

(C) to collect data concerning the effectiveness of the negotiated rulemaking and ADR procedures. The ADR Administrator also may conduct ADR proceedings.

(3) Alternative Dispute Resolution (ADR) Procedures--Alternative processes to judicial forums or administrative agency contested case proceedings for the voluntary settlement of contested matters through the facilitation of an impartial third-party.

(4) Claim--A demand for damages by the contractor based upon the Department's alleged breach of the contract.

(5) Commission--Texas Commission of Licensing and Regulation.

(6) Contested case or proceeding--A proceeding in which the legal rights, duties, or privileges of a party are to be determined by the Commission and/or Executive Director after an opportunity for adjudicative hearing.

(7) Counterclaim--A demand by the Department relating to the contractor's claim.

(8) Day--A calendar day. If an act is required to occur on a day falling on a Saturday, Sunday, or holiday, the first working day which is not one of these days should be counted as the required day for purpose of this chapter.

(9) Department--Texas Department of Licensing and Regulation.

(10) Financial Services Division--The division of the department tasked with performing the functions of accounting, budgeting, purchasing, contract management, and financial reporting.

(11) Financial Services Division Director--The person who directs and oversees the functions of the Financial Services Division.

(12) General Counsel--The attorney designated by the Texas Department of Licensing and Regulation, who provides legal representation to the Commission and the Department.

(13) Interested parties--All persons who have timely submitted bids or proposals to provide goods or services pursuant to a contract with the Department or who have requested in writing to the Department to be notified of a vendor protest.

(14) Mediation--A confidential, informal dispute resolution process in which an impartial person, the mediator, facilitates communication between or among the parties to promote reconciliation, settlement, or understanding among them.

(15) Mediator--The person who presides over a mediation proceeding. The mediator shall encourage and assist the parties in reaching a settlement but may not compel or coerce the parties to enter into a settlement agreement. The mediator may be a Department employee, an employee from another Texas state agency, or a person in the mediation profession who is not a Texas state employee ("private mediator").

(16) Parties--The contractor and the Department, having entered into a contract in connection with which a claim of breach of contract has been filed under Subchapter D.

(17) Person--Any individual, partnership, corporation, or other legal entity, including a state agency or governmental subdivision.

(18) Protesting Party--Any actual or prospective bidder, offeror, proposer, or contractor who submits a protest to the Department under Subchapter C.

(19) Purchasing Officer--A Departmental employee who has received certification as a Texas Public Purchaser and who is responsible for assisting with Departmental purchases, and who has been designated the Purchasing Officer for the purchase in question.

Subchapter F. Contract Monitoring.

§55.100. Contract Monitoring Responsibilities.

(a) This section implements Government Code, §2261.202.

(b) Contract monitoring shall be conducted by staff of the financial services division, subject to the oversight of the financial services division director.

(c) Subject to the oversight of the financial services division director, internal auditors and staff of the financial services division shall perform any additional contract monitoring specifically directed by the audit committee of the commission, or warranted by the results of the Department’s annual risk assessment.

§55.101. Enhanced Contract Monitoring.

(a) This section implements Government Code, §2261.253(c).

(b) For each contract entered into by the department, the financial services division director, or his or her designee, will determine if enhanced monitoring of the contract or the contractor’s performance is required.

(c) In determining whether a contract requires enhanced monitoring, the following factors may be considered, to the extent applicable:

(1) The estimated dollar amount of the contract;

(2) The total contract period, including renewal options;

(3) The extent and number of persons impacted by the contract;

(4) The impact to the department and the state if contract deliverables are delayed, or if the contractor fails to deliver as required in the contract;

(5) The complexity of funding sources for the contract;

(6) The complexity of requirements and resources to be managed pursuant to the contract;

(7) The extent of department resources readily available to manage the contract;

(8) The impact of the contract on the health and safety of the general public;

(9) The impact on the department's business processes;

(10) The complexity of the methodology for calculating and making payments under the contract;

(11) The extent of training required for end users as a result of the contract;

(12) The vendor’s experience delivering the contracted goods or services, and, if applicable, the vendor’s performance under previous department contracts; and

(13) With regard to a technology contract, the level of software customization required and the impact on existing technology applications or infrastructure.

(d) The financial services division director, or his or her designee, shall maintain a record of all contracts requiring enhanced monitoring. Contracts identified for enhanced monitoring shall be reported to the commission at least quarterly.

(e) The financial services division director shall notify the commission immediately of any serious issue or risk that is identified with respect to a contract requiring enhanced monitoring.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State, on February 6, 2017.

Brian E. Francis
Executive Director
Texas Department of Licensing and Regulation