CHAPTER 2251. PAYMENT FOR GOODS AND SERVICES
GOVERNMENT CODE
TITLE 10. GENERAL GOVERNMENT
SUBTITLE F. STATE AND LOCAL CONTRACTS AND FUND MANAGEMENT
CHAPTER 2251. PAYMENT FOR GOODS AND SERVICES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2251.001. DEFINITIONS. Except as otherwise provided by
this chapter, in this chapter:
(1) "Distribution date" means:
(A) if no payment law prohibits the comptroller from issuing a
warrant, the date the comptroller makes the warrant available:
(i) for mailing directly to its payee under Section 2155.382(c);
or
(ii) to the state agency that requested issuance of the warrant;
(B) if no payment law prohibits the comptroller from initiating
an electronic funds transfer, the date the comptroller initiates
the transfer;
(C) if a payment law prohibits the comptroller from issuing a
warrant, the date the comptroller would have made the warrant
available, in the absence of the payment law:
(i) for mailing directly to its payee under Section 2155.382(c);
or
(ii) to the state agency that requested issuance of the warrant;
or
(D) if a payment law prohibits the comptroller from initiating
an electronic funds transfer, the date the comptroller would have
made the warrant prepared under Section 403.0552(b) available, in
the absence of the payment law:
(i) for mailing directly to its payee under Section 2155.382(c);
or
(ii) to the state agency that requested initiation of the
transfer.
(2) "Goods" includes supplies, materials, or equipment.
(3) "Governmental entity" means a state agency or political
subdivision of this state.
(4) "Payment" means money owed to a vendor.
(5) "Payment law" means:
(A) Section 57.48 or 57.482, Education Code;
(B) Section 231.007, Family Code;
(C) Section 403.055 or 2107.008; or
(D) any similar statute.
(6) "Political subdivision" means:
(A) a county;
(B) a municipality;
(C) a public school district; or
(D) a special-purpose district or authority.
(7) "Service" includes gas and water utility service.
(8) "State agency" means:
(A) a board, commission, department, office, or other agency in
the executive branch of state government that is created by the
constitution or a statute of this state, including a river
authority and an institution of higher education as defined by
Section 61.003, Education Code;
(B) the legislature or a legislative agency; or
(C) the Supreme Court of Texas, the Court of Criminal Appeals of
Texas, a court of appeals, a state judicial agency, or the State
Bar of Texas.
(9) "Subcontractor" means a person who contracts with a vendor
to work or contribute toward completing work for a governmental
entity. The term does not include a state agency. The term
includes an officer or employee of a state agency when the
officer or employee contracts with a vendor in a private
capacity.
(10) "Vendor" means a person who supplies goods or a service to
a governmental entity or another person directed by the entity.
The term does not include a state agency, except for Texas
Correctional Industries. The term includes an officer or employee
of a state agency when acting in a private capacity to supply
goods or a service.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.40(a), eff.
Sept. 1, 1995; Acts 1999, 76th Leg., ch. 1188, Sec. 1.41, eff.
Sept. 1, 1999; Acts 2001, 77th Leg., ch. 1158, Sec. 60, eff. June
15, 2001.
Sec. 2251.002. EXCEPTIONS. (a) Except as provided by
Subchapter D, Subchapter B does not apply to a payment made by a
governmental entity, vendor, or subcontractor if:
(1) there is a bona fide dispute between the political
subdivision and a vendor, contractor, subcontractor, or supplier
about the goods delivered or the service performed that causes
the payment to be late;
(2) there is a bona fide dispute between a vendor and a
subcontractor or between a subcontractor and its supplier about
the goods delivered or the service performed that causes the
payment to be late;
(3) the terms of a federal contract, grant, regulation, or
statute prevent the governmental entity from making a timely
payment with federal funds; or
(4) the invoice is not mailed to the person to whom it is
addressed in strict accordance with any instruction on the
purchase order relating to the payment.
(b) This chapter does not affect Chapter 2253.
(c) Repealed by Acts 2001, 77th Leg., ch. 1158, Sec. 94(4), eff.
June 15, 2001.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.41(a), eff.
Sept. 1, 1995; Acts 2001, 77th Leg., ch. 1158, Sec. 61, eff. June
15, 2001; Acts 2001, 77th Leg., ch. 1158, Sec. 94(4), eff. June
15, 2001; Acts 2003, 78th Leg., ch. 286, Sec. 1, eff. Sept. 1,
2003.
Sec. 2251.003. RULES. The comptroller shall establish
procedures and adopt rules to administer this chapter. Before
adopting a rule under this section, the comptroller must conduct
a public hearing regarding the proposed rule regardless of
whether the requirements of Section 2001.029(b) are met.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 2001, 77th Leg., ch. 1158, Sec. 62, eff.
June 15, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
937, Sec. 1.73, eff. September 1, 2007.
Sec. 2251.004. WAIVER. A person may not waive any right or
remedy granted by this chapter. A purported waiver of any right
or remedy granted by this chapter is void.
Added by Acts 2003, 78th Leg., ch. 286, Sec. 2, eff. Sept. 1,
2003.
SUBCHAPTER B. PAYMENTS AND INTEREST
Sec. 2251.021. TIME FOR PAYMENT BY GOVERNMENTAL ENTITY. (a)
Except as provided by Subsection (b), a payment by a governmental
entity under a contract executed on or after September 1, 1987,
is overdue on the 31st day after the later of:
(1) the date the governmental entity receives the goods under
the contract;
(2) the date the performance of the service under the contract
is completed; or
(3) the date the governmental entity receives an invoice for the
goods or service.
(b) A payment under a contract executed on or after September 1,
1993, owed by a political subdivision whose governing body meets
only once a month or less frequently is overdue on the 46th day
after the later event described by Subsections (a)(1) through
(3).
(c) For a contract executed on or after July 1, 1986, and before
September 1, 1987, a payment by a governmental entity under that
contract is overdue on the 46th day after the later event
described by Subsections (a)(1) through (3).
(d) For purposes of this section, the renewal, amendment, or
extension of a contract executed on or before September 1, 1993,
is considered to be the execution of a new contract.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.42(a), eff.
Sept. 1, 1995; Acts 2001, 77th Leg., ch. 1158, Sec. 63, eff. June
15, 2001.
Sec. 2251.022. TIME FOR PAYMENT BY VENDOR. (a) A vendor who
receives a payment from a governmental entity shall pay a
subcontractor the appropriate share of the payment not later than
the 10th day after the date the vendor receives the payment.
(b) The appropriate share is overdue on the 11th day after the
date the vendor receives the payment.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2251.023. TIME FOR PAYMENT BY SUBCONTRACTOR. (a) A
subcontractor who receives a payment from a vendor shall pay a
person who supplies goods or a service for which the payment is
made the appropriate share of the payment not later than the 10th
day after the date the subcontractor receives the payment.
(b) The appropriate share is overdue on the 11th day after the
date the subcontractor receives the payment.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2251.024. MAILING OF PAYMENT. A payment is considered to
be mailed on the date the payment is postmarked.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2251.025. INTEREST ON OVERDUE PAYMENT. (a) A payment
begins to accrue interest on the date the payment becomes
overdue.
(b) The rate of interest that accrues on an overdue payment is
the rate in effect on September 1 of the fiscal year in which the
payment becomes overdue. The rate in effect on September 1 is
equal to the sum of:
(1) one percent; and
(2) the prime rate as published in the Wall Street Journal on
the first day of July of the preceding fiscal year that does not
fall on a Saturday or Sunday.
(c) Interest on an overdue payment stops accruing on the date
the governmental entity or vendor mails or electronically
transmits the payment. In this subsection, "governmental entity"
does not include a state agency.
(d) This subsection applies only if the comptroller is not
responsible for issuing a warrant or initiating an electronic
funds transfer to pay the principal amount owed by a state agency
to a vendor. The accrual of interest on an overdue payment to the
vendor:
(1) stops on the date the agency mails or electronically
transmits the payment; and
(2) is not suspended during any period that a payment law
prohibits the agency from paying the vendor.
(e) This subsection applies only if the comptroller is
responsible for issuing a warrant or initiating an electronic
funds transfer to pay the principal amount owed by a state agency
to a vendor. Interest on an overdue payment to the vendor:
(1) stops accruing on its distribution date; and
(2) does not stop accruing during any period that a payment law
prohibits the comptroller from issuing the warrant or initiating
the transfer.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 2001, 77th Leg., ch. 1158, Sec. 64, 65, 66,
67(a), eff. June 15, 2001; Acts 2003, 78th Leg., ch. 1310, Sec.
61, eff. July 1, 2004.
Sec. 2251.026. PAYMENT OF INTEREST BY STATE AGENCY. (a) A
state agency is liable for any interest that accrues on an
overdue payment under this chapter and shall pay the interest
from funds appropriated or otherwise available to the agency at
the same time the principal is paid.
(b) The comptroller shall issue a warrant or initiate an
electronic funds transfer on behalf of a state agency to pay any
interest that the agency must pay under Subsection (a) if the
comptroller is responsible for issuing a warrant or initiating an
electronic funds transfer to pay the principal amount on behalf
of the agency.
(c) The comptroller shall determine the amount of interest that
accrues on an overdue payment by a state agency under this
chapter if the comptroller is responsible for issuing a warrant
or initiating an electronic funds transfer to pay the principal
amount on behalf of the agency.
(d) A state agency shall determine the amount of interest that
accrues on an overdue payment by the agency under this chapter if
the comptroller is not responsible for issuing a warrant or
initiating an electronic funds transfer to pay the principal
amount on behalf of the agency.
(e) The comptroller or state agency shall submit the interest
payment with the net amount due for the goods or services.
(f) Neither the comptroller nor a state agency may require a
vendor to request payment of the interest that accrues under this
chapter before the interest is paid to the vendor.
(g) The comptroller may require a state agency to submit any
information the comptroller determines necessary to administer
and comply with Subsections (b) and (c). The information must be
submitted at the time and in the manner required by the
comptroller.
(h) The comptroller may require a state agency to change its
accounting systems or procedure as the comptroller determines
necessary to administer and comply with Subsections (b) and (c).
Any changes must conform with the comptroller's requirements.
(i) The comptroller may establish procedures and adopt rules to
administer Subsections (b), (c), (g), and (h).
(j) No interest accrues or may be paid under this section on a
payment if the total amount of interest that would otherwise have
accrued is equal to or less than $5 and the payment is made from
the institutional funds of an institution of higher education as
defined by Section 61.003, Education Code.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1997, 75th Leg., ch. 634, Sec. 3(a), eff.
Sept. 1, 1999; Acts 2001, 77th Leg., ch. 118, Sec. 3.03, eff.
Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1158, Sec. 68, eff. June
15, 2001 ; Acts 2003, 78th Leg., ch. 1275, Sec. 2(85), eff. Sept.
1, 2003.
Sec. 2251.027. PAYMENT OF INTEREST BY POLITICAL SUBDIVISION.
(a) A political subdivision shall compute interest imposed on
the political subdivision under this chapter.
(b) The political subdivision shall pay the interest at the time
payment is made on the principal.
(c) The political subdivision shall submit the interest payment
with the net amount due for the goods or service.
(d) The political subdivision may not require a vendor to
petition, bill, or wait an additional day to receive the interest
due.
(e) The political subdivision may not require a vendor or
subcontractor to agree to waive the vendor's or subcontractor's
right to interest under this chapter as a condition of the
contract between the parties.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1997, 75th Leg., ch. 1254, Sec. 1, eff.
Sept. 1, 1997; Acts 2001, 77th Leg., ch. 1158, Sec. 69, eff. June
15, 2001.
Sec. 2251.028. PAYMENT OF INTEREST BY VENDOR OR SUBCONTRACTOR.
A vendor or subcontractor shall pay interest as a payment is
overdue.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2251.029. PARTIAL PAYMENT. (a) The unpaid balance of a
partial payment made within the period provided by this chapter
accrues interest as provided by Section 2251.025 unless the
balance is in dispute.
(b) Section 2251.042 applies to a disputed balance.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2251.030. PROMPT OR EARLY PAYMENT DISCOUNT. (a) The
intent of the legislature is that a governmental entity should
take advantage of an offer for an early payment discount. A state
agency shall when possible negotiate a prompt payment discount
with a vendor.
(b) A governmental entity may not take an early payment discount
a vendor offers unless the governmental entity makes a full
payment within the discount period.
(c) If a governmental entity takes an early payment discount
later, the unpaid balance accrues interest beginning on the date
the discount offer expires.
(d) A state agency, when paying for the goods or service
purchased under an agreement that includes a prompt or early
payment discount, shall submit the necessary payment documents or
information to the comptroller sufficiently in advance of the
prompt or early payment deadline to allow the comptroller or the
agency to pay the vendor in time to obtain the discount.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1999, 76th Leg., ch. 1499, Sec. 1.35, eff.
Sept. 1, 1999; Acts 2001, 77th Leg., ch. 1158, Sec. 70, eff. June
15, 2001.
SUBCHAPTER C. CLAIMS AND DISPUTES
Sec. 2251.042. DISPUTED PAYMENT. (a) A governmental entity
shall notify a vendor of an error in an invoice submitted for
payment by the vendor not later than the 21st day after the date
the entity receives the invoice.
(b) If a dispute is resolved in favor of the vendor, the vendor
is entitled to receive interest on the unpaid balance of the
invoice submitted by the vendor beginning on the date under
Section 2251.021 that the payment for the invoice is overdue.
(c) If a dispute is resolved in favor of the governmental
entity, the vendor shall submit a corrected invoice that must be
paid in accordance with Section 2251.021. The unpaid balance
accrues interest as provided by this chapter if the corrected
invoice is not paid by the appropriate date.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2251.043. ATTORNEY FEES. In a formal administrative or
judicial action to collect an invoice payment or interest due
under this chapter, the opposing party, which may be the
governmental entity or the vendor, shall pay the reasonable
attorney fees of the prevailing party.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
SUBCHAPTER D. REMEDY FOR NONPAYMENT
Sec. 2251.051. VENDOR REMEDY FOR NONPAYMENT OF CONTRACT. (a) A
vendor may suspend performance required under a contract with a
governmental entity if:
(1) the governmental entity does not pay the vendor an
undisputed amount within the time limits provided by Subchapter
B; and
(2) the vendor gives the governmental entity written notice:
(A) informing the governmental entity that payment has not been
received; and
(B) stating the intent of the vendor to suspend performance for
nonpayment.
(b) The vendor may not suspend performance under this section
before the later of:
(1) the 10th day after the date the vendor gives notice under
Subsection (a); or
(2) the day specified by Section 2251.053(b).
(c) A vendor who suspends performance under this section is not:
(1) required to supply further labor, services, or materials
until the vendor is paid the amount provided for under this
chapter, plus costs for demobilization and remobilization; or
(2) responsible for damages resulting from suspending work if
the governmental entity with which the vendor has the contract
has not notified the vendor in writing before performance is
suspended that payment has been made or that a bona fide dispute
for payment exists.
(d) A notification under Subsection (c)(2) that a bona fide
dispute for payment exists must include a list of the specific
reasons for nonpayment. If a reason specified is that labor,
services, or materials provided by the vendor or the vendor's
subcontractor are not provided in compliance with the contract,
the vendor is entitled to a reasonable opportunity to:
(1) cure the noncompliance of the listed items; or
(2) offer a reasonable amount to compensate for listed items for
which noncompliance cannot be promptly cured.
Added by Acts 2003, 78th Leg., ch. 286, Sec. 3, eff. Sept. 1,
2003.
Sec. 2251.052. SUBCONTRACTOR REMEDY FOR VENDOR'S NONPAYMENT OF
CONTRACT. (a) A subcontractor of a vendor under a contract with
a governmental entity may suspend performance required under the
contract with the vendor if:
(1) the governmental entity with whom the subcontractor's vendor
has a contract does not pay the vendor an undisputed amount
within the time limits provided by Subchapter B; or
(2) the governmental entity with whom the subcontractor's vendor
has a contract has paid the vendor undisputed amounts and the
vendor does not pay the subcontractor an undisputed amount within
the time limits provided by Subchapter B.
(b) A subcontractor who suspends performance under Subsection
(a) must give the vendor written notice, a copy of which the
subcontractor may provide the governmental entity with whom the
vendor has a contract:
(1) informing the vendor that payment has not been received; and
(2) stating the intent of the subcontractor to suspend
performance for nonpayment.
(c) The subcontractor may not suspend performance under this
section before the later of:
(1) the 10th day after the date the subcontractor gives notice
under Subsection (b); or
(2) the date specified by Section 2251.053(b), if applicable.
(d) A subcontractor who suspends performance under this section
is not:
(1) required to supply further labor, services, or materials
until the subcontractor is paid the amount provided for under the
contract, plus costs for demobilization and remobilization; or
(2) responsible for damages resulting from suspending work if
the vendor has not notified the subcontractor in writing before
performance is suspended that payment has been made or the
governmental entity has notified the vendor that a bona fide
dispute for payment exists.
(e) A notification under Subsection (d)(2) that a bona fide
dispute for payment exists must include a list of the specific
reasons for nonpayment. If a reason specified is that labor,
services, or materials provided by the subcontractor are not
provided in compliance with the contract, the subcontractor is
entitled to a reasonable opportunity to:
(1) cure the noncompliance of the listed items; or
(2) offer a reasonable amount to compensate for listed items for
which noncompliance cannot be promptly cured.
Added by Acts 2003, 78th Leg., ch. 286, Sec. 3, eff. Sept. 1,
2003.
Sec. 2251.053. HIGHWAY-RELATED CONTRACTS. (a) This section
applies only to a contract entered into by the Texas Department
of Transportation for the construction or maintenance of a
highway or a related facility.
(b) A vendor or subcontractor may not suspend performance under
Section 2251.051 or 2251.052 before the 20th day after the date:
(1) the vendor gives written notice under Section 2251.051(a);
or
(2) the subcontractor gives written notice under Section
2251.052(b).
(c) A notice required under this subchapter and relating to a
contract described by Subsection (a) must be sent by certified
mail to:
(1) the executive director of the Texas Department of
Transportation;
(2) the director of construction of the Texas Department of
Transportation; or
(3) the person designated in the contract as the person to whom
notices must be sent.
Added by Acts 2003, 78th Leg., ch. 286, Sec. 3, eff. Sept. 1,
2003.
Sec. 2251.054. NOTICES. (a) This section applies only to a
notice or other written communication required by this
subchapter.
(b) A notice or other written communication to a governmental
entity must be delivered to:
(1) the person designated in the contract as the person to whom
a notice or other written communication must be sent; or
(2) if the contract does not designate a person to whom a notice
or other written communication must be sent, the executive
director or chief administrative officer of the governmental
entity.
(c) Any notice or other written communication may be personally
delivered to a person described by Subsection (b) or the person's
agent, regardless of any other manner of delivery prescribed by
law.
(d) If a notice or other written communication is sent by
certified mail, the notice is effective on the date the notice or
other written communication is deposited in the United States
mail.
(e) If a notice or other written communication is sent by
electronic means, the notice or other written communication is
effective on the date the person designated or entitled to
receive the notice or other written communication receives the
notice or other written communication.
(f) If a notice or other written communication is received by
the person designated or entitled to receive the notice or other
written communication, the method of delivery of the notice or
other written communication is immaterial.
Added by Acts 2003, 78th Leg., ch. 286, Sec. 3, eff. Sept. 1,
2003.
Sec. 2251.055. RIGHTS AND REMEDIES NOT EXCLUSIVE. The rights
and remedies provided by this subchapter are in addition to
rights and remedies provided by this chapter or other law.
Added by Acts 2003, 78th Leg., ch. 286, Sec. 3, eff. Sept. 1,
2003.