CHE(LEGAL) - PURCHASING AND ACQUISITION: VENDOR DISCLOSURES AND CONTRACTS
Note: For additional legal requirements applicable to purchases with federal funds, see CBB.
Required Vendor Disclosures
Disclosure of Interested Parties
A district may not enter into a contract described below with a business entity unless the business entity submits a disclosure of interested parties to the district at the time the business entity submits the signed contract to the district.
The requirement above applies only to a contract of a district that:
- Requires an action or vote by the board before the contract may be signed;
- Has a value of at least $1 million; or
- Is for services that would require a person to register as a lobbyist under Government Code Chapter 305.
Gov't Code 2252.908
A contract does not require an action or vote by the board if the board has legal authority to delegate to its staff the authority to execute the contract, the board has delegated this authority, and the board does not participate in the selection of the business entity with which the contract is entered into. 1 TAC 46.1(c)
The disclosure requirement does not apply to a contract with:
- A publicly traded business entity, including a wholly owned subsidiary of the entity;
- An electric utility, as defined by Utilities Code 31.002; or
- A gas utility, as defined by Utilities Code 121.001.
Gov't Code 2252.908(c)(4)–(6)
The disclosure of interested parties must be submitted on a form prescribed by the Texas Ethics Commission (TEC) that includes a list of each interested party for the contract of which the contracting business entity is aware; and a written, unsworn declaration subscribed by the authorized agent of the contracting business entity as true under penalty of perjury that is in substantially the form set out in Government Code 2252.908(e)(2). Gov't Code 2252.908(e); 1 TAC 46.5(a)
The certification of filing and the completed disclosure of interested parties form generated by TEC's electronic filing application must be printed, signed by an authorized agent of the contracting business entity, and submitted to the district that is the party to the contract for which the form is being filed. 1 TAC 46.5(b)
A district that receives a completed disclosure of interested parties form and certification of filing shall notify TEC, in an electronic format prescribed by TEC, of the receipt of those documents not later than the 30th day after the date the board receives the disclosure. 1 TAC 46.5(c); Gov't Code 2252.908(f)
The disclosure requirements do not apply to a change made to an existing contract, including an amendment, change order, or extension of a contract except as set out below.
The disclosure requirements apply to a change made to an existing contract, including an amendment, change order, or extension of a contract if:
- A disclosure of interested parties form was not filed for the existing contract; and either the changed contract requires an action or vote by the board or the value of the changed contract is at least $1 million; or
- The business entity submitted a disclosure of interested parties form to the district that is a party to the existing contract; and either there is a change to the disclosure; or the changed contract requires an action or vote by the board; or the value of the changed contract is at least $1 million greater than the value of the existing contract.
1 TAC 46.4
"Contract" means a contract between a board and a business entity at the time it is voted on by the board or at the time it binds the board, whichever is earlier, and includes an amended, extended, or renewed contract. 1 TAC 46.3(a)
"Business entity" means any entity recognized by law through which business is conducted, including a sole proprietorship, partnership, or corporation. The term includes an entity through which business is conducted with a district, regardless of whether the entity is a for-profit or nonprofit entity, and does not include a governmental entity or state agency. Gov't Code 2252.908(a)(1); 1 TAC 46.3(b)
"Interested party" means a person who has a controlling interest in a business entity with whom a district contracts or who actively participates in facilitating the contract or negotiating the terms of the contract, including a broker, intermediary, adviser, or attorney for the business entity. Gov't Code 2252.908(a)(3); 1 TAC 46.3(d), (e)
"Controlling interest" means:
- An ownership interest or participating interest in a business entity by virtue of units, percentage, shares, stock, or otherwise that exceeds ten percent;
- Membership on the board of directors or other governing body of a business entity of which the board or other governing body is composed of not more than ten members; or
- Service as an officer of a business entity that has four or fewer officers, or service as one of the four officers most highly compensated by a business entity that has more than four officers. This provision does not apply to an officer of a publicly held business entity or its wholly owned subsidiaries.
1 TAC 46.3(c)
"Signed" includes any symbol executed or adopted by a person with present intention to authenticate a writing, including an electronic signature. 1 TAC 46.3(f)
"Value" of a contract is based on the amount of consideration received or to be received by the business entity from the district under the contract. 1 TAC 46.3(g)
Conflict of Interest Questionnaire
Note: See BBFA for additional information applicable to disclosures under Local Government Code Chapter 176, including:
- Conflicts disclosure statements required to be filed by certain local government officers, including vendors who are also local government officers; and
- Internet posting requirements for conflicts disclosure statements and questionnaires.
A vendor shall file a completed conflict of interest questionnaire if the vendor has a business relationship with the district and:
- Has an employment or other business relationship with a local government officer of the district, or a family member of the officer, described by Local Government Code 176.003(a)(2)(A);
- Has given a local government officer of the district, or a family member of the officer, one or more gifts with the aggregate value specified by Local Government Code 176.003(a)(2)(B), excluding any gift described by Local Government Code 176.003(a-1); or
- Has a family relationship with a local government officer of the district.
Local Gov't Code 176.006(a)
The completed conflict of interest questionnaire must be filed with the appropriate records administrator not later than the seventh business day after the later of:
- The date that the vendor:
- Begins discussions or negotiations to enter into a contract with a district;
- Submits to the district an application, response to a request for proposals or bids, correspondence, or another writing related to a potential contract with the district; or
- The date the vendor becomes aware:
- Of an employment or other business relationship with a local government officer, or a family member of the officer described by Local Government Code 176.006(a);
- That the person has given one or more gifts described by Local Government Code 176.006(a); or
- Of a family relationship with a local government officer.
Local Gov't Code 176.006(a-1)
Updating Incomplete or Inaccurate Questionnaires
A vendor shall file an updated completed questionnaire with the appropriate records administrator not later than the seventh business day after the date on which the vendor becomes aware of an event that would make a statement in the questionnaire incomplete or inaccurate. Local Gov't Code 176.006(d)
Validity of Contract
The validity of a contract between a vendor and the district is not affected solely because the vendor fails to comply with these requirements. Local Gov't Code 176.006(i)
Required Contract Provisions
No Israel Boycott
A district may not enter into a contract with a company for goods and services unless the contract contains a written verification from the company that it does not boycott Israel and will not during the term of the contract.
The requirement above applies only to a contract that:
- Is between a district and a company with ten or more full-time employees; and
- Has a value of $100,000 or more that is to be paid wholly or partly from public funds of the district.
Gov't Code 2271.002
"Company" has the meaning assigned by Government Code 808.001, except that the term does not include a sole proprietorship. Gov't Code 2271.001(2)
Retention of Contracting Information
These provisions apply to a contract that:
- Has a stated expenditure of at least $1 million in public funds for the purchase of goods or services by the district; or
- Results in the expenditure of at least $1 million in public funds for the purchase of goods or services by the district in a fiscal year of the district.
A board may not accept a bid for a contract described above or award the contract to an entity that the board has determined has knowingly or intentionally failed to comply with Government Code Chapter 552, Subchapter J (Additional Provisions Relating to Contracting Information) in a previous bid or contract described above unless the board determines and documents that the entity has taken adequate steps to ensure future compliance with the requirements of that subchapter. [For additional information and requirements, see GBA and GBAA.]
A contract described above must require a contracting entity to:
- Preserve all contracting information related to the contract as provided by the records retention requirements applicable to the district for the duration of the contract;
- Promptly provide to the district any contracting information related to the contract that is in the custody or possession of the entity on request of the district; and
- On completion of the contract, either:
- Provide at no cost to the district all contracting information related to the contract that is in the custody or possession of the entity; or
- Preserve the contracting information related to the contract as provided by the records retention requirements applicable to the district.
Bid and Contract Language
Except as described at Exception, below, a bid for a contract described above and the contract must include the following statement: "The requirements of Subchapter J, Chapter 552, Government Code, may apply to this (include "bid" or "contract" as applicable) and the contractor or vendor agrees that the contract can be terminated if the contractor or vendor knowingly or intentionally fails to comply with a requirement of that subchapter."
Notice of Noncompliance
A board that is the party to a contract described above shall provide notice to the entity that is a party to the contract if the entity fails to comply with a requirement of Government Code Chapter 552, Subchapter J applicable to the entity. The notice must:
- Be in writing;
- State the requirement that the entity has violated; and
- Unless the exception described below applies, advise the entity that the board may terminate the contract without further obligation to the entity if the entity does not cure the violation on or before the tenth business day after the date the board provides the notice.
Except as provided below, a governmental body may terminate a contract described above if:
- The board provides the required notice to the entity that is party to the contract;
- The contracting entity does not cure the violation in the prescribed period;
- The board determines that the contracting entity has intentionally or knowingly failed to comply with a requirement of Government Code Chapter 552, Subchapter J; and
- The board determines that the entity has not taken adequate steps to ensure future compliance with the requirements of that subchapter.
An entity has taken adequate steps to ensure future compliance with Government Code Chapter 552, Subchapter J if:
- The entity produces contracting information requested by the board that is in the custody or possession of the entity not later than the tenth business day after the date the board makes the request; and
- The entity establishes a records management program to enable the entity to comply with Government Code Chapter 552, Subchapter J.
A board may not terminate a contract under these provisions if the contract is related to the purchase or underwriting of a public security, the contract is or may be used as collateral on a loan, or the contract's proceeds are used to pay debt service of a public security or loan.
Gov't Code 552.371(a), .372–.374 [See GBA]
Entertainment Event Contracts
A person, including a board, may not include a provision in a contract related to a parade, concert, or other entertainment event paid for in whole or in part with public funds that prohibits or would otherwise prevent the disclosure of information relating to the receipt or expenditure of public or other funds by a board for the event. A contract provision that violates Government Code 552.104(c) is void. Gov't Code 552.104(c) [See GBA for information related to competition or bidding.]
Taxpayer Resource Transactions
A district may not enter into a taxpayer resource transaction with an abortion provider or an affiliate of an abortion provider. Gov't Code 2272.003(a)
"Taxpayer resource transaction" means a sale, purchase, lease, donation of money, goods, services, or real property, or any other transaction between a governmental entity and a private entity that provides to the private entity something of value derived from state or local tax revenue, regardless of whether the governmental entity receives something of value in return.
"Affiliate" means a person or entity who enters into with another person or entity a legal relationship created or governed by at least one written instrument, including a certificate of formation, a franchise agreement, standards of affiliation, bylaws, or a license, that demonstrates:
- Common ownership, management, or control between the parties to the relationship;
- A franchise granted by the person or entity to the affiliate; or
- The granting or extension of a license or other agreement authorizing the affiliate to use the other person's or entity's brand name, trademark, service mark, or other registered identification mark.
Gov't Code 2272.001(3), (5)
Lobbying Restriction—Tobacco Education Grant Funds
A district receiving funds or grants from the Permanent Fund for Health and Tobacco Education and Enforcement may not use the funds to pay:
- Lobbying expenses incurred by the district;
- A person or entity that is required to register with the Texas Ethics Commission under Government Code Chapter 305 (Registration of Lobbyists);
- Any partner, employee, employer, relative, contractor, consultant, or related entity of a person or entity described by item 2; or
- A person or entity who has been hired to represent associations or other entities for the purpose of affecting the outcome of legislation, agency rules, ordinances, or other government policies.
Gov't Code 403.1067(a)
A district may not enter into a governmental contract with a company identified on a list prepared and maintained under Government Code 806.051 (now Government Code 2270.0201) (companies with business operations in Sudan), 807.051 (now Government Code 2270.0102) (companies with business operations in Iran), and 2252.153 (companies known to have contracts with or provide supplies or services to foreign terrorist organization). Gov't Code 2252.152
"Governmental contract" means a contract awarded by a governmental entity for general construction, an improvement, a service, or a public works project or for a purchase of supplies, materials, or equipment. The term includes a contract to obtain professional services subject to Government Code 2254. Gov't Code 2252.151(3)