Bill > SB776

This bill adds a new section to the Texas Government Code that clarifies the rules for awarding compensatory damages in construction contracts involving governmental entities. The bill defines compensatory damages as actual costs incurred by a contractor due to project delays that could not be reasonably mitigated, explicitly excluding special damages, consequential damages, home office overhead (except labor costs), profit, markup on indirect costs, and unrelated indirect costs. It broadly defines "governmental entity" to include state agencies, municipalities, courts, and educational institutions. The legislation prevents construction contracts from prohibiting compensatory damages when delays are solely caused by the governmental entity or its representatives. While the bill allows contracts to specify requirements for seeking such damages (such as notice and documentation), it mandates that these provisions cannot completely block compensation. Importantly, the bill stipulates that its provisions cannot be waived, and it will only apply to construction contracts entered into on or after September 1, 2025. The bill does not apply to contracts for disaster recovery residential repairs or certain transportation-related contracts.

Business and Industry

https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=SB776