88R614 MP-D     By: Hinojosa S.B. No. 1828       A BILL TO BE ENTITLED   AN ACT   relating to the procurement by local governments of energy savings   performance contracts for certain conservation measures; creating   criminal offenses; authorizing a fee.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subtitle C, Title 9, Local Government Code, is   amended by adding Chapter 302A to read as follows:   CHAPTER 302A.  ENERGY SAVINGS PERFORMANCE CONTRACTS   SUBCHAPTER A. GENERAL PROVISIONS          Sec. 302A.001.  DEFINITIONS.  In this chapter:                (1)  "Capital cost avoidance savings" means money spent   by a local government to pay for a conservation measure:                      (A)  that has been identified as a permanent   equipment replacement or repair by an investment grade audit of a   performance contract under Section 302A.108; and                      (B)  the cost of which has been documented and   discounted by any additional utility cost savings or any operation   and maintenance cost savings generated from another conservation   measure identified in the performance contract when compared with   an established baseline.                (2)  "Conservation measure" means the installation or   implementation of an item, equipment, modification, alteration,   improvement, or system for, or any employee training program or   architectural or engineering consulting service related to the   operation of, a conservation technique in a new or existing   facility, other than a conservation technique for the design or new   construction of a water supply project, water plant, wastewater   plant, water and wastewater distribution or conveyance facility, or   drainage project.                (3)  "Conservation technique" means:                      (A)  the insulation of a building structure or a   system within the building;                      (B)  a storm window or door, any caulking or   weather stripping, a multiglazed window or door, a heat-absorbing   or heat-reflective glazed and coated window or door system, or   another window or door system modification that reduces energy   consumption;                      (C)  an automatic energy control system,   including computer software and technical data licenses;                      (D)  a heating, ventilating, or air-conditioning   system modification or replacement that reduces energy or water   consumption;                      (E)  the replacement or retrofitting of a lighting   fixture that increases energy efficiency;                      (F)  an energy recovery system;                      (G)  an electric system improvement;                      (H)  a water-conserving fixture, appliance, or   equipment or the substitution of a non-water-using fixture,   appliance, or equipment;                      (I)  a water-conserving landscape irrigation   equipment;                      (J)  a landscaping measure that reduces watering   demands and captures and holds applied water and rainfall,   including:                            (i)  landscape contouring, including the use   of a berm, swale, and terrace; and                            (ii)  use of a soil amendment that increases   the water-holding capacity of the soil, including compost;                      (K)  any rainwater harvesting equipment or   equipment to make use of water collected as part of a storm-water   system installed for water quality control;                      (L)  any equipment for recycling or reusing water   originating on the premises or from other sources, including   treated municipal effluent;                      (M)  any equipment needed to capture water from   nonconventional, alternate sources, including air-conditioning   condensate or graywater, for nonpotable uses;                      (N)  any metering or related equipment or systems   that:                            (i)  reduces utility costs;                            (ii)  increases operation and maintenance   cost savings; or                            (iii)  increases in billable revenues   resulting from increased accuracy of water measurement by   identifying utility errors, optimizing rate schedules, or   increasing meter accuracy;                      (O)  an alternative fuel program resulting in   energy cost savings and reduced emissions for local government   vehicles, including fleet vehicles;                      (P)  a program resulting in utility cost savings   by reducing utility errors and optimizing existing rate schedules   under which service is provided; or                      (Q)  another energy or water conservation-related   improvement or equipment, including an improvement or equipment   relating to renewable energy or nonconventional water sources or   water reuse that produces cost savings or increases in billable   revenues for their appointed function.                (4)  "Debt service" means the total amount spent or to   be spent by a local government from property tax revenues to pay:                      (A)  the principal of and interest on debts;                      (B)  another payment required by contract to   secure debts; and                      (C)  if the local government is created under   Section 52, Article III, or Section 59, Article XVI, Texas   Constitution, a payment on debts that the local government   anticipates incurring in the next calendar year.                (5)  "Increase in billable revenues" means a projected   increase in billable revenues when compared with an established   baseline of billable revenues.                (6)  "Increase in meter accuracy" means a guaranteed   increase in efficiency or accuracy of utility metering or related   equipment or systems that is calculated or determined in accordance   with procedures established by the International Performance   Measurement and Verification Protocol or succeeding standards of   the United States Department of Energy.                (7)  "Local government" means a county, municipality,   school district, or other political subdivision of this state.                (8)  "Measurement and verification" means a method of   confirming whether a guaranteed savings increase in billable   revenues or an increase in meter accuracy resulting from a   conservation measure is being met as specified under a performance   contract and this chapter.                (9)  "Meter guarantee" means a stipulated or agreed to   increase in billable revenues to result from the guaranteed   increase in meter accuracy, based on stipulated or agreed to   components of a billable revenues calculation for a conservation   measure.                (10)  "Operation and maintenance cost savings" means a   measurable reduction in operating or maintenance costs on a   long-term basis that is a direct result of the installation of new   equipment or the implementation of a new service in connection with   one or more conservation measures when compared with an established   baseline.  The term does not include any savings that are realized   solely because of a shift in the cost of personnel or other similar   short-term cost savings related to or generated by outsourcing or   using contract workers to perform tasks previously performed by   employees.                (11)  "Performance contract" means a contract between a   local government and a qualified provider for the evaluation,   recommendation, or implementation of a conservation measure in a   new or existing facility that is identified by an investment grade   audit performed in accordance with Section 302A.108 and that is   designed to result in annual savings, an increase in billable   revenues, or an increase in meter accuracy guaranteed by the   provider in accordance with Section 302A.052(a) over a specified   period prescribed by Section 302A.051(a)(1), which includes both   the construction and repayment phases. The term includes a   contract related to the pilot program.                (12)  "Pilot program" means a pilot program operated by   the Energy Systems Laboratory at the Texas A&M Engineering   Experiment Station, in consultation with the Texas Facilities   Commission and the State Energy Conservation Office, that:                      (A)  establishes and implements energy efficiency   improvements to state-owned buildings maintained by the   commission;                      (B)  generates savings in utility costs resulting   from the improvements described by Paragraph (A) resulting in at   least a 30 percent annual return on the costs of the improvements;                      (C)  provides for the participation of not fewer   than two companies selected by the commission; and                      (D)  provides for any money attributable to   utility cost savings resulting from the pilot program to be   appropriated only to the commission.                (13)  "Provider" means an entity or an affiliate of the   entity that:                      (A)  has experience in the design, acquisition,   implementation, installation, and where appropriate, construction,   engineering, operation, maintenance, and repair of a conservation   measure;                      (B)  has the technical capability to verify that   such conservation measure generates savings, an increase in   billable revenues, or an increase in meter accuracy; and                      (C)  has the ability to secure or arrange the   financing necessary to satisfy the guarantee required by a   performance contract entered into by the provider.                (14)  "Request for qualifications" means a competitive   selection process achieved by a multistep negotiated procurement   process that involves sequential steps for the evaluation of   submissions by prospective providers.                (15)  "Savings" means the reduction in expenditures,   resulting from the implementation of one or more conservation   measures under a performance contract that are:                      (A)  generated from the date the conservation   measures become fully operational;                      (B)  calculated in accordance with the terms of   the performance contract and the requirements of this chapter;                      (C)  guaranteed by the provider; and                      (D)  measured and verified in accordance with   Sections 302A.055, 302A.301, and 302A.302 for each of the following   categories:                            (i)  utility cost savings;                            (ii)  operation and maintenance cost   savings; and                            (iii)  capital cost avoidance savings.                (16)  "Subcontractor" means a person, other than an   employee of a provider, who contracts with the provider to furnish   labor or materials to fulfill an obligation to the provider who is   acting as a general contractor or prime contractor for any of the   authorized work, including installation, required by a performance   contract.  The term includes a subcontractor of any tier, supplier,   vendor, fabricator, or manufacturer.                (17)  "Third-party engineer" means a professional   engineer who is selected or designated by a local government under   Section 302A.004.                (18)  "Total cost" includes the sum of the costs of a   conservation measure, investment grade audit, construction,   financing and debt services, measurement and verification   services, and maintenance and training during the term of the   performance contract.  The term does not include any obligations   that have not been fulfilled on termination of the contract before   the end of the contract term, provided that those obligations are   disclosed when the performance contract is executed.                (19)  "Utility cost savings" means a measured and   verified reduction in net fuel costs, energy costs, water costs,   stormwater fees, or other utility costs, on a long-term basis   resulting from the implementation of one or more conservation   measures when compared with an established baseline of usage of   those previous costs. The term does not include an estimated   reduction due to a decrease in energy rates that is not derived from   increased conservation or reduced usage.          Sec. 302A.002.  INAPPLICABILITY OF LAW GOVERNING CONTRACT   PROCEDURES FOR CONSTRUCTION PROJECTS.  Except as provided by   Section 302A.106(a)(1), Chapter 2269, Government Code, does not   apply to this chapter.          Sec. 302A.003.  CONTRACTS VOIDABLE. A contract entered into   or an arrangement made in violation of this chapter is voidable as   against public policy.          Sec. 302A.004.  THIRD-PARTY ENGINEER.  (a)  A local   government shall select or designate a third-party engineer to:                (1)  act as the local government's representative, and   serve as the local government's consultant, throughout the   performance contract procurement process and the duration of the   measurement and verification services;                (2)  assist the local government in evaluating the   qualifications, proposals, and change orders of, and related   presentations by, a provider;                (3)  provide to the local government written reports   under Section 302A.103(c) and written opinions under Section   302A.110 and submit the written reports and written opinions to the   appropriate state agencies as specified under Section 302A.111;                (4)  perform the measurement and verification review of   the meter guarantee under Section 302A.055;                (5)  monitor the performance of the provider's   measurement and verification services required under Section   302A.301; and                (6)  review measurement and verification reports and   the provider's annual reconciliation statement under Sections   302A.301 and 302A.302.          (b)  The third-party engineer must be a professional   engineer licensed under Chapter 1001, Occupations Code, and must:                (1)  have a minimum of three years of specialized   experience with performance contracts;                (2)  have demonstrated technical competence in   relation to, and working knowledge of, the procurement process of   performance contracts;                (3)  not be an officer or employee of:                      (A)  a provider for the performance contract; or                      (B)  a wholly owned subsidiary, majority-owned   subsidiary, parent company, or affiliate of the provider for the   contract; and                (4)  not be otherwise associated with the performance   contract.          (c)  A local government:                (1)  if the third-party engineer is not a full-time   employee of the local government, shall procure the third-party   engineer's services in accordance with the procedures prescribed   for procuring the professional services of an engineer under   Section 2254.004, Government Code; and                (2)  shall pay a third-party engineer described by   Subdivision (1) a pre-negotiated fee based on the work completed if   the local government does not enter into a performance contract   that was reviewed by the third-party engineer under Section   302A.110.          (d)  A provider selected to perform an investment grade audit   and propose a performance contract is prohibited from suggesting,   recommending, or arranging a third-party engineer.          (e)  Before the local government selects or designates a   third-party engineer, the third-party engineer shall certify in   writing to the local government that the engineer meets the   qualifications required under Subsection (b) and that there is no   conflict of interest with regard to the local government and the   proposals the third-party engineer is to evaluate that result from   the request for qualifications.           (f)  A third-party engineer who reviews a performance   contract shall maintain the confidentiality of any proprietary   information the third-party engineer acquires while reviewing the   contract.          (g)  A local government may require a provider to include in   the calculation of the cost of a proposal for a performance contract   any fees payable by the local government for use of a third-party   engineer who is not a full-time employee of the local government.  A   fee charged by a third-party engineer described by this subsection   may not exceed 2.5 percent of the total value of the performance   contract at the time that a contract is executed by that provider.   SUBCHAPTER B. ENERGY SAVINGS PERFORMANCE CONTRACT          Sec. 302A.051.  PERFORMANCE CONTRACT. (a)  The governing   body of a local government may enter into a multiyear performance   contract, structured as an installment payment contract or   lease-purchase contract, for the implementation of one or more   conservation measures in accordance with this chapter if:                (1)  the term of the contract, beginning on the final   date on which all the conservation measures become fully   operational, does not exceed the lesser of:                      (A)  20 years;                      (B)  the average useful life of the conservation   measures; or                      (C)  the term of financing;                (2)  after review of the investment grade audit report   prepared in accordance with Section 302A.108, the local government   determines that the savings, increase in billable revenues, or   both, that result from the conservation measures which are   identified by the audit report and guaranteed by the provider will   equal or exceed the total cost of the contract;                (3)  the contract includes the provisions required by   Sections 302A.052(a), (c), and (d); and                (4)  the local government receives approval for the   contract from the appropriate state agency under Section 302A.111.          (b)  Each conservation measure to be installed or   implemented under the performance contract must comply with current   local, state, and federal construction, plumbing, and   environmental codes and regulations.          (c)  A performance contract may not include an improvement or   equipment that allows or causes water from any condensing, cooling,   or industrial process or any system of nonpotable usage over which   public water supply system officials do not have sanitary control   to be returned to the potable water supply.          Sec. 302A.052.  REQUIRED PERFORMANCE CONTRACT PROVISIONS.   (a)  A performance contract must include a provision that requires   the provider to:                (1)  provide a written guarantee or meter guarantee,   or, if applicable, both, that:                      (A)  the savings, increase in billable revenues,   or increase in meter accuracy resulting from the conservation   measures implemented or installed under the performance contract   will at least equal the cost of the contract during the term of the   contract, including both the construction and repayment phases; and                      (B)  the guaranteed annual savings and increase in   billable revenues will at least equal the local government's annual   contractual obligations, including annual measurement and   verification costs, costs for third-party engineer services,   annual maintenance costs, repair costs, costs of design and   engineering services, installation costs, and costs for debt   service, and any financing charges incurred by the local government   in any one year period during the term of the contract beginning   after the final date of installation of all the conservation   measures; and                (2)  provide to the local government an annual   reconciliation statement of the written guarantee under Section   302A.302.          (b)  The written guarantee described by Subsection (a)(1)   must require the provider to pay the local government for any   shortfall amounts based on the results of the measurement and   verification review required under Section 302A.055.  If the   savings, increase in billable revenues, or both, resulting from a   performance contract fall short of the savings and increase in   billable revenues projected under the contract and all required   shortfall payments to the local government have not been made, the   local government may terminate the contract without incurring any   additional obligation to the provider.          (c)  A performance contract and any other contract entered   into by the local government with a provider under this chapter must   contain a prohibition against contingent fees as follows: "The   provider warrants that he or she has not employed or retained any   company or person, other than a bona fide employee working solely   for the provider to solicit or secure this agreement and that he or   she has not paid or agreed to pay any person, company, corporation,   individual, or firm, other than a bona fide employee working solely   for the provider any fee, commission, percentage, gift, or other   consideration contingent upon or resulting from the award or making   of this agreement."          (d)  A performance contract and any other contract entered   into by the local government with a provider must contain the   following provision: "The provider agrees that through the term of   the performance contract and contract amendment thereafter the   provider will maintain a compliance program and internal controls   designed to detect and deter fraudulent and corrupt conduct   through, among other things: policies and procedures to create   redundancy in the subcontractor bid review, bid normalization, bid   revision, subcontractor selection, and savings and cost review   processes."          (e)  The provision required by Subsection (c) cannot be   waived in a contract.          (f)  The performance contract must contain a provision   stating that the contract is not executory until approval is   obtained under Section 302A.111.          Sec. 302A.053.  CONTINGENCY CLAUSE FOR RELATED CONTRACT   REQUIRING SAME PROVIDER TO PERFORM CERTAIN SERVICES. (a)  This   section applies to a multiyear contract that requires a local   government to retain the same provider subject to the written   guarantee to perform annual measurement and verification review   services under Section 302A.301.          (b)  A multiyear contract to which this section applies must   contain the following contingency clause: "The continuation of this   contract is contingent upon the annual budget and appropriation of   funds by the local government to fulfill the requirements of the   contract.  If the local government fails to appropriate sufficient   money for payments to be continued under the contract, the contract   shall terminate on the last day of the fiscal year for which funds   have been allocated.  Such termination shall be without penalty or   expense to the local government except for payments which have been   earned prior to the termination date."          (c)  If a local government fails to allocate sufficient money   for payments to be continued under a multiyear contract to which   this section applies, the contract terminates on the last day of the   fiscal year for which funds have been allocated.  The local   government may not incur a penalty or be charged an expense as a   result of a termination of the contract described by this   subsection except for payments that have been earned before the   date on which the contract is terminated.          Sec. 302A.054.  BASELINE CALCULATION. (a)  A provider shall   calculate the baseline in a performance contract based on:                (1)  historical costs, revenues, accuracy, or related   components for the preceding three years for:                      (A)  an existing facility before the installation   or implementation of the conservation measures; or                      (B)  a new facility using a comparative existing   facility with a similar floor plan and identical uses; or                (2)  documentation of avoided anticipated costs of a   capital improvement or an item of equipment the local government   is:                      (A)  currently spending at the time of the   calculation; or                      (B)  has budgeted to spend in the future.          (b)  The baseline calculations of a provider may be used for   determining:                (1)  the costs for energy or water usage and related net   operation and maintenance costs;                (2)  the billable revenues from providing energy,   water, or other utilities to users; or                (3)  the efficiency or accuracy of metering or related   equipment or systems.          (c)  The provider's baseline calculations:                (1)  must identify the specific dollar amount and units   or percentages of consumption that the provider projects will be   eliminated or avoided on a long-term basis as a result of the   conservation measures that the local government is implementing;   and                (2)  if the calculation is for savings, must use and   reference as a benchmark the actual demand and energy components of   the utility rate applicable to the local government in effect at the   time of an investment grade audit, and may not use and reference a   blended rate that aggregates, combines, or restates in any manner   the distinct demand and energy components of the utility rate into a   single combined or restated utility rate.          (d)  The local government and provider may agree to make   modifications to the calculation of utility cost savings based only   on a subsequent material change to:                (1)  the baseline consumption of energy or water   identified at the beginning of the term of the performance   contract;                (2)  the utility rates;                (3)  the number of days in the utility billing cycle;                (4)  the square footage of the facility;                (5)  the operational schedule, and any corresponding   change in the occupancy and indoor temperature, of the facility;                (6)  the facility temperature;                (7)  the weather;                (8)  the amount of equipment or lighting used in the   facility; or                (9)  the nature or intensity of energy use such as the   change of classroom space to laboratory space.          (e)  Predetermined escalation rates may not be used in a   baseline calculation.          Sec. 302A.055.  MEASUREMENT AND VERIFICATION OF GUARANTEE.   (a)  Any guaranteed savings, increase in billable revenues, and, if   applicable, efficiency or accuracy of metering equipment must:                (1)  be consistent with the investment grade audit   report under Section 302A.108; and                (2)  be determined using one of the measurement and   verification methodologies listed in:                      (A)  the United States Department of Energy's   Measurement and Verification Guidelines for Energy Savings   Performance Contracts;                      (B)  the International Performance Measurement   and Verification Protocol maintained by the Efficiency Valuation   Organization; or                      (C)  Guideline 14-2022 of the American Society of   Heating, Refrigerating, and Air-Conditioning Engineers.          (b)  If none of the methodologies described by Subsection   (a)(2) are sufficient for measuring guaranteed savings due to the   existence of data limitations or the nonconformance of specific   project characteristics, the provider shall develop an alternate   method that is compatible with one of the methodologies described   by Subsection (a)(2) and mutually agreeable to the local   government.  The alternate method must be:                (1)  subject to approval under Section 302A.111; and                (2)  thoroughly documented and substantiated through   records showing that the expenses claimed are real.          Sec. 302A.056.  PAYMENT AND PERFORMANCE BOND. (a)     Notwithstanding any other law, before entering into a performance   contract, the governing body of the local government shall require   the provider of the conservation measures to file with the   governing body a payment and performance bond relating to the   installation of the conservation measures in accordance with   Chapter 2253, Government Code.          (b)  In addition to the bond required by Subsection (a), the   governing body may require the provider to file a separate bond to   cover the value of the guarantee.          Sec. 302A.057.  METER GUARANTEES. (a)  This section applies   to any performance contract that:                (1)  provides for any metering or related equipment or   systems; and                (2)  includes a meter guarantee by the provider,   regardless of whether the meter guarantee is a part of a broader   guarantee applicable to other conservation measures.          (b)  Not later than the fifth anniversary of the effective   date of a performance contract, the third-party engineer under   Section 302A.004 shall test a statistically relevant sample of the   meters installed or implemented under the contract to determine or   calculate the actual average accuracy and shall compare the actual   average accuracy to the baseline average accuracy of those tested   meters.          (c)  A meter guarantee applies if the third-party engineer   reports to the local government and the provider that the average   accuracy of the tested meters as of the testing date is less than   the baseline average accuracy of the tested meters as of the testing   date.          (d)  The amount payable under the meter guarantee, based on   the results of the third-party engineer's measurement and   verification report under Section 302A.301, must be determined for   each year subject to the provider's annual reconciliation statement   under Section 302A.302 and is equal to the difference between:                (1)  the agreed increase in billable revenues based on   the projected accuracy of all of the meters for each year, according   to the performance contract; and                (2)  the actual revenues for the same year that would   result from applying the third-party engineer's reported actual   average accuracy of the tested meters to all of the meters subject   to the performance contract, using the same contract components   that were used to calculate the agreed increase in billable   revenues for that year, assuming the annual decrease in actual   average accuracy of all the meters was a pro rata percentage of the   reported total decrease in actual average accuracy.          (e)  Notwithstanding Subsection (d), if the meter guarantee   in the contract is part of a broader guarantee applicable to other   conservation measures that is greater in value under the contract,   the amount payable under the meter guarantee for any year during the   measurement and verification period is subtracted from the   difference between:                (1)  the actual sum of the savings and the increase in   billable revenues resulting from the other conservation measures   for that year during the measurement and verification period; and                (2)  the guaranteed amount of the savings and the   increase in billable revenues from the other conservation measures   for that year during the measurement and verification period.          (f)  A test conducted under this section must be performed in   accordance with the procedures established by the International   Performance Measurement and Verification Protocol or succeeding   standards of the United States Department of Energy.          (g)  A third-party engineer conducting a test under this   section shall:                (1)  verify that the tested meters have been properly   maintained and are operating properly; and                (2)  comply with Sections 302A.110(b) and 302A.004(d).          (h)  A provider shall select both old and new meters to test   when performing an investment grade audit and developing baseline   average accuracy of existing meters to include in the investment   grade audit report.  In developing the baseline average accuracy,   the provider may not include within its guarantee calculation   meters that were inactive or out of service at the time of the   investment grade audit.  The meter guarantee may not include an   escalation factor that assumes water will increase by a certain   percentage each year.          Sec. 302A.058.  MAINTENANCE SERVICES. (a)  Subject to   Subsection (c), a local government may solicit and negotiate   maintenance services for proposed conservation measures as a   component of a request for qualifications.          (b)  Additional maintenance services:                (1)  are subject to budget appropriations of the local   government on an annual basis; and                (2)  may be discontinued at any time over the   guaranteed period with no negative impact to the performance   contract.          (c)  The local government may not be required under the terms   of a performance contract to purchase a maintenance contract or   other maintenance agreement from the provider if the local   government takes appropriate action to budget for its own forces or   another provider to maintain new systems installed pursuant to and   existing systems affected by the performance contract.  The   provider shall provide proper training and a sufficient number of   operation and maintenance manuals for all equipment replacements or   upgrades at each facility location.          (d)  A provider shall provide to the local government the   full capabilities to operate, maintain, repair, update,   reconfigure, and engineer changes necessary to accommodate   facility or operational changes or to incorporate new energy   savings control strategies for any system, including a facility   automation and control system, proposed under this chapter.  A   provider is not required under this subsection to provide the local   government with access to the operating system of the provider, but   the user interface software must provide for all capabilities   described by this subsection.          Sec. 302A.059.  USEFUL LIFE OF CERTAIN EQUIPMENT OR SYSTEM.   (a)  The useful life of an equipment or system that is to be   installed as part of a conservation measure and is acquired through   a performance contract may not exceed the useful life of the   equipment or system as determined by the maximum asset depreciation   range guidelines in effect for the Class Life Asset Depreciation   Range System established by the Internal Revenue Service under the   United States Internal Revenue Code.          (b)  If an equipment or system described by Subsection (a) is   not covered by the asset depreciation range guidelines described by   that subsection, the useful life of the equipment or system may not   exceed the useful life according to the equipment or system   manufacturer's standards.          Sec. 302A.060.  CERTAIN SAVINGS TO OFFSET COSTS OF   CONSERVATION MEASURE. Operation and maintenance cost savings   realized as the result of a performance contract may be used to   offset the costs of a conservation measure under a performance   contract, provided that the savings indicate a direct reduction   within a local government's operating and maintenance budget.  Any   projected operation and maintenance cost savings must be limited to   only those that can be thoroughly documented and substantiated   through invoices showing that the expenses claimed are real.          Sec. 302A.061.  PERFORMANCE CONTRACT CONCURRENT WITH   CONSTRUCTION CONTRACT. If a performance contract is to be executed   concurrently with one or more conventional construction contracts,   the performance contract must be separate and distinct from the   other contracts.          Sec. 302A.062.  REQUIRED PROVISION FOR CHANGE ORDER OR   CONTRACT ADDENDUM. The change order or contract addendum must   contain a provision that the change order or contract addendum, as   applicable, is not executory until approval is obtained under   Section 302A.111.   SUBCHAPTER C.  PROCUREMENT PROCEDURES FOR PERFORMANCE CONTRACTS          Sec. 302A.101.  PROCUREMENT OF PERFORMANCE CONTRACT.  A   local government must procure a performance contract under this   chapter in accordance with the procedures prescribed by this   subchapter.          Sec. 302A.102.  REQUEST FOR QUALIFICATIONS. (a)  A local   government shall issue a request for qualifications when selecting   a provider to perform any work related to a performance contract or   perform a service in connection with a performance contract. The   request for qualifications must be open to all providers before the   local government enters into an agreement for an investment grade   audit under Section 302A.108 or a performance contract.          (b)  Before issuing a request for qualifications, a local   government shall select or designate a third-party engineer to   serve as the representative and consultant in accordance with   Section 302A.004.          (c)  A person that assists the local government in preparing   a request for qualifications may not submit a response to the   request.          (d)  A prospective respondent or a prospective respondent's   representative may not communicate with a member of the governing   body or an employee of a local government who has influence in the   evaluation or selection process regarding the request for   qualifications from the time the request is published until the   request has been acted on by the governing body, except for   contacting the person identified in the request as the designated   point-of-contact.  The occurrence of an act prohibited by this   subsection will result in the prospective respondent's   disqualification from consideration.          (e)  In submitting a response to the request for   qualifications, a responding provider shall certify in writing to   the local government that neither the provider nor any of the   provider's affiliates or subcontractors or the employees of the   provider or of any of the provider's affiliates or subcontractors   have:                (1)  bribed or attempted to bribe an officer or   employee of the local government in connection with the performance   contract; and                (2)  not participated in the creation of the request   for qualifications.          (f)  A local government shall publish notice of the request   for qualifications in the same manner the local government would   publish notice of the request for a competitive bid under the law   applicable to the local government for the procurement of   contracts.  In addition, the local government may send notice of the   request for qualifications by the means most likely to reach   providers interested in responding to the request, including by   direct mail solicitation or electronic mail, or posting notice of   the request on a government Internet website.          (g)  A local government shall review, evaluate, and rank all   properly submitted responses to the request for qualifications   based on the provider's:                (1)  business qualifications;                (2)  personnel qualifications, including a list of any   subcontractors to be used by the provider;                (3)  financial qualifications, including information   that documents the sources of proposed financing and specific   projects that have used those proposed financing sources;                (4)  construction management qualifications for all   project phases;                (5)  project track record, including references from   past clients similar to the local government with respect to   project size and the project's scope; and                (6)  demonstrated ability to accomplish a performance   contract.          Sec. 302A.103.  REQUEST FOR PROPOSALS. (a)  To ensure only   qualified and capable providers are invited to submit proposals,   the local government shall create a short list of not more than five   providers who submitted responses to the request for   qualifications, ranked on the basis of demonstrated competence and   qualifications.  If, after the request for qualifications is   published, fewer than two providers have responded, the local   government may select the one respondent to conduct a preliminary   utility audit and negotiate an agreement for an investment grade   audit report.          (b)  After selecting the qualified providers from the short   list as described by Subsection (a), the local government shall   require each of the selected providers to perform a preliminary   utility audit under Section 302A.104 and to submit a written   proposal and make a presentation based on the audit. If a provider   submits a proposal that does not calculate projected savings in the   manner required by Section 302A.054, the local government shall   reject the proposal.          (c)  During the procurement process, the third-party   engineer selected or designated under Section 302A.004 shall   provide to the local government a written report containing both a   qualitative and quantitative evaluation of a provider's   qualifications and proposal.  The written report must include a   recommendation for selecting a provider, but the local government   is not obligated to follow the recommendation.          Sec. 302A.104.  PRELIMINARY UTILITY AUDIT. (a)  As provided   under Section 302A.103, each qualified provider selected from the   short list must complete a preliminary utility audit in accordance   with this section and submit a written report and proposal based on   the audit. The preliminary audit proposal shall form the basis for   a qualified provider's investment grade audit proposal under   Section 302A.108.          (b)  The preliminary utility audit must show for each   proposed conservation measure, at a minimum, a comparison of the   estimated costs and estimated project savings, increase in billable   revenues, and, if applicable, efficiency or accuracy of metering   equipment to support justification for each proposed conservation   measure.          (c)  To prepare a preliminary utility audit report, each   qualified provider selected under Section 302A.103 must be given an   equal opportunity to conduct an on-site survey of the facilities   identified in the published request for qualifications.  A site   visit must be scheduled after the date on which a request for   qualifications is issued, but not before the date the responses are   due.  During this period, the local government:                (1)  shall assist the selected qualified providers in   support of their responses through the collection of necessary   facility technical information, including by providing to each   qualified provider:                      (A)  at least three years of utility bills;                      (B)  floor plans as needed; and                      (C)  maintenance records as needed; and                (2)  may require that each selected qualified provider   attend a pre-proposal conference, conducted for the purpose of   discussing contract requirements and answering questions from   prospective providers.          (d)  A preliminary utility audit:                (1)  must be performed on a representative sample of   existing facilities; or                (2)  if the local government is considering   constructing a new facility, must be completed using comparative   existing facilities with similar floor plans and identical uses.          (e)  The preliminary utility audit must be provided at no   cost to the local government and with no obligation to select the   qualified provider to perform an investment grade audit.          (f)  For a preliminary utility audit required under this   section and before an agreement for an investment grade audit under   Section 302A.108 is executed, a local government may not require a   provider to submit:                (1)  a full engineering evaluation of the facilities;                (2)  a detailed scope of construction; or                (3)  any architectural or engineering designs.          Sec. 302A.105.  EVALUATION AND RANKING OF WRITTEN PROPOSALS.   (a)  The local government shall evaluate and rank each written   proposal submitted under Section 302A.103(b) and select the   qualified provider that submits the written proposal that offers   the best value for the local government based on the published   selection criteria and on its ranking evaluation.          (b)  Not later than the seventh business day after the date   the performance contract that is the subject of the proposal is   awarded under Section 302A.112, the local government shall make the   evaluations, including any scores, public and provide them to all   providers that were not selected.          Sec. 302A.106.  REQUIRED EVALUATION BY CERTAIN LOCAL   GOVERNMENTS BEFORE ENTERING INTO INVESTMENT GRADE AUDIT AGREEMENT.   (a)  Before entering into an agreement for an investment grade   audit:                (1)  a school district shall evaluate and determine   whether the audit or any other work reasonably required or   contemplated under a performance contract would be in compliance   with:                      (A)  Section 44.031, Education Code;                      (B)  Section 2269.056, Government Code;                      (C)  Section 271.004; and                      (D)  Subchapter B, Chapter 271;                (2)  a municipality shall evaluate and determine   whether the audit or any other work reasonably required or   contemplated under a performance contract would be in compliance   with Chapter 252; and                (3)  a county shall evaluate and determine whether the   audit or any other work reasonably required or contemplated under a   performance contract would be in compliance with Subchapter C,   Chapter 262, and Subchapter B, Chapter 271.          (b)  A school district, municipality, or county shall make   the appropriate determination required by Subsection (a) before   proceeding with the procurement process under this subchapter.          Sec. 302A.107.  NEGOTIATIONS FOR INVESTMENT GRADE AUDIT   AGREEMENT. (a)  The local government shall first attempt to   negotiate the scope of work and price for an investment grade audit   agreement with the highest ranked qualified provider under Section   302A.105.          (b)  If the local government and the highest ranked qualified   provider cannot enter into an agreement for an investment grade   audit, the local government shall, formally and in writing, end all   negotiations with that provider and proceed to negotiate with the   qualified provider in the order of the selection ranking until an   agreement is reached or negotiations with all ranked qualified   providers ends.          (c)  During the negotiation of an investment grade audit   agreement, the local government shall request the selected   qualified provider to submit to the local government the provider's   costing methodology, which:                (1)  means the provider's:                      (A)  policy on subcontractor markup;                      (B)  definition of general conditions;                      (C)  range of costs for general conditions;                      (D)  policy on retainage;                      (E)  policy on contingencies;                      (F)  discount for prompt payment; and                      (G)  expected staffing for administrative duties;   and                (2)  does not include a guaranteed maximum price or bid   for overall design or construction.          (d)  An agreement for the performance of an investment grade   audit under Section 302A.108 is the first of two contracts with the   selected qualified provider. The subsequent contract is described   by Section 302A.108(a).          Sec. 302A.108.  INVESTMENT GRADE AUDIT; REPORT. (a)     Following successful negotiations of an investment grade audit   agreement under Section 302A.107, the selected qualified provider   shall perform an investment grade audit to establish the exact   scope of work to be performed under a proposed performance   contract. The results of the audit will form the basis for   negotiating the performance contract with the local government   after presenting the audit report to the local government.          (b)  The scope of work for an investment grade audit must   include:                (1)  collecting facility information, such as data and   background information on:                      (A)  facilities;                      (B)  equipment;                      (C)  operations; and                      (D)  utility use and costs;                (2)  conducting an inventory of existing systems and   equipment, which requires a physical inspection of the facility and   an interview with a facility manager to log information on major   energy and water-using equipment;                (3)  establishing the current baseline and base year   consumption and reconciling those with end-use consumption   projections;                (4)  identifying and assessing a list of potential   conservation measures with a detailed projection of savings,   increase in billable revenues, or accuracy of metering equipment to   be obtained at the facilities as a result of the implementation of   the recommended conservation measures; and                (5)  preparing a detailed investment grade audit report   that includes:                      (A)  a proposed measurement and verification   plan;                      (B)  a sample periodic utility savings report; and                      (C)  the items described by Subsection (c).          (c)  The investment grade audit report under Subsection   (b)(5) must:                (1)  specify the total and itemization cost of each   recommended conservation measure that will comprise a proposed   performance contract, including projected costs associated with:                      (A)  the investment grade audit;                      (B)  the design of the measure;                      (C)  any engineering services;                      (D)  any financing and debt services;                      (E)  the third-party engineer services;                      (F)  annual measurement and verification   services;                      (G)  annual maintenance services;                      (H)  training of employees; and                      (I)  repairs;                (2)  identify the methods for measurement and   verification, in accordance with Section 302A.055, of the savings   or increase in billable revenues, or both, for each recommended   conservation measure;                (3)  identify all design and compliance issues that   require the professional services of an architect or engineer, and   identify the architect or engineer who will provide those services;                (4)  include a schedule of all costs, showing a   calculation of each cost of implementing the proposed conservation   measures and the projected savings, increase in billable revenues,   or increase in meter accuracy that could be realized and maximized;                (5)  list the subcontractors and vendors to be used by   the qualified provider with respect to the proposed performance   contract; and                (6)  identify maintenance requirements necessary to   ensure continued savings, an increase in billable revenues, or an   increase in meter accuracy that could be realized and maximized,   and describe how those requirements will be fulfilled.          (d)  The outcome of an investment grade audit cannot be   predetermined. The provider may not make up losses or   inefficiencies to make the cost of the performance contract project   appear budget neutral.          (e)  The cost for an investment grade audit must be based on   the cost per square footage actually audited and is intended to be   the market rate for a technical energy audit. The cost may then be   adjusted by mutual written agreement of the parties in the event   that the audited square footage is changed by either party.          (f)  If the investment grade audit report prepared by a   provider offers a guaranteed savings or increase in billable   revenues that is not materially less than the savings or revenues   estimated in the preliminary audit, the investment grade audit   report becomes, on execution of the performance contract, part of   the final performance contract, and the costs incurred by the   provider in preparing the investment grade audit report are   considered to be part of the performance contract.          (g)  If a local government decides not to enter into a   performance contract after an investment grade audit report is   prepared and the results of the audit are within 10 percent of both   the guaranteed savings and increase in billable revenues contained   in the preliminary utility audit proposal and the total proposal   amount, the local government shall reimburse the provider that   prepared the investment grade audit report the reasonable   documented costs incurred by the provider in preparing the   investment grade audit report if the local government has   specifically appropriated money for that purpose.          (h)  The results of an investment grade audit become the   property of the local government.          (i)  On completion of the investment grade audit, the   qualified provider shall submit the investment grade audit report   prepared under this section to the local government.          Sec. 302A.109.  SUBMISSION OF PROPOSAL FOR PERFORMANCE   CONTRACT; NEGOTIATIONS.  (a)  After acceptance by the local   government of an investment grade audit report submitted by the   qualified provider under Section 302A.108, the qualified provider   may submit a proposal for a performance contract to the local   government. The local government may then negotiate a performance   contract with the qualified provider.          (b)  On successful negotiation of a performance contract,   the local government shall require the third-party engineer to   review the investment grade audit report and supporting   documentation in accordance with Section 302A.110.          (c)  Prior to the award of any performance contract, the   local government shall submit the required documents and obtain   approval in accordance with Section 302A.111.          Sec. 302A.110.  REVIEW BY THIRD-PARTY ENGINEER; REPORT.  (a)     Before obtaining approval of a proposed performance contract as   required by Section 302A.111, the local government shall require   the third-party engineer selected or designated under Section   302A.004 to review the investment grade audit report and supporting   documentation as well as any subsequent change order, contract   addendum, or other amendment to the proposed contract. The   third-party engineer must verify that the proposed performance   contract, the investment grade audit report, and the measurement   and verification plan present a cohesive package that fully   describes the intended scope of services.          (b)  In conducting the review under Subsection (a), the   third-party engineer shall provide the local government with a   written opinion evaluating and validating the methodology and   calculations related to cost savings, increase in billable   revenues, and, if applicable, efficiency or accuracy of metering   equipment associated with each proposed conservation measure   identified in the investment grade audit report that will become   part of the final performance contract. The third-party engineer   may recommend that the local government not enter into the   contract.          (c)  In identifying and developing potential utility cost   reduction projects, the third-party engineer must certify that the   documents described by Subsection (a) have been reviewed and are   complete.          Sec. 302A.111.  REVIEW BY STATE AGENCY. (a)  Before awarding   a performance contract, a contract for third-party financing, or a   combination of both, a local government shall submit the proposed   contract to the Texas Water Development Board and the State Energy   Conservation Office for review and approval in accordance with this   section. The Texas Water Development Board and the State Energy   Conservation Office shall review the documents submitted and   evaluate the economic assumptions that purportedly support the   implementation of each conservation measure.          (b)  The Texas Water Development Board shall evaluate the   technical and economic feasibility of each proposed water-related   conservation measure in the proposed performance contract,   including any metering or related equipment, system, or process or   procedure, and either approve or disapprove each of those proposed   conservation measures.          (c)  The State Energy Conservation Office shall evaluate the   technical and economic feasibility of each conservation measure in   the proposed contract that is not water related and either approve   or disapprove each of those proposed conservation measures.          (d)  In addition to the submission of a final proposed   performance contract under Subsection (a), the local government   must submit:                (1)  the final investment grade audit report under   Section 302A.108;                (2)  a proposed measurement and verification plan;                (3)  a sample periodic utility savings report;                (4)  the written certifications listed under   Subsection (f); and                (5)  any other relevant documents determined necessary   by the Texas Water Development Board or the State Energy   Conservation Office, as applicable, to streamline the review.          (e)  In conducting an evaluation under this section, the   Texas Water Development Board and the State Energy Conservation   Office shall make their determination on the basis of a review of:                (1)  the project's scope and whether it is appropriate   for a performance contract, including a conservation measure's use   of capital cost avoidance savings in accordance with state law;                (2)  the project's compliance with applicable   provisions of this chapter;                (3)  the written certifications of the following that   are required under Subsection (f) and other provisions of this   chapter:                      (A)  members of the governing body of the local   government;                      (B)  the provider;                      (C)  any subcontractors of the provider; and                      (D)  the third-party engineer;                (4)  the methodology and calculations related to cost   savings, increase in billable revenues, and, if applicable,   efficiency or accuracy of metering equipment; and                (5)  the financing mechanism and proper financing   documentation, and the availability of local funds to pay for   conservation measures that will use capital cost avoidance savings.          (f)  To obtain approval for the proposed performance   contract, the local government shall submit the following written   certifications for review as provided by this section:                (1)  each member of the governing body shall certify   that in lieu of competitive bidding or competitive sealed proposals   for construction services under a public work contract, the   performance contract was procured under a request for   qualifications process in accordance with this subchapter;                (2)  the provider shall certify that neither the   provider nor any of the provider's affiliates or subcontractors,   employees of the provider or the provider's affiliates, or   subcontractors has bribed, or attempted to bribe, an official or   employee of the local government in connection with the performance   contract and has not participated in the creation of the request for   qualifications for the performance contract;                (3)  the provider or any third-party engineer   contracted to perform a measurement and verification review shall   certify that the methodologies for determining savings, increase in   billable revenues, and, if applicable, efficiency or accuracy of   metering equipment will be performed in accordance with Section   302A.055; and                (4)  the third-party engineer shall certify that the   engineer is free from financial interest in the provider of the   performance contract that conflicts with the proper completion of   work associated with the performance contract.          (g)  The Texas Water Development Board and the State Energy   Conservation Office shall complete their review and provide their   approval or disapproval not later than the 30th business day after   the date of receiving a complete proposed performance contract.   Submission of an incomplete contract may result in delayed review   and approval.          (h)  The Texas Water Development Board and the State Energy   Conservation Office may charge a reasonable fee for conducting a   review under this section, and the payment of the fee may be   included in the financing for the performance contract.          (i)  A local government that fails to provide documentation   required by the State Energy Conservation Office or the Texas Water   Development Board in accordance with this section may not engage in   further performance contracts until the documentation has been   provided.          (j)  The Texas Water Development Board and the State Energy   Conservation Office may adopt rules necessary to implement this   section.          Sec. 302A.112.  AWARDING OF PERFORMANCE CONTRACT. (a)  On   receiving notice of approval from the state under Section 302A.111   and subject to Section 302A.113, a local government shall enter   into the performance contract with the qualified provider for the   work, including any construction work, identified in the investment   grade audit report.          (b)  The local government shall provide a copy of the   executed performance contract and corresponding addendums to the   State Energy Conservation Office not later than the 30th day after   the effective date of the contract.          Sec. 302A.113.  MEETING TO ANNOUNCE AWARD OF PERFORMANCE   CONTRACT; NOTICE.  A local government shall hold a meeting to   announce the awarding of a performance contract. Public notice of   the meeting must be provided before the design and implementation   of the conservation measures begin. The notice must include:                (1)  the names of all potential parties to the proposed   performance contract;                (2)  a description of the conservation measures   included in the performance contract; and                (3)  an explanation of how the conservation measures   will:                      (A)  be financed; and                      (B)  generate savings or increase billable   revenues sufficient to pay for the cost of the conservation   measures.          Sec. 302A.114.  CHANGE ORDER AND CONTRACT ADDENDUM SUBJECT   TO SAME REVIEW PROCESS. Each change order or contract addendum to a   performance contract is subject to the same review and approval   requirements of the performance contract under Sections 302A.110   and 302A.111.          Sec. 302A.115.  PROCUREMENT OF SUPPLIES, EQUIPMENT, AND   MATERIAL.  (a)  This subsection does not apply to the purchase of   construction-related goods in an amount greater than $50,000, which   must comply with Section 791.011(j), Government Code.          (b)  A local government may contract for the purchase of   supplies, materials, or equipment by using contracts that are   available through the state's cooperative purchasing program under   Subchapter D, Chapter 271.          Sec. 302A.116.  PROCUREMENT OF CERTAIN CONSTRUCTION-RELATED   SERVICES.  (a)  This section applies to the purchase of a   construction-related service from a provider under a performance   contract in an amount that exceeds $50,000.          (b)  A local government may not use a purchasing cooperative   under Chapter 791, Government Code, or a local cooperative   organization under Subchapter F, Chapter 271, of this code for the   purchase of a preliminary utility audit, investment grade audit,   architectural services, design services, or engineering services   from a provider under a performance contract.   SUBCHAPTER D. METHOD OF FINANCING; PAYMENTS; USE OF FUNDS          Sec. 302A.151.  METHOD OF FINANCING. (a)  The financing of a   performance contract may be provided by the provider or an   independent third-party. The contract for third-party financing   may be separate from the performance contract.          (b)  A performance contract may be financed:                (1)  under a lease-purchase contract that has a term   not to exceed 20 years from the final date of installation of the   conservation measures and that meets federal tax requirements for   tax-free municipal leasing or long-term financing;                (2)  with the proceeds of bonds; or                (3)  under a contract with the provider of the   conservation measures that has a term not to exceed the lesser of 20   years from the final date of installation of the conservation   measures or the average useful life of the conservation measures.          Sec. 302A.152.  REQUIRED PROVISION FOR SEPARATE CONTRACT FOR   THIRD-PARTY FINANCING.  A separate contract for third-party   financing must include a provision that the third-party financier   may not be granted rights or privileges that exceed the rights and   privileges available to the provider of the performance contract.          Sec. 302A.153.  PAYMENTS TO PROVIDERS. (a)  Subject to   Subsection (b), the governing body of a local government may pay the   provider of a conservation measure, including payment of finance   charges, solely out of the savings or increase in billable revenues   realized by the local government under the performance contract.          (b)  A payment to the provider must be based on the   percentage of project completion, and not on a pre-established   schedule.          Sec. 302A.154.  ANNUAL BUDGET AND APPROPRIATIONS; USE OF   FUNDS DESIGNATED FOR CERTAIN EXPENDITURES. The governing body of a   local government may:                (1)  include in its annual budget and appropriations   the amounts payable under a performance contract, including the   amount payable under an installment payment contract or   lease-purchase contract financing the contract; and                (2)  use funds designated for utilities expenditures,   operation and maintenance expenditures, and capital expenditures   for purchases on an installment payment or lease purchase basis,   provided that the use is consistent with the purpose of the   appropriation.          Sec. 302A.155.  USE OF FUNDS RESULTING FROM EXCESS   GUARANTEED SAVINGS OR INCREASE IN BILLABLE REVENUES. A local   government may use excess actual guaranteed savings or increase in   billable revenues revealed by an annual reconciliation statement   under Section 302A.302 throughout the term of a performance   contract to reinvest in other conservation measures within the   scope of the performance contract through a change order or   contract addendum as authorized under this chapter.          Sec. 302A.156.  CAPITAL COST AVOIDANCE SAVINGS. (a)  The use   of capital cost avoidance savings are subject to the limitations   specified by Subsection (b).          (b)  The amount of expenditures to be paid from capital cost   avoidance savings under a performance contract:                (1)  may not exceed 50 percent of the total project   cost; and                (2)  are limited to payment for permanent equipment or   retrofits for:                      (A)  storm windows or doors, multiglazed windows   or doors, heat-absorbing or heat-reflective glazed and coated   window or door systems, or other window or door system   modifications;                      (B)  heating, ventilating, or air-conditioning   major components or system modifications or replacements;                      (C)  new lighting fixtures that are required to   achieve standards published by the Illuminating Engineering   Society of North America, provided the existing light fixtures have   been determined to be obsolete and incapable of achieving these   standards that increase energy efficiency;                      (D)  life safety system replacements or upgrades   that have been determined to be necessary to conform with existing   state and local codes and standards; or                      (E)  roof retrofits that are part of a larger   conservation measure, including solar, where the replacement is   necessary for the installation of the conservation measure and the   local government determines that replacement of more than 20   percent of the roof is necessary for the installation of the   conservation measure.   SUBCHAPTER E. WORK PERFORMED UNDER PERFORMANCE CONTRACT          Sec. 302A.201.  SUBCONTRACTORS FOR AUTHORIZED WORK UNDER   PERFORMANCE CONTRACT. (a)  A provider may be designated as the   general contractor or prime contractor for the installation or   implementation of any authorized work under a performance contract,   including any improvements to be made pursuant to the performance   contract, provided that a subcontractor contracting with the   provider for that purpose:                (1)  is experienced in the design, installation, or   implementation of the conservation measures agreed to between the   provider and local government; and                (2)  submits to the local government all written   certifications required under this chapter.          (b)  During the negotiation of a performance contract, the   provider shall submit to the local government a list of   subcontractors the provider intends to use and disclose whether a   subcontractor on the list is a subsidiary or wholly owned or   partially owned affiliate of the provider. The provider shall   update the disclosure during the term of the performance contract.          (c)  A subsidiary or wholly owned or partially owned   affiliate of a provider may not be an eligible contractor or   subcontractor under a performance contract unless:                (1)  an analysis provided to the local government   demonstrates that there is an economic advantage to the local   government in having such contractor or subcontractor perform work   as part of the performance contract; and                (2)  the local government determines that having such   contractor or subcontractor perform work as part of the performance   contract provides the best value for the local government.          Sec. 302A.202.  WORK RELATED OR ANCILLARY TO CONSERVATION   MEASURES. (a)  The governing body of the local government may   contract with a provider to perform work that is related to,   connected with, or otherwise ancillary to the conservation measures   resulting in utility cost savings and in operation and maintenance   cost savings as identified in the scope of a performance contract.          (b)  Additional work authorized under this section may not   increase the square footage of a facility unless the increase is   necessary to make a mechanical, electrical, or plumbing improvement   to achieve a reduction in energy consumption or to conserve water   resources.          (c)  A change order, contract addendum, or other amendment   for any additional conservation measures described by Subsection   (a) must be reasonably required or contemplated under the   investment grade audit under Section 302A.108 used to propose the   original performance contract.          Sec. 302A.203.  LIMITATION ON MODIFICATION TO SCOPE OF   PERFORMANCE CONTRACT. The scope of a performance contract may not   be modified by change order, contract addendum, or other method of   contract:                (1)  to perform work that is not related to, connected   with, or otherwise ancillary to the conservation measures described   by Section 302A.202;                (2)  in a way that increases the price of the original   awarded contract by more than 25 percent of the original contract   value; or                (3)  to perform work that would cause the annual   savings and increase in billable revenues resulting from the   performance contract to be less than the total annual contract   payments made by the local government, including any financing   charges or debt service to be incurred by the local government over   the term of the contract.          Sec. 302A.204.  LAW APPLICABLE TO ENGINEERING SERVICES   PERFORMED UNDER PERFORMANCE CONTRACT. Sections 1001.053 and   1001.407, Occupations Code, apply to work performed under a   performance contract.   SUBCHAPTER F. FRAUD DETERRENCE PROGRAM          Sec. 302A.251.  COMPLIANCE PROGRAM AND INTERNAL CONTROL TO   DETECT AND DETER FRAUD. (a)  A provider that enters into a   performance contract under this chapter shall maintain a compliance   program and internal controls designed to detect and deter   fraudulent and corrupt conduct, including:                (1)  policies and procedures to create redundancy in   the subcontractor bid review, bid normalization, bid revision, and   selection process; and                (2)  savings and cost review processes.          (b)  The policies and procedures described by Subsection   (a)(1) must specifically correct or prevent the circumstances that   would allow a single employee to control the subcontractor   selection process and obtain kickbacks or bribes either directly   from subcontractors and vendors or indirectly through   intermediaries in connection with the performance contract.          (c)  If necessary and appropriate, a provider shall modify an   existing compliance contract to ensure that the provider maintains   a rigorous compliance program that incorporates relevant internal   controls, policies, and procedures designed to effectively detect   and deter violation of fraud, anti-corruption, procurement   integrity, and anti-kickback laws.   SUBCHAPTER G. ANNUAL REPORTS AND STATEMENTS          Sec. 302A.301.  ANNUAL MEASUREMENT AND VERIFICATION REVIEW;   REPORT.  (a)  During the term of a performance contract and at the   discretion of the local government, a local government shall retain   the provider or an independent third-party to perform an annual   measurement and verification review of, and prepare a report on,   savings, increase in billable revenues, and, if applicable,   efficiency or accuracy of metering equipment resulting from the   conservation measures when compared with the established baseline   set forth in the performance contract.          (b)  The measurement and verification review and report must   comply with the measurement and verification methodologies   described by Section 302A.055(a)(2) that were published or listed   on the date the performance contract was entered into between the   local government and provider. An independent third-party retained   under this section must:                (1)  have the qualifications of a third-party engineer   as described by Section 302A.004(b); and                (2)  be retained under a separate contract from the   third-party engineer selected under Section 302A.004.          Sec. 302A.302.  ANNUAL RECONCILIATION STATEMENT. (a)     Pursuant to Section 302A.052(a)(2), the provider shall provide an   annual reconciliation statement of the guaranteed savings or   increase in billable revenues based on the results of the   measurement and verification review under Section 302A.301. The   statement must disclose any shortfall or surplus between guaranteed   savings or increase in billable revenues specified in the   performance contract and actual, not stipulated, savings incurred   during a given guarantee year as described by Subsection (b). If   the annual reconciliation statement reveals an excess actual   guaranteed savings or excess increase in billable revenues in a   given year, the surplus may not be used to cover any shortfalls in   subsequent contract years.          (b)  A guarantee year consists of a 12-month term beginning   on the date all the conservation measures become fully operational.          (c)  A provider shall pay the local government any shortfall   amount not later than the 30th day after the date the total year   savings have been determined.   SUBCHAPTER H. ENFORCEMENT          Sec. 302A.351.  VIOLATION OF PERFORMANCE CONTRACT PROVISION   CONTAINING PROHIBITION AGAINST CONTINGENCY FEES. If a provider   violates the provision of a performance contract described by   Section 302A.052(c), the local government may:                (1)  terminate the contract without liability; and                (2)  at the local government's discretion, deduct from   the contract price, including any finance charges subject to the   contract, or otherwise recover, the full amount of the fee,   commission, percentage, gift, or consideration.          Sec. 302A.352.  CRIMINAL OFFENSES. (a) In this section,   "person" means an individual, corporation, association,   partnership, firm, or company.          (b)  A person, including an employee working for the   provider, commits an offense if the person offers, agrees, or   contracts to solicit or secure a performance contract or   subcontract related to the performance contract for any other   person and the person is paid or to be paid any fee, commission,   percentage, gift, or other consideration contingent on, or   resulting from, the awarding or making of a performance contract.          (c)  A person commits an offense if the person offers to pay,   or pays, any fee, commission, percentage, gift, or other   consideration contingent on, or resulting from, the awarding or   making of a performance contract.          (d)  A local government official commits an offense if the   official offers to solicit or secure, or solicits or secures, a   performance contract between the local government and a person and   the official is to be paid, or is paid, any fee, commission,   percentage, gift, or other consideration contingent on the awarding   or making of the performance contract.          (e)  A person who is a local government employee or   contractor with any influence on the awarding or making of a   performance contract commits an offense if the person offers to   solicit or secure, or solicits or secures, a performance contract   and the person is to be paid, or is paid, any fee, commission,   percentage, gift, or other consideration contingent on the awarding   or making of a performance contract between the local government   and another person.          (f)  An offense under this section is a felony of the second   degree.          (g)  If conduct that constitutes an offense under this   section also constitutes an offense under another law, including   money laundering under Chapter 34, Penal Code, the actor may be   prosecuted under this section, the other law, or both.          Sec. 302A.353.  ENFORCEMENT BY ATTORNEY GENERAL AND LOCAL   PROSECUTORS. With the consent of the appropriate local county or   district attorney, the attorney general has concurrent   jurisdiction with that consenting local prosecutor to prosecute an   offense under Section 302A.352.          Sec. 302A.354.  DECLARATORY OR INJUNCTIVE RELIEF.  This   chapter may be enforced through an action for declaratory or   injunctive relief filed not later than the 10th day after the date   on which the contract is awarded.          SECTION 2.  Article 59.01(2), Code of Criminal Procedure, is   amended to read as follows:                (2)  "Contraband" means property of any nature,   including real, personal, tangible, or intangible, that is:                      (A)  used in the commission of:                            (i)  any first or second degree felony under   the Penal Code;                            (ii)  any felony under Section 15.031(b),   21.11, or 38.04 or Chapter 29, 30, 31, 32, 33, 33A, or 35, Penal   Code;                            (iii)  any felony under Chapter 43, Penal   Code, except as provided by Paragraph (B);                            (iv)  any felony under The Securities Act   (Title 12, Government Code); or                            (v)  any offense under Chapter 49, Penal   Code, that is punishable as a felony of the third degree or state   jail felony, if the defendant has been previously convicted three   times of an offense under that chapter;                      (B)  used or intended to be used in the commission   of:                            (i)  any felony under Chapter 481, Health   and Safety Code (Texas Controlled Substances Act);                            (ii)  any felony under Chapter 483, Health   and Safety Code;                            (iii)  a felony under Chapter 151, Finance   Code;                            (iv)  any felony under Chapter 20A or 34,   Penal Code;                            (v)  a Class A misdemeanor under Subchapter   B, Chapter 365, Health and Safety Code, if the defendant has been   previously convicted twice of an offense under that subchapter;                            (vi)  any felony under Chapter 32, Human   Resources Code, or Chapter 31, 32, 35A, or 37, Penal Code, that   involves a health care program, as defined by Section 35A.01, Penal   Code;                            (vii)  a Class B misdemeanor under Chapter   522, Business & Commerce Code;                            (viii)  a Class A misdemeanor under Section   306.051, Business & Commerce Code;                            (ix)  any offense under Section 42.10, Penal   Code;                            (x)  any offense under Section 46.06(a)(1)   or 46.14, Penal Code;                            (xi)  any offense under Chapter 71, Penal   Code;                            (xii)  any offense under Section 20.05,   20.06, 20.07, 43.04, or 43.05, Penal Code;                            (xiii)  an offense under Section 326.002,   Business & Commerce Code; or                            (xiv)  a Class A misdemeanor or any felony   under Section 545.420, Transportation Code, other than a Class A   misdemeanor that is classified as a Class A misdemeanor based   solely on conduct constituting a violation of Subsection (e)(2)(B)   of that section;                      (C)  the proceeds gained from the commission of a   felony listed in Paragraph (A) or (B) of this subdivision, a   misdemeanor listed in Paragraph (B)(vii), (ix), (x), (xi), or (xii)   of this subdivision, or a crime of violence;                      (D)  acquired with proceeds gained from the   commission of a felony listed in Paragraph (A) or (B) of this   subdivision, a misdemeanor listed in Paragraph (B)(vii), (ix), (x),   (xi), or (xii) of this subdivision, or a crime of violence;                      (E)  used to facilitate or intended to be used to   facilitate the commission of a felony under Section 15.031 or   Chapter 43, Penal Code; [or]                      (F)  used to facilitate or intended to be used to   facilitate the commission of an offense under Section 20.05, 20.06,   or 20.07 or Chapter 20A, Penal Code; or                      (G)  the proceeds gained from the commission of an   offense under Section 302A.352(b), (c), (d), or (e), Local   Government Code.          SECTION 3.  The following laws are repealed:                (1)  Section 44.901, Education Code; and                (2)  Chapter 302, Local Government Code.          SECTION 4.  The changes in law made by this Act apply to a   contract entered into or amended or modified on or after the   effective date of this Act.  A contract entered into or amended or   modified before the effective date of this Act is governed by the   law in effect on the date the contract was entered into or amended   or modified, and the former law is continued in effect for that   purpose.          SECTION 5.  This Act takes effect September 1, 2023.