Authority/Reference(s) Texas Government Code §2260; §2009
Revision Date September 1, 2021


In accordance with Texas Government Code §2260 and §2009 DFPS’ dispute resolution processes are in place to resolve contract disputes.

Contract dispute resolution is used when:

  • A contractor makes a claim for breach of contract against DFPS
  • When DFPS makes a claim for breach of contract against the contractor, or
  • When the dispute cannot be resolved in the ordinary course of business

Contract dispute resolution does not apply to non-financial contracts or to any claims for personal injury or wrongful death arising from a breach of contract.

If a contractor chooses to pursue the formal contract dispute resolution process, then the contractor must submit the claim of breach of contract, in writing, for dispute resolution.

  • A claim of breach of contract must be in writing from an authorized representative of the contractor, provided/delivered to DFPS no later than 180 calendar days after the date of the event that the contractor asserts is the basis of the claim.
  • Acceptable forms of submission include hand delivery, certified mail-return receipt requested, or other verifiable delivery service to DFPS. A contractor may also provide a courtesy email to DFPS as long as the contractor also sends the notice through a verifiable delivery service.
  • The claim of breach of contract must state the nature of the alleged breach of contract, the amount that the contractor seeks as damages, and the legal theory of recovery (i.e., breach of contract).

The contractor's claim for breach of contract must be submitted to a qualified third party for the contract dispute resolution process prior to the contractor or DFPS proceeding to a contested case hearing before the State Office of Administrative Hearings (SOAH). 

The requirements of Texas Government Code §2260 apply when the contractor claims that DFPS breached the contract and that the parties cannot resolve the matter in the ordinary course of business. 

Timeframe for Completion of the Contract Dispute Resolution Process

  • The parties must begin the negotiations no later than 120 days after DFPS receives the contractor's notice of claim, subject to one or more extensions agreed upon by the parties.
  • The parties may agree, in writing, on or before the 270th day after DFPS receives the contractor's notice of claim to extend the time for negotiations.
  • When parties are unable to resolve any claims, the contractor may request a contested case hearing before SOAH after the 270th day after DFPS receives the contractor's notice of claim, or the expiration of any extension agreed to by the parties.

Contract Dispute Resolution Process

The DFPS Commissioner, or designee, has the authority to appoint or designate the authority to appoint the DFPS representatives in the contract dispute resolution process. The DFPS negotiator should be identified to the contractor and the contractor identifies its negotiator. If the contractor has an attorney involved in any negotiation, mediation, or other communication related to the claim, DFPS must have a DFPS attorney involved.

To start the contract dispute resolution process, the claim is reviewed and negotiations are begun to attempt to resolve the claim and, if applicable, the counterclaim.

To facilitate an evaluation and negotiation of the claim and any counterclaim, the parties may exchange relevant documents that support the respective claims, defenses, counterclaims, or positions. The negotiators must consider all legally defendable and reasonable options in the efforts to resolve the issue. When consensus has been reached, the DFPS negotiator formulates the essential terms of the agreement and documents these in the settlement agreement.

An agreement must be signed by each party's representative who has the authority to bind their respective party, and the parties may mutually agree in writing to extend the statutory negotiation period for any unresolved portion of the dispute.

Each party is responsible for its own costs incurred in connection with the negotiation of the claim(s), including without limitation, the costs of attorneys' fees, consultants' fees, and experts' fees.