SECTION 27.9. Sanctions

(a) Procedure.

(1) Notification of rules. A copy of this section will be included in each request for qualifications, request for proposals, and request for competing proposals and qualifications issued under this subchapter. Failure to comply with this subsection does not affect the applicability of this section.

(2) Referral to executive director. In determining whether to refer a private entity to the executive director for possible sanctions, the department will consider the criteria set forth in subsection (c)(3) of this section.

(3) Notice of sanctions. The department will notify the private entity of a sanction by certified mail within five days after the executive director's decision to impose the sanction. The notice will summarize the facts and circumstances underlying the sanction, identify the effective date and period of the sanction, and state that the private entity may petition for a hearing within 10 days after receiving notice of the sanction. Except as provided in subsection (b) of this section, a sanction is effective on the date specified in the notice.

(4) Agreed modification of procedure. The procedure for considering a sanction may be modified by agreement of the executive director and the private entity.

(5) Contractual obligations unaffected. The imposition of sanctions does not affect a private entity's obligations under a comprehensive development agreement or any other agreement with the department or limit the commission's contractual remedies thereunder.

(6) Affiliated entities included. References to the term "private entity" also include an affiliate of the private entity, provided that the affiliate is an entity:

(A) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the private entity or any of its members, partners, or shareholders holding a 10% or greater interest in the private entity; or

(B) for which 10% or more of the equity interest in such entity is held directly or indirectly by the private entity, any of the private entity's members, partners or 10% or greater shareholders or any affiliate of the private entity under subparagraph (A) of this paragraph.

(7) Responsibility for acts of others. The conduct of an individual or other entity acting on behalf of the private entity may be imputed to the private entity.

(b) Opportunity for hearing.

(1) Availability of hearing. The private entity will be given the opportunity for a hearing after receiving notice of a sanction and may petition for a hearing as provided in §1.21 et seq. of this title (relating to Procedures in Contested Cases). The petition must be filed within 10 days after the private entity receives notice of the sanction.

(2) Stay of sanctions pending hearing. A sanction, except a suspension, is automatically stayed from the date a petition for hearing is filed until a final order is entered by the commission. On entry of a final order imposing the sanction or dismissing the hearing, the full term of the sanction will be reinstated as if it were first imposed on the date of the final order unless the commission specifically orders that a lesser sanction be imposed.

(3) Commission discretion. In the public interest, the commission may reduce, eliminate, or modify sanctions imposed under this section at any time.

(4) Exception. The opportunity for a hearing described in subsection (b)(1) of this section does not apply to a private entity that has been sanctioned though the use of a reprimand. In such cases, the private entity may submit written documentation disputing the reprimand to the executive director for further consideration.

(c) Application of sanctions.

(1) Determination of offense. The executive director will determine whether a private entity has committed an act or omission listed under subsection (e)(1) of this section.

(2) Consideration of all circumstances. The existence of grounds for imposing a sanction does not mandate that a private entity be sanctioned. The seriousness of the acts or omissions (including the existence of and elapsed time since previous acts or omissions) and any mitigating circumstances will be considered before sanctions are imposed.

(3) Mitigating circumstances. The executive director will consider mitigating circumstances (or lack thereof) in deciding whether to impose sanctions. Mitigating circumstances may include:

(A) the private entity's culpability;

(B) the level of impact the sanction will have on a particular comprehensive development agreement project;

(C) whether, in light of all facts and circumstances, a severe sanction is necessary to protect the interest of the state and the integrity of the comprehensive development agreement program;

(D) restitution paid by the private entity or a third party for damages suffered by a governmental entity as a result of the private entity's actions;

(E) cooperation by the private entity with a governmental entity in the investigation of bidding crimes, including the provision of a full and complete account of the private entity's involvement; and

(F) the private entity's disassociation from individuals and firms that have been involved in a bidding crime.

(4) Determination of sanction level. The executive director, after consideration of all circumstances (including any mitigating circumstances) will determine a sanction level described in subsection (e)(2) of this section to be imposed on the private entity.

(5) Progressive sanctions. If the private entity has previously been sanctioned, the executive director may use increasingly more severe sanctions in order to achieve the private entity's compliance with department policies and procedures. Every effort will be made to resolve the situation with the imposition of the least severe sanction that is appropriate for the circumstances under consideration. However, in cases where the act or omission is of such a nature that progressive sanction action is not in the best interest of the state or the comprehensive development agreement program, a more severe sanction may be imposed even if such act or omission is the first act or omission by the private entity which warrants sanction action.

(6) Consecutive sanctions. In the case of multiple violations by the same private entity arising out of separate occurrences, the executive director may impose multiple sanctions consecutively and in any order.

(7) Imposition of lesser sanctions. A lesser sanction may be imposed instead of the maximum sanction permitted.

(8) Executive director discretion. In the best interest of the state or the comprehensive development agreement program, the executive director may reduce, eliminate, or modify sanctions at any time.

(d) Suspension.

(1) Grounds. The executive director may immediately suspend a private entity without a prior hearing if the private entity is notified of debarment under subsection (e) of this section.

(2) Duration. A suspension will terminate when a final order is entered after a hearing or when ordered by the executive director.

(e) Sanctions.

(1) Grounds. The executive director may sanction a private entity for the following reasons:

(A) conviction of a bidding crime as defined in §9.101 of this title (relating to Contractor Sanctions), a plea of guilty or nolo contendere to a charge of a bidding crime, or a public admission to a bidding crime, whether made by the private entity or by an individual or other entity that acted on behalf of the private entity;

(B) conviction of the private entity for an offense indicating a lack of moral or ethical integrity, such as bribery or payment of kickbacks or secret rebates to agents of a governmental entity, if the offense reflects on the business practices of the private entity;

(C) commission of acts indicating a lack of moral or ethical integrity and reflecting on the business practices of the private entity, if the executive director has probable cause to believe that the acts have been committed;

(D) disqualification of the private entity by a state or by an agency of the federal government for any of the reasons listed in this section;

(E) failure of the private entity to notify the department promptly of a conviction of a bidding crime or debarment for any reason by a state or by an agency of the federal government;

(F) the private entity is declared in default on a comprehensive development agreement in accordance with the terms of that agreement;

(G) violation of the conflict of interest provisions applicable to private entities participating in the department's comprehensive development agreement program as set forth in §27.8 of this subchapter (relating to Conflict of Interest and Ethics Policies);

(H) violation of the provision relating to offering, conferring, or agreeing to confer gifts and benefits to department employees as set forth in §27.8 of this subchapter; or

(I) any other grounds described in §9.106(a) of this title (relating to Contractor Sanctions) exist.

(2) Sanction levels. The executive director will determine the level of sanction appropriate for the circumstances under consideration.

(A) Level 1. Reprimand. After four reprimands in one calendar year, any subsequent act or omission committed by the private entity will result in the imposition of a more severe sanction.

(B) Level 2. Prohibition against the private entity's participation in a particular procurement.

(C) Level 3. Debarment of the private entity for a period of no more than 36 months.

(D) Level 4. Permanent debarment of the private entity.

(3) Exception. Debarment under paragraph (2)(D) of this subsection may not be for more than the period of debarment established by the state or federal agency on whose actions the debarment is based.

(4) Use of sanction information. Information pertaining to any sanction(s) imposed against a private entity may be considered by the department during the evaluation of qualification submittals and other proposals submitted by the private entity during a procurement process. Use of this information is limited to sanction action(s) which occurred within 10 years of the date the qualification submittal or other proposal is received by the department.

Source Note: The provisions of this §27.9 adopted to be effective May 17, 2007, 32 TexReg 2670