(a) Conflicts of interests and standards of conduct for TDMHMR employees and officers.      
        (1) Conflicts of interest. TDMHMR employees and officers may not have a conflict of interest in contracts management. An employee or officer has a conflict of interest when the employee, officer, or a person related within the second degree of consanguinity or affinity to the employee or officer, intends to have or has:                  (A) actual employment with a respondent or contractor;                   (B) paid consultation with a respondent or contractor;                   (C) membership on a respondent's or contractor's board of directors;                   (D) ownership of 10% or more of the voting stock of shares of  a respondent or contractor;                   (E) ownership of 10% or more or $5,000 or more of the fair market value of a respondent or contractor; or                   (F) received funds from a respondent or contractor in excess of 10% of the employee's, officer's, or related person's gross income for the previous year.         
        (2) Standards of conduct.                  (A) TDMHMR employees and officers who participate in contracts management may not:                      (i) accept or solicit any gift, favor, service, or benefit from a respondent or contractor that might reasonably tend to influence the officer or employee in the discharge of official duties relating to contract management, or that the officer or employee knows or  should know is being offered with the intent to influence the officer's or employee's official duties; or                       (ii) intentionally or knowingly solicit, accept, or agree to accept any benefit for having exercised official powers or for having performed official duties in favor of another respondent or contractor.                     (B) TDMHMR employees who participate in contracts management shall comply with additional standards of ethical conduct contained in the TDMHMR Ethics Operating Instruction (417-16) and applicable state law.         
      (b) Conflicts of interests and standards of conduct for a respondent and its officers and employees.      
        (1) Conflict of interest. A respondent and its officers  and employees may not have a conflict of interest in the solicitation for which the respondent submits a response. A person has a conflict of interest when that person is related within the second degree of consanguinity or affinity to a TDMHMR employee or officer participating in the contract management for that contract.       
        (2) Standards of conduct.                  (A) A respondent may not attempt to induce any business entity to submit or not submit a response.                   (B) A respondent must arrive at its response independently and without consultation, communication, or agreement for the purposes of restricting competition.                   (C) A respondent and its officers and employees may not have a relationship  with any person, at the time of submitting the response or during the contract term, that may interfere with fair competition.                   (D) A respondent and its officers and employees may not participate in the development of specific criteria for award of the contract, nor participate in the selection of the business entity to be awarded the contract.         
      (c) When contracting with former and retired employees and officers, TDMHMR must ensure compliance with applicable state law, including the Texas Government Code, §572.054, §659.0115, and §2252.901.     
      (d) Except for the contracts management of construction contracts and performance contracts, all contracts management must be conducted in  accordance with the requirements of the             TDMHMR Contracts Manual.      
      (e) All contracts must contain standard terms and conditions as described in the             TDMHMR Contracts Manual            unless an exception is granted by CC&PS.     
      (f) TDMHMR is prohibited from contracting with a business entity that:      
        (1) is held in abeyance or barred from the award of a federal or state contract;       
        (2) is not in good standing for state tax, pursuant to the Texas Business Corporation Act, Texas Civil Statutes, Article 2.45;       
        (3) is not residing or located in Texas unless the business entity has a Texas sales tax permit or certifies that the entity does not sell taxable  goods or services within Texas, pursuant to the Texas Government Code, §2155.004;       
        (4) is on warrant hold status, pursuant to the Texas Government Code, §403.055; or       
        (5) is ineligible to receive a contract, pursuant to the Texas Family Code, §231.006.       
      (g) TDMHMR must ensure that its contractors comply with all contract provisions regardless of whether a contractor subcontracts a portion of the contract.     
      (h) TDMHMR may make advance payments to a contractor provided the payments meet a public purpose, ensure adequate consideration, and are accompanied by sufficient controls to ensure accomplishment of the public purpose. With the exception of contracts paid  on a capitated basis, at the end of each contract period the contractor must return to TDMHMR any state or federal funds received from or through TDMHMR that have not been expended or encumbered within the term of the contract.     
      (i) TDMHMR may recoup improper payments when it is verified that a contractor has been overpaid because of improper billing or accounting practices or failure to comply with the contract terms. The determination of impropriety is based on federal, state, and local laws and rules; TDMHMR procedures; contract provisions; or statistical data on program use compiled from paid claims and other sources of data. TDMHMR will recoup payments for contracted services not received by TDMHMR.     
      (j) TDMHMR shall  ensure quality services are provided to consumers, including during the transition from one contractor to another.     
      (k) All purchases of goods and services may be made only pursuant to a contract.     
     Source Note:        The provisions of this §7.55 adopted to be effective July 1, 2001, 26 TexReg 4719; transferred effective September 1, 2004, as published in the Texas Register September 10, 2004, 29 TexReg 8841