The Texas Prompt Payment Act's 10% Rule: A Weapon Against Runaway Change Orders
There is a statute sitting in Chapter 28 of the Texas Property Code that gives contractors and subcontractors on Texas construction projects the right to stop work when an owner keeps directing extra work without executing change orders — and I’m not sure if the industry has internalized it yet. Texas Property Code Section 28.0091, effective for contracts entered into on or after September 1, 2023, provides that a contractor or subcontractor may elect not to proceed with owner-directed additional work when both of the following conditions are met: (1) the contractor has not received a written, fully executed change order for that work, and (2) the aggregate value of all outstanding, unexecuted owner-directed additional work exceeds 10 percent of the original contract amount. The rule isn’t complicated, but I have not yet seen it meaningfully used as a negotiation instrument.
How the Rule Works in Practice
The statute operates on an aggregate basis: the clock runs on the cumulative total of all outstanding, unexecuted owner-directed additional work, meaning that twelve separate $80,000 directives on a $5 million contract can each look manageable in isolation and still collectively trigger your right to stop at directive number seven. Once the aggregate of unexecuted change order work reaches or exceeds that 10 percent threshold, a contractor or subcontractor who elects not to proceed is expressly not responsible for damages associated with that election. The statute draws a clean line: perform your originally contracted scope, hold on the extras. The right applies to both contractors and subcontractors, and a parallel provision — Texas Government Code Section 2251.0521 — extends substantially the same protection to contracts with governmental entities on public projects.
What the Statute Doesn’t Cover
Before using this as a basis to stop work, a few boundaries are worth understanding. Section 28.0091 applies specifically to owner-directed additional work — it is focused on scope additions the owner is pushing without executing a change order, not on every type of contract modification. Force majeure events, changes arising from contractor-caused conditions, and schedule-related adjustments that don't constitute "additional work" directed by the owner are likely outside the statute's scope. The statute also doesn't apply to oil and gas construction work — Chapter 28 contains a broad exemption for agreements to explore, produce, or develop mineral substances, well or mine services, and pipeline and hydrocarbon transportation facilities, which Texas courts have applied to oilfield construction broadly. If your project falls within that energy construction space, the Chapter 28 framework — including Section 28.0091 — may not apply, and a separate legal analysis is warranted. Finally, the statute doesn't tell you how to make your election — there is no prescribed notice form. The statutes are silent on form, which means the election should probably be made in writing, clearly, referencing the specific directives that caused the 10 percent threshold to be reached, and consistent with whatever notice requirements already exist in your contract. This is especially important if the Owner attempts to characterize the work stoppage as a contractor-caused delay; that characterization will be hard to sustain if your election is properly documented, because the statute expressly provides that a contractor who elects not to proceed is not responsible for damages associated with that election.
Using the 10% Threshold as a Negotiating Lever Before You Exercise It
The most commercially valuable use of this statute probably isn’t going to be stopping work, but rather using the approaching threshold as a defined trigger to force the change order conversation before the project deteriorates into a dispute. On a $10 million contract, that threshold is $1 million in aggregate unexecuted directives. On a $25 million contract, it's $2.5 million. The moment your running total of outstanding, unsigned extra-work directives approaches that number, you have a statutorily recognized basis to put the owner and their team on notice: the project is approaching the point at which you have the right to stop, and the way to prevent that outcome is to sit down and execute the outstanding change orders. That conversation, held proactively with documented notice, should end up far more productive than the same conversation had after you've stopped work and the project is in crisis. For a deeper look at how change order disputes develop and the legal framework for resolving them, this change orders page covers (at a high level) the range of scenarios from scope disagreements to cumulative impact claims.
The Broader Prompt Payment Act Framework
Section 28.0091 sits within a broader Chapter 28 framework that also imposes strict payment deadlines. Chapter 28 cannot be waived or modified by contract — any provision that attempts to do so is void. This means an owner cannot contractually strip the Section 28.0091 right out of a subcontract, and a general contractor cannot waive it downstream in the subcontract documents. The Texas legislature decided that these are baseline protections, and they apply whether or not your contract references them.
What This Means for Contract Negotiation
For construction companies that are currently in contract negotiations, Section 28.0091 creates a new baseline, but it doesn't replace careful contract drafting. On the owner side, structuring contracts with defined, expedited change order approval timelines and a change order management protocol reduces the risk that the contractor will reach the 10 percent threshold in the first place and eliminates the ambiguity about what constitutes "owner-directed additional work" for purposes of the statute. On the contractor side, be careful in how owner-issued directive clauses are drafted, as they often bypass any kind of mutual change order process entirely. In project delivery methods particularly prone to owner-directed design evolution, such as GMP and CMAR projects, project participants should be particularly wary of the 10% threshold; at some point, disputes over when a directive is a “change” or part of the base scope may become unavoidable if your contracts are not drafted tightly. For more on how unmanaged scope changes can compound into larger disputes on GMP or CMAR projects, click here.
When to Call Project Counsel
Section 28.0091 is a blunt instrument: the conditions are binary, the right is express, and the damage protection is clear. What it doesn't resolve is the documentation, the notice drafting, the threshold calculation when multiple scopes are in dispute, whether something is a change or base scope, the interaction with your specific contract's change order procedures, and the commercial decision about whether to exercise the right at all versus negotiating a commercial resolution. On a large or complex project, each of those issues has real consequences. Elkhoury Law represents owners, developers, contractors, and subcontractors on Texas construction projects — from contract negotiation and change order management through project recovery and arbitration. If your project is approaching a change order inflection point, the best time to evaluate your position under Section 28.0091 is well before the threshold is reached, not after the project has stopped.
