HBA-DMD H.B. 3032 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3032 By: Oliveira, Dukes State Affairs 3/30/1999 Introduced BACKGROUND AND PURPOSE The Historically Underutilized Business (HUB) program was instituted in 1991 in order to increase the opportunities available to companies owned by minorities and women. These companies experience low levels of participation in state procurement opportunities. Of the six legislated HUB contracting goals, no state agency has met all six goals and only some state agencies have met or exceeded one or two of the goals. The State Auditor's Report of March 1998 found that prime contractors do not suffer a loss or penalty for low HUB participation, and some contracts close before prime contractors are required to show good faith in subcontracting with HUBs. Under current law, there is a broad definition for HUBs, leaving an opportunity for fraud. Furthermore, there is no program to educate and aid new or recertified HUBs about state contracting opportunities and procedures. H.B. 3032 redefines "historically underutilized business" and requires the General Services Commission (GSC) to determine whether each state agency has failed to meet the applicable HUB contracting goals during the preceding fiscal year. This bill requires GSC to report on whether each health and human services agency has failed to meet the goals to the Health and Human Services Commission (HHSC). If upon determining that a health and human services agency has failed to meet the goals, HHSC is required to transfer one or more remaining procurement functions to another state agency. It requires the amount that is transferred to be determined by the Legislative Budget Board. H.B. 3032 requires GSC to enter into agreements with other certification programs to maximize the number of HUBs. This bill requires a state agency that has a $5 million annual budget to designate a staff member to serve as the HUB coordinator. This bill also requires each state agency that considers entering into a contract with an expected value of $100,000 or more to determine whether subcontracting services will be needed and if so, require that each bid, proposal, and offer include a HUB subcontracting plan. It prohibits a state agency from awarding a contract to a company that did not include a HUB subcontracting plan. This bill requires quarterly reports to be made on the progress that the contractor is making in meeting the goals of the HUB subcontracting plan. H.B. 3032 requires the purchasing personnel of the state agency to determine whether the value of subcontracts awarded have met or exceeded the HUB subcontracting goal. If the contractor has failed to meet the goals, then the contractor is required to pay damages to the state agency. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 2161.001(2) and (3), Government Code, to modify the definitions of "historically underutilized business" and "socially disadvantaged person." SECTION 2. Amends Subchapter A, Chapter 2161, Government Code, by adding Section 2161.003, as follows: Sec. 2161.003. REVOCATION OR TRANSFER OF PURCHASING AUTHORITY. (a) Defines "health and human services agency" in this section. (b) Requires the General Services Commission (commission), when preparing the consolidated yearly report under Section 2161.121 regarding the historically underutilized business (HUB) program to determine whether each state agency substantially failed to meet during the preceding fiscal year the applicable HUB contracting goals established by this chapter and by rules of the commission during the preceding state fiscal year. Requires the commission to revoke, for the remainder of the current state fiscal year, any purchasing authority that the commission has delegated to a state agency that the commission determines has failed to meet the applicable goals. (c) Requires the commission to report each health and human services agency that substantially failed to meet the goals during the preceding state fiscal year to the Health and Human Services Commission. Requires the Health and Human Services Commission to transfer, for the remainder of the current state fiscal year, one or more appropriate procurement functions of each of those agencies to another appropriate state agency. (d) Authorizes the comptroller, if the commission revokes a state agency's delegated purchasing authority under this section or the Health and Human Services Commission transfers a health and human services agency's purchasing functions under this section, to consider that fact in the event a transfer of an agency's appropriated funds is needed to cover the costs of assuming the agency's purchasing functions. Requires the amount transferred from the agency's funds to be an amount determined by the Legislative Budget Board. SECTION 3. Amends Sections 2161.061(b) and (c), Government Code, are amended to read as follows: (b) Authorizes the commission as one, rather than part, of its certification procedures, to approve a municipal, rather than another certification, program that certifies HUBs under substantially the same definition used by Section 2161.001, and to certify a business certified under the municipal program as a HUB under this chapter. (c) Requires the commission, in order to maximize the number of certified HUBs, to enter into agreements with other certification programs in the state which must take effect immediately and address certain issues. Deletes the authorization of a municipality to adopt the certification program of the commission, of the federal Small Business Administration, or of another political subdivision or other governmental entity. SECTION 4. Amends Section 2161.062, Government Code, by adding Subsections (d) and (e), as follows: (d) Requires the commission to send HUBs an orientation package on certification or recertification. Specifies the requirements for the package. (e) Requires a state agency with a budget greater than $5 million per fiscal year to designate a staff member to serve as the HUB coordinator for the agency. Authorizes the procurement director to serve as the coordinator. Provides that in agencies that currently employ a HUB coordinator, the position of coordinator, within the agency's structure, must be at least equal to the position of procurement director. Specifies the requirements for the coordinator. SECTION 5. Amends Section 2161.063(b), Government Code, to require the commission to assist the Texas Department of Economic Development, rather than the Texas Department of Commerce, in performing the department's duties under Section 481.0068 (Office of Small Business Assistance), rather than 481.103 (Repealed), Government Code. SECTION 6. Amends Section 2161.064(b), Government Code, to require the commission at least semiannually to update the directory and provide access to the directory electronically or in another form, rather than provide a copy of the directory, to each state agency. SECTION 7. Amends Sections 2161.121(a) and (e), Government Code, to require the commission to prepare a consolidated report that tracks graduation rates for HUBs as determined by the commission by vendor identification number and social security number. Deletes members of the legislature from those that are required to receive a report on the preceding fiscal year by the commission. Makes a conforming change. SECTION 8. Amends Section 2161.122(c), Government Code, to delete the citation from a requirement of a group purchasing program. SECTION 9. Amends Subchapter C, Chapter 2161, Government Code, by adding Sections 2161.126 and 2161.127, as follows: Sec. 2161.126. EDUCATION AND OUTREACH BY COMMISSION. Requires the commission, before September 1 of each year, to report to the governor, the lieutenant governor, and the speaker of the house of representatives on the education and training efforts being made toward HUBs. Specifies the provisions related to HUBs included in the report. Sec. 2161.127. LEGISLATIVE APPROPRIATIONS REQUESTS. Provides that each state agency must include as part of its legislative appropriations request a detailed report for consideration by the budget committees of the legislature that shows the extent to which the agency met the applicable HUB contracting goals established by this chapter and by rules of the commission during the two calendar years preceding the calendar year in which the request is submitted. Provides that if a state agency did not meet an applicable goal, the report must demonstrate the reasons for that fact. Provides that the extent to which a state agency meets applicable goals is considered a performance measure for purposes of the appropriations process. SECTION 10. Amends Section 2161.182(a), Government Code, to require a state agency that contracts for a construction project under Section 2166.003 (Exceptions), rather than a construction project including a project under Section 2166.003, to make a good faith effort to assist HUBs receive no less than 30 percent of the total value of each construction contract award that the agency expects to make during a fiscal year. SECTION 11. Amends Chapter 2161, Government Code, by adding Subchapter F, as follows: SUBCHAPTER F. SUBCONTRACTING Sec. 2161.251. APPLICABILITY. Sets forth that this subchapter applies to all contracts entered into by a state agency with an expected value of $100,000 or more, including contracts for the acquisition of a good or service, and contracts for or related to the construction of a public building, road, or other public work. Provides that this subchapter applies to the contract without regard to whether the contract is otherwise subject to this subtitle, or the source of funds for the contract, except that to the extent federal funds are used to pay for the contract, this subchapter does not apply if federal law prohibits the application of this subchapter in relation to the expenditure of federal funds. Sec. 2161.252. AGENCY DETERMINATION REGARDING SUBCONTRACTING OPPORTUNITIES; BUSINESS SUBCONTRACTING PLAN. (a) Requires each state agency considering entering into a contract with an expected value of $100,000 or more, before the agency solicits bids, proposals, offers, or other applicable expressions of interest from prospective contractors, to determine whether it is probable that there will be subcontracting opportunities under the contract. Requires the state agency upon determining that there is that probability, to require that each bid, proposal, offer, or other applicable expression of interest include a HUB subcontracting plan. (b) Requires the state agency, upon determining that there is the probability for subcontracting opportunities under the contract, to determine the extent to which HUBs will be available to enter into the subcontracts. Requires the state agency to make this determination based on the types of subcontracting opportunities available under the contract together with the agency's knowledge of the relevant market, any relevant disparity study conducted by or for a governmental entity that contains information on the availability of HUBs to perform the types of subcontracted work in the relevant locality, and other relevant information the agency considers to be reliable. Requires the state agency, given the expected value of the subcontracting opportunities and its determination regarding the availability of HUBs to perform the subcontracted work, to state the minimum HUB subcontracting goals for the contract expressed as a percentage of the expected dollar value of the contract. Requires the state agency to include the minimum percentage goal in its request for bids, proposals, offers, or other applicable expressions of interest. (c) Provides that when a state agency requires a HUB subcontracting plan under Subsection (a), a bid, proposal, offer, or other applicable expression of interest from a prospective contractor must contain a plan that meets the requirements of this section to be considered responsive. (d) Sets forth that the HUB subcontracting plan is considered to be part of the bid, proposal, offer, or other applicable expression of interest. Specifies the provisions for the plan. (e) Provides that if the HUB subcontracting goal stated in the prospective contractor's plan is less than the state agency's stated minimum goal for the contract, the plan must account for that fact. Provides that the plan must demonstrate the reason, in the prospective contractor's opinion, that there is an insufficient number of HUBs available in the locality at that time to allow the state agency's stated minimum goal to be met. Sec. 2161.253. AGENCY EVALUATION OF BUSINESS SUBCONTRACTING PLAN. (a) Prohibits a state agency that has required each bid, proposal, offer, or other applicable expression of interest for the contract to include a HUB subcontracting plan from awarding the contract to a prospective contractor who did not include a plan that complies with Section 2161.252. (b) Requires the state agency, when determining which bid, proposal, offer, or other applicable expression of interest offers the best value to the state or is the lowest and best responsible bid or proposal, to evaluate and consider the merits of each prospective contractor's HUB subcontracting plan. Sec. 2161.254. REQUIRED CONTRACT CLAUSES. (a) Provides that a contract awarded by a state agency that has required each bid, proposal, offer, or other applicable expression of interest for the contract to include a HUB subcontracting plan must include the contract clauses in this section. (b) Sets forth that the HUB subcontracting plan submitted by the prospective contractor receiving the contract, is considered to be part of the contract. Provides that the HUB subcontracting goal expressed in the plan as a percentage of the expected dollar amount of the contract is considered to be part of the contract, except that if negotiations were allowed under other law and the prospective contractor and the state agency agreed on a different percentage subcontracting goal during negotiations before the contract was awarded, the negotiated goal is considered to be part of the contract. (c) Provide that the contract must require quarterly reports on the progress the contractor is making in meeting the overall goals of the HUB subcontracting plan. Provides that the quarterly reports must generally describe, in the manner prescribed by the state agency, the progress being made in meeting the goals. Specifies the provisions for the quarterly reports. (d) Provides that the contract must include a clause outlining and describing the requirements of the state's HUB subcontracting program. (e) Provides that the contract must include a liquidated damages clause that requires the contractor to pay liquidated damages to the state after the contract is completed if the value of subcontracts awarded under the contract to HUBs did not meet or exceed the HUB subcontracting goal that is part of the contract, and the goal was not met at least in part because the contractor did not make a good faith effort to meet the goal. (f) Provides that the amount of the liquidated damages is computed by subtracting the value of subcontracts awarded under the contract to HUBs from the HUB subcontracting goal that is part of the contract. Sec. 2161.255. DETERMINING WHETHER TO ASSESS LIQUIDATED DAMAGES. (a) Requires the purchasing personnel of the state agency, after the contract is completed, to determine whether the value of subcontracts awarded under the contract to HUBs met or exceeded the HUB subcontracting goal that was part of the contract. Requires the state agency, if it is determined that the contractor failed to meet or exceed the goal, to notify the contractor of that determination. (b) Requires the state agency to give the contractor ample opportunity to submit documentation and to explain in discussions with state agency purchasing personnel that the failure to meet or exceed the goal is not attributable to a lack of good faith effort on the part of the contractor to meet the goal. (c) Specifies the factors that the state agency's purchasing personnel are required to consider when determining the extent to which the contractor made a good faith effort to meet the goal. (d) Requires the state agency's officer or employee in charge of procurement, if after considering the documentation and explanations submitted by the contractor, the officer or employee determines that the failure to meet or exceed the goal is to any significant degree attributable to a lack of good faith effort on the part of the contractor to meet the goal, to assess the liquidated damages on behalf of the agency. Requires the contractor to pay the amount of the liquidated damages to the state agency, which is required to send the money to the comptroller for deposit in the unobligated and undedicated portion of the general revenue fund. SECTION 12. Amends Section 2161.231, Government Code, to set forth that a person commits an offense if the person intentionally applies as a HUB for an award of a subcontract under a purchasing contract or public works contract with a state agency under this subtitle or other law and knows the person is not a HUB. Redesignates Subsection (b) to Subsection (c). SECTION 13.Effective date: September 1, 1999, except that Section 2161.003, Government Code, as added by this Act, takes effect September 1, 2000. Makes application of Subchapter F, Chapter 2161, Government Code, as added by this Act, prospective to subcontracting under a contract entered into by a state agency for which the request for bids, proposals, offers, or other applicable expressions of interest is published or otherwise disseminated on or after that date. SECTION 14.Emergency clause.