State Contracting Bill Adds Five-Member Committees To Approve Subcontracting Plans

The text as introduced · 2,866 words

By: Miles
S.B. No. 2912

A BILL TO BE ENTITLED

AN ACT

relating to the state historically underutilized business program;

creating a criminal offense.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2161.001, Government Code, is amended by

adding Subdivision (5) and (6) to read as follows:

(5) "Commercially useful function" means

responsibility for the execution of a distinct element of the work

of a contract and performance, management, and supervision of the

work involved, including:

(A) negotiation of the terms of a contract or

subcontract;

(B) assumption of financial risk commensurate

with a contract or subcontract;

(C) acquisition of appropriate lines of credit or

loans; or

(D) fulfillment of the responsibilities of a

joint venture partner under a joint venture agreement.

(6) "Disadvantaged business enterprise" means a

historically underutilized business as defined in Section 2161,

Government Code.

SECTION 2. Section 2161.0015, Government Code, is amended

to read as follows:

Sec. 2161.0015. DETERMINING SIZE STANDARDS FOR

HISTORICALLY UNDERUTILIZED BUSINESSES. To [ The comptroller may

establish size standards that a business may not exceed if it is to ]

be considered a historically underutilized business under this

chapter :

(1) the business owner may not have an individual

personal net worth of more than $1.32 million; and

(2) the business must:

(A) meet the Small Business Administration's

size standards for a small business for purposes of federal

government procurement under 13 C.F.R. Section 121.401, et seq.;

and

(B) have an annual gross income of not more than

$23.98 million . [ In determining the size standards, the comptroller

shall determine the size at which a business should be considered

sufficiently large that the business probably does not

significantly suffer from the effects of past discriminatory

practices. ]

SECTION 3. Section 2161.002(c), Government Code, is amended

to read as follows:

(c) In adopting rules to administer this chapter, the

comptroller shall adopt rules that are based on the results of the

"Texas Department of Transportation Disparity Study 2019" prepared

by Colette Holt & Associates [ "State of Texas Disparity Study, A

Report to the Texas Legislature as Mandated by H.B. 2626, 73rd

Legislature, December 1994" (prepared by National Economic

Research Associates, Inc.) ]. The comptroller shall revise the

rules in response to the findings of any updates of the study that

are prepared on behalf of the state.

SECTION 4. Section 2161.004(c), Government Code, is amended

to read as follows:

(c) Section 2161.003 and Subsections (a) and (b) of this

section [ do not ] apply to a project or contract subject to Section

201.702, Transportation Code.

SECTION 5. Section 2161.061, Government Code, is amended by

amending Subsections (a) and (e) and adding Subsections (a-1),

(a-2), and (a-3) to read as follows:

(a) The comptroller shall certify and recertify

historically underutilized businesses.

(a-1) A certification or recertification under this section

expires on the first anniversary of the date the certification or

recertification was issued.

(a-2) The comptroller may not initially certify a business

as a disadvantaged business enterprise unless each owner of the

business completes at least 32 hours of training provided by the

comptroller or a local government or nonprofit organization

approved by the comptroller to provide the training. The training

must include information regarding:

(1) the requirements of this chapter and rules adopted

under this chapter; and

(2) the programs available under 49 C.F.R. Part 26 and

the requirements for participation in those programs.

(a-3) The comptroller may not recertify a business as a

disadvantaged business enterprise unless each owner of the business

completes at least eight hours of continuing training provided by

the comptroller or a local government or nonprofit organization

approved by the comptroller to provide the continuing training.

(e) A local government or a nonprofit organization that

certifies historically underutilized businesses under Subsection

(c) or that conducts a certification program described by and

approved under Subsection (b) shall make available to the public an

online searchable database containing information about

historically underutilized businesses, minority business

enterprises, women's business enterprises, and disadvantaged

business enterprises certified by the local government or nonprofit

organization, including:

(1) the name of the business;

(2) the contact person or owner of the business;

(3) the address and telephone number of the business;

(4) the type or category of business, including

relevant capabilities of the business and the North American

Industry Classification System codes for the business; [ and ]

(5) the expiration date of the business's

certification ; and

(6) the date of completion of training required under

this section .

SECTION 6. Sections 2161.062(b), (d), and (e), Government

Code, are amended to read as follows:

(b) The comptroller shall offer historically underutilized

businesses assistance , [ and ] training , and continuing training

regarding state procurement procedures.

(d) The comptroller shall send each historically

underutilized business [ businesses ] an orientation package on

certification or recertification. The package shall include:

(1) a certificate issued in the historically

underutilized business's name;

(2) a description of the significance and value of

certification;

(3) a list of state purchasing personnel;

(4) information regarding electronic commerce

opportunities;

(5) information regarding the Texas Marketplace

website; [ and ]

(6) additional information about the state

procurement process ; and

(7) the business's current training and continuing

training status .

(e) A state agency with a biennial budget that exceeds $10

million shall designate a staff member to serve as the historically

underutilized businesses coordinator for the agency during the

fiscal year. The procurement director may serve as the coordinator.

In agencies that employ a historically underutilized businesses

coordinator, the position of coordinator, within the agency's

structure, must be at least equal to the position of procurement

director. In addition to any other responsibilities, the

coordinator shall:

(1) coordinate training programs for the recruitment ,

training, and retention of historically underutilized businesses;

(2) report required information to the comptroller

annually ; and

(3) match historically underutilized businesses with

key staff within the agency.

SECTION 7. Section 2161.063(a), Government Code, is amended

to read as follows:

(a) The comptroller shall encourage state agencies to use

historically underutilized businesses by:

(1) working with state agencies to establish a

statewide policy for increasing the use of historically

underutilized businesses;

(2) assisting state agencies in seeking historically

underutilized businesses capable of supplying required goods or

services;

(3) assisting state agencies in identifying and

advising historically underutilized businesses on the types of

goods and services the agencies need; [ and ]

(4) assisting state agencies in increasing the amount

of business placed with historically underutilized businesses ; and

(5) assisting state agencies in identifying

disadvantaged business enterprise that can perform commercially

useful functions for agencies .

SECTION 8. Section 2161.064, Government Code, is amended by

adding Subsection (f) to read as follows:

(f) The comptroller shall verify that each disadvantaged

business enterprise listed in the directory is in full compliance

with the training requirements under Section 2161.061.

SECTION 9. Section 2161.065, Government Code, is amended by

amending Subsection (a) and adding Subsection (c) to read as

follows:

(a) The comptroller shall design and oversee the

implementation by state agencies of a mentor-protege program to

foster long-term relationships between prime contractors and

historically underutilized businesses and to increase the ability

of historically underutilized businesses to contract with the state

or to receive subcontracts under a state contract. Each state

agency with a biennial appropriation that exceeds $10 million shall

implement and require participation in the program designed by the

comptroller.

(c) The mentor-protege program under this section must be

consistent with the program established under 49 C.F.R. Section

26.35.

SECTION 10. Section 2161.066(d), Government Code, is

amended to read as follows:

(d) Each state agency that has a historically underutilized

businesses coordinator shall:

(1) design its own program and model the program to the

extent appropriate on the program developed by the comptroller

under this section; [ and ]

(2) sponsor presentations by disadvantaged business

enterprise at the agency ; and

(3) provide a method for a disadvantaged business

enterprise to provide documentation through a state-approved

source that the business is able to perform a commercially useful

function in the industry for which the business is certified as a

disadvantaged business enterprise, according to the North American

Industry Classification System .

SECTION 11. Section 2161.121(a), Government Code, is

amended to read as follows:

(a) The comptroller shall prepare a consolidated report

that:

(1) includes the number and dollar amount of contracts

awarded and paid to historically underutilized businesses

certified by the comptroller;

(2) analyzes the relative level of opportunity for

historically underutilized businesses for various categories of

acquired goods and services; [ and ]

(3) tracks, by vendor identification number and, to

the extent allowed by federal law, by social security number, the

graduation rates for historically underutilized businesses that

grew to exceed the size standards determined by the comptroller ;

and

(4) includes assurances by state agencies that the

number and the dollar amounts of contracts awarded to disadvantaged

business enterprise es are properly calculated according to the

level of participation each disadvantaged business enterprise

performs for purposes of determining the amount that could be

counted toward a disadvantaged business enterprise participation

goal under 49 C.F.R. Section 26.55 .

SECTION 12. Sections 2161.122(b), (c), and (d), Government

Code, are amended to read as follows:

(b) A contractor or supplier awarded a contract by a state

agency shall report to the agency the identity of each historically

underutilized business to whom the contractor or supplier awarded a

subcontract for the purchase of goods or services and certify that

the disadvantaged business enterprise can perform a commercially

useful function .

(c) Each state agency shall report to the comptroller in

accordance with Section 2161.125 the following information with

regard to the expenditure of both treasury and nontreasury funds:

(1) the total dollar amount of purchases and payments

made under contracts awarded to historically underutilized

businesses that could be counted toward a disadvantaged business

enterprise participation goal under 49 C.F.R. Section 26.55 ;

(2) the number of businesses participating in any

issuance of state bonds by the agency;

(3) the number of contracts awarded to businesses with

regard to the agency's acquisition, construction, or equipping of a

facility or implementation of a program; and

(4) the number of bids, proposals, or other applicable

expressions of interest made by historically underutilized

businesses with regard to the agency's acquisition, construction,

or equipping of a facility or implementation of a program.

(d) A state agency participating in a group purchasing

program shall send to the comptroller in the agency's report under

Section 2161.121 a separate list of purchases from historically

underutilized businesses that are made through the group purchasing

program, including the dollar amount of each purchase allocated to

the reporting agency that could be counted toward a disadvantaged

business enterprise participation goal under 49 C.F.R. Section

26.55 .

SECTION 13. Sections 2161.123(a) and (d), Government Code,

are amended to read as follows:

(a) Each state agency, including the comptroller, that is

required to have a strategic plan under Chapter 2056 shall include

in its strategic plan a written plan for increasing the agency's use

of historically underutilized businesses in purchasing and public

works contracting and for monitoring the agency's use of

disadvantaged business enterprise based on amounts that could be

counted toward a disadvantaged business enterprise participation

goal under 49 C.F.R. Section 26.55 . The governing board of each

university system or institution of higher education not included

in a university system, other than a public junior college, shall

prepare a written plan for increasing the use of historically

underutilized businesses in purchasing and public works

contracting by the system or institution.

(d) The comptroller and the state auditor shall cooperate to

develop procedures providing for random periodic monitoring of

state agency compliance with this section. The state auditor shall

report to the comptroller a state agency that is not complying with

this section. In determining whether a state agency is making a

good faith effort to comply, the state auditor shall consider

whether the agency:

(1) has adopted rules under Section 2161.003;

(2) has used the comptroller's directory under Section

2161.064 and other resources to identify certified and qualified

historically underutilized businesses that are able and available

to contract with the agency;

(3) made good faith, timely efforts to contact

identified historically underutilized businesses regarding

contracting opportunities;

(4) conducted its procurement program in accordance

with the good faith effort methodology set out in comptroller

rules; and

(5) established goals for contracting with

historically underutilized businesses in each procurement category

based on:

(A) scheduled fiscal year expenditures; and

(B) the availability of historically

underutilized businesses in each category as determined by rules

adopted under Section 2161.002.

SECTION 14. Section 2161.125, Government Code, is amended

to read as follows:

Sec. 2161.125. CATEGORIZATION OF HISTORICALLY

UNDERUTILIZED BUSINESSES ; TRAINING INFORMATION . (a) The

comptroller, in cooperation with each state agency reporting under

this subchapter, shall categorize each historically underutilized

business included in a report under this subchapter by sex, race,

and ethnicity and by whether the business qualifies as a

historically underutilized business because it is owned or owned,

operated, and controlled, as applicable, wholly or partly by one or

more veterans as defined by 38 U.S.C. Section 101(2) who have

suffered at least a 20 percent service-connected disability as

defined by 38 U.S.C. Section 101(16).

(b) The report under Subsection (a) must also state whether

the disadvantaged business enterprise owners have completed

training and continuing training required by Section 2161.061 and

whether the business can perform a commercially useful function.

SECTION 15. Section 2161.181, Government Code, is amended

to read as follows:

Sec. 2161.181. GOALS FOR PURCHASES OF GOODS AND SERVICES. A

state agency, including the comptroller, shall make a good faith

effort to increase the contract awards for the purchase of goods or

services that the agency expects to make during a fiscal year to

historically underutilized businesses based on rules adopted by the

comptroller to implement the disparity study described by Section

2161.002(c). The agency's efforts and achievement of its goals

under this section must be measured based on amounts that could be

counted toward a disadvantaged business enterprise participation

goal under 49 C.F.R. Section 26.55.

SECTION 16. Section 2161.182(a), Government Code, is

amended to read as follows:

(a) A state agency that contracts for a construction

project, including a project under Section 2166.003, shall make a

good faith effort to increase the construction contract awards that

the agency expects to make during a fiscal year to historically

underutilized businesses based on rules adopted by the comptroller

to implement the disparity study described by Section 2161.002(c).

The agency's efforts and achievement of its goals under this

subsection must be measured based on amounts that could be counted

toward a disadvantaged business enterprise participation goal

under 49 C.F.R. Section 26.55.

SECTION 17. Section 2161.231, Government Code, is amended

by adding Subsection (a-1) to read as follows:

(a-1) A person commits an offense if the person

intentionally makes a false report under this subtitle regarding an

award of a purchasing contract or public works contract to a

disadvantaged business enterprise.

SECTION 18. Section 2161.252, Government Code, is amended

by adding Subsection (c) to read as follows:

(c) A state agency may not approve a disadvantaged business

enterprise subcontracting plan or award a contract to which the

plan relates unless the plan has been approved by the agency's good

faith effort review committee established under Section 2161.2521.

SECTION 19. Subchapter F, Chapter 2161, Government Code, is

amended by adding Section 2161.2521 to read as follows:

Sec. 2161.2521. GOOD FAITH EFFORT REVIEW COMMITTEE. (a) A

state agency that determines that there is a probability for

subcontracting opportunities under Section 2161.252 shall

establish a good faith effort review committee for the purpose of

reviewing any subcontracting plans.

(b) The committee shall consist of five members, including:

(1) three members from the state disadvantaged

business enterprise community;

(2) one member from the state agency; and

(3) one member from the prime contracting community.

SECTION 20. Sections 2161.253(b) and (c), Government Code,

are amended to read as follows:

(b) To the extent that subcontracts are not contracted for

as originally submitted in the historically underutilized business

subcontracting plan, the contractor shall report to the state

agency and the agency's good faith effort review committee all the

circumstances that explain that fact and describe the good faith

efforts made to find and subcontract with another historically

underutilized business.

(c) The state agency and the agency's good faith effort

review committee shall audit the contractor's compliance with the

historically underutilized business subcontracting plan. In

determining whether the contractor made the required good faith

effort, the agency may not consider the success or failure of the

contractor to subcontract with historically underutilized

businesses in any specific quantity. The agency's determination is

restricted to considering factors indicating good faith.

SECTION 21. Section 2161.065(b), Government Code, is

repealed.

SECTION 22. The changes in law made by this Act apply only

to a contract for which the request for bids or proposals or other

applicable expressions of interest, if applicable, is made public

on or after the effective date of this Act.

SECTION 23. This Act takes effect September 1, 2025.