By:  West                                    S.B. No. 1725

         97S0746/2                           

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to the historically underutilized business program of the

 1-2     State of Texas.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Section 2155.073, Government Code, is amended to

 1-5     read as follows:

 1-6           Sec. 2155.073.  HISTORICALLY UNDERUTILIZED [PARTICIPATION BY

 1-7     SMALL] BUSINESSES ASSISTANCE PROGRAM [IN STATE PURCHASING].  The

 1-8     commission shall assist and foster participation of historically

 1-9     underutilized [small] businesses in the purchasing activities,

1-10     other than construction or construction-related activity, of the

1-11     state.  Strategies for assisting and fostering such participation

1-12     shall include but not be limited to [by]:

1-13                 (1)  assisting state agencies in developing strategies

1-14     and procedures to ensure the inclusion of historically

1-15     underutilized [small] businesses on state agency master bid lists;

1-16                 (2)  informing historically underutilized [small]

1-17     businesses of state purchasing opportunities;

1-18                 (3)  assisting historically underutilized [small]

1-19     businesses in complying with the procedures for bidding on state

1-20     contracts and assisting those businesses in such skills as bidding

1-21     techniques and product analysis;

1-22                 (4)  providing training [working with state and federal

1-23     agencies and with private organizations in disseminating

 2-1     information on state purchasing procedures and the opportunities

 2-2     for small businesses to participate in state contracts;]

 2-3                 [(5)  assisting state agencies with the development of

 2-4     a comprehensive list of small businesses capable of providing goods

 2-5     or services to the state;]

 2-6                 [(6)  making recommendations] to state agencies on how

 2-7     to simplify contract specifications and terms to increase the

 2-8     opportunities for historically underutilized [small] business

 2-9     participation; and

2-10                 (5) [(7)  working with state agencies to establish a

2-11     statewide policy for increasing the use of small businesses;]

2-12                 [(8)]  assisting state agencies in seeking historically

2-13     underutilized [small] businesses capable of supplying goods and

2-14     services that the agencies require through the development of a

2-15     comprehensive list of historically underutilized businesses[;]

2-16                 [(9)  assisting state agencies in identifying and

2-17     advising small businesses on the types of goods and services needed

2-18     by the agencies; and]

2-19                 [(10)  assisting state agencies in increasing the

2-20     volume of business placed with small businesses].

2-21           SECTION 2.  Section 2161.001, Government Code, is amended to

2-22     read as follows:

2-23           Sec. 2161.001.  DEFINITIONS.  In this chapter:

2-24                 (1)  "Economically disadvantaged person" means a person

2-25     who is:

 3-1                       (A)(i)  an owner of a business that does not

 3-2     exceed, in any period of four consecutive years, the gross receipts

 3-3     or total employment levels stated in the small business guidelines,

 3-4     13 C.F.R. Section 121.201, promulgated by the United States Small

 3-5     Business Administration for businesses within the same four-digit

 3-6     Standard Industrial Classification code; and

 3-7                             (ii)  if the person is married and the

 3-8     person's spouse is a business owner, the spouse's business

 3-9     qualifies as a small business within the respective four-digit

3-10     Standard Industrial Classification code applicable to the spouse's

3-11     business; or

3-12                       (B)  a member of a group which has suffered the

3-13     effects of discriminatory practices or other similar circumstances

3-14     over which the person had no control, as defined in the state's

3-15     Disparity Study, including Black Americans, Hispanic Americans,

3-16     women, Asian Pacific Americans, and Native Americans who are also

3-17     economically disadvantaged persons as defined by Paragraph (A).

3-18                 (2)  "Goods" means supplies, materials, or equipment.

3-19                 (3) [(2)]  "Historically underutilized business" means:

3-20                       (A)  a corporation formed for the purpose of

3-21     making a profit in which 51 percent or more of all classes of the

3-22     shares of stock or other equitable securities are owned by one or

3-23     more economically [socially] disadvantaged persons who have a

3-24     proportionate interest and actively participate in the

3-25     corporation's control, operation, and management;

 4-1                       (B)  a sole proprietorship created for the

 4-2     purpose of making a profit that is completely owned, operated, and

 4-3     controlled by an economically [a socially] disadvantaged person;

 4-4                       (C)  a partnership formed for the purpose of

 4-5     making a profit in which 51 percent or more of the assets and

 4-6     interest in the partnership are owned by one or more economically

 4-7     [socially] disadvantaged persons who have a proportionate interest

 4-8     and actively participate in the partnership's control, operation,

 4-9     and management;

4-10                       (D)  a joint venture in which each entity in the

4-11     venture is a historically underutilized business, as determined

4-12     under another paragraph of this subdivision; or

4-13                       (E)  a supplier contract between a historically

4-14     underutilized business as determined under another paragraph of

4-15     this subdivision and a prime contractor under which the

4-16     historically underutilized business is directly involved in the

4-17     manufacture or distribution of the goods or otherwise warehouses

4-18     and ships the goods.

4-19                 (4)  "State agency" means:

4-20                       (A)  a department, commission, board, office, or

4-21     other agency in the executive branch of state government created by

4-22     the state constitution or a state statute;

4-23                       (B)  the supreme court, the court of criminal

4-24     appeals, a court of appeals, or the Texas Judicial Council; or

4-25                       (C)  a university system or an institution of

 5-1     higher education as defined by Section 61.003, Education Code,

 5-2     except a public junior college.  [(3)  "Socially disadvantaged

 5-3     person" means a person who is socially disadvantaged because of the

 5-4     person's identification as a member of a certain group, including

 5-5     Black Americans, Hispanic Americans, women, Asian Pacific

 5-6     Americans, and Native Americans, and who has suffered the effects

 5-7     of discriminatory practices or other similar insidious

 5-8     circumstances over which the person has no control.]

 5-9           SECTION 3.  Section 2161.002, Government Code, is amended to

5-10     read as follows:

5-11           Sec. 2161.002.  Commission Administration; Comptroller

5-12     Assistance.  (a)  To administer Subchapters B and C, the commission

5-13     may:

5-14                 (1)  require information from a state agency; and

5-15                 (2)  adopt rules.

5-16           (b)  The comptroller shall provide information to the

5-17     commission that will assist the commission in performing its duties

5-18     under Subchapters B and C.

5-19           (c)  In the event of a conflict between the provisions of

5-20     this chapter and rules promulgated under this chapter and the

5-21     requirements of federal law, federal law shall prevail and the

5-22     commission shall be authorized to administer this chapter

5-23     consistent with federal law.

5-24           SECTION 4.  Subchapter A, Chapter 2161, Government Code, is

5-25     amended by adding Section 2161.003 to read as follows:

 6-1           Sec. 2161.003.  ADOPTION OF RULES BY STATE AGENCY.  State

 6-2     agencies shall adopt for the administration of their historically

 6-3     underutilized business program the rules promulgated by the

 6-4     commission.  Each state agency may develop supplemental rules

 6-5     thereto provided that such rules are:

 6-6                 (1)  consistent with commission rules; and

 6-7                 (2)  based on the disparity study.

 6-8           SECTION 5.  Section 2161.122, Government Code, is amended to

 6-9     read as follows:

6-10           Sec. 2161.122.  Information Gathering by State Agency.

6-11     (a)  To ensure accuracy in reporting, a state agency shall maintain

6-12     and compile monthly information relating to the use by the agency

6-13     and each of its operating divisions of historically underutilized

6-14     businesses, including information regarding subcontractors and

6-15     suppliers required by Subsection (b).

6-16           (b)  A contractor or supplier awarded a contract by a state

6-17     agency shall report to the agency the identity of each historically

6-18     underutilized business to whom the contractor or supplier awarded a

6-19     subcontract for the purchase of goods or services.

6-20           (c)  State agencies shall report to the commission the

6-21     following information on businesses classified as owned by

6-22     economically disadvantaged persons, including Black Americans,

6-23     Hispanic Americans, Asian Pacific Americans, and by gender, with

6-24     regard to the expenditure of both treasury and nontreasury funds:

6-25                 (1)  the total dollar amount of purchases and payments

 7-1     made under contracts awarded to historically underutilized

 7-2     businesses; and

 7-3                 (2)  the number of payments received by each

 7-4     historically underutilized business under each contract.

 7-5           (d)  A state agency participating in a group purchasing

 7-6     program described under Section 2155.139(b) shall send to the

 7-7     commission in the agency's report under Section 2161.121 a separate

 7-8     list of purchases from historically underutilized businesses that

 7-9     are made through the group purchasing program, including the dollar

7-10     amount of each purchase allocated to the reporting agency.

7-11           (e) [(d)]  A state agency's report is a record of the

7-12     agency's purchases for which the agency selected the vendor.  If

7-13     the vendor was selected by the commission as part of its state

7-14     contract program, the commission shall include the purchase in the

7-15     commission's report of its own purchases unless the commission made

7-16     a sole source purchase for the agency under Section 2155.067.  The

7-17     state agency for which the purchase was made shall report the

7-18     selection of the vendor on its report as if the agency selected the

7-19     vendor when the agency drew specifications for goods or services

7-20     that are proprietary to one vendor.

7-21           SECTION 6.  Chapter 2161, Government Code, is amended by

7-22     adding Subchapter F to read as follows:

7-23               SUBCHAPTER F.  ACTIONS FOR AGENCY NONCOMPLIANCE

7-24           Sec. 2161.301.  ACCOUNTABILITY OF STATE AGENCIES.  (a)  The

7-25     state auditor shall report to the commission a state agency that is

 8-1     not complying with this chapter.

 8-2           (b)  If an agency is found by the state auditor not to be in

 8-3     compliance with this chapter, the commission may revoke any

 8-4     purchasing authority that the commission had delegated to the

 8-5     agency.  If the commission revokes an agency's delegated purchasing

 8-6     authority under this subsection, the comptroller may consider that

 8-7     fact in the event the commission needs a transfer of the violating

 8-8     agency's appropriated funds to cover the costs to the commission of

 8-9     assuming the violating agency's purchasing functions.  The amount

8-10     of transfer from the violating agency's funds to the commission

8-11     shall be in an amount determined by the Legislative Budget Board.

8-12           SECTION 7.  Chapter 321, Government Code, is amended by

8-13     adding Section 321.0137 to read as follows:

8-14           Sec. 321.0137.  HISTORICALLY UNDERUTILIZED BUSINESS PROGRAM

8-15     AUDIT.  (a)  A historically underutilized business program audit is

8-16     an audit to determine, according to the established program rules

8-17     and regulations, whether an agency is making a good faith effort to

8-18     comply with the program authorized in Chapter 2161, including

8-19     whether the agency:

8-20                 (1)  has adopted and complied with rules, strategic

8-21     plans, and procedures governing the agency's historically

8-22     underutilized business contract awards in accordance with the

8-23     commission's rules;

8-24                 (2)  used the commission's historically underutilized

8-25     business list and other sources to identify historically

 9-1     underutilized businesses that can, and are available to, meet

 9-2     agency needs;

 9-3                 (3)  made marketing and outreach efforts to

 9-4     historically underutilized businesses;

 9-5                 (4)  designated an employee with appropriate experience

 9-6     and authority to serve as the agency's historically underutilized

 9-7     business coordinator;

 9-8                 (5)  established objective measures in performance

 9-9     evaluations for all employees involved in negotiating or making

9-10     contracting decisions to measure improvements in the agency's

9-11     historically underutilized business participation; and

9-12                 (6)  submitted valid data for historically

9-13     underutilized business reporting to the commission.

9-14           SECTION 8.  Section 321.014, Government Code, is amended to

9-15     read as follows:

9-16           Sec. 321.014.  AUDIT REPORTS.  (a)  The State Auditor shall

9-17     prepare a written report for each audit conducted by the State

9-18     Auditor.

9-19           (b)  The written report must include a management letter with

9-20     comments about internal controls, compliance with state or federal

9-21     laws, and recommendations for improving operations or program

9-22     effectiveness, as applicable.  The report must also include an

9-23     opinion on fair presentation of financial statements if the State

9-24     Auditor considers an opinion to be necessary.

9-25           (c)  The State Auditor shall submit each report to the

 10-1    committee prior to publication.  The State Auditor shall file a

 10-2    copy of each report prepared under this section with:

 10-3                (1)  the governor;

 10-4                (2)  the lieutenant governor;

 10-5                (3)  the speaker of the house of representatives;

 10-6                (4)  the secretary of state;

 10-7                (5)  the Legislative Reference Library;

 10-8                (6)  the chairman of the governing body and the

 10-9    administrative head of each entity that is the subject of the

10-10    report; [and]

10-11                (7)  members of the legislature on a committee with

10-12    oversight responsibility for the entity or program that is the

10-13    subject of the report; and

10-14                (8)  the General Services Commission, for those audits

10-15    conducted under Section 321.0137.

10-16          (d)  The State Auditor shall maintain a complete file

10-17    containing:

10-18                (1)  copies of each audit report; and

10-19                (2)  audit work papers and other evidence relating to

10-20    the work of the State Auditor.

10-21          (e)  The State Auditor shall maintain the files required by

10-22    Subsection (d) for at least eight years after the date on which the

10-23    information is filed.

10-24          SECTION 9.  Section 325.011, Government Code, is amended to

10-25    read as follows:

 11-1          Sec. 325.011.  Criteria for Review.  The commission and its

 11-2    staff shall consider the following criteria in determining whether

 11-3    a public need exists for the continuation of a state agency or its

 11-4    advisory committees or for the performance of the functions of the

 11-5    agency or its advisory committees:

 11-6                (1)  the efficiency with which the agency or advisory

 11-7    committee operates;

 11-8                (2)  an identification of the objectives intended for

 11-9    the agency or advisory committee and the problem or need that the

11-10    agency or advisory committee was intended to address, the extent to

11-11    which the objectives have been achieved, and any activities of the

11-12    agency in addition to those granted by statute and the authority

11-13    for these activities;

11-14                (3)  an assessment of less restrictive or alternative

11-15    methods of performing any regulation that the agency performs that

11-16    could adequately protect the public;

11-17                (4)  the extent to which the advisory committee is

11-18    needed and is used;

11-19                (5)  the extent to which the jurisdiction of the agency

11-20    and the programs administered by the agency overlap or duplicate

11-21    those of other agencies and the extent to which the programs

11-22    administered by the agency can be consolidated with the programs of

11-23    other state agencies;

11-24                (6)  whether the agency has recommended to the

11-25    legislature statutory changes calculated to be of benefit to the

 12-1    public rather than to an occupation, business, or institution that

 12-2    the agency regulates;

 12-3                (7)  the promptness and effectiveness with which the

 12-4    agency disposes of complaints concerning persons affected by the

 12-5    agency;

 12-6                (8)  the extent to which the agency has encouraged

 12-7    participation by the public in making its rules and decisions as

 12-8    opposed to participation solely by those it regulates and the

 12-9    extent to which the public participation has resulted in rules

12-10    compatible with the objectives of the agency;

12-11                (9)  the extent to which the agency has complied with

12-12    applicable requirements of an agency of the United States or of

12-13    this state regarding equality of employment opportunity and the

12-14    rights and privacy of individuals;

12-15                (10)  the extent to which changes are necessary in the

12-16    enabling statutes of the agency so that the agency can adequately

12-17    comply with the criteria listed in this section;

12-18                (11)  the extent to which the agency issues and

12-19    enforces rules relating to potential conflicts of interest of its

12-20    employees;

12-21                (12)  the extent to which the agency complies with

12-22    Chapter 552[,] and with Chapter 551; [and]

12-23                (13)  the extent to which the agency has complied with

12-24    requirements of state law or state agency rules regarding

12-25    purchasing goals and programs for historically underutilized

 13-1    businesses; and

 13-2                (14)  the effect of federal intervention or loss of

 13-3    federal funds if the agency is abolished.

 13-4          SECTION 10.  Subchapter C, Chapter 552, Government Code, is

 13-5    amended by adding Section 552.125 to read as follows:

 13-6          Sec. 552.125.  EXCEPTION:  CERTAIN DOCUMENTS SUBMITTED FOR

 13-7    CERTIFICATION AS A HISTORICALLY UNDERUTILIZED BUSINESS.  All

 13-8    financial and other types of private, confidential documentation

 13-9    and information submitted for the purpose of determining economic

13-10    status and ownership interests of businesses under Chapter 2161 are

13-11    excepted from the requirements of Section 552.021.

13-12          SECTION 11.  This Act takes effect September 1, 1997.

13-13          SECTION 12.  The importance of this legislation and the

13-14    crowded condition of the calendars in both houses create an

13-15    emergency and an imperative public necessity that the

13-16    constitutional rule requiring bills to be read on three several

13-17    days in each house be suspended, and this rule is hereby suspended.