By Ellis S.B. No. 1638
76R3068 JRD-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to subcontracting with historically underutilized
1-3 businesses under prime contracts with state agencies; providing a
1-4 penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 2161, Government Code, is amended by
1-7 adding Subchapter F to read as follows:
1-8 SUBCHAPTER F. SUBCONTRACTING
1-9 Sec. 2161.251. APPLICABILITY. (a) This subchapter applies
1-10 to all contracts entered into by a state agency with an expected
1-11 value of $100,000 or more, including:
1-12 (1) contracts for the acquisition of a good or
1-13 service; and
1-14 (2) contracts for or related to the construction of a
1-15 public building, road, or other public work.
1-16 (b) This subchapter applies to the contract without regard
1-17 to:
1-18 (1) whether the contract is otherwise subject to this
1-19 subtitle; or
1-20 (2) the source of funds for the contract, except that
1-21 to the extent federal funds are used to pay for the contract, this
1-22 subchapter does not apply if federal law prohibits the application
1-23 of this subchapter in relation to the expenditure of federal funds.
1-24 Sec. 2161.252. AGENCY DETERMINATION REGARDING SUBCONTRACTING
2-1 OPPORTUNITIES; BUSINESS SUBCONTRACTING PLAN. (a) Each state agency
2-2 that considers entering into a contract with an expected value of
2-3 $100,000 or more shall, before the agency solicits bids, proposals,
2-4 offers, or other applicable expressions of interest from
2-5 prospective contractors, determine whether it is probable that
2-6 there will be subcontracting opportunities under the contract. If
2-7 the state agency determines that there is that probability, the
2-8 agency in its request for bids, proposals, offers, or other
2-9 applicable expressions of interest regarding the contract shall
2-10 require that each bid, proposal, offer, or other applicable
2-11 expression of interest include a historically underutilized
2-12 business subcontracting plan.
2-13 (b) If the state agency determines that there is the
2-14 probability for subcontracting opportunities under the contract,
2-15 the agency also shall determine the extent to which historically
2-16 underutilized businesses will be available to enter into the
2-17 subcontracts. The state agency shall make this determination based
2-18 on the types of subcontracting opportunities available under the
2-19 contract together with the agency's knowledge of the relevant
2-20 market, any relevant disparity study conducted by or for a
2-21 governmental entity that contains information on the availability
2-22 of historically underutilized businesses to perform the types of
2-23 subcontracted work in the relevant locality, and other relevant
2-24 information the agency considers to be reliable. Given the
2-25 expected value of the subcontracting opportunities and its
2-26 determination regarding the availability of historically
2-27 underutilized businesses to perform the subcontracted work, the
3-1 state agency shall state the minimum historically underutilized
3-2 business subcontracting goals for the contract expressed as a
3-3 percentage of the expected dollar value of the contract. The state
3-4 agency shall include the minimum percentage goal in its request for
3-5 bids, proposals, offers, or other applicable expressions of
3-6 interest.
3-7 (c) When a state agency requires a historically
3-8 underutilized business subcontracting plan under Subsection (a), a
3-9 bid, proposal, offer, or other applicable expression of interest
3-10 from a prospective contractor must contain a plan that meets the
3-11 requirements of this section to be considered responsive.
3-12 (d) The historically underutilized business subcontracting
3-13 plan is considered to be part of the bid, proposal, offer, or other
3-14 applicable expression of interest. The plan must include:
3-15 (1) the historically underutilized business
3-16 subcontracting goal that the prospective contractor expects to
3-17 meet, expressed as a percentage of the expected dollar amount of
3-18 the contract;
3-19 (2) the name of each historically underutilized
3-20 business with which the prospective contractor expects to
3-21 subcontract;
3-22 (3) the part of the work that each of those expected
3-23 subcontractors would perform;
3-24 (4) the expected dollar value of each of those
3-25 subcontracts; and
3-26 (5) information about the methods used in the past and
3-27 currently used by the prospective contractor to identify, contact,
4-1 and evaluate available historically underutilized businesses with
4-2 which to subcontract.
4-3 (e) If the historically underutilized business
4-4 subcontracting goal stated in the prospective contractor's plan is
4-5 less than the state agency's stated minimum goal for the contract,
4-6 the plan must account for that fact. The plan must demonstrate the
4-7 reason, in the prospective contractor's opinion, that there is an
4-8 insufficient number of historically underutilized businesses
4-9 available in the locality at that time to allow the state agency's
4-10 stated minimum goal to be met.
4-11 Sec. 2161.253. AGENCY EVALUATION OF BUSINESS SUBCONTRACTING
4-12 PLAN. (a) A state agency that has required each bid, proposal,
4-13 offer, or other applicable expression of interest for the contract
4-14 to include a historically underutilized business subcontracting
4-15 plan may not award the contract to a prospective contractor who did
4-16 not include a plan that complies with Section 2161.252.
4-17 (b) In determining which bid, proposal, offer, or other
4-18 applicable expression of interest offers the best value to the
4-19 state or is the lowest and best responsible bid or proposal, the
4-20 state agency shall evaluate and consider the merits of each
4-21 prospective contractor's historically underutilized business
4-22 subcontracting plan.
4-23 Sec. 2161.254. REQUIRED CONTRACT CLAUSES. (a) A contract
4-24 awarded by a state agency that has required each bid, proposal,
4-25 offer, or other applicable expression of interest for the contract
4-26 to include a historically underutilized business subcontracting
4-27 plan must include the following contract clauses.
5-1 (b) The historically underutilized business subcontracting
5-2 plan submitted by the prospective contractor receiving the contract
5-3 is considered to be part of the contract. The historically
5-4 underutilized business subcontracting goal expressed in the plan as
5-5 a percentage of the expected dollar amount of the contract is
5-6 considered to be part of the contract, except that if negotiations
5-7 were allowed under other law and the prospective contractor and the
5-8 state agency agreed on a different percentage subcontracting goal
5-9 during negotiations before the contract was awarded, the negotiated
5-10 goal is considered to be part of the contract.
5-11 (c) The contract must require quarterly reports on the
5-12 progress the contractor is making in meeting the overall goals of
5-13 the historically underutilized business subcontracting plan. The
5-14 quarterly reports must generally describe, in the manner prescribed
5-15 by the state agency, the progress being made in meeting the goals.
5-16 The quarterly reports must also specifically report:
5-17 (1) whether the historically underutilized businesses
5-18 named in the subcontracting plan as businesses with which the
5-19 contractor expected to subcontract actually received the expected
5-20 subcontracts, and if not:
5-21 (A) the reasons for that fact; and
5-22 (B) the efforts that the contractor made to find
5-23 another historically underutilized business that was available and
5-24 would be interested in the subcontract;
5-25 (2) the cumulative dollar value of subcontracts
5-26 awarded to historically underutilized businesses under the contract
5-27 as of the end of the quarterly reporting period; and
6-1 (3) the percentage of the cumulative amount the
6-2 contractor has spent under the contract, as of the end of the
6-3 quarterly reporting period, as payments to historically
6-4 underutilized businesses who have received subcontracts under the
6-5 contract.
6-6 (d) The contract must include a clause that outlines and
6-7 describes the requirements of the state's historically
6-8 underutilized business subcontracting program.
6-9 (e) The contract must include a liquidated damages clause
6-10 that requires the contractor to pay liquidated damages to the state
6-11 after the contract is completed if:
6-12 (1) the value of subcontracts awarded under the
6-13 contract to historically underutilized businesses did not meet or
6-14 exceed the historically underutilized business subcontracting goal
6-15 that is part of the contract; and
6-16 (2) the goal was not met at least in part because the
6-17 contractor did not make a good faith effort to meet the goal.
6-18 (f) The amount of the liquidated damages is computed by
6-19 subtracting the value of subcontracts awarded under the contract to
6-20 historically underutilized businesses from the historically
6-21 underutilized business subcontracting goal that is part of the
6-22 contract.
6-23 Sec. 2161.255. DETERMINING WHETHER TO ASSESS LIQUIDATED
6-24 DAMAGES. (a) After the contract is completed, the purchasing
6-25 personnel of the state agency shall determine whether the value of
6-26 subcontracts awarded under the contract to historically
6-27 underutilized businesses met or exceeded the historically
7-1 underutilized business subcontracting goal that was part of the
7-2 contract. If it is determined that the contractor failed to meet or
7-3 exceed the goal, the state agency shall notify the contractor of
7-4 that determination.
7-5 (b) The state agency shall give the contractor ample
7-6 opportunity to submit documentation and to explain in discussions
7-7 with state agency purchasing personnel that the failure to meet or
7-8 exceed the goal is not attributable to a lack of good faith effort
7-9 on the part of the contractor to meet the goal.
7-10 (c) In determining the extent to which the contractor made a
7-11 good faith effort to meet the goal, the state agency's purchasing
7-12 personnel shall consider factors indicating good faith such as
7-13 whether the contractor:
7-14 (1) provided timely notice of a subcontracting
7-15 opportunity to historically underutilized businesses that have the
7-16 ability to perform the subcontract and that may be interested in
7-17 receiving the subcontract;
7-18 (2) advertised the subcontracting opportunity in
7-19 general circulation media, trade association media, and media that
7-20 focus on serving one or more kinds of historically underutilized
7-21 businesses;
7-22 (3) effectively used the services of minority, women,
7-23 and community organization contractor groups, local, state, and
7-24 federal business assistance offices, and other organizations that
7-25 provide assistance in identifying historically underutilized
7-26 businesses that have the ability to perform the subcontract;
7-27 (4) divided subcontract work or purchases into the
8-1 smallest reasonable units to enhance the possibility of
8-2 historically underutilized business participation in the
8-3 subcontracting opportunity; and
8-4 (5) awarded a subcontract to the historically
8-5 underutilized business that qualified as the lowest responsible
8-6 bidder or offeror, or for negotiated subcontracts, negotiated in
8-7 good faith with interested historically underutilized businesses.
8-8 (d) If, after considering the documentation and explanations
8-9 submitted by the contractor, the state agency's officer or employee
8-10 in charge of procurement determines that the failure to meet or
8-11 exceed the goal is to any significant degree attributable to a lack
8-12 of good faith effort on the part of the contractor to meet the
8-13 goal, that officer or employee shall assess the liquidated damages
8-14 on behalf of the agency. The contractor shall pay the amount of
8-15 the liquidated damages to the state agency, which shall send the
8-16 money to the comptroller for deposit in the unobligated and
8-17 undedicated portion of the general revenue fund.
8-18 SECTION 2. Section 2161.231, Government Code, is amended to
8-19 read as follows:
8-20 Sec. 2161.231. PENALTY. (a) A person commits an offense if
8-21 the person:
8-22 (1) intentionally applies as a historically
8-23 underutilized business for an award of a purchasing contract or
8-24 public works contract under this subtitle; and
8-25 (2) knows the person is not a historically
8-26 underutilized business.
8-27 (b) A person commits an offense if the person:
9-1 (1) intentionally applies as a historically
9-2 underutilized business for an award of a subcontract under a
9-3 purchasing contract or public works contract with a state agency
9-4 under this subtitle or other law; and
9-5 (2) knows the person is not a historically
9-6 underutilized business.
9-7 (c) An offense under this section is a third degree felony.
9-8 SECTION 3. This Act takes effect September 1, 1999, and
9-9 applies only to subcontracting under a contract entered into by a
9-10 state agency for which the request for bids, proposals, offers, or
9-11 other applicable expressions of interest is published or otherwise
9-12 disseminated on or after that date.
9-13 SECTION 4. The importance of this legislation and the
9-14 crowded condition of the calendars in both houses create an
9-15 emergency and an imperative public necessity that the
9-16 constitutional rule requiring bills to be read on three several
9-17 days in each house be suspended, and this rule is hereby suspended.