HBA-ALS H.B. 1343 76(R) HBA-ALS, ALS, ALS H.B. 1343 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1343 By: Dukes State Affairs 3/31/1999 Introduced BACKGROUND AND PURPOSE A study commissioned by in the 73rd Legislature found that prime contractors were not meeting their negotiated Texas historically underutilized business (HUB) goals. In addition, a state auditor's report in 1998 found that prime contractors did not suffer a loss or pay a penalty for low HUB participation, and that contracts sometimes close before prime contractors are required to show goodfaith in subcontracting with HUBs. HUB participation in state procurement has declined over the last several years and there is a concern that direct awards to HUBs by the state will remain relatively low because these HUBs are unable to compete with large businesses. The purpose of this bill is to strengthen the HUB subcontracting program by creating greater accountability for noncompliance with negotiated HUB goals by prime contractors. H.B. 1343 requires a prime contractor to submit subcontracting plans for a procurement over $100,000. Under this bill, a prime contractor who does not meet or exceed its negotiated HUB subcontracting goals, due to the lack of a good faith effort, is subject to liquidated damages. 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 Chapter 2161, Government Code, by adding Subchapter F, as follows: SUBCHAPTER F. SUBCONTRACTING Sec. 2161.251. APPLICABILITY. (a) Provides that this subchapter applies to all contracts entered into by a state agency with an expected value of $100,000 or more, for the acquisition of a good or service and for the construction of a public building, road, or other public work. (b) Provides that this subchapter applies to a contract without regard to whether the contract is otherwise subject to this subtitle or the source of funds for the contract. Provides that this subchapter does not apply if federal law prohibits the application of this subchapter in relation to the expenditure of federal funds used to pay for the contract. Sec. 2161.252. AGENCY DETERMINATION REGARDING SUBCONTRACTING OPPORTUNITIES; BUSINESS SUBCONTRACTING PLAN. (a) Requires a state agency considering entering into a contract with an expected value of $100,000 or more to determine before the agency solicits bids, proposals, offers, or other applicable expressions of interest from prospective contractors (bids), if it is probable that there will be subcontracting opportunities under the contract. Requires the state agency, if it determines that there is that probability, to require each bid to include a historically underutilized business (HUB) subcontracting plan in its request for bids. (b) Requires the state agency, if it determines there is a probability for subcontracting opportunities under the contract, to determine the extent to which HUB will be available to enter into the subcontracts based on specified information. Requires the agency to state the minimum HUB subcontracting goals for the contract expressed as a percentage of the expected dollar value of the contract based on the expected value of the subcontracting opportunities and its determination regarding the availability of HUB to perform the subcontracted work. Requires the agency to include the minimum percentage goal in its request for bids. (c) Provides that, in the event that a state agency requires a HUB subcontracting plan under Subsection (a), a bid must contain a plan which that meets the requirements of this section in order for the bid to be considered responsive. (d) Provides that the HUB subcontracting plan is considered to be part of the bid. Provides that the plan must include: (1) the HUB subcontracting goal that the prospective contractor expects to meet, expressed as a percentage of the expected dollar amount of the contract; (2) the name of each HUB with which the prospective contractor expects to subcontract; (3) the part of the work that each of those expected subcontractors would perform; (4) the expected dollar value of each subcontract; and (5) information about the methods used in the past and present by the prospective contractor to identify, contact, and evaluate available HUB with which to subcontract. (e) Provides that a prospective contractor's plan must account for the possible event that the HUB subcontracting goal stated in the plan is less than the state agency's stated minimum goal for the contract. Provides that the plan must demonstrate the reason, in the prospective contractor's opinion, for an insufficient number of HUB available in the locality 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 which has required each bid for the contract to include a HUB subcontracting plan from awarding the contract to a contractor who did not include a plan in compliance with Section 2161.252. Requires the state agency to evaluate and consider the merits of each prospective contractor's HUB subcontracting plan when determining which bid offers the best value to the state or is the lowest and best responsible bid or proposal,. Sec. 2161.254. REQUIRED CONTRACT CLAUSES. (a) Requires 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 to include the contract clauses specified in this section. (b) Provides 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 is considered to be part of the contract, except the negotiated goal is considered part of the contract 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. (c) Provides 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 the progress being made in meeting the goals in the manner prescribed by the state agency and report specified information. (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 requiring the contractor to pay liquidated damages to the state after the contract is completed if certain circumstances exist. (f) Provides the formula for computing the amount of the liquidated damages. Sec. 2161.255. DETERMINING WHETHER TO ASSESS LIQUIDATED DAMAGES. (a) Requires the purchasing personnel of the state agency, after completion of the contract, to determine whether the value of subcontracts awarded under the contract to HUB met or exceeded the HUB subcontracting goal that was part of the contract. Requires the 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 how the failure to meet or exceed the goal is not attributable to a lack of good faith effort to meet the goal. (c) Requires the state agency's purchasing personnel, in determining the extent to which the contractor made a good faith effort to meet the goal, to consider specified factors indicating good faith on the part of the contractor. (d) Requires the state agency's officer or employee in charge of procurement who determines after considering the documentation and explanations submitted by the contractor that there was 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 2. Amends Section 2161.231, Government Code, as follows: Sec. 2161.231. PENALTY. Provides that a person commits a third degree felony 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. SECTION 3.Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 4.Emergency clause.