Presenter: Debra L. Pendley

Commission Agenda Item No. 7
Action
Proposed Adoption of General Services Commission
Historically Underutilized Business (HUB) Program Rules
January 2001

I. DISCUSSION: The Texas Parks and Wildlife Department proposes new §51.171, concerning the Historically Underutilized Business Program. The new section is necessary to comply with the provisions of Government Code, §2161.003, which requires state agencies to adopt General Services Commission rules governing historically underutilized businesses (HUBs). The new section will function by adopting by reference the rules of the General Services Commission (GSC) contained in 1 TAC §111.11-111.28.

II. RECOMMENDATION: Staff recommends the Texas Parks and Wildlife Commission adopt the following motion:

"The Parks and Wildlife Commission authorizes adoption by reference of 1 TAC Section 111.11-111.28, as published in the December 1, 2000 issue of the Texas Register (TexReg 11899).

Attachments - 2
1. Exhibit A - General Services Commission HUB Rules, 1 TAC §111.11-111.28
2. Exhibit B - Fiscal Note (Available upon request)


Commission Agenda Item No. 7
Exhibit A

TITLE 1 TEXAS ADMINISTRATIVE CODE
PART 5 GENERAL SERVICES COMMISSION
SUBCHAPTER B EXECUTIVE ADMINISTRATIVE DIVISION
RULE §111.11-111.28 HISTORICALLY UNDERUTILIZED BUSINESS PROGRAM

Rule §111.11 Policy and Purpose

It is the policy of the commission to encourage the use of historically underutilized businesses (HUBs) by state agencies and to assist agencies in the implementation of this policy through race, ethnic, and gender-neutral means. The purpose of this program is to promote full and equal business opportunities for all businesses in state contracting in accordance with the goals specified in the State of Texas Disparity Study. Sections 111.11 through 111.28 of this title (relating to the Historically Underutilized Program) describe the minimum steps and requirements to be undertaken by the commission and state agencies to fulfill the state's HUB policy.

Rule §111.12 Definitions

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Applicant—A corporation, sole-proprietorship, partnership, joint venture, limited liability company, or supplier that applies to the commission as an historically underutilized business.

(2) Application—A written request for certification as an historically underutilized business in the required format submitted to the commission.

(3) Commodities—Materials, supplies, or equipment.

(4) Comptroller—Comptroller of Public Accounts.

(5) Contractor/Vendor —A supplier of commodities or services to a state agency under a purchase order contract or other contract.

(6) Directory—The Texas Certified Historically Underutilized Business Directory.

(7) Disparity Study—The State of Texas Disparity Study, performed by the National Economic Research Associates, Inc. (NERA).

(8) Economically Disadvantaged Person—An eligible HUB applicant whose business has not exceeded the graduation size standards according to the commission's graduation procedures in §111.23 of this title (relating to Graduation Procedures).

(9) Forum—A collaborative effort between agencies and potential contractors/vendors to provide information and training regarding an agency's procurement opportunities.

(10) Graduation—When a business exceeds the commission's size standard for certification.

(11) Historically Underutilized Business—A business outlined in subparagraphs (C)-(H) with its principal place of business in Texas (as defined in paragraph (19) of this section) in which the owner(s):

(A) have a proportionate interest and demonstrate active participation in the control, operation, and management of the entities' affairs; and

(B) are economically disadvantaged because of their identification as members of the following groups:

(i) Black Americans—which includes persons having origins in any of the Black racial groups of Africa;

(ii) Hispanic Americans—which includes persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race;

(iii) American Women—which includes all women of any ethnicity except those specified in clauses (i), (ii), (iv), and (v) of this subparagraph;

(iv) Asian Pacific Americans—which includes persons whose origins are from Japan, China, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Samoa, Guam, the U.S. Trust Territories of the Pacific, the Northern Marianas, and Subcontinent Asian Americans which includes persons whose origins are from India, Pakistan, Bangladesh, Sri Lanka, Bhutan or Nepal; and

(v) Native Americans—which includes persons who are American Indians, Eskimos, Aleuts, or Native Hawaiians; and

(C) a corporation formed for the purpose of making a profit in which at least 51% of all classes of the shares of stock or other equitable securities are owned by one or more persons described by subparagraphs (A) and (B); or

(D) a sole proprietorship created for the purpose of making a profit that is 100% owned, operated, and controlled by a person described by subparagraphs (A) and (B) of this section; or

(E) a partnership formed for the purpose of making a profit in which 51% of the assets and interest in the partnership is owned by one or more persons who are described by subparagraphs (A) and (B) of this section; or

(F) a joint venture in which each entity in the joint venture is an historically underutilized business under this subdivision; or

(G) a supplier contract between a historically underutilized business under this subdivision and a prime contractor/vendor under which the historically underutilized business is directly involved in the manufacture or distribution of the supplies or materials or otherwise warehouses and ships the supplies;

(H) a business other than described in subparagraphs (D), (F), and (G) of this section, which is formed for the purpose of making a profit and is otherwise a legally recognized business organization under the laws of the State of Texas, provided that at least 51% of the assets and 51% of any classes of stock and equitable securities are owned by one or more persons described by subparagraphs (A) and (B) of this section.

(12) Historically Underutilized Business (HUB) Coordinator—An agency employee who holds a position equivalent to the procurement director or is the procurement director. The employee reports to the agency's executive director on HUB activities including, but are not limited to, the agency's good faith effort criteria, HUB reporting, contract administration, and marketing and outreach efforts for HUB participation.

(13) HUB Report—A fiscal year semi-annual and annual report of the state's total expenditures, contract awards and payments made to certified HUBs.

(14) Mentor Protege Program—A program designed by the commission to assist agencies in identifying prime contractors/vendors and HUBs for potential long-term contractual relationships.

(15) NERA—National Economic Research Associates, Inc.

(16) Non-Treasury Funds—Funds paid by a state agency that are not treasury funds.

(17) Other services—All services other than construction and professional services, including consulting services subject to Texas Government Code, Chapter 2254, Subchapter B.

(18) Person—U.S. citizen, born or naturalized.

(19) Principal place of business—A permanent business office located in Texas where the majority HUB owner(s) makes the decisions, controls the daily operations of the organization, and participates in the business. The qualifying owners must be residents of the State of Texas.

(20) Professional services—Services of accountants, architects, engineers, land surveyors, and physicians that must be purchased by state agencies under Texas Government Code, Chapter 2254, Subchapter A.

(21) Subcontractor—A supplier of commodities or services to a contractor/vendor.

(22) Subcontractor Funds—Payments made to certified historically underutilized businesses by a contractor/vendor or supplier under contract with the state.

(23) Size Standards—Graduation thresholds established by the HUB program consistent with the commission's rules which are extracted from the U.S. Small Business Administration's size standards, and based on the gross receipts and gross number of employees according to the Standard Industrial Classification codes.

(24) Term Contract—A contract establishing a source or sources of supply for a specified period of time as defined in §113.12 of this title (relating to Definitions).

(25) Treasury Funds—Funds maintained in the state treasury and paid through the comptroller's office for each state agency.

(26) USAS—Uniform Statewide Accounting System for the State of Texas.

(27) Vendor Identification Number (VID)—A 13-digit identification number used in state government to identify the bidder or business for payment or award of contracts, certification as a HUB, and registration on the bidders list.

(28) HUB Subcontracting Plan-Written documentation regarding the use of HUB subcontractors, which is required by a state agency in procurements with an expected value of $100,000 or more which a potential contractor/vendor must prepare and return with their bid, proposal, offer, or other applicable expression of interest. The HUB subcontracting plan subsequently becomes a provision of the contract awarded as a result of the procurement process.

Rule §111.13 Annual Procurement Utilization Goals

a) In accordance with §111.11 of this title (relating to Policy and Purpose) and the Texas Government Code, Sections 2161.181 and 2161.182, each state agency shall make a good faith effort to utilize HUBs in contracts for construction, services (including professional and consulting services) and commodities purchases. Each agency may achieve the annual procurement goals by contracting directly with HUBs or indirectly through subcontracting opportunities.

(b) Each state agency shall make a good faith effort to assist HUBs in receiving a portion of the total contract value of all contracts that the agency expects to award in a fiscal year in accordance with the following percentages:

(1) 11.9% for heavy construction other than building contracts;

(2) 26.1% for all building construction, including general contractors and operative builders contracts;

(3) 57.2% for all special trade construction contracts;

(4) 20% for professional services contracts;

(5) 33% for all other services contracts; and

(6) 12.6% for commodities contracts.

(c) Each state agency shall make a good faith effort to meet or exceed the goals outlined in subsection (b) of this section. The percentage goals established in subsection (b) are overall annual procurement goals for each state agency applicable to the total annual dollar amount of an agency's contracts for each of the specific types of contracts. It may not be practicable to apply these goals to each contract. For each contract, state agencies may set higher or lower procurement goals than those outlined in subsection (b) of this section. Agencies may consider HUB availability, HUB utilization, geographical location of the project, the contractual scope of work, or other relevant factors. By implementing the following procedures, an agency shall be presumed to have made a good faith effort:

(1) prepare and distribute information on procurement procedures in a manner that encourages participation in state contracts by all businesses;

(2) divide proposed requisitions into reasonable lots in keeping with industry standards and competitive bid requirements;

(3) where feasible, assess bond and insurance requirements and design requirements that reasonably permit more than one business to perform the work;

(4) specify reasonable, realistic delivery schedules consistent with an agency's actual requirements;

(5) ensure that specifications, terms, and conditions reflect an agency's actual requirements, are clearly stated, and do not impose unreasonable or unnecessary contract requirements;

(6) provide potential bidders with referenced list of certified HUBs for subcontracting;

(7) determine whether specific agencywide goals are appropriate under the Disparity Study, as some HUB groups have not been underutilized within applicable contracting categories and should not be included in the HUB goals for that category;

(8) identify potential subcontracting opportunities in all contracts and require a HUB subcontracting plan for contracts of $100,000 or more, where such opportunities exist, in accordance with the Texas Government Code, Chapter 2161, Subchapter F, §2161.251; and

(9) seek HUB subcontracting in contracts that are less than $100,000 whenever possible.

(d) A state agency may also demonstrate good faith under this section by submitting a supplemental letter with documentation to the Commission with their HUB Report or legislative appropriations request identifying the progress, including, but not limited to the following, as prescribed by the commission:

(1) identifying the percentage of contracts awarded to women and/or minority-owned businesses that are not certified as HUBs;

(2) demonstrating that a different goal from that identified in subsection (b) of this section was appropriate given the agency's types of purchases;

(3) demonstrating that a different goal was appropriate given the particular qualifications required by an agency for its contracts;

(4) demonstrating that a different goal was appropriate given that graduated HUBs cannot be counted toward the goal; or

(5) demonstrating assistance to noncertified HUBs in obtaining certification with the commission.

Rule §111.14 Subcontracts

(a) Requirement for HUB subcontracting plans. In accordance with the Texas Government Code, Chapter 2161, Subchapter F, each state agency that considers entering into a contract with an expected value of $100,000 or more shall, before the agency solicits bids, proposals, offers, or other applicable expressions of interest, determine whether subcontracting opportunities are probable under the contract.

(1) State agencies shall use the following steps in making the determination of whether subcontracting opportunities are probable under the contract:

(A) Use the HUB participation goals in §111.13 of this title (relating to Annual Procurement Utilization Goals);

(B) Research the Centralized Master Bidders List, the HUB Directory, the Internet, and other directories, identified by the commission, for HUBs that may be available to perform the contract work;

(C) Additionally, determination of subcontracting opportunities may include, but is not limited to, the following:

(i) contacting other state and local agencies and institutions of higher education to obtain information regarding similar contracting and subcontracting opportunities; and

(ii) reviewing the history of similar agency purchasing transactions.

(2) If subcontracting opportunities are probable, each agency's invitation for bids or other purchase solicitation documents for construction, professional services, other services, and commodities for $100,000 or more shall state that probability and require a HUB subcontracting plan. Accordingly, potential contractor/vendor responses that do not include a completed HUB subcontracting plan shall be rejected as a material failure to comply with advertised specifications in accordance with §113.6(a) of this title (relating to Bid Evaluation and Award). The plan shall include goals established pursuant to §111.13 of this title (relating to Annual Procurement Utilization Goals).

(b) Development and evaluation of HUB subcontracting plans. A state agency shall require a potential contractor vendor to state whether it is a Texas certified HUB. Potential contractors/vendors shall follow, but are not limited to, procedures in subsection (b)(1) of this section when developing the HUB subcontracting plan. The HUB subcontracting plan shall include the form provided by the agency identifying the subcontractors that will be used during the course of the contract, the expected percentage of work to be subcontracted, and the approximate dollar value of that percentage of work. The potential contractor/vendor shall provide all additional information required by the agency.

(1) Evidence of good faith effort in developing a HUB subcontracting plan includes, but is not limited to, the following procedures:

(A) Divide the contract work into reasonable lots or portions to the extent consistent with prudent industry practices.

(B) Notify HUBs of the work that the potential contractor/vendor intends to subcontract. The preferable method of notification shall be in writing. The notice shall, in all instances, include the scope of the work, information regarding the location to review plans and specifications, information about bonding and insurance requirements, and identify a contact person. The notice shall be provided to potential HUB subcontractors prior to submission of the contractor's/vendor's bid. The potential contractor/vendor shall provide potential HUB subcontractors reasonable time to respond to the potential contractor's/vendor's notice. "Reasonable time to respond" in this context is no less than five working days from receipt of notice, unless circumstances require a different time period, which is determined by the agency and documented in the contract file. The potential contractor/vendor shall effectively use the commission's Centralized Master Bidders List, the HUB Directory, Internet resources, and other directories as identified by the commission or agency when searching for HUB subcontractors. Contractors/Vendors may rely upon the services of minority, women, and community organizations contractor groups, local, state, and federal business assistance offices, and other organizations that provide assistance in identifying qualified applicants for the HUB program who are able to perform all or select elements of the HUB subcontracting plan. The potential contractor/vendor shall provide the notice described in this subsection to three or more HUBs that perform the type of work required. Upon request, the potential contractor/vendor shall provide official written documentation (i.e. phone logs, fax transmittals, etc.) to demonstrate compliance with the notice required in this subsection.

(C) Provide written justification of the selection process, if a non HUB subcontractor is selected through means other than competitive bidding, or a HUB bid is the best value responsive bidder to a competitive bid invitation, but is not selected.

(D) Advertise HUB subcontracting opportunities in general circulation, trade association, and/or minority/woman focus media concerning subcontracting opportunities.

(E) Encourage a selected noncertified minority or woman owned business subcontractor to apply for certification by the commission in accordance with the procedures set forth in §111.17 of this title (relating to Certification Process).

(2) If the contract is a lease contract, the lessor shall comply with the requirements of this section from and after the occupancy date provided in the lease, or such other time as may be specified in the invitation for bid for the lease contract.

(3) In making a determination whether a good faith effort has been made in the development of the required HUB subcontracting plan, a state agency shall require the potential contractor/vendor to submit supporting documentation explaining in what ways the potential contractor/vendor has made a good faith effort according to each criterion listed in subsection (b)(1) of this section. The documentation shall include at least the following:

(A) Whether the potential contractor/vendor divided the contract work into reasonable lots or portions consistent with prudent industry practices.

(B) Whether the potential contractor/vendor notices contain adequate information about bonding, insurance, the availability of plans, the specifications, scope of work, and other requirements of the contract to three or more qualified HUBs allowing reasonable time for HUBs to participate effectively.

(C) Whether the potential contractor/vendor negotiated in good faith with qualified HUBs, not rejecting qualified HUBs who were also the best value responsive bidder.

(D) Whether the potential contractor/vendor documented reasons for rejection of a HUB or met with the rejected HUB to discuss the rejection.

(E) Whether the potential contractor/vendor advertised in general circulation, trade association, and/or minority/women focus media concerning subcontracting opportunities.

(F) Whether the potential contractor/vendor assisted non-certified HUBs to become certified.

(4) The HUB subcontracting plan shall be reviewed and evaluated prior to contract award and, if accepted, shall become a provision of the agency's contract. No changes shall be made to an accepted subcontracting plan prior to its incorporation into the contract. State agencies shall review the supporting documentation submitted by the potential contractor/vendor to determine if a good faith effort has been made in accordance with this section and the bid specifications. If the agency determines that a submitted HUB subcontracting plan was not developed in good faith, the agency shall treat the lack of good faith as a material failure to comply with advertised specifications, and the subject bid or other response shall be rejected. The reasons for rejection shall be recorded in the procurement file.

(5) If the potential contractor/vendor can perform all the subcontracting opportunities identified by the agency, a statement of the potential contractor's/vendor's intent to complete the work with its employees and resources without any subcontractors will be submitted with the potential contractor's/vendor's bid, proposal, offer, or other expression of interest. If the potential contractor/vendor is selected and decides to subcontract any part of the contract after the award, as a provision of the contract, the contractor/vendor must comply with provisions of this section relating to developing and submitting a subcontracting plan before any modifications or performance in the awarded contract involving subcontracting can be authorized by the state agency. If the selected contractor/vendor subcontracts any of the work without prior authorization and without complying with this section, the contractor/vendor would be deemed to have breached the contract and be subject to any remedial actions provided by Texas Government Code, Chapter 2161, state law and this section. Agencies may report non-performance relative to its contracts to the commission in accordance with Chapter 113, Subchapter F of this title (relating to the Vendor Performance and Debarment Program).

(c) Submission, review and determination of changes to an approved subcontracting plan during contract performance. If at any time during the term of the contract, a contractor/vendor desires to make changes to the approved subcontracting plan, such proposed changes must be received for prior review and approval by the state agency before changes will be effective under the contract. The contractor/vendor must comply with provisions of subsection (b) of this section relating to developing and submitting a subcontracting plan for substitution of work or of a subcontractor, prior to any alternatives being approved under the subcontracting plan. The state agency shall approve changes by amending the contract or by another form of written agency approval. The reasons for amendments or other written approval shall be recorded in the procurement file.

(d) Determining contractor/vendor contract compliance. The contractor/vendor shall maintain business records documenting its compliance with the HUB subcontracting plan and shall submit a compliance report to the contracting agency periodically and in the format required by the contract documents. During the term of the contract, the state agency shall determine whether the value of the subcontracts to HUBs meets or exceeds the HUB subcontracting provisions specified in the contract. Accordingly, state agencies shall audit and require a contractor/vendor to whom a contract has been awarded to report to the agency the identity and the amount paid to its subcontractors in accordance with §111.16(c) of this title (relating to State Agency Reporting Requirements). If the contractor/vendor is meeting or exceeding the provisions, the state agency shall maintain documentation of the contractor's/vendor's efforts in the contract file. If the contractor/vendor fails to meet the HUB subcontracting provisions specified in the contract, the state agency shall notify the contractor of any deficiencies. The state agency shall give the contractor/vendor an opportunity to submit documentation and explain to the state agency why the failure to fulfill the HUB subcontracting plan should not be attributed to a lack of good faith effort by the contractor/vendor.

(1) In determining whether the contractor/vendor made the required good faith effort, the agency may not consider the success or failure of the contractor/vendor to subcontract with HUBs in any specific quantity. The agency's determination is restricted to considering factors indicating good faith effort including, but not limited to, the following:

(A) Whether the contractor gave timely notice to the subcontractor regarding the time and place of the subcontracted work.

(B) Whether the contractor facilitated access to the work site, electrical power, and other necessary utilities.

(C) Whether documentation or information was provided that included potential changes in the scope of contract work.

(2) If a determination is made that the contractor/vendor failed to implement the HUB subcontracting plan in good faith, the agency, in addition to any other remedies, may report nonperformance to the commission in accordance with Chapter 113, Subchapter F of this title (relating to Vendor Performance and Debarment Program).

(3) State agencies shall review their procurement procedures to ensure compliance with this section. In accordance with §111.26 of this title (relating to HUB coordinator responsibilities) the agency's HUB coordinator and contract administrators should facilitate institutional compliance with this section.

Rule §111.15 Agency Planning Responsibilities

(a) Agencies are required to prepare a written plan for the use of HUBs in purchasing, and in public works contracts in accordance with Texas Government Code, Chapter 2056, and Chapter 2161, §2161.123.

(b) An agency shall adopt the commission's rules related to the HUB Program as part of its required strategic plan.

(c) Agencies must include a detailed report with their appropriations request identifying Good Faith Effort (GFE) compliance. The report should include the agency's effort to identify HUBs for contracts and subcontracts, the agency's utilization of HUBs and the agency's successes and shortfalls to increase HUB participation.

Rule §111.16 State Agency Reporting Requirements

a) The comptroller will report to the commission not later than March 15 of each year regarding the previous six-month period, and on September 15 of each year regarding the preceding fiscal year, the payments made for the purchase of goods, services and public works awarded and actually paid from treasury funds by each state agency. Subject to the capabilities of the comptroller's USAS system, the comptroller shall identify state agencies' purchases from state term contracts which are paid from treasury funds so that those purchases awarded and actually paid under term contracts may be included in the commission's report of its own purchases.

(b) State agencies will report to the commission, not later than March 15 of each year regarding the previous six-month period and on September 15 of each year regarding the preceding fiscal year, the payments made for the purchase of goods and services awarded and actually paid from non-treasury funds by the state agency. The report shall include information requested by the commission and shall be in a form prescribed by the commission. State agencies' purchases from state term contracts which are paid from non-treasury funds must be identified on the report as such so that they may be reflected on the commission's report of its own purchases.

(c) State agencies shall maintain, and compile monthly, information relating to the agency's and each of its operating division's use of historically underutilized businesses, including information regarding subcontractors and suppliers. This information shall include but is not limited to the information required in subsections (a) and (b) of this section. On a monthly basis state agencies shall require a contractor/vendor to whom a state agency has awarded a contract to report to the agency the identity and amount paid to each historically underutilized business to whom the contractor/vendor has awarded a subcontract for the purchase of supplies, materials and equipment, provided that payment was made to a historically underutilized business in the month to be reported. Contractors/Vendors shall report to a state agency progress payments made to subcontractors, professionals, consultants and suppliers certified as historically underutilized businesses each month in which such payment is made.

(d) State agencies will report to the commission, not later than March 15 of each year regarding the previous six-month period and on September 15 of each year regarding the preceding fiscal year, the total dollar amount of historically underutilized business subcontracting participation in all of the agencies' contracts for the purchase of goods, services and public works payments. State agencies must include subcontracting participation paid from Treasury and Non-Treasury funds.

(e) State agencies that participate in a group purchasing program under Texas Government Code §2155.134 shall include a separate report to the commission, not later than March 15 of each year regarding the previous six-month period and September 15 of each year regarding the preceding fiscal year, of purchases that are made through the group purchasing program and shall report the dollar amount of each purchase that is allocated to the reporting agency.

(f) The commission shall prepare a consolidated report based on a compilation and analysis of the reports submitted by each state agency and information provided by the comptroller in the format specified by the commission. These reports of historically underutilized business purchasing and contracts shall form a record of each agency's purchases in which the agency selected the contractor/vendor. If the contractor/vendor was selected by the commission as part of its state term contract program, the purchase will be reflected on the commission's report of its own purchases. The commission report will contain the following information:

(1) the total dollar amount of payments made by each state agency;

(2) the total number of HUBs actually paid by each state agency;

(3) the total number of contracts awarded to HUBs by each state agency;

(4) the number of bids received from HUBs by each state agency; and

(5) the graduation rates of HUBs as defined in §111.23 of this title (relating to Graduation Procedures) for the following groups as defined in §111.12 of this title (relating to Definitions) and certified by the commission:

(A) Black Americans;

(B) Hispanic Americans;

(C) American Women;

(D) Asian Pacific Americans; and

(E) Native Americans.

(g) On April 15 of each year, the commission shall submit the consolidated report regarding the previous six-month period and on October 15 of each year regarding the preceding fiscal year to the presiding officer of each house of the legislature, the members of the legislature and the joint select committee.

(h) State agencies will receive HUB credit for the total value of contracts awarded directly to certified HUBs under the Vendor Identification Number in the commission's HUB Directory. When the prime contractor/vendor is a HUB, it must perform at least 25% of the total value of the contract with its own or leased employees, as defined by the Internal Revenue Service, in order for the agency to receive 100% HUB credit for the entire contract. The prime HUB contractor/vendor may subcontract up to 75% of the contract with HUBs or non-HUB subcontractors. If a prime HUB contractor's/vendor's HUB subcontracting plan identifies that it is planning to perform less than 25% of the total value of contract with its employees, the agency will receive HUB credit for the value of the contract that was actually performed by the prime HUB contractor/vendor and its HUB subcontractors. To obtain HUB credit, the agency must report its HUB subcontracting expenditures to the commission in accordance with subsection (d) of this section.

(i) Any prime HUB contractor/vendor that seeks to satisfy the good faith effort requirement shall report to the agency the identity and amount paid to each historically underutilized business each month in which such payment is made. The report will include the volume of work performed under the contract, the portion of the work that was performed with its employees, non-HUB contractors/vendors and other HUB contractors/vendors. The agency may request payment documentation in accordance with subsection (c) of this section and the HUB subcontracting plan that confirms the performance of the contractor/vendor. The agency shall discuss the performance of the contractor/vendor and document the contractor/vendor's performance in the contract file. Any deficiencies will be identified by the agency and must be rectified prior to the next reporting period by the contractor/vendor.

Rule §111.17 Certification Process

(a) A business seeking certification as an historically underutilized business must submit an application to the commission on a form prescribed by the commission, affirming under penalty of perjury that the business qualifies as an historically underutilized business.

(b) If requested by the commission, the applicant must provide any and all materials and information necessary to demonstrate active participation in the control, operation, and management of the historically underutilized business.

(c) Texas Government Code, §2161.231, provides that a person commits a felony of the third degree if the person intentionally applies as an historically underutilized business for an award of a purchasing contract or public works contract and the person knowingly does not meet the definition of an historically underutilized business.

(d) The commission shall certify the applicant as an historically underutilized business or provide the applicant with written justification of its denial of certification within 60 days after the date the commission receives a satisfactorily completed application from the applicant.

(e) The commission reviews and evaluates applications, and may reject an application based on one or more of the following:

(1) the application is not satisfactorily completed;

(2) the applicant does not meet the requirements of the definition of historically underutilized business;

(3) the application contains false information;

(4) the applicant does not provide required information in connection with the certification review conducted by the

commission; or

(5) the applicant's record of performance of any prior contracts with the state.

(f) The commission will develop agreements with local governments to identify historically underutilized businesses and assist these businesses in obtaining state certification through the commission.

(g) The commission will send all certified HUBs an orientation packet including a certificate, description of certification value/significance, list of agency purchasers, and information regarding electronic commerce, the Texas Marketplace, and the state procurement process.

Rule §111.18 Protests

An applicant may protest the commission's denial of its application by filing a written protest with the commission within 30 days after the date the commission sent notice of the disposition to the applicant. Commission staff will then prepare a recommendation for review by the executive director of the commission. The decision of the executive director is final.

Rule §111.19 Recertification

(a) The certification is valid for a two-year period beginning on the date the commission certified the applicant as an historically underutilized business.

(b) Upon expiration of the two-year period, an historically underutilized business that desires recertification must:

(1) return a completed recertification form as provided by the commission; and

(2) comply with the requirements specified in §111.17 of this title (relating to the Certification Process) which apply to the recertification process.

Rule §111.20 Revocation

The commission shall revoke the certification of an historically underutilized business if the commission determines that a business does not meet the definition of historically underutilized business or that the business fails to provide requested information in connection with a certification review conducted by the commission. The commission shall provide the business with written notice of the proposed revocation. Applicants have 30 days from receipt of the written notice to provide written documentation stating the basis for disputing the grounds for revocation. The applicant shall also submit documentation to address the deficiencies identified in the notice. The commission shall evaluate the documentation to confirm the applicant's eligibility. The commission shall provide the applicant with written notification of their certification status. If an applicant's certification is revoked, the applicant may appeal to the commissioners within 14 days of receipt of written notice of the revocation. Upon receipt of the applicant's request for appeal, the commissioners will vote on the proposed revocation at the next available open meeting. The action of the commissioners is final.

Rule §111.21 Certification and Compliance Reviews

(a) The commission will conduct certification reviews of applicants and random compliance reviews of certified businesses by auditing them to verify the information submitted by a business is accurate, and the business continues to meet all HUB eligibility requirements after certification has been granted. Certification is subject to revocation if it is determined that a business does not qualify as an historically underutilized business. Certification and compliance reviews of any business may be conducted upon determining a review is warranted.

(b) Businesses subject to certification and compliance reviews must provide the commission with any information requested to verify the certification eligibility of the business.

(c) In order to be qualified, the applicant's business documentation shall be reviewed to substantiate an applicant's level of participation and control, and must demonstrate responsibility in the critical areas of the business' operation. Eligible owners must be able to make independent and unilateral business decisions which guide the future and destiny of the business, and must be proportionately responsible for the direction and management of the business. Absentee or titular ownership by eligible owners who do not take an active role in controlling and participating in the business is not consistent with the definition of a HUB.

(d) Meet all other certification and compliance requirements identified in the Commission's HUB Policies and Procedures used to determined eligibility.

Rule §111.22 Definitions Texas Historically Underutilized Business Certification Directory

The commission shall compile in the most cost-efficient format a directory of businesses certified as historically underutilized businesses. The commission shall update the directory as necessary to maintain its accuracy. The commission shall provide a copy to state agencies, local governments and the public on a cost recovery basis upon receipt of a written request. The commission shall provide access to the directory either electronically or in hard copy, on floppy diskette, or on magnetic tape, depending on the needs of the each state agency. The commission and state agencies shall use the directory in conjunction with the commission's bidders list to solicit bids from certified HUBs for state purchasing and public works contracts.

Rule §111.23 Graduation Procedures

a) A HUB shall be graduated from being used to fulfill HUB procurement utilization goals when it has maintained gross receipts or total employment levels four consecutive years which exceed the U.S. Small Business Administration's size standards for firms within similar primary four-digit Standard Industrial Classification codes as stated in 13 Code of Federal Regulations 121.201 for the following categories:

(1) heavy construction other than building construction;

(2) building construction, including general contractors and operative builders;

(3) special trade construction;

(4) medical, financial and accounting services;

(5) architectural/engineering and surveying services;

(6) other services including legal services;

(7) commodities wholesalers;

(8) commodities manufacturers.

(b) Firms which have achieved the size standards identified in subsection (a) of this section will be assumed to have reached a competitive status in overcoming the effects of discrimination. The commission shall review as part of the certification, compliance or recertification process the financial revenue or relevant data of firms to determine whether the size standards identified in subsection (a) of this section have been met.

(c) The graduation of HUBs will be tracked and included in the HUB Report by the applicant's Vendor Identification Number and by Social Security Number to the extent allowed by federal law.

(d) The commission will monitor the progress of graduated HUBs and report their participation in the state's procurements to the Legislature, General Services commission, and other state agencies.

(e) Businesses that have graduated from the HUB program in accordance with this section or have been decertified in accordance with §§111.17-111.22 of this title (relating to Executive Administration Division) may not be included in meeting agency goals.

(f) The General Services Commission shall review the U.S. Small Business Administration's size standards when they change to determine the need to reassess HUB graduation size standards and make changes which would then be effective immediately.

Rule §111.24 Program Review

The commission shall revise the HUB rules based on updates of disparity studies conducted and prepared on behalf of the State of Texas. The commission may determine the need to reassess the HUB rules upon receipt of new disparity study information.

Rule §111.25 Memorandum of Understanding between Texas Department of Economic Development and the General Services Commission

a) Pursuant to the Texas Government Code, §481.028 (Vernon 1998) the General Services Commission adopts the following memorandum of understanding (MOU) with the Texas Department of Economic Development, under which they agree to cooperate in program planning and budgeting relating to procurement information, and certification and technical assistance to small and historically underutilized businesses.

(b) The General Services Commission and the Texas Department of Economic Development mutually agree to the following in order to serve the citizens of Texas in an efficient and fiscally responsible way:

(1) to cooperate on regional economic planning with Texas;

(2) to cooperate in providing procurement information, certification and technical assistance to small and historically underutilized businesses;

(3) to share information of mutual interest;

(4) to develop the agreements necessary to accomplish the activities set forth in the MOU; and

(5) to cooperate to encourage economic development within Texas.

(c) The MOU becomes effective upon execution by representatives of each agency, and shall terminate on August 31, 2001, unless extended by the mutual agreement of the parties.

Rule §111.26 HUB Coordinator Responsibilities

a) In accordance with Texas Government Code, §2161.062(e), state agencies with biennial budgets that exceed $10 million shall designate a staff member to serve as the Historically Underutilized Business (HUB) Coordinator for the agency during the fiscal year. The HUB coordinator will advise and assist agency executive directors and staff in complying with the requirements of Chapter 111, Subchapter B of this title (relating to the Historically Underutilized Business Program), the Texas Government Code, §§321.013, 2101.011, and the Texas Government Code, Chapter 2161.

(b) To demonstrate good faith effort, an agency shall provide the HUB coordinator with necessary and sufficient resources from its current operations and budget to effectively promote the achievement of all the responsibilities of the HUB coordinator. The HUB coordinator will assist its agency in the development of the agency's procurement specifications, HUB subcontracting plans, and evaluation of contracts for compliance. The HUB coordinator should be identified in a responsive role that reports, communicates, and provides information to the agency's executive director. To assist state agencies and the commission with HUB compliance, the duties and responsibilities of HUB coordinators include, but are not limited to, facilitating compliance with the agency's good faith effort criteria, HUB reporting, contract administration, and marketing and outreach efforts for HUB participation. The commission may assist agencies, upon request, to identify other responsibilities of a HUB coordinator for compliance.

Rule §111.27 HUB Forum Programs for State Agencies

(a) In accordance with Texas Government Code, §2161.066, the commission shall design a program of forums in which historically underutilized businesses are invited by state agencies to deliver technical and business presentations that demonstrate their capability to do business with the agency:

(1) to senior managers and procurement personnel at state agencies that acquire goods and services of a type supplied by the historically underutilized businesses; and

(2) to contractors/vendors with the state who may be subcontracting for goods and services of a type supplied by the historically underutilized businesses.

(b) The forums shall be held at state agency offices. Each agency with a biennial appropriation exceeding $10 million shall participate in the forums by sending senior managers and procurement personnel to attend relevant presentations. The agency will inform their contractors/vendors about presentations relevant to subcontracting opportunities for HUBs and small businesses. The commission and each agency that has a HUB coordinator shall:

(1) design its own forum program and model the program, to the extent appropriate, following the format established by the commission;

(2) sponsor presentations by HUBs at the agency;

(3) advertise the forums in appropriate trade publications to target HUBs; and

(4) identify and invite HUBs to make marketing presentations on the types of goods and services they provide.

(c) The agency's forum programs may include, but are not limited to, the following initiatives:

(1) providing marketing information that will direct HUBs to key staff within the agency;

(2) requesting other state agencies to assist in the preparation and planning of the forum when necessary;

(3) informing HUBs about potential contract opportunities and future awards; and

(4) preparing an annual report of each sponsored forum.

Rule §111.28 Mentor Protégé Program

a) In accordance with the Texas Government Code, §2161.065, the commission shall design a Mentor Protege Program to foster long-term relationships between contractors/vendors and Historically Underutilized Businesses (HUBs) and to increase the ability of HUBs to contract with the state or to receive subcontracts under a state contract. The objective of the Mentor Protege Program is to provide professional guidance and support to the protege to facilitate their development and growth. All participation is voluntary and program features should remain flexible so as to maximize participation. Each state agency with a biennial appropriation that exceeds $10 million shall implement a Mentor Protege Program.

(b) In efforts to design a Mentor Protege Program, each agency, because of its unique mission and resources, is encouraged to implement a Mentor Protege Program that considers;

(1) the needs of protege businesses requesting to be mentored;

(2) the availability of mentors who possess unique skills, talents, and experience related to the mission of the agency's Program; and

(3) the agency's staff and resources.

(c) Agencies may elect to implement Mentor Protege Programs individually or cooperatively with other agencies, and/or other public entities and private organizations, with skills, resources and experience in Mentor Protege Programs. Agencies are encouraged to implement a Mentor Protege Program to address the needs of its protege businesses in the following critical areas of the state's procurements:

(1) construction,

(2) commodities, and/or

(3) services.

(d) State agencies may consider, but are not limited to, the following factors in developing their Mentor Protege

Program:

(1) Develop and implement internal procedures, including an application process, regarding the Mentor Protege Program which identifies the eligibility criteria and the selection criteria for mentors and potential HUB protege businesses;

(2) Recruit contractor/vendor mentors and proteges to voluntarily participate in the Program;

(3) Establish a Mentor Protege Program objective identifying both the roles and expectations of the agency, mentor and the protege;

(4) Monitor the progress of the mentor protege relationship;

(5) Identify key agency resources including senior managers and procurement personnel to assist with the implementation of the Program; and

(6) Encourage partnerships with local governmental and nonprofit entities to implement a community based Mentor Protege Program.

(e) An agency's Mentor Protege Program must include mentor eligibility and selection criteria. In determining the eligibility and selection of a mentor, state agencies may consider the following criteria:

(1) Whether the mentor is a registered bidder on the commission's Centralized Master Bidders List (CMBL);

(2) Whether the mentor has extensive work experience and can provide developmental guidance in areas that meet the needs of the protege, including but not limited to, business, financial, and personnel management; technical matters such as production, inventory control and quality assurance; marketing; insurance; equipment and facilities; and/or other related resources.

(3) Whether the mentor is in "good standing" with the State of Texas and is not in violation of any state statutes, rules or governing policies;

(4) Whether the mentor has mentoring experience; and

(5) Whether the mentor has a successful past work history with the agency.

(f) An agency's Mentor Protege Program must include protege eligibility and selection criteria. In determining the eligibility and selection of HUB proteges, state agencies may use the following criteria:

(1) Whether the protege is eligible and willing to become certified as a HUB;

(2) Whether the protege's business has been operational for at least one year;

(3) Whether the protege is willing to participate with a mentoring firm and will identify the type of guidance that is needed for its development;

(4) Whether the protege is in "good standing" with the State of Texas and is not in violation of any state statutes, rules or governing policies; and

(5) Whether the protege is involved in a mentoring relationship with another contractor/vendor.

(g) The mentor and the protege should agree on the nature of their involvement under the agency's mentor/protege initiative. Each agency will monitor the process of the relationship. The mentor and Protege relationship should be reduced to writing and that agreement may include, but is not limited to, the following:

(1) Identification of the developmental areas in which the protege needs guidance ;

(2) The time period which the developmental guidance will be provided by the mentor;

(3) Name, address, phone and fax numbers, and the points of contact that will oversee the agreement of the mentor and Protege;

(4) Procedure for a mentor firm to notify the Protege in advance if it intends to voluntarily withdraw from the program or terminate the mentor Protege relationship;

(5) Procedure for a protege firm to notify the mentor in advance if it intends to terminate the mentor protege relationship;

(6) A mutually agreed upon timeline to report the progress of the mentor Protege relationship to the state agency.

(h) Each agency must notify its mentors and proteges that participation is voluntary. The notice must include written documentation that participation in the agency's Mentor Protege Program is neither a guarantee for a contract opportunity nor a promise of business; but the Program's intent is to foster positive long-term business relationships.

(i) State agencies may demonstrate their good faith under this section by submitting a supplemental letter with documentation to the commission with their HUB Report or legislative appropriations request identifying the progress and testimonials of mentors and proteges that participate in the agency's Program. In accordance with §111.26 of this title (relating to HUB Coordinator Responsibilities) the agency's HUB Coordinator shall facilitate compliance by its agency.


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