1 TAC §111.13, §111.14
The General Services Commission adopts amendments to Title
1, T.A.C., Sections 111.13 and 111.14, Historically Underutilized Business
(HUB) Certification Program with changes to the proposed text as published
in February 5, 1999, issue of the
Texas Register
(24 TexReg 647).
The amendments to Sections 111.13 and 111.14 are adopted to clarify terminology
within the current rules; eliminate the predetermined time deadlines for submission
of required information; require that the General Services Commission's Centralized
Master Bidders List (CMBL) and HUB directory be utilized when locating potential
HUB subcontractors; change the minimum number of required notices from five
to three to align with the recommended minimum number of bids that should
be obtained; and require that all data collected relating to HUB Good Faith
Effort Requirements be maintained in the project file for audit purposes.
In subsection 111.14(b), second sentence, the word "bidders" was deleted
and the new language "potential contractors" inserted.
In the first sentence of subsection 111.14(c), the word "potential" was
inserted before the word "contractor" that appears twice. The sentence reads
"If the potential contractor plans to subcontract and is not using a HUB,
the potential contractor shall be presumed to have made a good faith effort
by having implemented the following procedure:" Paragraph 111.14(c)(2), third
sentence, the new word "made" was deleted and the deleted word "provided"
was reinserted for the sentence to read "The notice shall be provided to potential
subcontractors prior to submission of the contractor's bid." In the fourth
sentence of paragraph 111.14(c)(2), the word "potential" was inserted before
the words "contractor" and "contractor's" of the sentence. The word "accepted"
was deleted and the word "determined" was inserted in the new language of
the last sentence of paragraph 111.14(c)(2) that begins with "'Reasonable
time' in this context..." In paragraph 111.14(c)(3), the word "potential"
was inserted before the word "contractor" in the first, second and third sentences
of the paragraph. The words "make a good faith effort to" were inserted in
the second sentence between the words "the contractor shall" and "provide
the notice". Also, in the third sentence the word "an" was deleted between
the words "provide" and "official"; and the words "form of" were deleted between
the words "official" and "written" to read "contractor shall provide official
written documentation..."
Due to comment that was received, subsection 111.14(d) that was shown in
the proposed rule text as having no change, has been amended. In the first
sentence of subsection (d), the word "five" was deleted and the word "three"
was inserted between the words "least" and "businesses" to read "If the commission's
directory does not include at least three businesses...."
In the first sentence of subsection 111.14(f) the word "potential" has
been inserted before the word "contractor". The comma after the word "requirement"
has been deleted and replaced with a period. The proposed new language "in
a time frame" has been deleted as well in the first sentence. After the period
of the first sentence, the words "This shall be done" have been inserted before
the word "prior", thus creating a second sentence in subsection (f). The word
"potential" has been inserted before the word "contractor" that appears twice
in paragraph 111.14(f)(1). The word "potential" has also been inserted before
the word "contractor" in paragraph 111.14(f)(2) and the word "sufficient"
has been deleted after the words "HUBs allowing" and replaced with the new
word "reasonable".
The original purpose, intent, good faith effort requirements and annual
procurement utilization goals of the current rule would not be affected by
these proposed amendments. Rather, the adopted changes would render the rule
more efficient administratively for state agencies and universities. The adopted
amendments to Sections 111.13 and 111.14 should prove beneficial to the state
and bidders by streamlining the administrative process related to the good
faith effort program.
Two written comments were received from the Texas Natural Resources Conservation
Commission (TNRCC) and the Texas A&M University. Both entities offer comments
to make the rules more effective. A summary of the comments and the General
Services Commission's responses follow:
TNRCC Comment on the Proposed Rules:
Obligation to Identify Subcontracting Opportunities. The proposed rule
reads:" If the contractor plans to subcontract and is not using a HUB, the
contractor shall be presumed to have made a good faith effort by" taking certain
steps outlined in Section 111.14(c). It is unclear how this it to be applied
to a contractor who plans to subcontract and is in fact using a HUB, but only
for a fraction of the total subcontracting the contractor plans to do. Should
that contractor go through the steps outlined in Section 111.14(c) with respect
to subcontracts, which will be awarded to non-HUBs?
GSC Response: Yes, contractor should go through the steps outlined in Section
111.14(c) with respect to subcontracts. The requirement is to ensure an effort
was made to utilize HUBs if there are opportunities for subcontracting.
Prudent or Standard Industry Practice and Contractor's Division of the
Work into Lots or Portions. Under the existing rule a contractor is presumed
to have made a Good Faith Effort if, among other things, it has divided the
contract work into "reasonable lots" to the extent consistent with "prudent
industry practice." (Section 111.14 (c)(1)). In determining whether a Good
Faith Effort has been made, however, a state agency is required to obtain
information regarding whether the contract work has been divided into "reasonable
portions" in accordance with "standard industry practices." (Section 111.14(f)(3))
Are these intended to be the same standard? If not, why are they different
and what information should a state agency consider with respect to the contractor's
division of the work and industry practices? Should the rule be altered so
that the same words are used in Sections 111.14(c)(1) and 111.14(f)(3)?
GSC Response: The standards referred to in both Sections 111.14(c)(1) and
111.14(f)(3) are intended to be the same. However, in Section 111.14(c)(1)
the standard "prudent industry practice" is applicable to prime contractors
who intend to subcontract. In Section 111.14(f)(3) the "standard industry
practices" applies to the agency evaluation for contract compliance of the
Good Faith Effort.
Subcontracting to Non-Certified HUB. In addition, the proposed rule limits
the good faith effort presumption to contractors who solicit certified HUBs,
except in cases where there are fewer than five certified HUBs on the GSC
HUB Directory (§§111.14(c)(3) and 111.14(d)). This requirement could
limit HUB participation and result in lost business for minority and women
owned businesses who are eligible HUBs, but not yet certified, and limit HUB
participation in state contracts. It could be especially problematic with
respect to purchases funded in whole or in part by federal funds, because
federal Minority Business Enterprise/Women's Business Enterprise requirements
are not limited to certified businesses.
GSC Response: The intent of the Good Faith Effort requirement is to insure
utilization of HUB businesses certified with the General Services Commission.
State agencies will receive HUB credit for utilizing HUBs actively certified
with the Commission. Non-certified minority or woman owned businesses should
be encouraged by prime contractors and state agencies to become certified
with the GSC to increase their contract opportunities and HUB participation.
Minimum Number of HUBs for Contractor to Solicit. The proposed rule change
alters the requirement that contractors solicit five HUBs to a requirement
that they solicit three HUBs (proposed §§ 111.14(b)(3), 111.14(f)(1),
and 111.14(f)(2). However, § 114.14(d) still refers to an alternate procedure
for contractors to follow if the GSC HUB Directory does not include at least
five HUBs. Why is this requirement different? Should it also be altered from
five to three?
GSC Response: Staff agrees and changes made in recommendation.
Use of Terms "Bidder," "Contractor," and "Potential Contractor." The rule
uses the terms "bidder," "contractor," and "potential contractor" in a confusing
manner.
GSC Response: The use of the terms "bidder," "contractor," and "potential
contractor" have been reviewed and changed accordingly throughout the rule.
Sufficient vs. Reasonable Time. The proposed rule refers to a "reasonable
time" for notice to potential HUB subcontractors in Section 111.14(c)(2),
but later refers to "sufficient time" for such notice in Section 111.14(f)(6).
It appears that the same standard is intended. Therefore, we suggest that
"reasonable time" be used in both places.
GSC Response: GSC agrees, but commentor erroneously referred to 111.14(f)(6)
in the above comment and intended to refer to Section 111.14(f)(2). Appropriate
correction made to Section 111.14(f)(2) to change language from "sufficient
time" to "reasonable time" so that language is consistent in rule Section
111.14.
Texas A&M University's Comments on the following Proposed Rules:
Comment: In Sec. 111.13(c)(6), the proposed text changes the term "contractor"
to potential bidder. I believe this change is appropriate and more descriptive
of the true nature of those individuals/firms that are interested in offering
a bid to the state. If this new term is to be used in that context, the term
contractor should be removed and replaced throughout the entire text of this
rule. The individual/firm is a "potential bidder" until the presentation of
a bidder, they then become a "potential contractor" and only after an award
is made do they become a "contractor." In order to be correct the terms must
be consistent throughout.
Response: GSC agrees and changes made in recommendation.
Comment: In Sec. 111.14(b), line 4 includes the term "bidder." The proper
context here should be potential bidder.
Response: Language was changed in Sec. 111.14(b) from "bidder" to "potential
contractor" due to other comments that were received. In the context used,
the bids have already been received and opened. Thus, those that have submitted
bids for evaluation are "potential contractors," not "potential bidders."
Comment: In Sec. 111.14(c), the first line should include potential in
front of "contractor" and the phrase "and is not using a HUB" should be stricken.
It serves no purpose in as much as the activities are required of all bidders
regardless of their intent to ultimately use a HUB or not. In this same section
on line 4, the term "procedure" should be used in the plural.
Response: Agree about the use of "potential" in front of "contractor."
That change has been made. However, the staff believes that the use of "and
is not using a HUB" in the proposed rule is appropriate in order to have the
potential contractor document their effort to utilize a HUB subcontractor.
Comment: In Sec. 111.14(c)(2) line 5, I believe that a more appropriate
word to use in the context of this sentence is "provided" rather than the
replacement word of "made."
Response: GSC agrees and changes made in recommendation.
Comment: In Sec. 111.14(c)(2) line 8, the term "contractor" is not use
properly as stated in the first paragraph of these comments.
Response: GSC agrees and changes made in recommendation.
Comment: In Sec. 111.14(c)(2) line 9, I believe the proper word to used
in this sentence is "response" rather than "respond".
Response: GSC does not agree. In the context used, the appropriate word
to use is "respond." No change recommended.
Comment: In Sec. 111.14(c)(2) lines 9 and 10, the phrase "which is accepted
by the agency" should be deleted. The agency should have no responsibility
or right to approve the time period. The sense of the rule without this phrase
is completely clear without having the approval by the agency in it. It would
add unneeded interference and bureaucracy to the bidder and the agency alike.
Response: GSC does not agree with commentor that language should be deleted.
However, the phrase "which is accepted by the agency" has been amended to
read "which is determined by the agency." Further, state agencies should have
the authority to change the time frame if circumstances warrant (i.e. construction
related procurements/projects may require a longer time frame for response
than commodity/service related procurements).
Comment: In Sec. 111.14(c)(3) line 3, it is strongly recommended that the
following phrase ("make a good faith effort") be inserted after the phrase
"...the contractor shall..." The entire implementation concept of the HUB
statute is centered on the "making of a good faith effort" to include HUB
businesses in the bidding opportunities of the state. By isolating specific
instances in these proposed rules to be more stringent, the basic intent of
this principle is destroyed and makes the whole concept ambiguous. As long
as the courts accept the premise of "goals" rather than quotas, we cannot
penalize businesses if they cannot obtain specific numbers of HUBs in the
bidding process. The "good faith effort" is a sound practice.
Response: GSC agrees and changes made in recommendation.
Comment: Sec 111.14(c)(3) line 8, to use consistent terms in the document,
I believe the word [contractor] should be deleted and replaced with bidder.
Also, since there is no "official form" for the written documentation of phone
logs, fax transmittals, etc., using that term is erroneous. Delete the phrase
"...an official form of...."
Response: GSC agrees in principal and has amended the rule to read "potential
contractor" instead of "contractor". Also, changed "...official form of..."
to "...official written documentation...."
Comment: Sec. 111.14(f) line 3, I suggest deleting the phrase "...and not
utilize a HUB,..." All proposed contractors should be required to submit documentation
of their efforts in making a good faith effort in accordance with this section.
I believe contractors will appreciate the fact that they must provide this
documentation for each bidding opportunity rather that it only being required
when they are not intending to subcontract with a HUB.
Response: Recommendation not incorporated. Potential contractors are, in
fact, required to submit supporting documentation regarding their decision
to subcontract and not utilize a HUB subcontractor. Additionally, potential
contractors are required to submit supporting documentation prior to the award
if there is an intent to subcontract with a HUB. If the potential contractor
makes a business decision not to subcontract any portion of the contract,
state agencies will determine through the evaluation criteria identified in
111.14(f) if a good faith effort has been made.
Comment: Sec. 111.14(f) lines 6 and 7, I suggest deleting the phrase "...in
a time frame [within 14 days] following selection but..." which follows "...according
to each requirement..." In this way, the state agency will contact the specific
time requirements for submittal of data on a case-by-case basis. The award
could not be made until such time as the data was submitted and judged as
acceptable to the contracting agency.
Response: GSC agrees and changes made in recommendation.
Comment: Sec. 111.14(f)(1) - (2), I suggest in each of these sections inserting
the word "attempted" to after the opening phrase which reads "Whether the
contractor...." Also change "provided" to "provide".
Response: Comment not incorporated. The recommendation to insert "attempted"
after the opening phrase of "Whether the contractor..." implies a lessening
of the current rule requirement which requires the potential contractor to
provide written notices to HUBs not merely "attempt" to provide the notice.
The amendments are adopted under the Texas Government Code, Title
10, Subtitle D, Chapter 2161, Section 2161.002 which provides the General
Services Commission with the authority to promulgate rules under this Code.
§111.13.Annual Procurement Utilization Goals.
(a)-(b)
(No change.)
(c)
Each 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 program 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 program goals than those outlined in this subsection.
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)-(5)
(No change.)
(6)
provide potential bidders with referenced list of
certified HUBs for subcontracting;
(7)
(No change.)
(d)
(No change.)
§111.14.Subcontracts.
(a)
(No change.)
(b)
A state agency shall require a potential contractor to
state whether it is a Texas certified HUB and whether subcontractors will
be used to perform the contract. After the bid opening and prior to award
of the contract, potential contractors may be required to submit a copy of
the notice described in subsection (c)(2) of this section and shall provide
the expected percentage of work, if any, to be subcontracted.
(c)
If the potential contractor plans to subcontract and is
not using a HUB, the potential contractor shall be presumed to have made a
good faith effort by having implemented the following procedure:
(1)
To the extent consistent with prudent industry practice,
divide the contract work into reasonable lots.
(2)
Notify HUBs of the work that the contractor intends
to subcontract. The preferable method of notice shall be in writing. The notice
shall, in all instances, include a quantitative description of the subcontracting
opportunities and identify the location to review contract specifications.
The notice shall be provided to potential subcontractors prior to submission
of the contractor's bid. The potential contractor shall provide potential
subcontractors reasonable time to respond to the potential contractor's notice.
"Reasonable time" in this context is no less than five working days from receipt
to respond unless circumstances require a different time period which is determined
by the agency, and documented in the project file.
(3)
The potential contractor shall utilize the Commission's
Centralized Master Bidders List and HUB Directory when searching for HUB subcontractors.
In this effort, the potential contractor shall make a good faith effort to
provide the notice described in paragraph (2) of this subsection to at least
three certified HUBs that perform the type of work required in the area in
which the work will be performed. Upon request, the potential contractor shall
provide official written documentation (i.e. phone logs, fax transmittals,
etc.) to substantiate the notice described in paragraph (2) of this subsection.
This information shall be retained as part of the project file.
(4)
If a non-HUB subcontractor is selected through means
other than competitive bidding, or a HUB bid is the lowest price responsive
bidder to a competitive bid, but not selected, the contractor will be required
to document the selection process.
(5)
The contractor shall maintain business records documenting
its compliance with this section and shall make a compliance report to the
contracting agency and report in the format required by the agency's contract
documents, provided that reporting shall be required at least once for each
calendar quarter during the term of the contract.
(6)
If the contract is a state lease contract, the contractor
or 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.
(d)
If the commission's directory does not include at least
three businesses, the contractor shall send the notice to HUBs on lists of
minority and women-owned businesses maintained by other government agencies
or organizations. If a contractor uses a source other than the commission's
directory, the selected HUB subcontractor must become certified by the commission
in accordance with the procedures set forth in §111.17 of this title
(relating to Certification Process).
(e)
An agency shall ensure that a contractor has complied with
this section as a condition of awarding any contract.
(f)
In making a determination whether a good faith effort has
been made in cases where a bidder is planning to subcontract and not utilize
a HUB, a state agency shall require the potential contractor to complete a
checklist, and submit supporting documentation explaining in what ways the
potential contractor has made a good faith effort according to each requirement.
This shall be done prior to award of the contract. The checklist shall include
at least the following:
(1)
Whether the potential contractor provided notices to at
least three qualified HUBs or the potential contractor advertised in general
circulation, trade association, and/or minority/women focus media concerning
subcontracting opportunities.
(2)
Whether the potential contractor provided notice to
at least three qualified HUBs allowing reasonable time for HUBs to participate
effectively.
(3)
Whether the contractor divided the contract work into
the reasonable portions in accordance with standard industry practices.
(4)
Whether the contractor documented reasons for rejection
or met with the rejected HUB to discuss the rejection.
(5)
Whether the contractor provided qualified HUBs with
adequate information about bonding, insurance, the plans, the specifications,
scope of work and requirements of the contract.
(6)
Whether the contractor negotiated in good faith with
qualified HUBs, not rejecting qualified HUBs who are also the lowest responsive
bidder.
(g)
Contractors are encouraged to use the services of available
minority and women; community organizations contractor groups; local, state,
and federal business assistance offices, and other organizations that provide
support services to HUBs.
(h)
State agencies shall review the checklist and the attached
documentation submitted by the contractor to determine if a good faith effort
has been made in accordance with this section or the contract specifications.
If determined that a good faith effort has not been made in accordance with
this section and the contract specifications, the bid will be rejected. The
reasons for non-compliance shall be recorded in the project file.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on June
25, 1999.
TRD-9903807
Judy Ponder
General Counsel
General Services Commission
Effective date: July 15, 1999
Proposal publication date: February 5, 1999
For further information, please call: (512) 463-3960