1. (a) Policy and Purpose. It is the policy of the Department to encourage the use of historically underutilized businesses (HUBs) and to assist 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 Department contracting in accordance with the goals specified in the State of Texas Disparity Study. 1 TAC §§111.11-111.27, relating to HUBs, describing the minimum steps and requirements to be undertaken.

2. (b) Definitions. The following words and terms, when used in this subsection, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Applicant--A corporation, sole-proprietorship, partnership, joint venture, limited liability company, or supplier that applies to the Department as an historically underutilized business.
   2. (2) Application--A written request for certification as an historically underutilized business in the required format submitted to the Department.
   3. (3) Certified HUB--A business that has applied to the General Services Commission and has been approved for certification as a historically underutilized business.
   4. (4) Commission--The General Services Commission.
   5. (5) Commodities--Materials, supplies, or equipment.
   6. (6) Contractor/Vendor--A supplier of commodities or services to a state agency under a purchase order contract or other contract.
   7. (7) Department--The Texas Department of Housing and Community Affairs (TDHCA)
   8. (8) Directory--The Texas Certified Historically Underutilized Business Directory.
   9. (9) Disparity Study--The State of Texas Disparity Study, performed by the National Economic Research Associates, Inc. (NERA).
   10. (10) Economic Opportunity Forums (EOF)--A collaborative effort between agencies and potential contractors/vendors to provide information and training regarding the Department's procurement opportunities.
   11. (11) Graduation--When a business exceeds the Commission size standard for certification.

   12. (12) Historically Underutilized Business (HUB)--A business that is a Corporation, Sole Proprietorship, Partnership, or Joint Venture in which at least 51% of the business is owned, operated, and actively controlled and managed by a minority or woman in which the owner(s):

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

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

          1. (i) Black Americans--which includes persons having origins in any of the Black racial groups of Africa;
          2. (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;
          3. (iii) American Women--which includes all women of any ethnicity except those specified in clauses (i), (ii), (iv), and (v) of this subparagraph;
          4. (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
          5. (v) Native Americans--which includes persons who are American Indians, Eskimos, Aleuts, or Native Hawaiians; and
       3. (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
       4. (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 subsection; or
       5. (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
       6. (F) a joint venture in which each entity in the joint venture is a HUB under this subdivision; or
       7. (G) a supplier contract between a HUB under this subdivision and a prime contractor/vendor under which the HUB is directly involved in the manufacture or distribution of the supplies or materials or otherwise warehouses and ships the supplies;
       8. (H) a business other than described in subparagraphs (D), (F), and (G) of this subsection, 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 subsection.
   13. (13) Historically Underutilized Business (HUB) Coordinator--The Department's procurement director.
   14. (14) HUB Report--A fiscal year semi-annual and annual report of the state's total expenditures, contract awards and payments made to certified HUBs.
   15. (15) Other services--All services other than construction and professional services, including consulting services subject to the Texas Government Code, Subchapter B.
   16. (16) Person--U.S. citizen, born or naturalized.
   17. (17) 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.
   18. (18) Professional services--Services of accountants, architects, engineers, and land surveyors that must be purchased by the Department under the Texas Government Code, Chapter 2254, Subchapter A.
   19. (19) Subcontractor--A supplier of commodities or services to a contractor/vendor.

3. (c) Annual Procurement Utilization Goals.

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

   2. (2) The Department shall make a good faith effort to assist HUBs in receiving a portion of the total contract value of all contracts that the Department expects to award in a fiscal year in accordance with the following percentages:

      1. (A) 11.9% for heavy construction other than building contracts;
      2. (B) 26.1% for all building construction, including general contractors and operative builders contracts;
      3. (C) 57.2% for all special trade construction contracts;
      4. (D) 20% for professional services contracts;
      5. (E) 33% for all other services contracts; and
      6. (F) 12.6% for commodities contracts.

   3. (3) The Department shall make a good faith effort to meet or exceed the goals outlined in paragraph (2) of this subsection. The percentage goals established in paragraph (2) are overall annual procurement goals for the Department applicable to the total annual dollar amount of the Department'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, the Department may set higher or lower procurement goals than those outlined in paragraph (2) of this subsection. The Department shall consider HUB availability, HUB utilization, geographical location of the project, the contractual scope of work, or other relevant factors. By implementing the following procedures, the Department shall be presumed to have made a good faith effort:

      1. (A) prepare and distribute information on procurement procedures in a manner that encourages participation in Department contracts by all businesses;
      2. (B) divide proposed requisitions into reasonable lots in keeping with industry standards and competitive bid requirements;
      3. (C) where feasible, assess bond and insurance requirements and design requirements that reasonably permit more than one business to perform the work;
      4. (D) specify reasonable, realistic delivery schedules consistent with the Department's actual requirements;
      5. (E) ensure that specifications, terms, and conditions reflect the Department's actual requirements, are clearly stated, and do not impose unreasonable or unnecessary contract requirements;
      6. (F) provide potential bidders with referenced list of certified HUBs for subcontracting;
      7. (G) determine whether specific agency wide 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. (H) 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. (I) seek HUB subcontracting in contracts that are less than $100,000 whenever possible.

   4. (4) The Department may also demonstrate good faith under this paragraph by submitting a supplemental letter with documentation to the Commission with the HUB Report or legislative appropriations request identifying the progress, including, but not limited to the following, as prescribed by the Commission:

      1. (A) identifying the percentage of contracts awarded to women and/or minority-owned businesses that are not certified as HUBs;
      2. (B) demonstrating that a different goal from that identified in paragraph (2) of this section was appropriate given the Department's types of purchases;
      3. (C) demonstrating that a different goal was appropriate given the particular qualifications required by the Department for its contracts;
      4. (D) demonstrating that a different goal was appropriate given that graduated HUBs cannot be counted toward the goal; or
      5. (E) demonstrating assistance to noncertified HUBs in obtaining certification with the Commission.

4. (d) Subcontracts.

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

      1. (A) The Department shall use the following steps in making the determination of whether subcontracting opportunities are probable under the contract:

         1. (i) Use the HUB participation goals in subsection (c), relating to Annual Procurement Utilization Goals;
         2. (ii) 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;

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

            1. (I) contacting other state and local agencies and institutions of higher education to obtain information regarding similar contracting and subcontracting opportunities; and
            2. (II) reviewing the history of similar agency purchasing transactions.
      2. (B) If subcontracting opportunities are probable, the Department'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 1 TAC §113.6(a), relating to Bid Evaluation and Award. The plan shall include goals established pursuant to subsection (c), relating to Annual Procurement Utilization Goals.

   2. (2) Development and evaluation of HUB subcontracting plans. The Department 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 subparagraph (A) of this paragraph when developing the HUB subcontracting plan. The HUB subcontracting plan shall include the form provided by the Department 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 Department.

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

         1. (i) Divide the contract work into reasonable lots or portions to the extent consistent with prudent industry practices.
         2. (ii) 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 Department 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 Department 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 clause 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 clause.
         3. (iii) 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.
         4. (iv) Advertise HUB subcontracting opportunities in general circulation, trade association, and/or minority/woman focus media concerning subcontracting opportunities.
         5. (v) 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 1 TAC §111.17, relating to Certification Process.
      2. (B) If the contract is a lease contract, the lessor shall comply with the requirements of this subparagraph 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. (C) In making a determination whether a good faith effort has been made in the development of the required HUB subcontracting plan, the Department 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 paragraph (2)(A) of this subsection. The documentation shall include at least the following:

         1. (i) Whether the potential contractor/vendor divided the contract work into reasonable lots or portions consistent with prudent industry practices.
         2. (ii) 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.
         3. (iii) Whether the potential contractor/vendor negotiated in good faith with qualified HUBs, not rejecting qualified HUBs who were also the best value responsive bidder.
         4. (iv) Whether the potential contractor/vendor documented reasons for rejection of a HUB or met with the rejected HUB to discuss the rejection.
         5. (v) Whether the potential contractor/vendor advertised in general circulation, trade association, and/or minority/women focus media concerning subcontracting opportunities.
         6. (vi) Whether the potential contractor/vendor assisted non-certified HUBs to become certified.
      4. (D) The HUB subcontracting plan shall be reviewed and evaluated prior to contract award and, if accepted, shall become a provision of the Department's contract. No changes shall be made to an accepted subcontracting plan prior to its incorporation into the contract. The Department will review the supporting documentation submitted by the potential contractor/vendor to determine if a good faith effort has been made in accordance with this subparagraph and the bid specifications. If the Department determines that a submitted HUB subcontracting plan was not developed in good faith, the Department 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. (E) If the potential contractor/vendor can perform all the subcontracting opportunities identified by the Department, 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 subparagraph relating to developing and submitting a subcontracting plan before any modifications or performance in the awarded contract involving subcontracting can be authorized by the Department. If the selected contractor/vendor subcontracts any of the work without prior authorization and without complying with this subparagraph, the contractor/vendor would be deemed to have breached the contract and be subject to any remedial actions provided by the Texas Government Code §2161, state law, and this subparagraph. The Department may report non-performance relative to its contracts to the Commission in accordance with 1 TAC §§113.100-113.102, relating to the Vendor Performance and Debarment Program.
   3. (3) 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 Department before changes will be effective under the contract. The contractor/vendor must comply with provisions of paragraph (2) of this subsection 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 Department 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.

   4. (4) 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 Department periodically and in the format required by the contract documents. During the term of the contract, the Department shall determine whether the value of the subcontracts to HUBs meets or exceeds the HUB subcontracting provisions specified in the contract. Accordingly, the Department shall audit and require a contractor/vendor to whom a contract has been awarded to report to the Department the identity and the amount paid to its subcontractors in accordance with 1 TAC §111.16(c), relating to State Agency Reporting Requirements. If the contractor/vendor is meeting or exceeding the provisions, the Department 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 Department shall notify the contractor of any deficiencies. The Department shall give the contractor/vendor an opportunity to submit documentation and explain to the Department 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. (A) In determining whether the contractor/vendor made the required good faith effort, the Department may not consider the success or failure of the contractor/vendor to subcontract with HUBs in any specific quantity. The Department's determination is restricted to considering factors indicating good faith effort including, but not limited to, the following:

         1. (i) Whether the contractor gave timely notice to the subcontractor regarding the time and place of the subcontracted work.
         2. (ii) Whether the contractor facilitated access to the work site, electrical power, and other necessary utilities.
         3. (iii) Whether documentation or information was provided that included potential changes in the scope of contract work.
      2. (B) If a determination is made that the contractor/vendor failed to implement the HUB subcontracting plan in good faith, the Department, in addition to any other remedies, may report nonperformance to the Commission in accordance with 1 TAC §§113.100-113.102, relating to Vendor Performance and Debarment Program.
      3. (C) The Department shall review their procurement procedures to ensure compliance with this subparagraph. In accordance with 1 TAC §111.26, relating to HUB Coordinator responsibilities, the Department's HUB coordinator and contract administrators should facilitate institutional compliance with this subparagraph.

5. (e) Economic Opportunity Forums (EOF).

   1. (1) In accordance with Tex. Gov't Code Ann. §2161.066, the Department shall participate in multiple EOFs throughout the fiscal year to promote vendor participation opportunity in building business relationships with the State of Texas.
   2. (2) The Department's HUB Coordinator will meet with purchasing staff and department staff to coordinate planning and participation in co-sponsorship/co-hosting for the Fiscal Year.
   3. (3) The Department's HUB Coordinator will create a list of focus topics and finalize all EOF planning for participation in EOFs including all correspondence.
   4. (4) The Department's HUB Coordinator will keep records of EOFs participated in and co-sponsored/co-hosted pursuant to Senate Bill 178.

Source Note:The provisions of this §1.6 adopted to be effective January 28, 2001, 26 TexReg 947.