Bill Analysis - HB 1259, Women and Minority Business Enterprises Oversight (Hearing Date 1/26/21)

Summary

Bill analysis of HB 1259 from the Office of Program Research for the Community & Economic Development Committee, with a hearing date of 1/26/21. The brief description is expanding public contracting opportunities for women and minority business enterprises by increasing the regulatory oversight and accountability of the office of minority and women's business enterprises. The brief summary says the bill establishes an Audit and Review unit within the Office of Minority and Women's Business Enterprises, modifies requirements related to the small-works roster and limited public works process, and repeals the Office of the Attorney General's authority to investigate and enforce compliance. It states that a fiscal note was requested on January 19, 2021.

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Washington State BILL
House of Representatives
Office of Program Research ANALYSIS
Community & Economic Development
Committee
HB 1259
Brief Description: Expanding public contracting opportunities for women and minority
business enterprises by increasing the regulatory oversight and accountability of the office
of minority and women's business enterprises.

Sponsors: Representatives Santos, Dolan, Ryu, Valdez, Fey, Ramel, Ortiz-Self, Hackney,
Ramos, Kloba, Callan, Lekanoff, Macri, Gregerson, Slatter, Stonier and Harris-Talley.

Brief Summary of Bill
• Establishes an Audit and Review unit within the Office of Minority and
Women's Business Enterprises (OMWBE) to detect and investigate fraud
and violations pertaining to the certification of, and contracts with,
minority- and women-owned businesses.
• Modifies requirements related to the small-works roster and limited
public works process, including increasing the cost thresholds for
eligible projects under each process.
• Requires the OMWBE to annually identify state agencies and
educational institutions with low levels of participation by minority- and
women-owned businesses in the execution of public contracts.
• Repeals the Office of the Attorney General's authority to investigate and
enforce compliance with minority- and women-owned businesses
contract requirements.

Hearing Date: 1/26/21

Staff: Kyle Raymond (786-7190).

This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.

House Bill Analysis -1- HB 1259
Background:

Office of Minority and Women's Business Enterprises.
The Office of Minority and Women's Business Enterprises (OMWBE) was created to provide
minority- and women-owned and controlled businesses with the maximum practicable
opportunity for increased participation in public-works contracts and public contracts for goods
and services.

The OMWBE is the sole authority in Washington for certifying minority- and women-owned,
and socially and economically disadvantaged, business enterprises. Among other duties, the
OMWBE must identify barriers to equal participation by qualified businesses in all state agency
and educational contracts, and the OMWBE must establish annual participation goals by
qualified businesses for each state agency and educational institution.

Prohibited Activities. Certain activities relating to certification of, and contracts with, minority
and women-owned businesses are prohibited. A person, firm, corporation, business, union, or
other organization may not:
• prevent or interfere with a contractor's compliance with laws and rules pertaining to the
certification of, and contracts with, minority- and women-owned businesses;
• submit false or fraudulent information;
• fraudulently obtain, retain, or attempt to obtain or retain certification;
• knowingly make a false statement to a state official or employee for the purpose of
influencing certification or denial of certification;
• knowingly obstruct, impede, or attempt to obstruct or impede any state official or
employee who is investigating the qualification of a business entity applying for
certification;
• fraudulently obtain, attempt to obtain, or aid another person in fraudulently obtaining or
attempting to obtain public monies to which the person is not entitled; or
• knowingly make false statements that an entity is or is not certified for purposes of
obtaining a contract.

Enforcement. The state may impose penalties for violations for applicable laws and rules. For
any violation, the state may: (1) withhold payment; (2) debar, suspend, or terminate the contract;
or (3) impose civil penalties of up to 10 percent of the contract amount or up to $5,000 per
violation.

For a willful and repeated violation, a contractor may be disqualified from state contracts for a
period of up to three years. The OMWBE must adopt rules that identify criteria for the
imposition of penalties.

The Office of the Attorney General (AGO) may enforce laws and rules with respect to the
OMWBE programs and certification procedures. The AGO may conduct investigations and may
file for civil injunctive relief.

House Bill Analysis -2- HB 1259
Small-Works Roster and the Limited Public-Works Process.
In general, public works includes all work, construction, alteration, and repair or improvement,
other than ordinary maintenance, that is a cost to the state or a local government. All public
works must comply with the public works prevailing wage requirements under Chapter 39.12
RCW.

Small-Works Roster. For public works projects estimated to cost $350,000 or less, state agencies
and authorized local governments may use the small-works roster process to award contracts. A
small-works roster includes any responsible contractor who requests to be on the roster, which
may be a single general list or lists for specialties or categories of work.

Under the small-works process, instead of advertising the contract opportunity, the state agency
or local government solicits bids from at least five contractors on the small-works roster. If the
estimated cost of the work is from $250,000 to $350,000, a state agency or local government
may solicit bids from less than all the appropriate contractors. If bids are solicited from less than
five contractors, notification must be provided to the remaining contractors on the appropriate
small-works roster that quotations on the work are being sought. The state agency or local
government awards the contract to the lowest responsible bidder.

When using the small-works roster for a project, state agencies and local governments must
attempt to equitably distribute opportunities for the project among the listed contractors.
"Equitably distribute" means a state agency or authorized local government may not favor
certain contractors on the appropriate small-works roster over other contractors on the same
roster who perform similar services.

For projects awarded under the small-works roster process, a state agency or authorized local
government may waive certain retainage requirements and assume liability for the contractor's
nonpayment of taxes and of laborers, subcontractors, mechanics, material persons, and
suppliers. The state agency or local government retains the right of recovery against the
contractor for any payments made on the contractor's behalf. Recovery of unpaid wages and
benefits must be the first priority of actions filed against the retainage.

Limited Public-Works Process. For public works projects estimated to cost less than $50,000,
state agencies and authorized local governments may use the limited public-works process to
award contracts. Under the limited public-works process, the state agency or local government
solicits bids from at least three contractors from the appropriate small- works roster and awards
the contract to the lowest responsible bidder.

Public works projects awarded through the limited public-works process are exempt from certain
small- works roster process requirements and are exempt from the requirement that contracts be
awarded after advertisement.

When using the limited public-works processes for a project, state agencies and local
governments must attempt to equitably distribute opportunities for the project among the listed

House Bill Analysis -3- HB 1259
contractors willing to perform in the geographic area.

A state agency or authorized local government is required to maintain a list of the contractors
contacted and awarded during the previous 24 months under the limited public-works process,
including the name of the contractor, the contractor's registration number, the amount of the
contract, a brief description of the type of work performed, and the date the contract was
awarded.

For limited public-works projects, the state agency or local government may waive payment,
performance bond, and retainage requirements, thereby assuming the liability for the contractor's
nonpayment of laborers, mechanics, subcontractors, material persons, suppliers, and taxes,
increases, and penalties.

A state agency or authorized local government may use the limited public-works process to
solicit and award small-works roster contracts to minibusinesses and microbusinesses that are
registered contractors.

Retainage. Retainage refers to a portion of the contractor's payment that is withheld by the
contracting agency until the project is complete, and the portion is limited to 5 percent of the
payment amount. The retainage is used to satisfy claims that a person, such as a laborer or
supplier, may have under the contract and to pay any taxes or penalties that may be due from the
contractor. In instances where retainage is not waived, certain notice of completion requirements
apply.

Department of Enterprise Services.
The Department of Enterprise Services (DES) manages procurement of goods and services for
state agencies. The DES is, in part, responsible for developing procurement policies and
procedures that encourage and facilitate the purchase of goods and services from Washington
small businesses, microbusinesses, minibusinesses, and minority and women-owned businesses
to the maximum extent practicable.

Microbusinesses are independently owned and operated business entities with an annual gross
revenue of less than $1 million.

Minibusinesses are independently owned and operated business entities with an annual gross
revenue between $1 million and $3 million.

Summary of Bill:

Audit and Review Unit.
The Office of Minority and Women's Business Enterprises (OMWBE) establishes an Audit and
Review Unit (Unit) to detect and investigate fraud and other relating to the certification of, and
contracts with, minority- and women-owned businesses.

House Bill Analysis -4- HB 1259
The Unit must respond to all complaints for investigation made by other agencies, and the Unit
must develop processes to prioritize and conduct thorough investigations when an external
complaint or internal concerns are received. The Unit must annually conduct a site review of a
minimum of 3 percent of contractors.

Enforcement and Penalties. The penalties for violations of the applicable laws and rules are
modified. If a person, firm, corporation, business, union, or other organization engages in
activity that is an expressly prohibited activity, the state must impose one or more of the
following penalties:
• withholding payment;
• decertifying the contractor;
• debarring the contractor for a period of between one and three years;
• terminating the contract; or
• subjecting the contractor to civil penalties of between 2 and 10 percent of the amount of
the contract, or between $1,000 and $5,000 for each violation.

All civil penalties imposed must be deposited in the Minority and Women's Business Enterprises
Account.

If a contractor commits willful, repeated violations, the contractor must be debarred from state
contracting for three years, in addition to any other penalties imposed. A willful violation
includes a conscious or deliberate false statement, misrepresentation, omission, or concealment
of a material fact, with the intent of impacting benefits that are awarded.

The Director of the OMWBE, or the Director's designee, may subpoena witnesses and is granted
enforcement authority under the Administrative Procedures Act. The Director may apply for and
obtain a superior court order approving and authorizing a subpoena in advance of its issuance. A
superior court may issue an approval and authorization without prior notice to the person to
whom the subpoena is directed or to the person who is the subject of the investigation.

The Office of the Attorney General (AGO) enforcement authority is repealed.

"Debar" is defined as prohibiting a contractor, individual, or other entity from submitting a bid,
having a bid considered, or entering into a state contract during a specified period of time as set
forth in a debarment order.

Small-Works Roster and the Limited Public-Works Process.
The project cost threshold for which state agencies and authorized local governments may use
the small-works roster process to award contracts is increased to $500,000.

The range for which a state agency or local government may solicit bids from less than the
appropriate contractors and is required to notify the remaining contractors on the roster of the
quote being sought is changed from $150,000 to $500,000.

House Bill Analysis -5- HB 1259
The project cost threshold for which state agencies and authorized local governments may use
limited public-works process to award contracts is increased to $150,000.

Agency Identification.
The OMWBE must annually identify the state agencies and educational institutions that are:
• in the lowest quintile of utilization of minority- and women-owned contractors as a
percentage of all contracts issued by the agency;
• in the lowest quintile of dollar value awarded to minority- and women-owned contractors
as a percentage of the dollar value of all contracts issued by the agency; and
• performing significantly below their established goals.

The OMWBE must meet with each identified agency to review the agency's plan and identify
tools for increasing participation by qualified businesses.

The OMWBE must include the information identified and actions taken to the Legislature and
the Governor in their annual report.

Appropriation: None.

Fiscal Note: Requested on January 19, 2021.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is
passed.

House Bill Analysis -6- HB 1259

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