GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

S	1 

SENATE BILL 927

Short Title:  Minority Business Enterprises.	(Public)
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Sponsors: Senators Hunt of Durham, Ballance, Richardson, and Martin of Guilford.
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Referred to:  Small Business.
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April 18, 1989

A BILL TO BE ENTITLED
AN ACT TO PROVIDE OPPORTUNITIES TO PARTICIPATE IN STATE PROCUREMENT CONTRACTS TO MINORITY BUSINESS ENTERPRISES.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 143 of the General Statutes is amended by adding a new Article to read:
“ARTICLE 3E.
"Minority Business Enterprises.
"§ 143-64.40.  Purpose.
The purpose of this Article is to provide maximum contracting opportunities to minority business enterprises.  To further this purpose:
(1)	Each Department, except the Department of Transportation as to construction contracts, shall structure its procedures for procuring supplies, services, maintenance, and construction to attempt to achieve a minimum goal of ten percent (10%) of the total dollar value of these procurements that are made directly or indirectly from certified minority business enterprises;
(2)	The Department of Transportation shall structure its procurements for procuring construction to attempt to achieve participation by certified minority business enterprises, in the amount of a minimum goal of ten percent (10%) of the dollar value of contracts in excess of one hundred thousand dollars ($100,000) on the prime or subcontract level; and
(3)	Each procurement agency shall structure its procedures for procuring supplies, services, maintenance, and construction to encourage a fair participation in the State procurement process by certified minority business enterprises.
"§ 143-64.41.  Definitions.
As used in this Article, unless the context indicates otherwise:
(1)	‘Certification' means a determination by the Minority Business Development agency in the Department of Commerce that a legal entity is a minority business enterprise for purposes of this Article.
(2)	‘Control' means the exercise of the power to manage and operate a business enterprise.
(3)	‘Department' means the Department of Administration, The University of North Carolina, and the Department of Transportation.
(4)	‘Goal' means a voluntary percentage or quantitative objective.
(5)	‘Minority Business Enterprise' (MBE), means any legal entity, other than a joint venture, organized to engage in commercial transactions, that is at least fifty-one percent (51%) owned and controlled by one or more minority persons, or a non-profit entity organized to promote the interests of the physically or mentally disabled.
(6)	‘Minority person' means a member of a socially or economically disadvantaged minority group, and includes Blacks, Hispanics, American Indians, Alaska natives, Asians, Pacific Islanders, women, and the physically or mentally disabled.
(7)	‘North Carolina Minority Business Development agency' means an agency in the Small Business Development Division of the Department of Commerce.
(8)	‘Ownership' means:
a.	For a sole proprietorship, that the sole proprietor is a minority person.  If the ownership interest held by a minority person is subject to formal or informal restrictions such as options, security interests, or agreements held by a nonminority person or business entity, the options, security interests, or agreements held by the nonminority person or business entity may not significantly impair the minority person's ownership interest.
b.	For a partnership, that at least fifty-one percent (51%) of the partnership's assets or interests are owned by a minority person or minority persons.  If the ownership interest held by a minority person is subject to formal or informal restrictions such as options, security interests, or agreements, held by a nonminority person or business entity, the options, security interests, or agreements held by the nonminority person or business entity may not significantly impair the minority person's ownership interest.
c.	For a corporation, that legal and equitable ownership of at least fifty-one percent (51%) of all classes of stock, bonds, or other securities issued by the corporation is owned by a minority person or minority persons.  If an ownership interest held by a minority person is subject to formal or informal restrictions such as options, security interests, or agreements held by a nonminority person or business entity, the options, security interests, or agreements held by the nonminority person or business entity may not significantly impair the minority person's ownership interest.
(9)	‘Procurement agency' means any State agency that is authorized by law or regulations to procure or contract.
(10)	‘Solicitation notice' means public notice of a solicitation for bids, offers, or expressions of interest which contains the nature of the procurement, relevant dates, the availability of solicitation documents, if any, and other pertinent information.  The notice shall consist of, but is not limited to:
a.	Legal advertisement;
b.	Newspaper notice;
c.	Bid board notice; or
d.	Bid or proposal documents including the invitation for bids or request for proposals.
"§ 143-64.42.  Scope of Article.
This Article applies to every procurement of supplies, services, maintenance, and construction by a Department or procurement agency.  Nothing in this Article is to be construed to relieve a Department from attempting to achieve its statutory cumulative contract goal for MBE participation.
"§ 143-64.43.  Department and procurement agency responsibility.
(a)	Each Department and procurement agency shall make its procurements in accordance with this Article.  Each local board of education shall adopt procedures consistent with this Article before obtaining State funds for public school construction projects.  When delegating procurement authority to procurement agencies and other departments, the Department of Administration shall condition the delegation on compliance with this Article.
(b)	Departments and procurement agencies shall, to the extent practicable, develop uniform affidavits and reporting forms required by this Article.
"§ 143-64.44.  MBE Liaison Officer.
The head of each Department and procurement agency shall designate an employee to be an MBE Liaison Officer in the administration of that agency's minority business enterprise program.  The MBE Liaison Officer shall be a high-level employee reporting directly to a Secretary, Deputy Secretary, or head of a Department or procurement agency.  The MBE Liaison Officer shall be responsible for coordinating agency outreach efforts to the minority business community, reviewing agency contracting procedures to assure compliance with this Article, assisting in the resolution of contracting issues, and for the submission of all required MBE program reports or information.
"§ 143-64.45.  Central directory.
The North Carolina Minority Business Development agency and the Department of Administration shall publish a central directory of MBEs certified by the North Carolina Minority Business Development agency under G.S. 143-64.53.  The central directory shall specify the type of supplies, services, maintenance, or construction  primarily provided by the MBE, and the date of certification.  The central directory shall include:
(1)	The address;
(2)	Phone number; and
(3)	Contact person
of all certified MBEs; and the name of every business entity that has been denied certification or decertified within the last two years.  The directory shall be updated at least quarterly, and if feasible, monthly.
"§ 143-64.46.  Outreach.
Outreach efforts to minority business enterprises shall advise of contracting opportunities within the State as follows:
(1)	Departments and procurement agencies shall periodically conduct meetings with minority business enterprises, as appropriate, to advise of procurement opportunities within that Department or agency.  These meetings shall be coordinated with the North Carolina Minority Business Development agency and other State agencies which make similar procurements.
(2)	The Minority Business Development agency shall:
a.	Periodically convene seminars that include the minority business community and appropriate personnel of the various Departments and procurement agencies.  These seminars shall address topics of interest to prospective or current MBEs such as State procurement procedures, certification, and anticipated State procurements.  The Minority Business Development agency may provide technical assistance to MBEs relating to the procurement process.
b.	Provide notice of all seminars and meetings undertaken under this regulation to each minority business listed in the central directory that may be reasonably expected to be interested in the effort, as well as to those entities described in G.S. 143-64.47(3).
"§ 143-64.47.  MBE notification.
A Department or procurement agency shall notify MBEs of procurement contract opportunities as follows:
(1)	Minority business enterprises listed in the central directory or otherwise known to the Department or procurement agency as providing the supplies, services, maintenance, or construction activity being procured, and that may be reasonably expected to be interested in an upcoming procurement as decided by the Department or procurement agency, shall be sent a copy of the solicitation notice as part of the solicitation process being employed for the business community in general.  The Department or procurement agency shall solicit a sufficient number of MBEs as to reasonably assure one or more MBE responses to the solicitation.  A Department or procurement agency shall have fulfilled the solicitation requirements of this Article if it has used the central directory in the solicitation process.  Each solicitation notice shall include the following statement:  ‘Minority business enterprises are encouraged to respond to this solicitation notice.'
(2)	Within 30 days following the first day of the fiscal year, every Department and procurement agency shall forward to the Minority Business Development agency a complete listing of all known regularly recurring procurement solicitations reasonably expected to be of one hundred thousand dollars ($100,000) or more.  The list shall include the subject of the contract, where the work is to be performed or delivery made, the approximate solicitation date and the name and telephone number of the procurement officer.  The Minority Business Development agency shall compile a master list containing the above information, and distribute it to the Division of Small Business Development of the Department of Commerce, appropriate minority business associations, minority business assistance agencies, trade organizations, and to each Department and procurement agency which shall post the list on all bid boards for the remainder of the fiscal year.
(3)	Except for sole source, small, and emergency procurements, a copy of the solicitation notice for each procurement shall be sent to the Minority Business Development agency for distribution to the appropriate minority business associations, minority business assistance agencies, and trade organizations identified by the Minority Business Development agency.  One copy of solicitation documents for these procurements shall be made available, by the Department or agency, free of charge, to these entities on request.  The copy shall be marked ‘For Informational Purposes Only.'
"§ 143-64.48.  Procurement solicitations.
(a)	A Department or procurement agency shall assess the potential for MBE participation expected under each of the methods described in subsection (b) of this section before initiating the procurement.  The Department or procurement agency shall utilize the MBE procurement method, or combination of methods decided most appropriate for the particular contract.
(b)	The following factors shall be used to anticipate the degree of MBE participation, to decide the MBE subcontract participation goal, when used, and the MBE procurement method to be used:
(1)	The extent to which the direct solicitation, subcontracting opportunity method, or combination of both methods, is determined most likely to result in maximum MBE participation in the contract;
(2)	The number of MBEs listed in the central directory or otherwise identified for a particular supply, service, maintenance, or construction;
(3)	The geographical proximity, when relevant, of MBEs identified under subdivision (2) of this section to the location of the work to be performed;
(4)	The feasibility of subcontracting opportunities given the nature and extent of the proposed contract; and
(5)	Specific statutory participation goals applicable to a Department's procurement.
(c)	The Department of Administration may employ the following procurement methods:
(1)	Direct solicitation.  If known MBEs can provide the entire contract, then the MBEs may be solicited directly as part of the solicitation process being employed for the business community in general.
(2)	MBE subcontract method.  Notwithstanding whether a direct solicitation is made under subdivision (1) of this subsection, all Department of Transportation construction contracts in excess of one hundred thousand dollars ($100,000) and all other construction contracts in excess of fifty thousand dollars ($50,000) shall contain an MBE subcontract participation goal, expressed as a percentage of the dollar value of the contract that should be attempted to be subcontracted to MBEs.  A Department or procurement agency may establish an MBE subcontract goal for a particular construction contract of fifty thousand dollars ($50,000) or less, or any supply, maintenance, or service contract.  A bidder or offeror shall submit with its bid or proposal a completed MBE utilization affidavit on a form provided by the appropriate Department or procurement agency.  The names of prime contractors requesting or purchasing solicitation documents for construction contracts shall be made available on request to any certified MBEs whose specialty suggests an interest in subcontracting.  Each prime contractor given solicitation documents as part of a procurement under the MBE subcontract method, and who does not have an updated central directory shall be given, upon request, one copy of the directory or the pertinent portions for purposes of soliciting subcontract quotations, bids, or offers from certified MBEs.
(3)	Combination procurement method.  A combination of direct solicitation and the MBE subcontract methods, pursuant to subdivisions (2) and (3) of this subsection, which may be used when the Department or procurement agency decides this method will be most likely to achieve the greatest degree of MBE participation.
(4)	Pre-bid and pre-proposal conferences.  When pre-bid or pre-proposal conferences are held, the Department or procurement agency shall explain the MBE subcontracting goal, if applicable, the MBE provisions of the solicitation, the documentation required and its relationship to the bidder responsiveness and responsibility or offeror acceptability determinations which will be made in connection with the evaluation process.
(5)	Federal requirements.  To the extent required by federal assistance instruments applicable to contracts let by the State under a federal assistance program, those MBEs meeting requirements and criteria of the federal government shall be utilized.
"§ 143-64.49.  Contract award.
(a)	The Department of Administration may require all determinations under this section and G.S. 143-64.50 to be made before execution of a contract, or approval by the Department, or both.
(b)	A contract involving subcontracts shall be subject to the Department or procurement agency concluding that the apparent low bidder or successful offeror meets the applicable MBE participation provisions contained in the solicitation.  The apparent low bidder or successful offeror shall, within 10 working days from the date of award of the contract or notification that it is the apparent low bidder or successful offeror, whichever is earlier, submit any required documentation.  Nothing in this regulation is intended to preclude the award of a contract conditionally upon receipt of any required documentation.
(c)	Whenever an uncertified minority business is identified for contract award, the Department or procurement agency shall forward the affidavit of the minority business to the Department of Administration and the Minority Business Development agency for certification consistent with G.S. 143-64.53.  A contract may be awarded notwithstanding the pendency of certification.  The certification entity shall notify the Department or procurement agency promptly of its disposition.  In the event of an unfavorable disposition, the Department or procurement agency shall include that fact as part of its annual report and may not, in the future, treat that business entity as an MBE until it is certified.
(d)	If a Department or procurement agency determines that the apparent low bidder or successful offeror has not complied with the MBE subcontract participation contract goal and has not obtained a waiver in accordance with G.S. 143-64.50, or if the bidder or offeror fails to submit the documentation required by the solicitation, the procurement officer, upon review by an assistant attorney general and approval of the Department or agency head having jurisdiction over the contract, may reject the bid or offer or cancel the award of the contract.  The reasons for this action shall be specified in writing and mailed or delivered to the bidder or offeror.
"§ 143-64.50.  Waiver.
(a)	If, for any reason, the apparent low bidder or successful offeror is unable to achieve the contract goal for MBE participation, the bidder or offeror may request, in writing, an exception to the goal with justification, including the following:
(1)	A detailed statement of the efforts made to select portions of the work proposed to be performed by MBEs in order to increase the likelihood of achieving the stated goal;
(2)	A detailed statement of the efforts made to contact and negotiate with MBEs including:
a.	The names, addresses, dates, and telephone numbers of MBEs contacted, and
b.	A description of the information provided to MBEs regarding the plans, specifications, and anticipated time schedule for portions of the work to be performed;
(3)	As to each MBE that placed a subcontract quotation or offer which the apparent low bidder or successful offeror considers not to be acceptable, a detailed statement of the reasons for this conclusion; and
(4)	A list of minority subcontractors found to be unavailable.  This list should be accompanied by an MBE unavailability certification signed by the MBE, or a statement from the apparent low bidder or successful offeror that the MBE refused to give the written certification.
(b)	A waiver of an MBE contract goal may be granted only upon a reasonable demonstration by the bidder or offeror that MBE participation was unable to be obtained or was unable to be obtained at a reasonable price, and a determination by the agency head or the agency head's designee that the public interest is served by a waiver.  In making a determination under this section, the agency head or agency head's designee may consider engineering estimates, catalogue prices, general market availability, and availability of MBEs in the area work is to be performed, other bids or offers and subcontract bids or offers substantiating significant variances between MBE and non-MBE cost of participation, and their impact on the overall cost of the contract to the State, and any other relevant factor.
(c)	A Department or agency head may waive any of the provisions of G.S. 143-64.48 and G.S. 143-64.49 for a sole source or emergency procurement in which the public interest cannot reasonably accommodate use of those procedures.
(d)	When a waiver is granted, except waivers under subsection (c) of this section, one copy of the waiver determination and the reasons for the determination shall be kept by the MBE Liaison Officer with another copy forwarded to the Minority Business Development agency.
"§ 143-64.51.  Amendment for unforeseen circumstances.
If at any time before execution of a contract, the apparent low bidder or successful offeror determines that an MBE has become or will become unavailable, then the apparent low bidder or successful offeror shall immediately notify the procurement officer.  Any desired change in the schedule for participation shall be approved in advance by the procurement officer and shall indicate the contractor's efforts to substitute another MBE subcontractor to perform the work.  Desired changes occurring after the date of contract execution may occur only upon written approval by the Department or agency head and subsequently by contract amendment.
"§ 143-64.52.  Compliance.
(a)	To assure compliance with MBE subcontract requirements, a Department or procurement agency may require a contractor to furnish:
(1)	Copies of purchase orders, subcontracts, cancelled checks, and other records that may indicate the number, names, dollar value of MBE subcontracts, dates, and schedule time for performance of work by an MBE subcontractor; and
(2)	Entry for an on-site verification inspection.
(b)	Upon determining a contractor's noncompliance, the Department or procurement agency shall notify the contractor in writing of its findings and shall specify what corrective actions are required.  The contractor shall be required to initiate the corrective actions within 10 days and complete them within the time specified by the Department or procurement agency.
(c)	If a Department or procurement agency determines that substantial non-compliance with MBE contract provisions exists and that the prime contractor refuses or fails to take the corrective action required by the Department or procurement agency, then the following sanctions may be invoked:
(1)	Termination of the contract;
(2)	Referral to the office of the Attorney General for appropriate action; or
(3)	Initiation of any other specific remedy identified by contract.
"§ 143-64.53.  Certification.
(a)	Contractors seeking to be certified by and do business with the Department of Transportation shall use certification procedures developed by that Department.  The Department of Transportation shall also develop recertification and decertification procedures.
(b)	Contractors seeking to be certified for procurements solicited by other Departments or procurement agencies shall file an application with the Minority Business Development agency of North Carolina.
(c)	The Minority Business Development agency may request the following information to assist in any certification, recertification, and decertification determination.
(1)	Copies of articles of incorporation, bylaws, minutes, shareholder agreements, stock certificates, stock transfer ledgers, any additional profit-sharing agreements or buyout rights, or in the case of a partnership, the partnership agreement;
(2)	Current financial statements, business licenses, the prior two years' federal tax returns, cancelled checks, resumes of principal parties, and any relevant personal and third-party agreements, such as rental and management agreements;
(3)	Any other information that the certifying entity determines is necessary.
Failure to furnish the requested information within a reasonable time as specified in writing may result in a denial of certification or recertification, or a determination to decertify.
(d)	Certification as an MBE by the Minority Business Development agency shall be made by disclosure affidavit and any other supporting documentation that may be required.
(e)	All certifications by the Minority Business Development agency shall be valid until terminated by the agency after which MBEs previously certified are required to re-submit disclosure affidavits and other required supporting documentation.  All MBEs certified before the effective date of this Article may be recertified as required by the Minority Business Development agency.
(f)	The Minority Business Development agency may decertify a business, which it finds no longer is a minority business enterprise.  A decertified business entity may reapply for certification 12 months from the date of the decertification.  A new affidavit and any supporting documentation required shall be submitted as if the business entity were requesting initial certification.
"§ 143-64.54.  Reporting requirements.
(a)	Each Department and procurement agency shall make a report annually within 90 days following the close of the fiscal year to the Minority Business Development agency:
(1)	The total number and value of its procurements from State certified MBEs as prime contractors, and separately as subcontractors;
(2)	The percentage which purchases and contracts from MBEs represent of its total number and value of its procurements from business enterprises for the fiscal year just ended;
(3)	The number of waivers granted pursuant to G.S. 143-64.50; and
(4)	An evaluation by the Department of the success of its MBE program.
The Minority Business Development agency shall prepare an annual report summarizing MBE participation throughout the State for submission by the end of each calendar year to the General Assembly and to each Department and procurement agency."
Sec. 2.  G.S. 143-48 reads as rewritten:
"§ 143-48. State policy; cooperation in promoting the use of small, minority, physically handicapped and women contractors; purpose.
It is the policy of this State to encourage and promote the use of small, minority, physically handicapped and women contractors in State purchasing of goods and services. All State agencies, institutions and political subdivisions shall cooperate with the Department of Administration and all other State agencies, institutions and political subdivisions in efforts to encourage the use of small, minority, physically handicapped and women contractors in achieving the purpose of this Article, which is to provide for the effective and economical acquisition, management and disposition of goods and services by and through the Department of Administration.  Accordingly, all contracts entered into for the purchase of goods and services pursuant to this Article shall be subject to the provision of Article 3E of this Chapter."
Sec. 3.  G.S. 143-135.5 reads as rewritten:
"§ 143-135.5. State policy; cooperation in promoting the use of small, minority, physically handicapped and women contractors; purpose.
It is the policy of this State to encourage and promote the use of small, minority, physically handicapped and women contractors in State construction projects. All State agencies, institutions and political subdivisions shall cooperate with the Department of Administration and all other State agencies, institutions and political subdivisions in efforts to encourage and promote the use of  small, minority, physically handicapped and women contractors in achieving the purpose of this Article, which is the effective and economical construction of public buildings. Accordingly, all contracts entered into for the purchase of goods and services pursuant to this Article shall be subject to the provision of Article 3E of this Chapter."
Sec. 4.  G.S. 136-28.4 reads as rewritten:
"§ 136-28.4. State policy; cooperation in promoting the use of small, minority, physically handicapped and women contractors.
It is the policy of this State to encourage and promote the use of small, minority, physically handicapped and women contractors in the construction, alteration and maintenance of State roads, streets, highways, and bridges and in the procurement of materials for such projects. All State agencies, institutions and political subdivisions shall cooperate with the Department of Transportation and all other State agencies, institutions and political subdivisions in efforts to encourage and promote the use of small, minority, physically handicapped and women contractors in such State construction, alteration, maintenance and procurement. Accordingly, all contracts entered into for construction, alteration, maintenance, and procurement in excess of one hundred thousand dollars ($100,000) pursuant to this Article shall be subject to the provisions of Article 3E of Chapter 143 of the General Statutes."
Sec. 5.  This act shall become effective January 1, 1990.